SELECTED CONSOLIDATED FINANCIAL INFORMATION

     Set forth below are selected  consolidated  financial and other data of the
Company.  This  financial  data is derived  in part from,  and should be read in
conjunction  with,  the  Consolidated  Financial  Statements  and  Notes  to the
Consolidated  Financial  Statements of the Company  presented  elsewhere in this
Annual Report.
<TABLE>
<CAPTION>
                                                           December 31,
                                        2000        1999        1998         1997         1996
                                     ---------   ---------   ---------     ---------    ---------
     Selected Consolidated                                  (In thousands)
     Financial Condition Data:
<S>                                  <C>         <C>         <C>          <C>          <C>
Total assets .....................   $ 706,636   $ 740,672   $ 735,472    $ 510,444    $ 472,421
Securities available for sale ....     138,990     212,145     244,241      205,808      200,539
Loans receivable, net ............     459,958     465,477     420,933      281,123      248,094
Deposits .........................     478,592     450,134     461,413      333,265      298,082
Borrowed funds ...................     143,935     204,905     173,810      111,550      108,780
Shareholders' equity .............      77,122      75,593      85,893       61,202       61,518

                                                        Years Ended December 31,
                                         2000       1999        1998        1997         1996
                                      ---------  ---------   ---------    ---------    ---------
    Selected Consolidated                   (Dollars in thousands, except per share data)
    Operations Data:
Total interest and dividend income    $49,745    $48,767     $38,973     $  35,566    $  32,348
Total interest expense ...........     28,551     26,319      22,441        19,654       16,435
                                      -------    -------     -------     ---------    ---------
Net interest income ..............     21,194     22,448      16,532        15,912       15,913
Provision for loan losses ........        480        790         900         1,088        9,450
                                      -------    -------     -------     ---------    ---------
Net interest income after
 provision for loan losses .......     20,714     21,658      15,632        14,824        6,463
Non-interest income ..............      2,041      1,803       1,144         1,819          908
Non-interest expenses.............     16,793     16,063      15,075        12,190       13,136
                                      -------    -------     -------     ---------    ---------
Income (loss) before taxes .......      5,962      7,398       1,701         4,453       (5,765)
Income tax expense (benefit) .....      2,420      3,095         670         1,693       (1,929)
                                      -------    -------     -------     ---------    ---------
Net income (loss) ................    $ 3,542    $ 4,303     $ 1,031     $   2,760    ($  3,836)
                                      =======    =======     =======     =========    =========
Basic earnings (loss) per share...    $  0.77    $  0.88     $  0.26     $    0.70    ($   0.81)
                                      =======    =======     =======     =========    =========
Diluted earnings (loss) per share     $  0.76    $  0.87     $  0.26     $    0.69    ($   0.81)
                                      =======    =======     =======     =========    =========
Dividend payout ratio ............       64.9%      38.6%       96.1%         14.3%         N/A
                                      =======    =======     =======     =========    =========
</TABLE>

<PAGE>


<TABLE>
<CAPTION>
                                                At or for the years ended December 31,
                                                   2000    1999    1998    1997     1996
                                                   ----    ----    ----    ----     ----
Selected Consolidated Financial
Ratios and Other Data:
<S>                                                <C>     <C>     <C>     <C>     <C>
Performance Ratios:
Return (loss) on average assets (1) .......        0.50%   0.59%   0.18%   0.56%   (0.84)%
Return (loss) on average equity (1) .......        4.66    5.26    1.64    4.52    (5.24)
Interest rate information:
   Interest rate spread during year .......        2.37    2.57    2.32    2.58     2.74
   Net interest margin during year (2) ....        3.06    3.21    3.04    3.36     3.66
Efficiency ratio (3) ......................       68.96   63.79   74.44   69.81    62.50
Ratio of average earning assets to
   average interest-bearing liabilities ...      116.82  117.24  117.28  118.93   124.26

Asset Quality Ratios:
Non-performing assets to total assets (1) .        0.51    0.61    0.45    0.67     1.18
Non-performing loans to total loans .......        0.70    0.89    0.68    1.16     1.94
Allowance for loan losses to
  non-performing loans ....................      176.99  130.86  168.42  117.07    70.47
Allowance for loan losses to total loans ..        1.23    1.17    1.15    1.34     1.37

Capital Ratios:
Equity to total assets at end of period (1)       10.91   10.21   11.68   11.99    13.02
Average equity to average assets (1) ......       10.67   11.29   11.18   12.42    15.95

Other Data:
Number of full-service offices ............        17      17      18       12       9
<FN>
(1) Period end and average asset and equity amounts reflect securities available
for sale at fair value, with net unrealized  gains/losses,  net of tax, included
as a component of equity.

(2) Net interest income divided by average earning assets.

(3) The efficiency ratio represents other expenses  (excluding real estate owned
and  repossessed  assets  expenses,  net,  the  amortization  of  goodwill,  and
significant  non-recurring  expenses)  divided by the sum of net interest income
and   non-interest   income   (excluding   net  gains   (losses)  on  securities
transactions).
</FN>
</TABLE>


<PAGE>
                         MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


General

Ambanc Holding Co., Inc.  ("Ambanc" or the  "Company") is a unitary  savings and
loan holding company.  Ambanc was formed as a Delaware Corporation to act as the
holding company for the former Amsterdam  Savings Bank, FSB (now known as Mohawk
Community Bank) upon the completion of Amsterdam  Savings Bank's conversion from
the mutual to stock form on December 26, 1995.

Mohawk  Community  Bank's (the  "Bank's")  results of  operations  are primarily
dependent  on its net  interest  income,  which is the  difference  between  the
interest  and  dividend  income  earned  on  its  assets,  primarily  loans  and
securities, and the interest expense on its liabilities,  primarily deposits and
borrowings.  Net  interest  income  may be  affected  significantly  by  general
economic  and  competitive  conditions  and  policies  of  regulatory  agencies,
particularly  those  with  respect  to market  interest  rates.  The  results of
operations  are also  significantly  influenced  by the  level  of  non-interest
expenses,  such as employee salaries and benefits,  non-interest income, such as
fees on  deposit-related  services,  the provision  for loan losses,  and income
taxes.

The  Company  has been,  and  intends to  continue  to be, a  community-oriented
financial  institution  offering a variety of financial  services.  Management's
strategy has been to try to achieve a high loan to asset ratio with  emphasis on
originating traditional one- to four-family residential mortgage and home equity
loans in its primary market area.  Recently,  the Company has also been focusing
on  the  origination  of   commercial-type   loans,   including   entering  into
participation  agreements  with other  financial  institutions.  At December 31,
2000, the Company's  loans  receivable,  net, to assets ratio was 65.1%, up from
62.8% at December  31, 1999.  The  Company's  portfolio  of one- to  four-family
residential  mortgage and home equity loans was 82.3% of total loans at December
31, 2000,  as compared  with 85.2% at December 31, 1999.  Total  commercial-type
loans were 11.8% of total loans at December 31,  2000,  up from 7.4% at December
31, 1999.


Forward-Looking Statements

When used in this  Annual  Report,  in future  filings by the  Company  with the
Securities  and Exchange  Commission,  in the Company's  press releases or other
public  or  shareholder  communications,  and in oral  statements  made with the
approval of an authorized  executive officer,  the words or phrases "will likely
result",  "are expected to",  "will  continue",  "is  anticipated",  "estimate",
"project"  or similar  expressions  are  intended to  identify  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995.  Such  statements are subject to certain risks and  uncertainties  that
could cause actual  results to differ  materially  from  historical  results and
those presently anticipated or projected, including, but not limited to, changes
in economic  conditions  in the  Company's  market area,  changes in policies by
regulatory  agencies,  fluctuations in interest  rates,  demand for loans in the
Company's market area and competition. The Company wishes to caution readers not
to place undue reliance on any such forward-looking statements, which speak only
as of the date made.  The  Company  wishes to advise  readers  that the  factors
listed above could affect the Company's  financial  performance  and could cause
the Company's  actual results for future periods to differ  materially  from any
opinions or statements  expressed  with respect to future periods in any current
statements.

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


Financial Condition

Comparison  of Financial  Condition at December 31, 2000 and 1999.  Total assets
decreased  $34.0  million,  or 4.6%,  to $706.6  million at December  31,  2000,
primarily due to decreases in securities  available for sale, loans  receivable,
net,  and  other  assets  of $73.2  million,  $5.5  million,  and $3.2  million,
respectively,  partially  offset by an increase in cash and cash  equivalents of
$48.9 million.

Securities  available for sale  decreased  $73.2  million,  or 34.5%,  to $139.0
million at December 31, 2000 from $212.1  million at December 31, 1999 resulting
primarily  from the sale of securities,  and to a lesser extent the  maturities,
pay downs and calls of  securities.  During  the  fourth  quarter  of 2000,  the
Company  completed a significant  restructuring  of its balance sheet by selling
approximately  $65.5  million in debt  securities,  resulting  in a loss of $1.5
million.  Also during the fourth quarter of 2000, the Company  recognized a gain
on sale of equity  securities  of $1.7  million.  The proceeds  from the sale of
securities in the fourth  quarter of 2000 were not  reinvested in the securities
available for sale portfolio, but were rather invested in term deposits with the
Federal  Home Loan Bank and federal  funds  sold.  The  Company  reinvested  the
proceeds received in these short-term instruments in anticipation of redeploying
the funds into the loan portfolio as market conditions permit. If the Company is
unable to redeploy  the funds into the loan  portfolio,  management  anticipates
that some of the funds will be reinvested  in  securities  available for sale or
used to paydown borrowings as they mature.

Cash and cash  equivalents  increased  by $48.9  million,  or  165.1%,  to $78.5
million at December 31, 2000 from $29.6  million at December 31, 1999  primarily
due to an increase in  interest-bearing  deposits  from $3.2 million at December
31, 1999 to $51.6  million at December 31, 2000.  Likewise,  federal  funds sold
increased from $0 at December 31, 1999 to $11.6 million at December 31, 2000. As
noted above,  the proceeds from the sale of securities in the fourth  quarter of
2000 were  invested  in term  deposits  with the  Federal  Home Loan Bank and in
federal funds sold. The Company anticipates  redeploying the funds into the loan
portfolio as market conditions permit. Offsetting these increases was a decrease
in cash and due from banks from $26.4  million  at  December  31,  1999 to $15.3
million at December  31,  2000.  The  decrease in cash and due from banks is the
result  of  the  Company's  decision  to  temporarily  increase  vault  cash  in
preparation  for potential year 2000  liquidity  needs of depositors at year end
1999.  However,  early in the first quarter of 2000, vault cash returned to more
normal levels.

Loans receivable, net decreased $5.5 million from $465.5 million at December 31,
1999,  to $460.0  million at December 31, 2000.  During the second half of 2000,
the Company  purchased  $14.0 million of commercial  real estate and  commercial
business loan  participations  from an unrelated  financial  institution  in its
market area. The Company  anticipates  entering into additional  commercial loan
participation  agreements  with  this  unrelated  financial  institution.   This
strategy is consistent with  management's  focus on the growth of the commercial
loan   portfolio.   In  addition  to  the  $14.0  million  of  commercial   loan
participations entered into during 2000, the Company experienced internal growth
of $6.2 million in the commercial  loan portfolios  (commercial  real estate and
commercial business loans). The increases in the commercial loan portfolios were
more  than  offset  by  decreases  in  most  other  loan  categories,  primarily
one-to-four family mortgage loans (down $15.0 million),  home equity loans (down
$2.8 million), and consumer loans (down $4.8 million).

 Other assets decreased $3.2 million,  or 46.6%, to $3.7 million at December 31,
2000 due primarily to the deferred tax consequences related to the adjustment of
securities available for sale to fair value.

Deposits increased by $28.5 million,  or 6.3%, to $478.6 million at December 31,
2000 from $450.1 million at December 31, 1999 due primarily to various marketing
promotions  offered  during the first half of 2000. The growth from December 31,
1999 to December 31, 2000 was primarily in time deposits,  which increased 13.0%
from $220.3 million to $248.9 million; NOW accounts,  which increased 29.1% from
$35.9 million to $46.3 million; and non-interest-bearing  demand deposits, which
increased  8.5% from  $35.5  million  to $38.6  million.  These  increases  were
partially  offset by decreases in savings  accounts,  which  decreased 6.1% from
$129.4 million to $121.4  million,  and money market  accounts,  which decreased
19.3% from $29.0 million to $23.4 million.

Securities  repurchase  agreements  decreased $40.2 million,  or 35.7%, to $72.5
million at December  31, 2000 from $112.7  million at  December  31,  1999,  due
primarily to the maturity and subsequent repayment of the repurchase agreements.
Short-term  borrowings  with the FHLB decreased by $66.2 million,  or 93.0%,  to
$5.0 million at December 31, 2000.  These  funding  reductions  were replaced in
part  with a  combination  of  long-term  advances  from the FHLB and  increased
deposits.  Long-term  advances from the FHLB increased  $45.5 million,  to $66.4
million at December 31, 2000 from $21.0 million at December 31, 1999.  The shift
to  longer-term  borrowings  is part of the  Company's  effort  to  improve  its
interest  rate risk  position by more  closely  matching the  maturities  of its
assets and liabilities.  See Note 9 to the consolidated financial statements for
further information regarding the Company's borrowings.

Shareholders'  equity  increased  $1.5 million,  or 2.0%,  from $75.6 million at
December 31, 1999 to $77.1  million at December 31, 2000,  primarily  due to net
income of $3.5 million and the decrease in net  unrealized  losses on securities
available  for  sale,  net of tax,  of $5.0  million,  partially  offset  by the
treasury stock purchases totaling $5.7 million and the payment of cash dividends
of $2.4 million for the year. Other items impacting  shareholders' equity during
2000 were the release of ESOP shares, which increased  shareholders' equity $661
thousand,  as well as the  continued  amortization  of the  unearned RRP shares,
which increased shareholders' equity $484 thousand.

<PAGE>
Average Balances, Interest Rates and Yields

     The  following  table  presents for the periods  indicated the total dollar
amount of interest and dividend  income earned on average earning assets and the
resultant  yields,  as well as the  total  dollar  amount  of  interest  expense
incurred on average interest-bearing liabilities and the resultant rates. No tax
equivalent  adjustments  were  made.  All  average  balances  are daily  average
balances.  Non-accruing  loans  have been  included  in the table as loans  with
interest earned on a cash basis only. Securities available for sale are included
at amortized cost.
<TABLE>
<CAPTION>
                                                             2000                         1999                         1998
                                               ---------------------------  ---------------------------  --------------------------
                                               Average    Interest  Yield/  Average    Interest  Yield/  Average    Interest  Yield/
                                               Balance    Inc./Exp. Rate    Balance    Inc./Exp. Rate    Balance    Inc./Exp. Rate
                                               -------    --------- ------  -------    --------- ------  -------    --------- -----
Earning assets                                                                 (Dollars in Thousands)
<S>                                          <C>        <C>         <C>   <C>        <C>         <C>   <C>        <C>         <C>
  Loans receivable (1) ......................$ 466,644  $  34,872  7.47%  $ 442,802  $  32,578  7.36%  $ 322,335  $  24,623  7.64%
  Securities available for sale (AFS) (2)....  209,359     13,800  6.59%    239,439     15,245  6.37%    205,995     13,479  6.54%
  Federal Home Loan Bank stock ..............    8,832        610  6.91%      7,402        503  6.80%      5,048        364  7.21%
  Federal funds sold and interest-
    bearing deposits ........................    7,331        463  6.32%      9,319        441  4.73%     10,632        507  4.77%
                                               -------     ------           -------     ------           -------     ------
      Total earning assets ..................  692,166     49,745  7.19%    698,962     48,767  6.98%    544,010     38,973  7.16%
                                               -------     ------           -------     ------           -------     ------
Allowance for loan losses ...................   (5,571)                      (5,314)                      (4,220)
Unrealized (loss) gain on AFS securities ....   (9,176)                      (3,176)                         225
Other assets ................................   34,260                       33,970                       21,191
                                               -------                      -------                      -------
Total average assets ........................$ 711,679                    $ 724,442                    $ 561,206
                                             =========                    =========                    =========
Interest-bearing liabilities
  Savings deposits ..........................$ 126,829      3,473  2.74%  $ 137,506      4,001  2.91%  $ 103,513      3,119  3.01%
  NOW  deposits .............................   40,117        685  1.71%     36,703        567  1.54%     25,410        549  2.16%
  Certificates of deposit ...................  240,777     13,620  5.66%    223,551     11,242  5.03%    176,136      9,882  5.61%
  Money market accounts .....................   25,794        994  3.85%     24,628        945  3.84%      8,481        272  3.21%
  Borrowed funds ............................  159,000      9,779  6.15%    173,803      9,564  5.50%    150,335      8,619  5.73%
                                               -------     ------           -------     ------           -------     ------
      Total interest-bearing liabilities ....  592,517     28,551  4.82%    596,191     26,319  4.41%    463,875     22,441  4.84%
Demand deposits .............................   36,850     ------            35,051     ------            24,466     ------
Other liabilities ...........................    6,382                       11,407                       10,124
                                               -------                      -------                      -------
Total liabilities ...........................  635,749                      642,649                      498,465
Shareholders' equity ........................   75,930                       81,793                       62,741
                                               -------                      -------                      -------
Total average liabilities & equity ..........$ 711,679                    $ 724,442                    $ 561,206
                                             =========                    =========                    =========
    Net interest income .....................           $  21,194                    $  22,448                    $  16,532
                                                          =======                      =======                      =======
    Interest rate spread ....................                      2.37%                        2.57%                        2.32%
                                                                  ======                       ======                       ======
    Net earning assets ...................... $  99,649                   $$ 102,771                   $  80,135
                                              =========                    =========                    =========
    Net interest margin .....................                      3.06%                        3.21%                        3.04%
                                                                  ======                       ======                       ======
    Average earning assets/Average
      interest-bearing liabilities ..........    116.82%                      117.24%                     117.28%
                                              ==========                  ===========                  ==========
(1)Calculated net of deferred loan fees and costs,loan discounts and loans in process.
(2)Securities available for sale exclude securities pending settlement.
</TABLE>
<PAGE>

Rate/Volume Analysis of Net Interest Income


     The following  table  presents the dollar amount of changes in interest and
dividend income and interest  expense for major components of earning assets and
interest-bearing  liabilities.  It distinguishes  between the changes related to
outstanding  balances and the changes due to changes in interest rates. For each
category of earning  assets and  interest-bearing  liabilities,  information  is
provided  on changes  attributable  to (i) changes in volume  (i.e.,  changes in
volume  multiplied  by old rate) and (ii) changes in rate (i.e.  changes in rate
multiplied by old volume).  For purposes of this table,  changes attributable to
both  rate  and  volume,  which  cannot  be  segregated,   have  been  allocated
proportionately to the change due to volume and the change due to rate.
<TABLE>
<CAPTION>
                                           -----------------------------------------------------------------------
                                                          2000 vs. 1999                        1999 vs. 1998
                                           ---------------------------------    ---------------------------------
                                                   Increase                             Increase
                                                  (Decrease)                           (Decrease)
                                                    Due to           Total               Due to           Total
                                              -----------------     Increase       -----------------     Increase
                                              Volume       Rate    (Decrease)      Volume       Rate    (Decrease)
                                           ----------   -------    ---------   -----------   -------    ---------
Earning assets                                                           (In thousands)
<S>                                        <C>         <C>         <C>          <C>         <C>         <C>
  Loans receivable .....................   $ 1,775     $   519     $  2,294     $ 8,826     $  (871)    $  7,955
  Securities available for sale ........    (1,982)        537       (1,445)      2,118        (352)       1,766
  Federal Home Loan Bank stock .........       100           7          107         159         (20)         139
  Federal funds sold and interest-
    bearing deposits ...................      (107)        129           22         (61)         (5)         (66)
                                           -------      -------     -------     -------      -------     -------
      Total earning assets .............      (214)      1,192          978      11,042      (1,248)       9,794
                                           -------      -------     -------     -------      -------     -------

Interest-bearing liabilities
  Savings deposits .....................      (300)       (228)        (528)        985        (103)         882
  NOW  deposits ........................        55          63          118          50         (32)          18
  Certificates of deposit ..............       908       1,470        2,378       2,212        (852)       1,360
  Money market accounts ................        45           4           49         610          63          673
  Borrowed funds .......................      (855)      1,070          215       1,273        (328)         945
                                           -------      -------     -------     -------      -------     -------
      Total interest-bearing liabilities      (147)      2,379        2,232       5,130      (1,252)       3,878
                                           -------      -------     -------     -------      -------     -------

    Net interest income ................   $   (67)    $(1,187)     $(1,254)    $ 5,912     $     4      $ 5,916
                                           =======     ========     =======     =======     ========     =======
</TABLE>



<PAGE>

Comparison of Operating Results for the Years Ended December 31, 2000 and 1999.

Net Income.  Net income for the year ended  December  31, 2000 was $3.5  million
compared to $4.3 million for the year ended  December  31, 1999.  Net income for
the year ended December 31, 2000 was reduced  primarily as a result of decreased
net interest income and increased  non-interest  expenses,  offset in part by an
increase in non-interest income (primarily net gains on securities transactions)
and decreases in the provision for loan losses and income tax expense. These and
other changes are discussed in more detail below.

Net Interest  Income.  Net interest income  decreased $1.3 million,  or 5.6%, to
$21.2  million for the year ended  December 31, 2000 from $22.4  million for the
year ended December 31, 1999. The decrease in net interest  income was primarily
due to a decrease  in the  interest  rate  spread  from 2.57% for the year ended
December 31, 1999 to 2.37% for the year ended  December  31, 2000,  as well as a
decrease in the net interest margin from 3.21% to 3.06%.

Earning  assets  consist of loans  receivable,  securities  available  for sale,
federal funds sold and  interest-bearing  deposits,  and FHLB of New York stock.
Interest-bearing liabilities consist of interest-bearing deposits, FHLB advances
and securities repurchase agreements.

The interest rate spread,  which is the difference  between the yield on average
earning assets and the cost of average interest-bearing  liabilities,  decreased
to 2.37% for the year ended  December  31,  2000,  from 2.57% for the year ended
December  31,  1999.  The  decrease  in the  interest  rate spread is due to the
increase in the  average  cost of  interest-bearing  liabilities  exceeding  the
increase in the average yield on earning assets during the period.  During 2000,
the Company re-deployed assets from lower-yielding securities available for sale
to the higher-yielding loan portfolio and, on an interim basis, to term deposits
and federal  funds sold.  Primarily  due to the shift to loans  receivable,  the
average yield on earning assets increased from 6.98% for the year ended December
31,  1999 to 7.19% for the year  ended  December  31,  2000.  The impact of this
increase  was more than offset by  increases  in the  average  rate paid on time
deposits and borrowings of 63 basis points,  to 5.66%,  and 65 basis points,  to
6.15%,  respectively.  Thus,  the average cost of  interest-bearing  liabilities
increased  to 4.82% for the year  ended  December  31,  2000 from  4.41% for the
previous year.

The  experience of the Company has been that net interest  income  declines with
increases in market interest rates and that net interest  income  increases with
decreases in market  interest  rates.  Generally,  during  periods of increasing
market  interest  rates,  the  Company's  interest  rate  sensitive  liabilities
re-price faster than its interest rate sensitive assets causing a decline in the
Company's  interest rate spread and net interest margin.  This would result from
an increase in the  Company's  cost of funds that would not be  immediately  and
fully offset by an increase in its yield on earning  assets.  An increase in the
cost of funds  without an  equivalent  increase  in the yield on earning  assets
would tend to reduce net  interest  income.  This trend was  evident in 1999 and
2000 when market  interest rates  generally  began to increase during the second
half of 1999 and continued  into the first half of the year 2000.  This increase
in interest rates caused a decline in the net interest margin from 3.21% for the
year ended December 31, 1999, to 3.06% for the year ended December 31, 2000.

The Company  operates in an environment of intense  competition for deposits and
loans.  The  competition  in today's  environment  is not limited to other local
banks and thrifts,  but also includes a myriad of financial  services  providers
that are located both within and outside the Company's local market area. Due to
this  heightened  level of  competition  to attract  and retain  customers,  the
Company must continue to offer competitive interest rates on loans and deposits.
As a consequence of these competitive pressures, from time-to-time, the relative
spreads  between  interest  rates earned and interest  rates paid will  tighten,
exerting downward pressure on net interest income,  the interest rate spread and
the net interest margin.  This is especially true during periods when the growth
in  earning  assets  lags  behind the  growth in  interest-bearing  liabilities.
However,  management  does not want to  discourage,  by offering  noncompetitive
interest  rates,  the  creation  of new  customer  relationships  or  jeopardize
existing  relationships  thereby curtailing the Company's customer base and loan
growth and the attendant benefits to be derived from them.  Management  believes
that the longer-term benefits to be derived from this position will outweigh the
shorter-term  costs associated with attracting,  cross-selling  and retaining an
expanding customer base. The growing customer base provides the Company with the
potential for future,  profitable customer  relationships,  which should in turn
increase the value of the franchise.

Interest and Dividend  Income.  Interest and dividend  income  increased by $978
thousand,  or 2.0%, to $49.7 million for year ended December 31, 2000 from $48.8
million for year ended December 31, 1999. The increase was largely the result of
the shift in the average balance of earning assets from securities available for
sale to loans receivable (and, to a much lesser extent,  FHLB stock),  offset in
part by a decrease in the average balance of total earning  assets.  The average
balance of loans  receivable  increased $23.8 million,  or 5.4%, and the average
balance of FHLB stock  increased $1.4 million,  or 19.3%.  These  increases were
more than offset by a decrease in the average  balance of  securities  available
for sale of $30.1  million,  or 12.6%.  In addition to the decrease and shift in
the  average  balance of earning  assets was a 21 basis  point  increase  in the
average  yield on total  earning  assets.  The yield on the  average  balance of
earning  assets was 7.19% and 6.98% for the year  ended  December  31,  2000 and
1999, respectively.

Interest and fees on loans increased $2.3 million, or 7.0%, to $34.9 million for
year ended  December 31, 2000.  This  increase  was  primarily  the result of an
increase in the average  balance of net loans  receivable of $23.8  million,  or
5.4%, to $466.6 million for the year ended December 31, 2000 from $442.8 million
for the year ended  December 31, 1999, in addition to an 11 basis point increase
in the average  yield.  The  increase in the average  yield is the result of the
increase in market  interest  rates during the second half of 1999 and the first
half of  2000,  and the  change  in the mix of the  loan  portfolio  to a higher
percentage of  commercial-type  loans,  which  generally have higher yields than
residential real estate and home equity loans. For further information regarding
changes in market  interest rates and the impact on interest rate spread and net
interest margin, please refer to "Market Risk".

Interest  income on securities  available for sale  decreased  $1.4 million,  or
9.5%, to $13.8  million for the year ended  December 31, 2000 from $15.2 million
for the previous  year.  This  decrease is primarily the result of a decrease of
$30.1 million in the average balance of securities  available for sale offset in
part by a 22 basis point increase in the average yield on these securities.  The
increase in the average  yield is the result of the increase in market  interest
rates during the second half of 1999 and the first half of 2000.

Interest  income on FHLB  stock  increased  $107  thousand,  or  21.3%,  to $610
thousand  for the year  ended  December  31,  2000  from $503  thousand  for the
previous year  primarily due to a increase in the average  balance of FHLB stock
of $1.4  million,  or 19.3%,  coupled  with an 11 basis  point  increase  in the
average yield.

Interest Expense.  Total interest expense increased by $2.2 million, or 8.5%, to
$28.6  million for the year ended  December 31, 2000 from $26.3  million for the
year  ended  December  31,  1999.  Total  average  interest-bearing  liabilities
decreased by $3.7 million, or 0.6%, to $592.5 million in 2000 compared to $596.2
million  in 1999  primarily  due to the pay down of  borrowed  funds,  partially
offset by an increase in average interest-bearing  deposits. The average balance
of borrowed funds decreased $14.8 million,  or 8.5%, from $173.8 million for the
year ended  December 31, 1999 to $159.0  million for the year ended December 31,
2000.  During  the same  periods,  the  average  rate  paid on  interest-bearing
liabilities increased by 41 basis points to 4.82% from 4.41%.

Total interest expense for the year ended December 31, 2000 increased  primarily
due to an increase of 63 basis  points,  to 5.66%,  in the average  rate paid on
certificates of deposit during the period.  In addition,  the average balance of
these deposit  accounts  increased to $240.8 million for the year ended December
31, 2000, from $223.6 million for the previous year. Likewise,  interest expense
relative to borrowed  funds and NOW accounts  increased  during the period.  The
increase in interest on borrowed  funds was  primarily due to an increase in the
average  cost of these funds from 5.50% for the year ended  December 31, 1999 to
6.15% for the year ended December 31, 2000,  which more than offset the decrease
in the average balance.

Provision for Loan Losses. The Company's provision for loan losses is based upon
management's  analysis of the adequacy of the  allowance  for loan  losses.  The
allowance is increased by a charge to the provision for loan losses,  the amount
of which  depends  upon an analysis of the changing  risks  inherent in the loan
portfolio.  Management  determines the adequacy of the allowance for loan losses
based upon its analysis of risk  factors in the loan  portfolio.  This  analysis
includes evaluation of credit risk for specifically  reserved loans,  historical
loss  experience,  economic  conditions,  estimated  fair  value  of  underlying
collateral,  delinquencies, and other factors. The provision for loan losses for
the year ended  December 31, 2000  decreased $310 thousand to $480 thousand from
$790  thousand for the year ended  December 31, 1999.  The provision was reduced
primarily  due to improved  asset  quality,  as evidenced by the decrease in the
ratio of non-performing  loans to total loans from 0.89% at December 31, 1999 to
0.70%  at  December  31,  2000,  partially  offset  by an  increase  in net loan
charge-offs  and a change  in the mix of the  loan  portfolio,  which  now has a
higher concentration of commercial-type loans.

Non-Interest  Income.  Total  non-interest  income increased by $238 thousand to
$2.0 million for the year ended December 31, 2000 from $1.8 million for the year
ended  December  31,  1999,  an increase of 13.2%.  The  increase was due almost
entirely  to net  gains on  securities  transactions  of $222  thousand  in 2000
resulting from the  recognition  of a gain on sale of equity  securities of $1.7
million  during the fourth quarter of 2000,  partially  offset by losses of $1.5
million on the sale of approximately $65.5 million of debt securities (primarily
during the fourth quarter), as the Company completed a significant restructuring
of its balance  sheet.  In addition to the  increase in net gains on  securities
transactions,  the Company  experienced a $77 thousand increase in other income,
from $427 thousand in 1999 to $504 thousand in 2000. During the first quarter of
2000, the Company increased its fees charged for cashing non-customer tax refund
checks,  in addition to increasing the fees associated with the purchase of bank
checks  and money  orders.  Moreover,  the  Company  now  charges an ATM fee for
non-customer  transactions  made  at  the  Company's  ATM  machines.   Partially
offsetting the increase in net gains on securities transactions and other income
was a decrease in service charges on deposits of $61 thousand,  primarily due to
the reduction in volume of NSF charges to customers  experienced  by the Company
during 2000 as compared to 1999.

Non-Interest  Expenses.  Non-interest expenses increased $730 thousand, or 4.5%,
to $16.8 million for the year ended December 31, 2000 from $16.1 million for the
previous year  primarily due to increased  data  processing  costs and increased
professional fees. These and other changes are discussed in more detail below.

Salaries,  wages and benefits  expense  increased by $29  thousand,  or 0.4%, in
2000.  This  nominal  increase  was the result of  increased  salaries and wages
associated  with the increase in staff in the commercial  loan department due to
the  Company's  decision to increase  emphasis  in growing  commercial  lending,
coupled  with the general  cost of living and merit raises given to employees at
the beginning of 2000. These increases were offset in part by the elimination of
temporary  outside services relative to work performed during the second half of
1999 and the reduction in ESOP expense. The expense related to the ESOP for 2000
was $83 thousand  lower than the  previous  year due to the lower stock price in
2000  relative  to 1999,  as well as the lower  number of  shares  released  for
allocation in 2000  compared to 1999.  In addition,  during the first quarter of
1999, salaries, wages and benefits expense was reduced due to the reversal of an
accrual associated with severance offered to an employee  terminated at the time
of the  merger  with  AFSALA  Bancorp,  Inc.  in  November  1998,  which was not
accepted.  Management  believes that salaries,  wages and benefits  expenses may
fluctuate in future periods as costs related to the Company's ESOP are dependent
on the Company's average stock price.

Effective  November 30, 2000,  the Company froze all pension  accruals under its
defined benefit pension plan and also froze participation in the plan. Since the
Company's  prior  contributions  to the plan were intended to fund both benefits
earned and those  expected to be earned in the future,  the freezing of benefits
generated a  curtailment  gain of $1.0  million.  The Company uses a measurement
date of October 1 for the purposes of accounting for the plan. Accordingly,  the
curtailment gain was not recognized in the Company's 2000 consolidated statement
of  income.  The  curtailment  gain will be  recognized  in other  income in the
Company's  consolidated  statement  of income in the first  quarter of 2001.  In
addition to the  curtailment  gain,  the Company  anticipates  recognizing a net
periodic  pension  credit as a  component  of  salaries,  wages and  benefits of
approximately $256 thousand for the year ending December 31, 2001,  primarily as
a result of reducing the service cost  component of net periodic  pension  cost.
This  compares to net periodic  pension  expense of  approximately  $78 thousand
recognized for the year ended December 31, 2000. However, the Company expects an
increase in expense in 2001 related to matching  contributions  to be made under
the Company's 401(k) plan. No matching  contributions were made in 2000, 1999 or
1998.

Occupancy and equipment increased $6 thousand to $2.4 million for the year ended
December  31,  2000 when  compared to the  previous  year,  primarily  due to an
increase in  depreciation  of furniture,  fixtures and equipment  resulting from
computer  hardware  and  software  upgrades  related  to  year  2000  compliance
subsequent to the first  quarter of 1999.  Likewise,  depreciation  of buildings
increased due primarily to renovations completed at the Main Office and a branch
office  during the third  quarter of 1999.  Offsetting  these  increases was the
acceleration  of  depreciation  and  amortization  of  equipment  and  leasehold
improvements,  during the first  quarter of 1999,  on a branch being closed as a
result of the acquisition of AFSALA Bancorp, Inc.

Data processing increased $234 thousand,  or 17.2%, from $1.4 million in 1999 to
$1.6 million for the year ended  December 31, 2000 due primarily to the increase
in volume of deposit and loan  accounts  serviced by the  Company.  In addition,
during the first quarter of 1999,  at the time of the initial  conversion of the
core  application  data system,  the Company  received credits from the new data
center totaling approximately $92 thousand to be applied against data processing
fees in the first quarter of 1999. No such credits were received in 2000.

Real estate owned and repossessed  assets expense  increased $13 thousand to $73
thousand for the year ended  December 31, 2000  primarily due to the increase in
real estate owned and repossessed assets during the year.

Professional  fees increased $378 thousand,  or 70.5%,  to $914 thousand for the
year ended  December 31, 2000,  from $536  thousand for the previous  year.  The
increased  professional  fees were due  primarily  to expenses of $318  thousand
associated  with the  attempted  acquisition  of and  tender  offer  for  Cohoes
Bancorp, Inc. Also impacting professional fees during 2000 were costs associated
with certain tax planning strategies being implemented by the Company during the
year.

Other non-interest expense increased $71 thousand,  or 2.2%, to $3.3 million for
the year ended  December  31, 2000 when  compared  to the  previous  year.  This
increase  was  primarily  due to  expenses  associated  with the  promotion  and
advertising of time deposit and lending  products  offered during the first half
of 2000.

Income Tax Expense.  Income tax expense decreased by $675 thousand, or 21.8%, to
$2.4 million for the year ended December 31, 2000 from $3.1 million for the year
ended  December 31, 1999.  The decrease was primarily the result of the decrease
in income before taxes, as well as certain tax planning  strategies  implemented
by the Company.


Comparison of Operating Results for the Years Ended December 31, 1999 and 1998.


Net Income. Net income increased by $3.3 million for the year ended December 31,
1999 to $4.3 million from $1.0 million for the year ended December 31, 1998. Net
income for the year ended December 31, 1999  increased  primarily as a result of
increased  net interest  income and  non-interest  income,  offset in part by an
increase  in  non-interest  expenses  and  income tax  expense.  These and other
changes are discussed in more detail below.

Net Interest Income.  Net interest income  increased $5.9 million,  or 35.8%, to
$22.4  million for the year ended  December 31, 1999 from $16.5  million for the
year ended December 31, 1998. The increase in net interest  income was primarily
due to an  increase  of $155.0  million,  or 28.5%,  in the  average  balance of
earning assets  (primarily due to the acquisition of AFSALA),  in addition to an
increase in the interest rate spread from 2.32% for the year ended  December 31,
1998 to 2.57%  for the year  ended  December  31,  1999.  This was  offset by an
increase  in the  average  balance  of  interest-bearing  liabilities  of $132.3
million (primarily due to the acquisition of AFSALA), or 28.5%.

The interest rate spread increased to 2.57% for the year ended December 31, 1999
from 2.32% for the year ended  December 31,  1998.  The increase in the interest
rate spread was  primarily  the result of the  decrease  in the average  cost of
interest-bearing  liabilities  being  greater  than the  decrease in the average
yield on earning assets.

Interest  and  Dividend  Income.  Interest  and  dividend  income  increased  by
approximately  $9.8  million,  or 25.1%,  to $48.8  million  for the year  ended
December 31, 1999 from $39.0 million for the year ended  December 31, 1998.  The
increase was largely the result of an increase of $155.0  million,  or 28.5%, in
the  average  balance of  earning  assets to $699.0  million  for the year ended
December 31, 1999 as compared to $544.0  million for the year ended December 31,
1998. The increase in the average balance of earning assets consisted  primarily
of increases in the average balance of loans  receivable of $120.5  million,  or
37.4%,  securities available for sale of $33.4 million, or 16.2%, and FHLB stock
of $2.4  million,  or 46.6 %, offset in part by a decrease in federal funds sold
and interest-bearing  deposits of $1.3 million, or 12.3%. Offsetting the effects
of the increase in the average  balance of earning  assets was an 18 basis point
decrease in the average yield on total earning assets.  The yield on the average
balance of earning  assets was 6.98% and 7.16% for the years ended  December 31,
1999 and 1998, respectively.

Interest and fees on loans  increased $8.0 million,  or 32.3%,  to $32.6 million
for the year ended December 31, 1999.  This increase was primarily the result of
an increase in the average  balance of net loans  receivable  of $120.5  million
offset in part by a 28 basis point decrease in the average yield.  The reduction
in the  average  yield is the  result of the  decline in market  interest  rates
during 1998 and the first half of 1999 which provided  opportunity for borrowers
to refinance their existing loans at lower rates.

Interest  income on securities  available for sale  increased  $1.8 million,  or
13.1%,  to $15.2 million for the year ended December 31, 1999 from $13.5 million
for the previous  year.  This increase is primarily the result of an increase in
the average balance of securities  available for sale of $33.4 million offset in
part by a 17 basis point decrease in the average yield on these securities.

Interest Expense. Total interest expense increased by $3.9 million, or 17.3%, to
$26.3  million for the year ended  December 31, 1999 from $22.4  million for the
year  ended  December  31.  1998.  Total  average  interest-bearing  liabilities
increased by $132.3  million,  or 28.5%,  to $596.2  million in 1999 compared to
$463.9  million  in 1998.  During the same  periods,  the  average  rate paid on
interest-bearing liabilities decreased by 43 basis points to 4.41% from 4.84%.

Total interest expense for the year ended December 31, 1999 increased  primarily
due to an increase in the interest expense  relative to savings,  time deposits,
and money market  accounts as a result of  increases in the average  balances on
these  deposit  accounts as a result of the  acquisition  of AFSALA.  Offsetting
these  increases  was a decline in the average  rates paid on savings,  NOW, and
time deposit  accounts.  This  decrease was due primarily  from  offering  lower
interest  rates  paid  on  these  deposit  products.  Also  contributing  to the
increased total interest expense was an increase in the average balance of total
borrowed funds from $150.3 million in 1998 to $173.8 million in 1999,  partially
offset by a decrease of 23 basis points,  to 5.50%, in the average rate paid for
these funds during the year.

Provision  for Loan  Losses.  The  provision  for loan losses for the year ended
December 31, 1999  decreased  $110  thousand to $790 thousand from $900 thousand
for the year ended  December 31, 1998.  The  decrease in the  provision  was due
primarily to the decrease in net charge-offs,  partially offset by the impact of
an increase in  non-performing  loans, as well as the overall growth in the loan
portfolio.

Non-Interest  Income.  Total  non-interest  income increased by $659 thousand to
$1.8 million for the year ended December 31, 1999 from $1.1 million for the year
ended December 31, 1998, an increase of 57.6%. An increase in service charges on
deposit accounts of $364 thousand  attributable to the  restructuring of service
charges on certain deposit products, in addition to an increase in the number of
deposit  accounts  due to the  acquisition  of AFSALA,  along with net losses on
securities  transactions recorded during 1998 of $165 thousand,  are the primary
reasons  for the  increase  from the  previous  year.  Also,  included  in other
non-interest  income  during 1999 was  approximately  $70 thousand  representing
interest  received on IRS tax refunds as well as a $20 thousand gain on the sale
of assets which were fully depreciated.

Non-Interest  Expenses.  Non-interest expenses increased $988 thousand, or 6.6%,
to $16.1 million for the year ended December 31, 1999 from $15.1 million for the
year ended December 31, 1998.  Non-interest  expenses were impacted by increased
salaries,  wages and benefits  primarily due to the additional  AFSALA  branches
acquired,  and the  amortization  of goodwill as a result of the  acquisition of
AFSALA.   Also  impacting   non-interest   expenses  were  the  acceleration  of
depreciation and amortization of equipment and leasehold improvements due to the
closing of a branch, and costs associated with the relocation of a branch. These
and other changes are discussed in more detail below.

Salaries,  wages and benefits expense increased by $1.6 million,  or 25.0%, from
the  previous  year  due  primarily  to  increased  costs  as a  result  of  the
acquisition of AFSALA,  the opening of a new branch in February 1999, as well as
general cost of living and merit raises to employees.

Also impacting  non-interest expenses during 1998 were $608 thousand of expenses
incurred in connection with the termination  and consulting  agreements  entered
into with the Company's  former  President  and CEO, and severance  packages for
three former officers. There were no such expenses in 1999.

Occupancy and equipment  increased $498 thousand,  or 27.5%, to $2.3 million for
the year ended  December 31, 1999,  from $1.8 million in 1998  primarily  due to
increased  rent and  maintenance  expense  resulting  from the  opening of a new
branch in February 1999 and the four additional AFSALA branches  acquired.  Also
contributing  to  this  increase  was  the   acceleration  of  depreciation  and
amortization of equipment and leasehold improvements on a branch being closed as
a result of the  acquisition  of AFSALA,  as well as costs  associated  with the
relocation of a branch during the third quarter of 1999.

Data   processing   decreased  $328  thousand,   or  19.4%,   primarily  due  to
non-recurring  expenses  incurred  during the fourth  quarter of 1998 related to
contract  terminations  associated  with the core  system  (loans and  deposits)
conversion.

Professional  fees  decreased  $199  thousand,  or 27.1%,  from 1998 to 1999 due
primarily to $219 thousand in legal expenses incurred by the Company during 1998
to defend against  litigation  initiated by a shareholder.  However,  during the
fourth quarter of 1999, the Company incurred  professional fees in the amount of
$124 thousand in connection  with the Company's  response to inquires  from, and
preliminary   discussions  with,  third  parties  regarding   possible  business
combinations with the Company.  These discussions were terminated by the parties
in the fourth quarter without reaching any agreements.

Non-interest  expenses for 1999 included the  amortization of goodwill  totaling
approximately  $533  thousand for a full year,  up from $67 thousand in 1998 for
the month and a half after the acquisition.

Other  non-interest  expense decreased $444 thousand,  or 12.1%, to $3.2 million
for the year ended  December  31,  1999,  from $3.7  million  for the year ended
December 31, 1998.  This decrease was primarily due to  merger-related  expenses
incurred  during the fourth quarter of 1998, in addition to expenses  related to
the  settlement  of a  shareholder  action  and a  one-time  charge  related  to
significantly  modifying repurchase agreements incurred during the third quarter
of 1998.

Income Tax Expense. Income tax expense increased by $2.4 million to $3.1 million
for the year  ended  December  31,  1999 from $670  thousand  for the year ended
December 31, 1998.  The  increase  was  primarily  the result of the increase in
income before income taxes, as well as the impact of the non-deductible goodwill
amortization.


Asset Quality

     The Company's  loan  portfolio  consists  primarily of  one-to-four  family
residential  mortgage  and  home  equity  loans,  which as a  percentage  of the
Company's total loan portfolio were 82.3% at December 31, 2000.  During 1999 and
into 2000,  the Company also began to  re-emphasize  commercial  real estate and
commercial  business  lending.  Those loans, by nature,  tend to be of a shorter
term than one-to-four family residential  mortgages.  In addition,  the interest
rate charged on commrcial  real estate and commercial  business loans  generally
adjusts  within a period of five years or less. The growth in these loans should
improve the interest  rate risk  position of the  Company.  The  commercial  and
multi-family real estate portfolios  increased $12.7 million to $44.5 million at
December 31, 2000 from $31.8 million at December 31, 1999, an increase of 39.9%.
Likewise,  commercial business loans increased $7.4 million, or 111.0%, to $14.0
million at December 31, 2000.

The Company's  non-performing  assets consist of  non-accruing  loans,  accruing
loans delinquent more than 90 days,  troubled debt restructurings and foreclosed
and repossessed  assets.  Total non- performing assets at December 31, 2000 were
$3.6  million,  or 0.51% of total  assets,  compared  with $4.5 million and $3.3
million at  December  31,  1999 and 1998,  respectively.  The  decrease in total
non-performing  assets from  year-end  1999 to  year-end  2000 was due to a $964
thousand decrease in total  non-performing  loans.  Total  non-performing  loans
decreased from $4.2 million at December 31, 1999 to $3.2 million at December 31,
2000. This decrease was due primarily to a decrease in accruing loans delinquent
more than 90 days, of $811 thousand from December 31, 1999 to December 31, 2000.
This decrease in accruing loans  delinquent  more than 90 days was due primarily
to several  commercial  real estate  loans which were 90 days or more past their
contractual  maturity dates at December 31, 1999,  which were refinanced  during
2000. These loans,  although past their  contractual  maturity or balloon dates,
were making regularly scheduled payments.  The Company's ratio of non-performing
loans to total loans and allowance for loan losses to non-performing  loans were
0.70% and 177.0%,  respectively,  at December  31,  2000,  compared to 0.89% and
130.9%, respectively, at December 31, 1999.


Market Risk

Interest rate risk is the most  significant  market risk  affecting the Company.
Other types of market  risk,  such as foreign  currency  exchange  rate risk and
commodity  price  risk,  do not  arise in the  normal  course  of the  Company's
business activities.

The Company does not currently  engage in trading  activities or use  derivative
instruments, such as caps, collars or floors, to manage interest rate risk. Even
though  such  activities  may be  permitted  with the  approval  of the Board of
Directors,  the  Company  does not  intend to engage in such  activities  in the
immediate future.

The Company's net interest  income is sensitive to changes in interest rates, as
the rates paid on its interest-bearing  liabilities generally change faster than
the rates  earned on its  interest-earning  assets.  As a result,  net  interest
income will frequently  decline in periods of rising interest rates and increase
in periods of decreasing interest rates.

To mitigate the impact of changing  interest  rates on its net interest  income,
the Company manages its interest rate sensitivity and  asset/liability  products
through its asset/liability management committee. The asset/liability management
committee meets weekly to determine the rates of interest for loans and deposits
and  consists of the  President  and Chief  Executive  Officer,  the Senior Vice
President and Chief Commercial  Lending  Officer,  the Senior Vice President and
Chief Consumer Lending Officer,  and the Treasurer and Chief Financial  Officer.
Rates on deposits are primarily  based on the Company's needs for funds and on a
review of rates offered by other financial  institutions in the Company's market
areas. Interest rates on loans are primarily based on the interest rates offered
by other financial  institutions in the Company's  primary market areas, as well
as the Company's cost of funds.

The committee  manages the interest rate  sensitivity of the Company through the
determination  and  adjustment  of   asset/liability   composition  and  pricing
strategies. The committee then monitors the impact on interest rate risk and the
earnings  consequences  of such  strategies for  consistency  with the Company's
liquidity needs, growth, and capital adequacy.  The Company's principal strategy
is to reduce the interest rate sensitivity of its interest-earning assets and to
match, as closely as possible,  the maturities of  interest-earning  assets with
interest-bearing liabilities.

The  Company  is  subject  to  interest   rate  risk  to  the  extent  that  its
interest-bearing liabilities reprice on a different basis or at a different pace
than its  interest-earning  assets.  Management  of the  Company  believes it is
important  to  manage  the  effect  interest  rates  have on the  Company's  net
portfolio value ("NPV") and net interest income. NPV helps measure interest rate
risk by calculating  the  difference  between the present value of expected cash
flows from assets and the present value of expected cash flows from liabilities,
as well as cash flows from off-balance sheet contracts.

Presented below is an analysis of the Bank's interest rate risk as calculated by
the OTS as of  December  31,  2000,  measured  by  changes in the Bank's NPV for
instantaneous  and sustained  parallel  shifts in the yield curve,  in 100 basis
points increments, up and down 300 basis points.
<PAGE>

                                                              NPV as % of PV
                           Net Portfolio Value                  of Assets
                      ----------------------------------    ------------------

       Change                                                NPV
      in Rates        $Amount    $Change(1)    %Change(2)   Ratio(3) Change(4)
      --------        -------    ----------    ----------   -------- ---------

                           (Dollars in thousands)

        +300 bp       36,109     (39,220)         (52)%         5.44%  -512 bp
        +200 bp       48,882     (26,447)         (35)          7.19   -337 bp
        +100 bp       62,067     (13,262)         (18)          8.91   -165 bp
           0 bp       75,329                                   10.56
        -100 bp       83,341       8,012           11          11.49     93 bp
        -200 bp       90,531      15,202           20          12.29    173 bp
        -300 bp      100,992      25,663           34          13.44    288 bp

-------------------------------------------------------------------------------
(1)  Represents  the excess  (deficiency)  of the  estimated  NPV  assuming  the
indicated  change in interest  rates  compared to the  estimated NPV assuming no
change  in  interest  rates.
(2)  Calculated  as the  amount of change in the  estimated  NPV  divided by the
estimated NPV assuming no change in interest rates.
(3)  Calculated  as the  estimated NPV divided by present value of total assets.
(4)  Calculated  as the  excess  (deficiency)  of the  NPV  ratio  assuming  the
indicated  change in interest  rates over the  estimated  NPV ratio  assuming no
change in interest rates.

Certain  assumptions  utilized by the OTS in assessing the interest rate risk of
savings  associations  were  employed in  preparing  the previous  table.  These
assumptions  related to interest  rates,  loan prepayment  rates,  deposit decay
rates,  and the market values of certain assets under the various  interest rate
scenarios.  It was also  assumed  that  delinquency  rates  will not change as a
result of changes in interest rates although there can be no assurance that this
will be the case. Even if interest rates change in the designated amounts, there
can be no assurance that the Bank's assets and liabilities  would perform as set
forth above. In addition, certain shortcomings are inherent in the preceding NPV
table since the data reflects hypothetical changes in NPV based upon assumptions
used by the OTS to evaluate the Bank as well as other institutions.

The  experience of the Company has been that net interest  income  declines with
increases in market interest rates and that net interest  income  increases with
decreases in market  interest  rates.  Generally,  during  periods of increasing
interest rates, the Company's interest rate sensitive liabilities would re-price
faster  than its  interest  rate  sensitive  assets  causing  a  decline  in the
Company's  interest rate spread and net interest margin.  This would result from
an increase in the  Company's  cost of funds that would not be  immediately  and
fully offset by an increase in its yield on earning  assets.  An increase in the
cost of funds  without an  equivalent  increase  in the yield on earning  assets
would tend to reduce net  interest  income.  This trend was  evident in 1999 and
2000 when market  interest rates  generally  began to increase during the second
half of 1999  and  continued  into the  first  half of 2000.  This  increase  in
interest rates caused a decline in the net interest margin and net interest rate
spread from 3.21% and 2.57%, respectively, for the year ended December 31, 1999,
to 3.06% and 2.37%,  respectively,  for the year ended  December  31,  2000.  In
January  2001,  the  Federal  Reserve  Board took  actions to reduce  short-term
interest rates by 100 basis points,  in two separate 50 basis point cuts.  These
market  interest  rate  reductions  (in addition to actions taken by the Company
during 2000 to reduce  borrowings,  lengthen  the  maturities  of its  remaining
borrowings,  increase deposits, and increase  commercial-type loans) should help
reduce the  pressure on the  Company's  net interest  margin and  interest  rate
spread in 2001.


Liquidity and Capital Resources


The Bank is required by OTS regulations to maintain,  for each calendar month, a
daily average balance of cash and eligible  liquid  investments of not less than
4% of the average daily balance of its net  withdrawable  savings and borrowings
(due in one year or less) during the preceding  calendar  month.  This liquidity
requirement may be changed from time to time by the OTS to any amount within the
range of 4% to 10%. The Bank's average  liquidity ratio was 31.25% and 28.36% at
December 31, 2000 and 1999, respectively.

The Company's sources of liquidity include cash flows from operations, principal
and interest payments on loans,  mortgage-backed  securities and  collateralized
mortgage obligations, maturities of securities, deposit inflows, borrowings from
the FHLB of New York  and  proceeds  from  the  sale of  securities  sold  under
agreements to repurchase.

While  maturities and scheduled  amortization  of loans and  securities  are, in
general, a predictable  source of funds,  deposit flows and prepayments on loans
and  securities  are greatly  influenced  by general  interest  rates,  economic
conditions and  competition.  In addition,  the Company  invests excess funds in
overnight  and  short-term  deposits  which  provide  liquidity  to meet lending
requirements.

In addition to deposit  growth,  the Company  borrows funds from the FHLB of New
York or may utilize other types of borrowed  funds to supplement its cash flows.
At  December  31,  2000 and 1999,  the  Company  had  $71.4  and $92.2  million,
respectively,  in  outstanding  borrowings  from the FHLB and $72.5  million and
$112.7 million,  respectively,  in securities  repurchase  agreements,  the vast
majority  of  which  are  also  with the  FHLB.  See note 9 to the  consolidated
financial statements for further information regarding the Company's borrowings.

As of  December  31, 2000 and 1999,  the  Company had $139.0  million and $212.1
million,  respectively,  of  securities  classified as available for sale. As of
December  31,  2000,  the  Company  also had $51.6  million of  interest-bearing
deposits,  as well as $11.6 million of federal funds sold.  The liquidity of the
securities available for sale portfolio,  interest-bearing  deposits and federal
funds sold  provides the Company with  additional  potential  cash flows to meet
loan growth and deposit flows.

Liquidity may be adversely  affected by unexpected  deposit outflows,  excessive
interest rates paid by competitors,  adverse  publicity  relating to the savings
and loan industry, and similar matters.  Management monitors projected liquidity
needs  and  determines  the  level  desirable,  based  in part on the  Company's
commitment to make loans and management's assessment of the Company's ability to
generate funds.

The Bank is subject to federal  regulations  that impose certain minimum capital
requirements.  At December 31, 2000,  the Bank's  capital  exceeded  each of the
regulatory  capital  requirements of the OTS. The Bank is "well  capitalized" at
December 31, 2000 according to regulatory definition.  At December 31, 2000, the
Bank's  tangible and core capital  levels were both $64.0 million (9.1% of total
adjusted assets) and its total risk-based capital level was $68.3 million (19.7%
of  total   risk-weighted   assets).   The  minimum   regulatory  capital  ratio
requirements of the Bank are 1.5% for tangible  capital,  4.0% for core capital,
and 8.0% for total risk-based capital. See note 15 to the consolidated financial
statements  for further  information  regarding  the Bank's  regulatory  capital
requirements.

The Board of Directors previously  authorized the repurchase of up to 10% of the
Company's  common stock,  or  approximately  477,000  shares.  During 2000,  the
Company  repurchased 374,906 shares of the Company's common stock in open-market
transactions at a total cost of $5.7 million.


Effect of Inflation and Changing Prices


The  Company's  consolidated  financial  statements  and related data  presented
herein have been prepared in accordance  with  accounting  principles  generally
accepted in the United  States of America,  which  require  the  measurement  of
financial position and operating results in terms of historical dollars, without
considering  changes in the relative  purchasing power of money over time due to
inflation.  Unlike  industrial  companies,  virtually  all  of  the  assets  and
liabilities  of a financial  institution  are  monetary in nature.  As a result,
interest  rates  have a more  significant  impact on a  financial  institution's
performance  than the effects of general levels of inflation.  Interest rates do
not  necessarily  move in the same  direction or with the same  magnitude as the
prices of goods and services.



Recent Accounting Pronouncement


In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting   for  Derivative   Instruments  and  Hedging   Activities,"   which
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities.  As amended,  this  Statement is  effective  for all fiscal
quarters of fiscal  years  beginning  after June 15, 2000.  The Company  adopted
Statement No. 133 on January 1, 2001. As of January 1, 2001, the Company did not
have any  derivative  instruments  or derivative  instruments  embedded in other
contracts,  and  therefore  the  adoption  of  Statement  No. 133 did not have a
material impact on the Company's consolidated financial statements.


<PAGE>



<TABLE>
<CAPTION>

Unaudited Consolidated Quarterly Financial Information
                                                                2000                                         1999
                                           -----------------------------------------    -----------------------------------------
                                              3/31       6/30      9/30       12/31        3/31       6/30      9/30       12/31
                                           --------   --------   --------   --------    --------   --------   --------   --------
                                                                (In thousands, except share and per share data)
<S>                                         <C>        <C>        <C>        <C>         <C>        <C>        <C>        <C>
Interest and dividend income .......       $12,544    $12,436    $12,373    $12,392     $11,964    $11,957    $12,334    $12,512

Net interest income ................         5,516      5,446      5,203      5,029       5,393      5,506      5,892      5,657

Provision for loan losses ..........           120        120        120        120         255        240        175        120

Income  before taxes ...............         1,707      1,567      1,488      1,200       1,816      1,868      2,200      1,514

Net income .........................           984        929        904        725       1,035      1,092      1,257        919

Basic earnings per share ...........          0.21       0.20       0.19       0.16        0.21       0.22       0.26       0.20
Diluted earnings per share .........          0.21       0.20       0.19       0.16        0.20       0.22       0.26       0.19

Average Shares Outstanding - Basic .     4,669,625  4,627,006  4,653,495  4,515,314   5,009,031  4,993,494  4,838,482  4,673,154
Average Shares Outstanding - Diluted     4,691,976  4,666,262  4,692,862  4,572,865   5,060,835  5,058,050  4,894,297  4,731,445
</TABLE>
<PAGE>











                          Independent Auditors' Report


The Shareholders and Board of Directors
Ambanc Holding Co., Inc.:


We have audited the accompanying  consolidated statements of financial condition
of Ambanc  Holding Co., Inc. and  subsidiaries  (the Company) as of December 31,
2000 and 1999,  and the related  consolidated  statements of income,  changes in
shareholders'  equity  and cash  flows for each of the  years in the  three-year
period ended December 31, 2000. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Ambanc Holding Co.,
Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 2000, in conformity  with  accounting  principles  generally
accepted in the United States of America.



/s/KPMG LLP
Albany, New York
February 9, 2001


<PAGE>
<TABLE>
<CAPTION>
                   AMBANC HOLDING CO., INC. AND SUBSIDIARIES
                 Consolidated Statements of Financial Condition
                                                                     December 31,
                                                                   2000        1999
                                                               ----------   ----------
                                                                    (In thousands)
<S>                                                           <C>              <C>
    Assets
Cash and due from banks ....................................   $  15,306       26,380
Federal funds sold .........................................      11,600         --
Interest-bearing deposits ..................................      51,591        3,231
                                                               ---------    ---------
   Cash and cash equivalents ...............................      78,497       29,611
Securities available for sale, at fair value ...............     138,990      212,145
Federal Home Loan Bank of New York stock, at cost ..........       8,870        8,748
Loans receivable, net ......................................     459,958      465,477
Accrued interest receivable ................................       4,103        4,411
Premises and equipment, net ................................       5,288        5,646
Real estate owned and repossessed assets ...................         373          322
Goodwill, net ..............................................       6,858        7,390
Other assets ...............................................       3,699        6,922
                                                               ---------    ---------
   Total assets ............................................   $ 706,636      740,672
                                                               =========    =========
  Liabilities and Shareholders' Equity
Liabilities:
 Deposits ..................................................     478,592      450,134
 Federal Home Loan Bank short-term borrowings ..............       5,000       71,200
 Federal Home Loan Bank long-term advances .................      66,435       20,965
 Securities sold under agreements to repurchase ............      72,500      112,740
 Advances from borrowers for taxes and insurance ...........       3,402        3,641
 Accrued interest payable ..................................       1,108        1,508
 Accrued expenses and other liabilities ....................       2,477        4,891
                                                               ---------    ---------
   Total liabilities .......................................     629,514      665,079
                                                               ---------    ---------
Commitments and contingent liabilities (note 13)
Shareholders' equity:
 Preferred stock $.01 par value. Authorized 5,000,000
  shares; none issued at December 31, 2000 and 1999 ........        --           --
 Common stock $.01 par value. Authorized 15,000,000 shares;
  5,432,245 shares issued at December 31, 2000 and 1999 ....          54           54
 Additional paid-in capital ................................      63,529       63,314
 Retained earnings, substantially restricted ...............      29,994       28,879
 Treasury stock, at cost (829,279 shares at December
  31, 2000 and 465,155 shares at December 31, 1999) ........     (13,032)      (7,486)
 Unallocated common stock held by ESOP .....................      (1,909)      (2,353)
 Unearned RRP shares .......................................        (126)        (443)
 Accumulated other comprehensive loss ......................      (1,388)      (6,372)
                                                               ---------    ---------
   Total shareholders' equity ..............................      77,122       75,593
                                                               ---------    ---------
   Total liabilities and shareholders' equity ..............   $ 706,636      740,672
                                                               =========    =========
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                   AMBANC HOLDING CO., INC. AND SUBSIDIARIES
                       Consolidated Statements of Income
                                                             Years ended December 31,
                                                           2000       1999       1998
                                                          -------   -------   -------
                                                   (In thousands, except per share amounts)
<S>                                                        <C>       <C>       <C>
Interest and dividend income:
 Loans receivable .....................................   $34,872    32,578    24,623
 Securities available for sale ........................    13,800    15,245    13,479
 Federal funds sold and interest-bearing deposits .....       463       441       507
 Federal Home Loan Bank stock .........................       610       503       364
                                                          -------   -------   -------
   Total interest and dividend income .................    49,745    48,767    38,973
                                                          -------   -------   -------
Interest expense:
 Deposits .............................................    18,772    16,755    13,822
 Borrowings ...........................................     9,779     9,564     8,619
                                                          -------   -------   -------
   Total interest expense .............................    28,551    26,319    22,441
                                                          -------   -------   -------
   Net interest income ................................    21,194    22,448    16,532
Provision for loan losses .............................       480       790       900
                                                          -------   -------   -------
   Net interest income after provision for loan losses     20,714    21,658    15,632
                                                          -------   -------   -------
Non-interest income:
 Service charges on deposit accounts ..................     1,315     1,376     1,012
 Net gains (losses) on securities transactions ........       222      --        (165)
 Other ................................................       504       427       297
                                                          -------   -------   -------
   Total non-interest income ..........................     2,041     1,803     1,144
                                                          -------   -------   -------
Non-interest expenses:
 Salaries, wages and benefits .........................     8,056     8,027     6,423
 Non-recurring termination benefits ...................      --        --         608
 Occupancy and equipment ..............................     2,355     2,349     1,932
 Data processing ......................................     1,594     1,360     1,688
 Real estate owned and repossessed assets expenses, net        73        60        61
 Professional fees ....................................       914       536       735
 Amortization of goodwill .............................       532       533        67
 Other ................................................     3,269     3,198     3,561
                                                          -------   -------   -------
   Total non-interest expenses ........................    16,793    16,063    15,075
                                                          -------   -------   -------
Income before taxes ...................................     5,962     7,398     1,701
Income tax expense ....................................     2,420     3,095       670
                                                          -------   -------   -------
   Net income .........................................   $ 3,542     4,303     1,031
                                                          =======   =======   =======
Basic earnings per share ..............................   $  0.77      0.88      0.26
                                                          =======   =======   =======
Diluted earnings per share ............................   $  0.76      0.87      0.26
                                                          =======   =======   =======

See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                    AMBANC HOLDING CO., INC. AND SUBSIDIARIES
        Consolidated Statements of Changes in Shareholders' Equity
                     Years ended December 31, 2000, 1999 and 1998
                 (In thousands, except share and per share data)
                                                                    Additional
                                                           Common    paid-in   Retained   Treasury
                                                           stock     capital   earnings    stock
                                                          -------  ----------  --------   --------
<S>                                                       <C>        <C>        <C>       <C>
Balance at December 31, 1997 ..........................        54    52,385     26,458    (12,585)
Comprehensive income:
 Net income ...........................................        --        --      1,031         --
 Other comprehensive income, net of tax:
   Unrealized net holding gains on securities available
     for sale arising during the year (pre-tax $908)
   Reclassification adjustment for net losses on
     securities  transactions realized in net
     income during the year (pre-tax $165)
 Other comprehensive income ...........................        --        --         --         --
      Comprehensive income
Purchase of treasury shares (215,320 shares) ..........        --        --         --     (4,111)
Release of ESOP shares (48,498 shares) ................        --       331         --         --
RRP shares vested .....................................        --        --         --         --
Tax benefit related to RRP shares vested ..............        --        76         --         --
RRP shares forfeited (29,331 shares) ..................        --        --         --       (403)
Exercises of stock options (9,489 shares) .............        --         5         --        125
Acquisition of AFSALA Bancorp, Inc. (see note 2).......        --    10,222         --     16,645
Cash dividends - $0.25 per share ......................        --        --     (1,133)        --
                                                          -------  ----------  --------   --------
Balance at December 31, 1998 ..........................        54    63,019     26,356       (329)
Comprehensive loss:
 Net income ...........................................        --        --      4,303         --
 Other comprehensive loss, net of tax:
   Unrealized net holding losses on securities available
     for sale arising during the year (pre-tax $11,237)        --        --         --         --
      Comprehensive loss
Purchase of treasury shares (459,000 shares) ..........        --        --         --     (7,438)
Release of ESOP shares (46,434 shares) ................        --       279         --         --
Issuance of RRP shares (7,586 shares) .................        --        --         (4)       121
RRP shares vested .....................................        --        --         --         --
Tax benefit related to RRP shares vested ..............        --        21         --         --
Exercises of stock options (10,167 shares) ............        --        (5)       (16)       160
Cash dividends - $0.34 per share ......................        --        --     (1,760)        --
                                                          -------  ----------  --------   --------
Balance at December 31, 1999 ..........................   $    54    63,314     28,879     (7,486)
Comprehensive income:
 Net income ...........................................        --        --      3,542         --
 Other comprehensive income, net of tax:
   Unrealized net holding losses on securities available
     for sale arising during the year (pre-tax $ 8,528)
 Reclassification adjustment for net gains on
     securities transactions realized in net
     income during the year (pre-tax $222)
 Other comprehensive income ...........................        --        --         --         --
      Comprehensive income
Purchase of treasury shares (374,906 shares) ..........        --        --         --     (5,717)
Release of ESOP shares (44,405 shares) ................        --       217         --         --
Issuance of RRP shares(10,782 shares) .................        --        --         (4)       171
RRP shares vested .....................................        --        --         --         --
Tax benefit related to RRP shares vested ..............        --        (2)        --         --
Cash dividends - $0.50 per share ......................        --        --     (2,423)        --
                                                          -------  ----------  --------   --------
Balance at December 31, 2000 ..........................   $    54    63,529     29,994    (13,032)
                                                          =======  ==========  ========   ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                    AMBANC HOLDING CO., INC. AND SUBSIDIARIES
     Consolidated Statements of Changes in Shareholders' Equity (continued)
                  Years ended December 31, 2000, 1999 and 1998
                (In thousands, except share and per share data)

                                                       Unallocated             Accumulated
                                                       common stock   Unearned    other
                                                         held by         RRP  comprehensive          Comprehensive
                                                           ESOP        shares (loss) income  Total   income (loss)
                                                       -----------  ---------- ------------ -------- -------------
<S>                                                       <C>              <C>      <C>      <C>
Balance at December 31, 1997 ..........................    (3,303)    (1,533)      (274)     61,202
Comprehensive income:
 Net income ...........................................        --         --         --       1,031       $1,031
 Other comprehensive income, net of tax:
   Unrealized net holding gains on securities available
     for sale arising during the year (pre-tax $908) ..                                                      545
   Reclassification adjustment for net losses on
     securities transactions realized in net
     income during the year (pre-tax $165) .....                                                              99
                                                                                                         -------
 Other comprehensive income ...........................        --         --        644         644          644
                                                                                                         -------
      Comprehensive income ............................                                             $      1,675
                                                                                                         =======
Purchase of treasury shares (215,320 shares) ..........        --         --         --      (4,111)
Release of ESOP shares (48,498 shares) ................       485         --         --         816
RRP shares vested .....................................        --        371         --         371
Tax benefit related to RRP shares vested ..............        --         --         --          76
RRP shares forfeited (29,331 shares) ..................        --        403         --          --
Exercises of stock options (9,489 shares) .............        --         --         --         130
Acquisition of AFSALA Bancorp, Inc. (see note 2).......        --         --         --      26,867
Cash dividends - $0.25 per share ......................        --         --         --      (1,133)
                                                       -----------  ---------- ------------ --------
Balance at December 31, 1998 ..........................    (2,818)      (759)       370      85,893
Comprehensive loss:
 Net income ...........................................        --         --         --       4,303       $4,303
 Other comprehensive loss, net of tax:
   Unrealized net holding losses on securities available
     for sale arising during the year (pre-tax $11,237)        --         --     (6,742)     (6,742)      (6,742)
                                                                                                         -------
      Comprehensive loss ..............................                                             $     (2,439)
                                                                                                         =======
Purchase of treasury shares (459,000 shares) ..........        --         --         --      (7,438)
Release of ESOP shares (46,434 shares) ................       465         --         --         744
Issuance of RRP shares (7,586 shares) .................        --       (117)        --          --
RRP shares vested .....................................        --        433         --         433
Tax benefit related to RRP shares vested ..............        --         --         --          21
Exercises of stock options (10,167 shares) ............        --         --         --         139
Cash dividends - $0.34 per share ......................        --         --         --      (1,760)
                                                       -----------  ---------- ------------ --------
Balance at December 31, 1999 ..........................   $(2,353)      (443)    (6,372)     75,593
Comprehensive income:
 Net income ...........................................        --         --         --       3,542       $3,542
 Other comprehensive income, net of tax:
   Unrealized net holding losses on securities available
     for sale arising during the year (pre-tax $ 8,528)                                                    5,177
 Reclassification adjustment for net gains on
     securities transactions realized in net
     income during the year (pre-tax $222)                                                                  (133)
                                                                                                         -------
 Other comprehensive income ...........................        --         --      4,984       4,984        4,984
                                                                                                         -------
      Comprehensive income ............................                                                 $  8,526
                                                                                                         =======
Purchase of treasury shares (374,906 shares) ..........        --         --         --      (5,717)
Release of ESOP shares (44,405 shares) ................       444         --         --         661
Issuance of RRP shares(10,782 shares) .................        --       (167)        --          --
RRP shares vested .....................................        --        484         --         484
Tax benefit related to RRP shares  vested..............        --         --         --          (2)
Cash dividends - $0.50 per share ......................        --         --         --      (2,423)
                                                       -----------  ---------- ------------ --------
Balance at December 31, 2000 ..........................   $(1,909)      (126)    (1,388)     77,122
                                                       ===========  ========== ============ ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                    AMBANC HOLDING CO., INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows

                                                                Years ended December 31,2000
                                                              2000       1999        1998
                                                            -------    -------     -------
                                                                     (In thousands)

Increase  (decrease)  in cash and cash  equivalents:
Cash flows from operating activities:
<S>                                                        <C>         C>            <C>
   Net income ..........................................   $  3,542      4,303       1,031
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation and amortization of premises and
          equipment ....................................        924        888         735
       Amoritization of goodwill .......................        532        533          67
       Net amortization of purchase accounting
          adjustments ..................................        368       (204)        (36)
       Net amortization of premiums on securities ......        250        734       1,094
       Provision for loan losses .......................        480        790         900
       Provision for losses and writedowns on real
          estate owned and repossessed assets ..........         14          6           7
       Net losses (gains) on sales of real estate
          owned and repossessed assets .................         28         --          (7)
       ESOP compensation expense .......................        661        744         816
       RRP expense .....................................        484        433         371
       Net (gains) losses on securities transactions ...       (222)        --         165
       Decrease in accrued interest
          receivable and other assets ..................        207        539          65
       (Decrease)increase in accrued interest payable
          and accrued expenses and other liabilities ...      (2,814)       479       1,423
                                                            -------    -------     -------
               Net cash provided by operating activities      4,454      9,245       6,631
                                                            -------    -------     -------
 Cash flows from investing activities:
   Proceeds from sales of securities available for sale.     69,810        ---      79,101
   Purchases of securities available for sale ..........     (4,834)   (60,296)   (157,188)
   Proceeds from principal paydowns, maturities
      and calls of securities available for sale .......     16,421     74,385     101,488
   Purchases of FHLB stock .............................       (122)    (1,533)     (3,359)
   Net loans repaid by (made to) customers .............     18,412    (46,025)    (26,391)
   Purchases of loans ..................................    (14,000)       ---     (31,888)
   Purchases of premises and equipment .................     (  566)    (1,944)       (422)
   Proceeds from sales of real estate owned and
     repossessed assets ................................        191        419         270
   Net cash acquired in acquisition ....................         --         --      24,996
                                                            -------    -------     -------
    Net cash provided by (used in) investing activities.     85,312    (34,994)    (13,393)
                                                            -------    -------     -------
                                                                                (continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                    AMBANC HOLDING CO., INC. AND SUBSIDIARIES
                Consolidated Statements of Cash Flows, Continued
                                                                Years ended December 31,2000
                                                              2000        1999        1998
                                                            -------     -------     -------
 Cash flows from financing activities:                                (In thousands)
<S>                                                      <C>           >            <C>
   Net increase (decrease) in deposits ...............   $   28,458     (10,709)    (16,533)
   Net (decrease) increase in FHLB short-term
     borrowings ......................................      (66,200)     71,200     (12,300)
   Proceeds from FHLB long-term advances .............       50,000          --      20,000
   Repayments of FHLB long-term advances .............       (4,519)       (432)        (35)
   Proceeds from repurchase agreements ...............       25,391      15,550     142,575
   Repayments of repurchase agreements ...............      (65,631)    (55,210)    (89,425)
   (Decrease) increase in advances from borrowers for
      taxes and insurance ............................         (239)      1,205         150
   Purchases of treasury stock .......................       (5,717)     (7,438)     (4,111)
   Exercises of stock options ........................          ---         139         130
   Dividends paid ....................................       (2,423)     (1,760)     (1,133)
                                                            -------     -------     -------
    Net cash(used in)provided by financing activities.      (40,880)     12,545      39,318
                                                            -------     -------     -------
Net increase (decrease) in cash and cash equivalents .       48,886     (13,204)     32,556
Cash and cash equivalents at beginning of year .......       29,611      42,815      10,259
                                                            -------     -------     -------
Cash and cash equivalents at end of year .............   $   78,497      29,611      42,815
                                                            =======     =======     =======
Supplemental  disclosures  of cash flow  information -
 cash paid during the year for:
   Interest ..........................................   $   28,951      26,237      21,834
                                                            =======     =======     =======
   Income taxes ......................................   $    2,524       2,866       1,429
                                                            =======     =======     =======
Noncash investing and financing activities:
 Net transfer of loans to real estate owned and
   repossessed assets ................................   $      284         348         386
                                                            =======     =======     =======
 (Decrease) increase in amounts due to brokers for
   purchases of securities available for sale ........   $       --      (6,000)      6,000
                                                            =======     =======     =======
 Adjustment of securities available for sale to fair
   value,net of tax...................................   $    4,984      (6,742)        644
                                                            =======     ========    =======
 Fair value of non-cash assets acquired in acquisition   $       --          --     142,820
                                                            =======     =======     =======
 Fair value of liabilities assumed in acquisition ....   $       --          --     148,565
                                                            =======     =======     =======
 Issuance of RRP shares ..............................   $      171         121          --
                                                            =======     =======     =======
 Tax impact related to RRP shares vested .............   $       (2)         21          76
                                                            =======     =======     =======
 RRP shares forfeited ................................   $       --          --         403
                                                            =======     =======     =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
                    AMBANC HOLDING CO., INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998



(1)    Summary of Significant Accounting Policies

       (a)    Basis of Presentation

              The accompanying  consolidated  financial  statements  include the
              accounts  of Ambanc  Holding  Co.,  Inc.  (Ambanc  or the  Holding
              Company),  and its wholly  owned  subsidiaries,  Mohawk  Community
              Bank,  formerly  known as Amsterdam  Savings Bank, FSB (the Bank),
              and A.S.B. Insurance Agency, Inc., collectively referred to as the
              Company.   All   significant   intercompany   accounts  have  been
              eliminated in consolidation. The accounting and reporting policies
              of the Company  conform in all  material  respects  to  accounting
              principles  generally accepted in the United States of America and
              to general practice within the banking industry.

       (b)    Use of Estimates

              The  preparation  of  the  consolidated  financial  statements  in
              conformity with accounting  principles  generally  accepted in the
              United States of America requires management to make estimates and
              assumptions  that  affect  the  reported  amounts  of  assets  and
              liabilities and disclosure of contingent assets and liabilities at
              the date of the consolidated financial statements and the reported
              amounts of revenues  and  expenses  during the  reporting  period.
              Actual results could differ from those estimates.

              A  material   estimate  that  is   particularly   susceptible   to
              significant  change in the near-term  relates to the determination
              of the  allowance  for loan losses.  Management  believes that the
              allowance  for loan losses is  adequate.  In  connection  with the
              determination of the allowance for loan losses, management obtains
              appraisals for significant  loans. While management uses available
              information to recognize losses on loans,  future additions to the
              allowance   may  be   necessary   based  on  changes  in  economic
              conditions.  In  addition,  various  regulatory  agencies,  as  an
              integral part of their examination  process,  periodically  review
              the Company's allowance for loan losses. Such agencies may require
              the Company to recognize additions to the allowance based on their
              judgments about information available to them at the time of their
              examination which may not be currently available to management.

              A substantial portion of the Company's assets are loans secured by
              real  estate  in the  upstate  New  York  area.  Accordingly,  the
              ultimate collectibility of a considerable portion of the Company's
              loan portfolio is dependent upon market  conditions in the upstate
              New York region.

       (c)    Cash Equivalents

              For purposes of the  consolidated  statements of cash flows,  cash
              and cash  equivalents  consist  of cash on hand,  due from  banks,
              federal funds sold and interest-bearing deposits.


<PAGE>


       (d)    Securities  Available  for Sale, Securities  Held to  Maturity and
                 FHLB of New York Stock

              Management determines the appropriate classification of securities
              at the time of purchase. If management has the positive intent and
              ability to hold debt  securities to maturity,  they are classified
              as securities  held to maturity and are stated at amortized  cost.
              All other debt and marketable  equity securities are classified as
              securities available for sale and are reported at fair value, with
              net  unrealized  gains and losses  reported in  accumulated  other
              comprehensive income or loss. Unrealized losses on securities that
              reflect  a  decline  in  value  that is  other-than-temporary  are
              charged  to  income.  The  Company  does not  maintain  a  trading
              portfolio,  and at December 31, 2000 and 1999,  the Company had no
              securities classified as held to maturity.

              Non-marketable  equity securities,  such as Federal Home Loan Bank
              of New York (FHLB) stock,  are stated at cost.  The  investment in
              FHLB stock is  required  for  membership  and is pledged to secure
              FHLB borrowings.

              Gains and losses on the sale or call of  securities  available for
              sale are based on the amortized cost of the specific security sold
              or called. The cost of securities is adjusted for the amortization
              of premiums and the accretion of discounts, which is calculated on
              an effective interest method.  Purchases and sales are recorded on
              a trade date basis.

              Mortgage-backed  securities,  which are  guaranteed by Ginnie Mae,
              Freddie Mac or Fannie Mae,  represent  participation  interests in
              pools of long-term first mortgage loans originated and serviced by
              the issuers of the securities.

       (e)    Loans Receivable and Allowance for Loan Losses

              Loans receivable are stated at the unpaid principal amount, net of
              unearned  discount,  net  deferred  loan fees and  costs,  and the
              allowance for loan losses.  Discounts are amortized to income over
              the  contractual  life of the loan using the  level-yield  method.
              Loan fees received and certain  direct costs of  originations  are
              deferred and recorded as yield  adjustments  over the lives of the
              related loans using the interest method of amortization.


<PAGE>


              Non-performing loans include nonaccrual loans,  restructured loans
              and loans  which  are 90 days or more past due and still  accruing
              interest.  Loans  considered  doubtful of collection by management
              are placed on a nonaccrual  status with respect to interest income
              recognition.  Generally,  loans  past  due 90  days  or more as to
              principal or interest are placed on  nonaccrual  status except for
              certain loans which,  in  management's  judgment,  are  adequately
              secured and for which collection is probable.  Previously  accrued
              income  that has not  been  collected  is  reversed  from  current
              income.   Thereafter,   the   application  of  payments   received
              (principal  or interest) on  nonaccrual  loans is dependent on the
              expectation  of  ultimate  repayment  of  the  loan.  If  ultimate
              repayment of the loan is reasonably assured, any payments received
              are applied in accordance with the contractual  terms. If ultimate
              repayment  of principal is not  reasonably  assured or  management
              judges it to be  prudent,  any  payment  received  is  applied  to
              principal  until  ultimate  repayment of the remaining  balance is
              reasonably assured.  Loans are removed from nonaccrual status when
              they are  estimated to be fully  collectible  as to principal  and
              interest.  Amortization  of the related  deferred fees or costs is
              suspended when a loan is placed on nonaccrual status.

              The  allowance  for loan losses is  maintained  at a level  deemed
              appropriate by management  based on an evaluation of the known and
              inherent  risks in the  portfolio,  the  level  of  non-performing
              loans,   past  loan  loss  experience,   the  estimated  value  of
              underlying collateral,  and economic conditions.  The allowance is
              increased by  provisions  for loan losses  charged to  operations.
              Losses on loans  (including  impaired  loans)  are  charged to the
              allowance  when  all  or a  portion  of a  loan  is  deemed  to be
              uncollectible.  Recoveries  of loans  previously  charged  off are
              credited to the allowance when realized.

       (f)    Loan Impairment

              Management  considers a loan to be impaired  if,  based on current
              information,  it is probable  that the  Company  will be unable to
              collect all  scheduled  payments of principal or interest when due
              according to the contractual  terms of the loan agreement.  When a
              loan is considered to be impaired, the amount of the impairment is
              measured based on the present value of expected  future cash flows
              discounted  at  the  loan's  effective  interest  rate  or,  as  a
              practical expedient,  at the loan's observable market price or the
              fair value of the collateral if the loan is collateral  dependent.
              Except for loans  restructured  in a troubled debt  restructuring,
              management  excludes large groups of  smaller-balance  homogeneous
              loans such as residential  mortgages and consumer loans, which are
              collectively evaluated for impairment.

       (g)    Real Estate Owned and Repossessed Assets

              Real estate owned and  repossessed  assets include assets received
              from foreclosures, in-substance foreclosures, and repossessions. A
              loan is classified as an in-substance foreclosure when the Company
              has taken  possession  of the  collateral  regardless  of  whether
              formal foreclosure proceedings have taken place.


<PAGE>


              Real estate owned and repossessed assets,  including  in-substance
              foreclosures,  are  recorded on an  individual  asset basis at the
              lower of fair value less  estimated  costs to sell or the recorded
              investment in the loan.  When a property is acquired or identified
              as an  in-substance  foreclosure,  the  excess,  if  any,  of  the
              recorded  investment  in the loan over the fair value of the asset
              acquired is charged to the allowance  for loan losses.  Subsequent
              writedowns  to carry the property at fair value less costs to sell
              are included in non-interest  expenses.  Costs incurred to develop
              or improve  properties  are  capitalized,  while holding costs are
              charged to expense.

              At December 31, 2000 and 1999,  real estate owned and  repossessed
              assets  consisted  primarily  of  one-to-four  family  residential
              properties, commercial properties and automobiles. The Company had
              no in-substance foreclosures at December 31, 2000 or 1999.

       (h)    Premises and Equipment, Net

              Premises  and  equipment  are  carried at cost,  less  accumulated
              depreciation  applied on a straight-line  basis over the estimated
              useful lives of the assets.  Leasehold  improvements are amortized
              on a  straight-line  basis  over  the  shorter  of the term of the
              original  lease (without  regard to lease renewal  options) or the
              estimated useful lives of the assets.

       (i)    Goodwill

              Goodwill represents the excess of the purchase price over the fair
              value of the net assets  acquired for  transactions  accounted for
              using  the  purchase  method  of  accounting.  Goodwill  is  being
              amortized  over  fifteen  years  using the  straight-line  method.
              Accumulated  amortization  of goodwill  amounted to  approximately
              $1.1   million  and  $600,000  at  December  31,  2000  and  1999,
              respectively.  Goodwill is periodically reviewed by management for
              recoverability, and impairment is recognized by a charge to income
              if a permanent loss in value is indicated.

       (j)    Securities Repurchase Agreements

              In securities  repurchase  agreements,  the Company  receives cash
              from a counterparty  in exchange for the transfer of securities to
              a third party custodian's  account that explicitly  recognizes the
              Company's  interest  in  the  securities.   These  agreements  are
              accounted  for by the  Company as secured  financing  transactions
              since  it  maintains   effective   control  over  the  transferred
              securities  and  meets  other  criteria  for  such  accounting  as
              specified in Statement of Financial  Accounting  Standards  (SFAS)
              No. 125.  Accordingly,  the cash proceeds are recorded as borrowed
              funds and the underlying  securities continue to be carried in the
              Company's securities available for sale portfolio.


<PAGE>


       (k)    Income Taxes

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

       (l)    Financial Instruments

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

       (m)    Stock-Based Compensation Plans

              The Company  accounts for its Stock Option Plan in accordance with
              the  provisions of Accounting  Principles  Board (APB) Opinion No.
              25,  "Accounting  for Stock  Issued  to  Employees,"  and  related
              Interpretations.  Accordingly,  compensation expense is recognized
              only if the  exercise  price of the  option  is less than the fair
              value of the  underlying  stock at the grant  date.  SFAS No. 123,
              "Accounting for Stock-Based  Compensation," encourages entities to
              recognize the fair value of all stock-based  awards on the date of
              grant  as   compensation   expense   over  the   vesting   period.
              Alternatively,  SFAS No. 123 allows  entities to continue to apply
              the  provisions  of APB  Opinion  No.  25 and  provide  pro  forma
              disclosures  of  net  income  and  earnings  per  share  as if the
              fair-value-based  method  of SFAS No.  123 had been  applied.  The
              Company has elected to  continue  to apply the  provisions  of APB
              Opinion No. 25 and provide the pro forma  disclosures  required by
              SFAS No. 123.

              The  Company's  Recognition  and  Retention  Plan  (RRP)  is  also
              accounted  for in  accordance  with APB Opinion No. 25 and related
              Interpretations. The fair value of the shares awarded, measured as
              of the grant  date,  is  recognized  as unearned  compensation  (a
              deduction from shareholders' equity) and amortized to compensation
              expense as the shares become vested.


<PAGE>


       (n)    Earnings per share

              Basic earnings per share (EPS) excludes dilution and is calculated
              by dividing  net income  available to common  shareholders  by the
              weighted-average  number of common shares  outstanding  during the
              period.  Shares of  restricted  stock are  considered  outstanding
              common  shares and included in the  computation  of basic EPS when
              they become  fully  vested.  Diluted EPS  reflects  the  potential
              dilution  that could occur if  securities  or other  contracts  to
              issue  common  stock  (such as the  Company's  stock  options  and
              unvested RRP shares) were  exercised or otherwise  resulted in the
              issuance  of common  stock.  Dilution is measured by the number of
              incremental  shares  that  would be  issued,  computed  using  the
              treasury stock method.  Unallocated common shares held by the ESOP
              are not included in the  weighted-average  number of common shares
              outstanding for either the basic or diluted EPS calculations.

       (o)    Official Bank Checks

              The Company has certain  official bank checks which are drawn upon
              the Bank and ultimately  paid through the Bank's  Federal  Reserve
              Bank of New York correspondent  account.  These outstanding checks
              are  included in accrued  expenses  and other  liabilities  in the
              consolidated statements of financial condition.

       (p)    Comprehensive Income or Loss

              Comprehensive  income or loss represents the sum of net income and
              items of other  comprehensive  income or loss,  which are reported
              directly in shareholders'  equity,  net of tax, such as the change
              in the net  unrealized  gain or loss on  securities  available for
              sale.  Accumulated  other  comprehensive  income or loss, which is
              included in  shareholders'  equity,  represents the net unrealized
              gain or loss on securities available for sale, net of tax.

       (q)    Segment Reporting

              The Company engages in the  traditional  operations of a community
              banking  enterprise,  principally the delivery of loan and deposit
              products and other financial services.  Management makes operating
              decisions and assesses  performance  based on an ongoing review of
              the Company's community banking  operations,  which constitute the
              Company's only operating segment for financial reporting purposes.
              The Company operates  primarily in upstate New York in Montgomery,
              Fulton,  Schenectady,   Saratoga,  Albany,  Otsego,  Chenango  and
              Schoharie counties and surrounding areas.

       (r)    Reclassifications

              Amounts in the prior years' consolidated  financial statements are
              reclassified  whenever  necessary to conform to the current year's
              presentation.


<PAGE>


(2)    Acquisition of AFSALA Bancorp, Inc.

       On November 16, 1998, the Company acquired AFSALA Bancorp,  Inc. (AFSALA)
       and its wholly owned  subsidiary,  Amsterdam Federal Bank. At the date of
       the merger,  AFSALA had  approximately  $167.1 million in assets,  $144.1
       million in deposits, and $19.2 million in shareholders' equity.  Pursuant
       to the merger  agreement,  AFSALA was merged with and into Ambanc Holding
       Co., Inc., and Amsterdam Federal Bank was merged with and into the former
       Amsterdam  Savings  Bank,  FSB.  The  combined  bank now  operates as one
       institution under the name "Mohawk Community Bank".

       Upon  consummation  of the merger,  each share of AFSALA common stock was
       converted  into the right to receive 1.07 shares of Ambanc  common stock.
       Based  on  the  1,249,727  shares  of  AFSALA  common  stock  issued  and
       outstanding immediately prior to the merger, the Company issued 1,337,081
       shares of common stock in the merger and paid out 126  fractional  shares
       in cash. Of the 1,337,081  shares  issued in the merger,  1,327,086  were
       issued  from the  Company's  treasury  stock and 9,995 were  newly-issued
       shares.  In addition,  under the merger  agreement,  the Company  assumed
       unexercised,  fully-vested  options to purchase  144,118 shares of AFSALA
       common  stock,  which  converted  into  fully-vested  options to purchase
       154,203 shares of Ambanc common stock. See also Note 11(d).

       The acquisition was accounted for using purchase accounting in accordance
       with  APB  Opinion  No.  16,  "Business   Combinations."  Under  purchase
       accounting,  the purchase  price is allocated  to the  respective  assets
       acquired and  liabilities  assumed based on their  estimated fair values.
       The  acquisition  of AFSALA  resulted in  approximately  $8.0  million in
       excess of cost over net assets acquired  ("goodwill").  Goodwill is being
       amortized  to  expense   over  a  period  of  fifteen   years  using  the
       straight-line  method.  The  results of  operations  of AFSALA  have been
       included in the Company's consolidated statements of income from the date
       of acquisition.

       In conjunction  with the  acquisition of AFSALA,  premiums on securities,
       loans,   time  deposits  and  FHLB   advances   were  recorded   totaling
       approximately $155,000,  $1,459,000,  $651,000 and $26,000, respectively,
       in order to record these assets and  liabilities at their  estimated fair
       values  based on  market  interest  rates at the  acquisition  date.  The
       premiums are being  amortized  over the estimated  period to repricing of
       the respective items. For the year ended December 31, 2000, the impact of
       the net  amortization  of the  premiums  was to  decrease  net  income by
       approximately  $221,000. For the year ended December 31, 1999, the impact
       of the net  amortization  of the  premiums  was to increase net income by
       approximately  $122,000.  The  impact  of  the  net  amortization  of the
       premiums for the year ended December 31, 1998 was not significant.


<PAGE>


(3)    Reserves and Investments Required by Law

       The  Company is  required  to  maintain  certain  reserves of cash and/or
       deposits with the Federal Reserve Bank (FRB).  The amount of this reserve
       requirement,  satisfied  by vault  cash and  deposits  with the FRB,  was
       approximately  $7.0  million and $4.4  million at  December  31, 2000 and
       1999, respectively.

       The Company is required to maintain  certain levels of stock in the FHLB.
       The  Company  has pledged  its  investment  in this  stock,  as well as a
       blanket pledge of qualifying residential real estate loans, to secure its
       borrowings with the FHLB.


(4)    Securities Available for Sale

       The amortized cost, gross unrealized gains and losses, and estimated fair
       value of securities  available for sale at December 31, 2000 and 1999 are
       as follows:
<TABLE>
<CAPTION>
                                                                         2000
                                                     ------------------------------------------
                                                                  Gross       Gross   Estimated
                                                     Amortized  unrealized unrealized    fair
                                                       cost       gains     losses       value
                                                     --------   --------   --------    --------
                                                                     (In thousands)
<S>                                                  <C>          <C>          <C>       <C>
     U.S. Government and agency securities .......   $ 53,704       --         (839)     52,865
     Mortgage-backed securities ..................     58,032          3       (740)     57,295
     Collateralized mortgage obligations .........     26,102          5       (345)     25,762
     Corporate debt securities ...................      2,538       --         (335)      2,203
     States and political subdivisions ...........        305       --           (2)        303
                                                     --------   --------   --------    --------
             Total debt securities ...............    140,681          8     (2,261)    138,428
     Marketable equity securities and mutual funds        623        --         (61)        562
                                                     --------   --------   --------    --------
             Total ...............................   $141,304          8     (2,322)    138,990
                                                     ========   ========   ========    ========

                                                                         1999
                                                     ------------------------------------------
                                                                  Gross       Gross   Estimated
                                                     Amortized  unrealized unrealized    fair
                                                       cost       gains     losses       value
                                                     --------   --------   --------    --------
                                                                     (In thousands)
     U.S. Government and agency securities .......   $ 89,976       --       (4,943)     85,033
     Mortgage-backed securities ..................     85,174         25     (3,258)     81,941
     Collateralized mortgage obligations .........     44,166          4     (2,146)     42,024
     Corporate debt securities ...................      2,538       --         (298)      2,240
     States and political subdivisions ...........        911          2         (6)        907
                                                     --------   --------   --------    --------
        Total ....................................   $222,765         31    (10,651)    212,145
                                                     ========   ========   ========    ========
</TABLE>
<PAGE>

       The amortized cost and estimated fair value of debt securities  available
       for sale at December 31, 2000, by contractual  maturity,  are shown below
       (mortgage-backed  securities and collateralized  mortgage obligations are
       included by final contractual maturity).  Expected maturities will differ
       from contractual maturities because issuers may have the right to call or
       prepay obligations with or without call or prepayment penalties.

                                                    Amortized        Estimated
                                                       cost          fair value
                                                 -------------     ------------
                                                             (In thousands)

       Due within one year                        $          -                -
       Due after one year through five years             4,161            4,121
       Due after five years through ten years           34,079           33,612
       Due after ten years                             102,441          100,695
                                                 -------------     ------------
            Totals                                $    140,681          138,428
                                                 =============     ============


       The  following  table  sets  forth  information  with  regard to sales of
       securities available for sale for the years ended December 31:
                                                2000         1999        1998
                                               ------      -------     -------
                                                        (In thousands)

              Proceeds from sale             $ 69,810           -        79,101
              Gross realized gains              1,689           -           154
              Gross realized losses             1,467           -           319

       Securities   available   for  sale  with  an  estimated   fair  value  of
       approximately  $77.1 million and $122.3  million at December 31, 2000 and
       1999,   respectively,   were  pledged  to  secure  securities  repurchase
       agreements. See also note 9.



<PAGE>


(5)    Loans Receivable, Net

       Loans  receivable  consisted  of the  following  at December 31, 2000 and
       1999:

                                                             2000        1999
                                                           --------     -------
                                                              (In thousands)
         Loans secured by real estate:
          One-to-four family                              $ 291,682     306,665
          Home equity                                        89,767      92,605
          Commercial                                         40,727      27,910
          Multi-family                                        3,738       3,881
          Construction                                        2,435       4,924
                                                           --------     -------
                  Total loans secured by real estate        428,349     435,985
                                                           --------     -------

         Other loans:
          Consumer loans:
              Auto loans                                      8,023      11,641
              Recreational vehicles                           2,713       3,551
              Other secured                                   4,473       4,697
              Unsecured                                       5,905       5,918
              Manufactured homes                                180         249
                                                           --------     -------
                  Total consumer loans                       21,294      26,056
                                                           --------     -------
          Commercial loans:
              Secured                                        12,784       5,562
              Unsecured                                       1,192       1,063
                                                           --------     -------
                  Total commercial loans                     13,976       6,625
                                                           --------     -------
                  Total loans receivable                    463,619     468,666
     Deferred costs, net of deferred fees and discounts       2,084       2,320
     Allowance for loan losses                               (5,745)     (5,509)
                                                           --------     -------
                  Loans receivable, net                   $ 459,958     465,477
                                                           ========     =======

       Qualifying  one-to-four  family loans have been  pledged  under a blanket
       collateral agreement to secure the Company's borrowings with the FHLB.

       A summary of  activity  in the  allowance  for loan  losses for the years
       ended December 31 is as follows:

                                              2000          1999        1998
                                           ---------     ---------    ---------
                                                       (In thousands)

         Balance at beginning of year     $    5,509         4,891        3,807
         Provision charged to operations         480           790          900
         Charge-offs                            (354)         (463)      (1,226)
         Recoveries                              110           291          295
         Allowance acquired                       -             -         1,115
                                           ---------     ---------    ---------
         Balance at end of year           $    5,745         5,509        4,891
                                           =========     =========    =========


<PAGE>


       The following table sets forth  information with regard to non-performing
       loans at December 31:

                                                2000        1999        1998
                                               ------      ------      ------
                                                          (In thousands)

       Non-accrual loans                       $2,448       2,576       1,610
       Loans contractually past due 90 days
         or more and still accruing interest      257       1,068         580
       Restructured loans                         541         566         714
                                               ------      ------      ------
            Total non-performing loans         $3,246       4,210       2,904
                                               ======      ======      ======

       There are no material  commitments  to extend further credit to borrowers
       with non-performing loans.

       Interest  income not  recognized  on the above  non-performing  loans was
       approximately  $156,000,  $194,000 and  $118,000 in 2000,  1999 and 1998,
       respectively.  Approximately $216,000,  $304,000 and $238,000 of interest
       on the above  non-performing loans was collected and recognized as income
       in 2000, 1999 and 1998, respectively.

       At December 31, 2000 and 1999, the recorded  investment in loans that are
       considered to be impaired  totaled  approximately  $560,000 and $572,000,
       respectively,  for  which  the  related  allowance  for loan  losses  was
       approximately $169,000 and $61,000, respectively. As of December 31, 2000
       and 1999,  there were no impaired  loans which did not have an  allowance
       for loan losses. The average recorded investment in impaired loans during
       the years ended  December  31,  2000,  1999 and 1998,  was  approximately
       $523,000,  $481,000  and  $688,000,  respectively.  For the  years  ended
       December 31, 2000, 1999 and 1998, the Company recognized  interest income
       on those impaired loans of  approximately  $29,000,  $52,000 and $78,000,
       respectively,  which included $21,000, $26,000 and $50,000, respectively,
       of  interest  income  recognized  using the cash  basis  method of income
       recognition.

       Certain directors and executive  officers of the Company are customers of
       and have other  transactions  with the Company in the ordinary  course of
       business.  Loans to these  parties  are made in the  ordinary  course  of
       business at the Company's  normal credit terms,  including  interest rate
       and  collateralization.  The aggregate of such loans totaled less than 5%
       of total shareholders' equity at both December 31, 2000 and 1999.


<PAGE>


(6)    Accrued Interest Receivable

       Accrued interest receivable consisted of the following at December 31:

                                                   2000          1999
                                                   ------       ------
                                                    (In thousands)

               Loans                               $2,451        2,204
               Securities available for sale        1,427        2,207
               Interest-bearing deposits              225         --
                                                   ------       ------
                                                   $4,103        4,411
                                                   ======       ======


(7)    Premises and Equipment

       A summary of premises and equipment is as follows at December 31:

                                                          2000          1999
                                                        --------      --------
                                                             (In thousands)

          Land and buildings                            $  4,015         3,520
          Furniture, fixtures and equipment                5,821         5,565
          Leasehold improvements                           2,040         2,071
          Construction in progress                            17           486
                                                        --------      --------
                                                          11,893        11,642
          Accumulated depreciation and amortization       (6,605)       (5,996)
                                                        --------      --------
                                                        $  5,288         5,646
                                                        ========      ========

       Amounts   charged  to   depreciation   and   amortization   expense  were
       approximately  $924,000,  $888,000  and  $735,000  for  the  years  ended
       December 31, 2000, 1999 and 1998, respectively.



<PAGE>


(8)    Deposits

       Deposits are summarized as follows at December 31:

                                                              2000      1999
                                                            --------  --------
                                                              (In thousands)

         Savings accounts (2.63% at December 31, 2000 and
              2.73%-3.00% at December31, 1999)             $ 121,411   129,359
                                                            --------  --------
         Time deposits:
              3.01 to 4.00%                                      453     1,042
              4.01 to 5.00%                                   39,464   120,458
              5.01 to 6.00%                                  104,900    76,084
              6.01 to 7.00%                                  103,411     9,452
              7.01 to 8.00%                                      646    13,300
                                                            --------  --------
                                                             248,874   220,336
                                                            --------  --------
         NOW accounts (1.23%-4.19% at December 31,
            2000 and 1.23% at December 31, 1999)              46,330    35,884
         Money market accounts (2.19%-5.28% at December
            31, 2000 and 2.19%-4.34% at December 31,
            1999)                                             23,416    29,009
         Demand accounts (non-interest-bearing)               38,561    35,546
                                                            --------  --------
                  Total deposits                           $ 478,592   450,134
                                                            ========  ========

        The approximate  amount of  contractual  maturities of time deposits for
        the years subsequent to December 31, 2000 are as follows:

                                      (In thousands)
          Years ending December 31,
              2001                    $    183,066
              2002                          40,080
              2003                          16,564
              2004                           3,259
              2005                           5,905
                                        ----------
                                      $    248,874
                                        ==========

       The aggregate  amount of time deposits with a balance of $100,000 or more
       was  approximately  $32.6  million and $30.4 million at December 31, 2000
       and 1999, respectively.


<PAGE>


       Interest  expense on deposits for the years ended December 31, 2000, 1999
       and 1998, is summarized as follows:

                                      2000       1999         1998
                                    -------     -------     -------
                                           (In thousands)

          Savings accounts          $ 3,473       4,001       3,119
          Time deposits              13,620      11,242       9,882
          NOW accounts                  685         567         549
          Money market accounts         994         945         272
                                    -------     -------     -------
                Total               $18,772      16,755      13,822
                                    =======     =======     =======


(9)    Borrowed Funds

       At December 31, 2000, the Company had short-term borrowings with the FHLB
       totaling $5.0 million which mature on February 26, 2001.  The Company had
       a $35.6 million  overnight  line of credit and a $35.6 million  one-month
       line of credit with the FHLB at December  31,  2000.  As of December  31,
       2000,  the Company had no amounts  outstanding  on these lines of credit.
       Under the  terms of a blanket  collateral  agreement  with the FHLB,  any
       outstanding  borrowings  are  collateralized  by FHLB  stock and  certain
       qualifying assets not otherwise pledged (primarily first-lien residential
       mortgage loans).

       The Company also had  long-term  advances  with the FHLB  totaling  $66.4
       million at December 31, 2000. These advances  consisted of the following:
       (i) $20.0 million of  interest-only,  adjustable rate advances,  with the
       interest rate tied to LIBOR and adjusted quarterly; $10.0 million matures
       in July 2001 and $10.0 million  matures in July 2003;  (ii) $30.0 million
       of interest-only,  fixed rate advances with a  weighted-average  rate and
       maturity of 6.78% and 2.3 years,  respectively;  (iii)  $15.9  million of
       fixed rate,  amortizing  advances with a weighted-average  rate and final
       contractual  maturity  of 7.01%  and 4.0  years,  respectively;  and (iv)
       $576,000 of adjustable  rate,  amortizing  advances  with interest  rates
       ranging from 6.08% to 8.03%;  final  maturities on these  advances  range
       from February 2001 to September 2004.



<PAGE>


       Information concerning outstanding securities repurchase agreements as of
       December 31, 2000 is summarized as follows:


                      Securities Repurchase Agreements
      -----------------------------------------------------------
                                              Accrued   Weighted-  Fair Value
       Remaining Term to         Repurchase   Interest   Average  of Collateral
         Final Maturity (1)       Liability   Payable     Rate    Securities (2)
      ---------------------       -------     -------     ----      -------
                                          (Dollars in thousands)

         Within 90 days            $  --          --       -- %      $  --
         After 90 days but
             within one year        20,000         138    6.96        20,446
          After one year but
             within five years        --          --       --           --
          After five years but
             within ten years       52,500         437    5.48        57,371
                                   -------     -------     ----      -------
                   Total           $72,500         575    5.89%      $77,817
                                   =======     =======     ====      =======

           (1)  The  weighted-average  remaining  term  to  final  maturity  was
                approximately  5.6 years at December 31,  2000.  At December 31,
                2000,  $52.5  million of the  securities  repurchase  agreements
                contained call provisions. The weighted-average rate at December
                31, 2000 on the callable  securities  repurchase  agreements was
                5.48%, with a weighted-average  remaining period of 1.7 years to
                the call  date.  At  December  31,  2000,  $20.0  million of the
                securities   repurchase   agreements   did  not   contain   call
                provisions.  The  weighted-average  rate at December 31, 2000 on
                the  non-callable  securities  repurchase  agreements was 6.96%,
                with a  weighted-average  term to maturity of approximately  six
                months.
           (2)  Represents  the fair  value  of the  securities  subject  to the
                repurchase agreements,  including accrued interest receivable of
                approximately $754,000 at December 31, 2000.


<PAGE>


       The following  table presents the detail of the Company's  borrowings and
       weighted-average  interest rates thereon for the years ended December 31,
       2000, 1999 and 1998:
                                                                    Securities
                                             FHLB        FHLB       Sold Under
                                           Short-Term  Long-Term    Agreements
                                           Borrowings   Advances   to Repurchase
                                          -----------  ---------  --------------
                                                 (Dollars in thousands)

    2000:
          Balance at December 31            $  5,000    $ 66,435    $ 72,500
          Average balance during the year     31,180      45,108      82,712
          Maximum month-end balance           63,600      67,461     112,740
          Weighted-average interest rate:
              At December 31                    6.77%       6.82%       5.89%
              During the year                   6.30%       6.79%       5.74%


     1999:
          Balance at December 31            $ 71,200    $ 20,965    $112,740
          Average balance during the year     15,429      21,148     137,226
          Maximum month-end balance           71,200      21,347     152,400
          Weighted-average interest rate:
              At December 31                    5.71%       6.23%       5.51%
              During the year                   5.62%       5.22%       5.53%


     1998:
          Balance at December 31            $   --      $ 21,410    $152,400
          Average balance during the year      9,366       8,493     132,476
          Maximum month-end balance           38,800      21,446     165,150
          Weighted-average interest rate:
              At December 31                    --          5.32%       5.48%
              During the year                   5.49%       5.71        5.67




<PAGE>




(10)   Income Taxes

       The  components  of income tax expense are as follows for the years ended
       December 31:

                                            2000       1999      1998
                                           -------    -------   -------
                                                  (In thousands)
         Current tax expense:
               Federal                     $ 2,483      2,534       763
               State                           276        429        13
                                           -------    -------   -------
                                             2,759      2,963       776
          Deferred tax (benefit) expense      (339)       132      (106)
                                           -------    -------   -------
               Total income tax expense    $ 2,420      3,095       670
                                           =======    =======   =======

       Actual income tax expense for the years ended December 31, 2000, 1999 and
       1998, differs from expected income tax expense,  computed by applying the
       Federal  corporate tax rate of 34% to income before taxes, as a result of
       the following items:

                                                    2000     1999      1998
                                                   ------   ------    ------
                                                        (In thousands)

          Expected tax expense                     $2,027    2,516       578
          State taxes, net of Federal income tax
            benefit                                   134      325         1
          Non-deductible portion of ESOP
            compensation expense                       74       95       113
          Non-deductible goodwill amortization        181      181        23
          Other items, net                              4      (22)      (45)
                                                   ------   ------    ------
                                                   $2,420    3,095       670
                                                   ======   ======    ======


<PAGE>


       The tax effects of temporary  differences  that give rise to  significant
       portions of the deferred tax assets and  liabilities at December 31, 2000
       and 1999 are presented below:

                                                            2000       1999
                                                         ----------  ---------
                                                             (In thousands)
      Deferred tax assets:
       Allowance for loan losses                      $       2,231       2,140
       Deferred compensation                                    261         315
       Unvested RRP shares                                       76          76
       Other deductible temporary differences                    95         145
                                                         ----------  ---------
           Total deferred tax assets                          2,663       2,676
                                                         ----------  ---------
      Deferred tax liabilities:
       Net deferred loan costs                                 (769)       (842)
       Purchase accounting adjustments                         (319)       (470)
       Prepaid pension cost                                    (168)       (199)
       Property and equipment                                   (59)        (91)
       Tax bad debt reserve                                     (51)        (77)
       Other prepaid expenses                                   (49)        (59)
       Other taxable temporary differences                     (157)       (186)
                                                         ----------  ---------
           Total deferred tax liabilities                    (1,572)     (1,924)
                                                         ----------  ---------
           Net deferred tax asset at end of year              1,091         752
           Net deferred tax asset at beginning of year          752         884
                                                         ----------  ---------
           Deferred tax (benefit) expense              $       (339)        132
                                                         ==========  =========

       The Company also had a deferred tax asset of $926,000 and $4.2 million at
       December 31, 2000 and 1999,  respectively,  related to the net unrealized
       loss on securities available for sale.

       There was no valuation  allowance for deferred tax assets at December 31,
       2000 and 1999. Management believes that the realization of the recognized
       deferred  tax assets at  December  31,  2000 and 1999 is more likely than
       not,  based  on  historical   taxable  income,   available   tax-planning
       strategies and expectations as to future taxable income.

       As a thrift institution, the Bank is subject to special provisions in the
       Federal and new York State tax laws  regarding its allowable tax bad debt
       deductions   and  related  tax  bad  debt  reserves.   These   deductions
       historically  have been determined using methods based on loss experience
       or a percentage of taxable  income.  Tax bad debt reserves are maintained
       equal to the excess of allowable  deductions  over actual bad debt losses
       and  other  reserve  reductions.  These  reserves  consist  of a  defined
       base-year amount, plus additional amounts ("excess reserves") accumulated
       after the base year. Deferred tax liabilities are recognized with respect
       to such excess  reserves,  as well as any portion of the base-year amount
       which is expected to become taxable (or  "recaptured") in the foreseeable
       future.


<PAGE>


       In accordance with SFAS No. 109, the Company has not recognized  deferred
       tax  liabilities  with respect to the Bank's Federal and state  base-year
       reserves of approximately  $5.2 million and $13.7 million,  respectively,
       at  December  31,  2000,  since the  Company  does not expect  that these
       amounts  will become  taxable in the  foreseeable  future.  Under the tax
       laws, as amended,  events that would result in taxation of these reserves
       include  (i)   redemptions   of  the  Bank's  stock  or  certain   excess
       distributions  to the  Holding  Company,  or (ii)  failure of the Bank to
       maintain  a  specified  qualifying  assets  ratio  or meet  other  thrift
       definition  tests  for New York  State  tax  purposes.  The  unrecognized
       deferred  tax  liability at December 31, 2000 with respect to the Federal
       base-year  reserve  was  approximately  $1.8  million.  The  unrecognized
       deferred  tax  liability  at December  31, 2000 with respect to the state
       base-year reserve was approximately $766,000 (net of Federal benefit).


(11)   Employee Benefit Plans

       (a)    Pension Plan

              The Company maintains a non-contributory,  defined benefit pension
              plan  with  RSI  Retirement  Trust,  covering   substantially  all
              employees  age 21 and over with 1 year of service  as of  November
              30,  2000.  Benefits  are  computed  as two percent of the highest
              three year average annual earnings  multiplied by credited service
              (as defined in the plan), up to a maximum of 35 years. The amounts
              contributed  to the plan are  determined  annually on the basis of
              (a) the maximum amount that can be deducted for Federal income tax
              purposes,  or (b) the amount certified by a consulting  actuary as
              necessary to avoid an accumulated funding deficiency as defined by
              the Employee Retirement Income Security Act of 1974. Assets of the
              plan are  primarily  invested  in pooled  equity and fixed  income
              funds.

              Effective November 30, 2000, the Company froze all pension benefit
              accruals and  participation in the plan. Since the Company's prior
              contributions  to the plan were  intended  to fund  both  benefits
              earned and those expected to be earned in the future, the freezing
              of benefits  generated a  curtailment  gain of $1.0  million.  The
              Company  uses a  measurement  date of  October 1 for  purposes  of
              accounting for the plan. Accordingly, the curtailment gain was not
              recognized in the Company's 2000 consolidated  statement of income
              or  reflected  in  the   calculation  of  the  projected   benefit
              obligation  as of October 1, 2000.  The  curtailment  gain will be
              recognized  in the Company's  consolidated  statement of income in
              the first quarter of 2001.



<PAGE>


              The  following  table  provides  a summary  of the  changes in the
              plan's  projected  benefit  obligation  and the fair  value of the
              plan's assets for the years ended December 31 (using a measurement
              date of October  1),  and a  reconciliation  of the plan's  funded
              status:

                                                               2000        1999
                                                             -------    -------
                                                               (In thousands)
     Changes in the projected benefit obligation:
         Projected benefit obligation at beginning of year   $ 4,906      5,256
             Service cost                                        270        251
             Interest cost                                       366        332
             Benefits paid                                      (289)      (242)
             Plan amendments                                    --           77
             Actuarial gain                                     (118)      (768)
                                                             -------    -------
         Projected benefit obligation at end of year           5,135      4,906
                                                             -------    -------

     Changes in the fair value of plan assets:
         Fair value of plan assets at beginning of year        6,531      5,760
             Actual return on plan assets                      1,086      1,013
             Benefits paid                                      (289)      (242)
             Employer contributions                             --         --
                                                             -------    -------
         Fair value of plan assets at end of year              7,328      6,531
                                                             -------    -------

     Funded status:
         Funded status                                         2,193      1,625
         Unrecognized prior service cost                           2          5
         Unrecognized net gain                                (1,763)    (1,120)
                                                             -------    -------
             Prepaid pension cost                            $   432        510
                                                             =======    =======

     The following  table provides the  components of net periodic  pension cost
     for the years ended December 31:


                                          2000     1999     1998
                                          -----    -----    -----
                                              (In thousands)

     Service cost                         $ 270      251      219
     Interest cost                          366      332      318
     Expected return on plan assets        (512)    (452)    (471)
     Amortization of unrecognized net
       asset at transition                 --        (39)     (46)
     Amortization of unrecognized prior
       service cost                           3        4        3
     Amortization of unrecognized net
       actuarial gain                       (49)    --        (22)
                                          -----    -----    -----
         Net periodic pension cost        $  78       96        1
                                          =====    =====    =====


<PAGE>


              Unrecognized net actuarial gains or losses in excess of 10% of the
              greater of the projected  benefit  obligation or the fair value of
              the plan assets are amortized over the average  remaining  service
              period of active plan participants.

              The  significant  assumptions  used in accounting for the plan are
              shown in the table below:

                                                   2000     1999    1998
                                                   ----     ----    ----
              Weighted-average assumptions at
                  October 1:
                    Discount rate                   8.00%   7.75%   6.50%
                    Rate of increase in future
                         compensation levels        5.50    5.50    4.50
                    Expected return on plan
                         assets                     9.00    8.00    8.00

       (b)    401(k) Savings Plan

              The Company maintains a defined  contribution 401(k) savings plan,
              covering all full-time employees who have attained age 21 and have
              completed one year of employment. For the years ended December 31,
              2000, 1999 and 1998, there were no matching  contributions made by
              the  Company.  Effective  January 1, 2001,  the Company  will make
              matching  contributions  equal to 50% of the  first  6% of  salary
              contributed by an employee.

       (c)    Employee Stock Ownership Plan

              The Company  sponsors an employee  stock  ownership plan (ESOP) to
              provide substantially all employees of the Company the opportunity
              to also become  shareholders.  The ESOP borrowed $4.3 million from
              the  Company  in  December  1995 and used  the  funds to  purchase
              433,780 shares of Company  common stock.  The loan is being repaid
              principally  from the Company's  contributions  to the ESOP over a
              period of ten years.  At December 31, 2000 and 1999,  the loan had
              an   outstanding   balance  of  $2.2  million  and  $2.6  million,
              respectively. The loan obligation is reduced by the amount of loan
              repayments  made by the ESOP.  Shares are released for  allocation
              and unearned  compensation  is amortized  over the loan  repayment
              period based on the amount of principal  and interest  paid on the
              loan as a  percentage  of the total  principal  and interest to be
              paid on the loan over its entire term.  Shares  purchased with the
              loan proceeds are held in a suspense  account for allocation among
              participants as the loan is repaid.  Contributions to the ESOP and
              shares  released  from the suspense  account are  allocated  among
              participants   on  the  basis  of  compensation  in  the  year  of
              allocation.


<PAGE>


              The Company  accounts for the ESOP in accordance with the American
              Institute of Certified Public  Accountants'  Statement of Position
              No. 93-6,  "Employers'  Accounting  for Employee  Stock  Ownership
              Plans." Accordingly, the shares pledged as collateral are reported
              as unallocated ESOP shares in shareholders'  equity. As shares are
              released from collateral, the Company reports compensation expense
              equal to the  average  market  price  of the  shares  (during  the
              applicable service period),  and the shares become outstanding for
              earnings per share  computations.  Unallocated ESOP shares are not
              included  in the  earnings  per share  computations.  The  Company
              recorded   approximately   $661,000,   $744,000  and  $816,000  of
              compensation  expense  related to the ESOP  during the years ended
              December 31, 2000, 1999 and 1998, respectively.

              The shares in the ESOP as of December 31, 2000 were as follows:

              Shares allocated for periods through
                 December 31, 1999                                     149,386
              Shares released for allocation during 2000                44,405
              Unallocated shares at December 31, 2000                  190,918
                                                                    ----------
                 Total ESOP shares                                     384,709
                                                                    ==========

              Market value of unallocated shares at
                 December 31, 2000                                  $3,126,282
                                                                    ==========

       (d)    Stock Option Plan

              The Company has a Stock Option and  Incentive  Plan (Stock  Option
              Plan),  the primary  objective of which is to provide officers and
              directors  with  a  proprietary  interest  in  the  Company  as an
              incentive to encourage such persons to remain with the Company.

              The Stock  Option  Plan  provides  for awards in the form of stock
              options,  stock appreciation rights and limited stock appreciation
              rights.   Under  the  Stock  Option  Plan,  as  amended,   696,428
              authorized  but unissued  shares are  reserved  for issuance  upon
              option  exercises.  As of December 31, 2000,  691,914 options have
              been awarded. The Company also has the alternative to use treasury
              shares to satisfy option exercises.  Options under the plan may be
              either  non-qualified  stock options or incentive  stock  options.
              Each option  entitles  the holder to purchase  one share of common
              stock at an exercise  price equal to the fair value on the date of
              grant.  Options  generally  vest  ratably over a four year period,
              although a limited  number of options  have been  granted  with no
              vesting  requirement.  Options  expire  no later  than  ten  years
              following the date of original grant.

              under the terms of the merger  agreement with AFSALA  discussed in
              note 2, the Company  issued 154,203  fully-vested  options with an
              exercise  price of $12.97 in  exchange  for  144,118  fully-vested
              AFSALA  options with an exercise  price of $13.88.  The  estimated
              fair value of these options was $9.95 per option.  The issuance of
              these options was included in the  computation  of goodwill,  with
              the offsetting credit to additional paid-in capital.


<PAGE>


              A  summary  of the  stock  option  activity  for the  years  ended
              December 31, 2000, 1999 and 1998 is presented below:
<TABLE>
<CAPTION>

                                                     2000                       1999                      1998
                                           -----------------------    -----------------------   -----------------------
                                                          Weighted-                 Weighted-                 Weighted-
                                                           Average                   Average                   Average
                                              No. of      Exercise      No. of      Exercise      No. of      Exercise
                                              Options       Price       Options       Price       Options       Price
                                              -------       -----       -------       -----       -------       -----

<S>                                 <C>        <C>       <C>              <C>         <C>          <C>          <C>
             Outstanding at January 1          429,864   $  13.47         442,741     13.48        373,974      13.75
               Granted                         246,908      15.71              -        -            2,000      13.50
               Exercised                            -        -            (10,167)    13.75         (9,489)     13.75
               Forfeited                        (4,514)     13.75          (2,710)    13.75        (77,947)     13.75
               Issued in acquisition                -        -                 -        -          154,203      12.97
                                            ----------                 ----------                  -------
             Outstanding at December 31        672,258      14.29         429,864     13.47        442,741      13.48
                                            ==========                 ==========               ==========

             Exercisable at December 31        361,449      13.42         293,034     13.34        227,838      13.22
                                            ==========                 ==========               ==========
</TABLE>

          The following table summarizes  information  about the Company's stock
          options at December 31, 2000:

                                          Weighted-Avg.
           Exercise                        Remaining
           Price        Outstanding     Contractual Life      Exercisable
          -------      -------------   -----------------     -------------
           $12.97         154,203          6.4 years          154,203
            13.50           2,000          7.9                  2,000
            13.75         269,147          6.4                205,246
            15.53         146,000          9.8                     -
            15.97         100,908          9.9                     -
                       ----------                           ---------
                          672,258          7.7                361,449
                       ==========                           =========

          All options have been  granted at an exercise  price equal to the fair
          value of the common  stock at the grant  date,  except for the options
          issued in  connection  with the AFSALA  acquisition.  Accordingly,  no
          compensation expense has been recognized for stock option grants. SFAS
          No. 123  requires  companies  not using a  fair-value-based  method of
          accounting  for employee  stock options or similar  plans,  to provide
          pro-forma  disclosures of net income and earnings per share as if that
          method of accounting  had been applied.  The fair value of each option
          grant  is  estimated  on the  date of grant  using  the  Black-Scholes
          option-pricing model with the following  weighted-average  assumptions
          used for  grants in 2000 and  1998,  respectively:  dividend  yield of
          3.72%  and  1.32%;  expected  volatility  of 15%  and  30%;  risk-free
          interest rate of 6.72% and 4.54%;  and expected option life of 7 years
          and 5 years.  The estimated fair value of the options  granted in 2000
          and 1998 was $2.94 and $4.09 per share, respectively.


<PAGE>


              Pro-forma disclosures for the Company for the years ended December
              31, 2000, 1999 and 1998 are as follows:

                                                 2000       1999      1998
                                                 ----       ----      ----
              Net income (in thousands):
                  As reported               $    3,542      4,303     1,031
                  Pro-forma                      3,284      4,040       731

              Basic EPS:
                  As reported                     0.77       0.88      0.26
                  Pro-forma                       0.71       0.83      0.19

              Diluted EPS:
                  As reported                     0.76       0.87      0.26
                  Pro-forma                       0.71       0.82      0.18

              Because the Company's employee stock options have  characteristics
              significantly different from those of traded options for which the
              Black-Scholes  model was  developed,  and  because  changes in the
              subjective input  assumptions can materially affect the fair value
              estimate,  the existing model, in management's  opinion,  does not
              necessarily provide a reliable single measure of the fair value of
              its stock options.

       (e)    Recognition and Retention Plan

              The Company also has a Recognition  and Retention Plan (RRP).  The
              purpose of the RRP is to promote the  long-term  interests  of the
              Company  and  its   shareholders   by   providing  a   stock-based
              compensation program to attract and retain officers and directors.
              Under the RRP,  216,890 shares of authorized  but unissued  shares
              are reserved for issuance under the plan. The Company also has the
              alternative to use treasury shares to fund RRP awards.

              On May 23, 1997, a total of 131,285  shares were awarded under the
              RRP.  The shares vest in four equal  installments  commencing  one
              year from the date of grant.  The fair market  value of the shares
              awarded  under the plan at the grant date was $13.75 per share and
              is being  amortized to expense on a  straight-line  basis over the
              four year vesting period.  During 1998, 29,331 unvested RRP shares
              were forfeited and transferred to treasury stock at the grant date
              fair market  value of $13.75 per share.  As of December  31, 2000,
              there were 23,045 unvested RRP shares remaining.


<PAGE>


              During 2000 and 1999, 10,782 and 7,586 shares, respectively,  were
              awarded to non-employee directors under the RRP. These shares were
              awarded  in lieu of board fees which  would  have  otherwise  been
              payable in cash  during  each  year.  The  shares  vested  monthly
              throughout  each year and were fully vested as of each  respective
              year-end.

       (f)    Postretirement Benefits

              Certain   postretirement   health  insurance  benefits  have  been
              committed to a closed group of retired employees.  The Company has
              formally  adopted  measures  to not offer  these  benefits  to any
              additional  employees.  There are no plan assets. The net periodic
              postretirement   benefit   cost  in   2000,   1999  and  1998  was
              approximately $26,000 in each year.

       (g)    Directors' Deferred Compensation Agreements

              Under  the  Directors'  Deferred  Compensation   Agreements,   the
              Company's  directors  were  eligible  to elect  to defer  fees for
              services that were otherwise currently payable. Fees were deferred
              over a period of five years.  The Company  utilized  the  deferred
              fees to purchase life insurance policies on each director with the
              Company named as the beneficiary.  Each director  participating in
              such agreements deferred their fees over a five year period with a
              set amount  established as an annual payout over a ten year period
              beginning  five  years  from  the  date of the  agreement  or upon
              reaching the age of 65,  whichever is later.  The present value of
              the  remaining   installments   due  under  these  agreements  was
              approximately $578,000 and $598,000 at December 31, 2000 and 1999,
              respectively,   and  is  included  in  other  liabilities  in  the
              consolidated statements of financial condition. The cash surrender
              value of the life insurance  policies was  approximately  $222,000
              and $224,000 at December 31, 2000 and 1999,  respectively,  and is
              included  in  other  assets  in  the  consolidated  statements  of
              financial condition.


<PAGE>


(12)   Earnings Per Share

       The calculation of basic and diluted EPS for the years ended December 31,
       2000, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>

                                                             2000        1999         1998
                                                          ----------   ----------   ----------
                                                   (In thousands, except share and per share data)

<S>                                                       <C>          <C>          <C>
         Basic EPS
            Net income available to common shareholders   $    3,542   $    4,303   $    1,031
                                                          ==========   ==========   ==========

            Weighted-average common shares outstanding     4,616,186    4,877,510    3,916,047
                                                          ==========   ==========   ==========

            Basic earnings per share                      $     0.77   $     0.88   $     0.26
                                                          ==========   ==========   ==========

          Diluted EPS
            Net income available to common shareholders   $    3,542   $    4,303   $    1,031
                                                          ==========   ==========   ==========

            Weighted-average common shares outstanding     4,616,186    4,877,510    3,916,047
            Effect of dilutive securities:
                 Stock options                                27,760       43,083       49,043
                 Unvested RRP shares                          11,871       14,534       24,155
                                                          ----------   ----------   ----------
            Weighted-average common shares (diluted)       4,655,817    4,935,127    3,989,245
                                                          ==========   ==========   ==========

            Diluted earnings per share                    $     0.76   $     0.87   $     0.26
                                                          ==========   ==========   ==========
</TABLE>

       The  weighted-average  number of options excluded from the computation of
       diluted EPS during 2000 because the options'  exercise  price was greater
       than the average  market price of the common  stock for certain  quarters
       during 2000 (anti-dilutive) was 77,190, with a weighted-average  exercise
       price of $14.00. At December 31, 2000, there were no outstanding  options
       which were anti-dilutive.


(13)   Commitments and Contingent Liabilities

       (a)    Legal Proceedings

              The  Company  and its  subsidiaries  may,  from  time to time,  be
              defendants in legal  proceedings  relating to the conduct of their
              business.  Based on consultation with outside counsel,  management
              believes  that the outcome of any pending legal  proceedings  will
              not have a material impact on the Company's consolidated financial
              statements.


<PAGE>


       (b)    Lease Commitments

              The Company  leases  certain  branch  facilities  and office space
              under noncancelable  operating leases.  Minimum rental commitments
              under these leases are as follows:

                                                     (In thousands)
                  Years ending December 31,
                      2001                          $           575
                      2002                                      514
                      2003                                      476
                      2004                                      446
                      2005                                      378
                      2006 and thereafter                     3,166
                                                      -------------
                                                    $         5,555
                                                      =============

              Amounts  charged  to rent  expense  were  approximately  $574,000,
              $553,000 and $385,000 for the years ended December 31, 2000,  1999
              and 1998, respectively.

       (c)  Off-Balance-Sheet Financial Instruments and Concentrations of Credit

              The  Company  is a party to  certain  financial  instruments  with
              off-balance-sheet  risk in the normal  course of  business to meet
              the financing needs of its customers.  These financial instruments
              include  commitments to extend credit,  unused lines of credit and
              standby letters of credit.  These instruments  involve, to varying
              degrees,  elements  of  credit  risk  in  excess  of  the  amounts
              recognized on the consolidated  statement of financial  condition.
              The contract  amounts of these  instruments  reflect the extent of
              involvement  the Company has in  particular  classes of  financial
              instruments.

              The   Company's   exposure   to  credit   loss  in  the  event  of
              nonperformance  by the other  party to the  commitments  to extend
              credit,  unused  lines of credit and standby  letters of credit is
              represented   by  the   contractual   notional   amount  of  these
              instruments.  The Company uses the same credit  policies in making
              commitments as it does for on-balance-sheet instruments.

              Unless otherwise noted, the Company does not require collateral or
              other security to support off-balance-sheet  financial instruments
              with credit risk.


<PAGE>


              Commitments  to extend credit are agreements to lend to a customer
              as long as there is no violation of any condition  established  in
              the contract. Commitments generally have fixed expiration dates or
              other termination  clauses and may require payment of a fee. Since
              many of the commitments are expected to expire without being fully
              drawn  upon,  the  total  commitment  amounts  do not  necessarily
              represent  future cash  requirements.  The Company  evaluates each
              customer's creditworthiness on a case-by-case basis. The amount of
              collateral,  if any, required by the Company upon the extension of
              credit is based on management's credit evaluation of the customer.
              Mortgage  commitments  are secured by a first lien on real estate.
              Collateral on extensions of credit for commercial loans varies but
              may include  property,  plant and equipment,  and income producing
              commercial property.

              Standby  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 borrowing
              arrangements.  The credit risk involved in issuing standby letters
              of credit is  essentially  the same as that  involved in extending
              loan facilities to customers.

              Contract amounts of financial  instruments with  off-balance-sheet
              credit risk as of December 31, 2000 and 1999 at fixed and variable
              interest rates are as follows:

                                             Fixed   Variable    Total
                                            -------   -------   -------
                                                  (In thousands)
                 2000:
             Commitments to extend credit   $ 6,254       725     6,979
             Unused lines of credit           1,592     7,182     8,774
             Standby letters of credit         --         107       107
                                            -------   -------   -------
                                            $ 7,846     8,014    15,860
                                            =======   =======   =======

                 1999:
             Commitments to extend credit   $10,203      --      10,203
             Unused lines of credit           1,788     5,092     6,880
             Standby letters of credit         --          33        33
                                            -------   -------   -------
                                            $11,991     5,125    17,116
                                            =======   =======   =======



<PAGE>


(14)   Fair Values of Financial Instruments

       Fair value  estimates  for financial  instruments  are made at a specific
       point in time, based on relevant market information and information about
       the financial  instrument.  These estimates do not reflect any premium or
       discount  that  could  result  from  offering  for  sale at one  time the
       Company's entire holdings of a particular financial  instrument.  Because
       no market  exists for a significant  portion of the  Company's  financial
       instruments, fair value estimates are based on judgments regarding future
       expected   net   cash   flows,   current   economic   conditions,    risk
       characteristics  of various  financial  instruments,  and other  factors.
       These  estimates are subjective in nature and involve  uncertainties  and
       matters of significant  judgment and therefore  cannot be determined with
       precision.   Changes  in  assumptions  could  significantly   affect  the
       estimates.

       Fair value  estimates  are based on  existing  on- and  off-balance-sheet
       financial  instruments  without  attempting  to  estimate  the  value  of
       anticipated  future business and the value of assets and liabilities that
       are  not  considered  financial   instruments.   Significant  assets  and
       liabilities  that are not  considered  financial  assets  or  liabilities
       include  the  deferred  tax  assets  and  liabilities  and  premises  and
       equipment.  In addition, the tax ramifications related to the realization
       of the unrealized gains and losses can have a significant  effect on fair
       value  estimates  and have not been  considered  in the estimates of fair
       value.  There also are significant  intangible assets that the fair value
       estimates  do not  recognize,  such  as the  value  of  "core  deposits,"
       goodwill and the Company's branch network.

       Financial Assets and Liabilities

       The  specific   estimation  methods  and  assumptions  used  can  have  a
       significant  impact on the  resulting  fair values  ascribed to financial
       assets  and  liabilities.  The  following  is  a  brief  summary  of  the
       significant methods and assumptions used:

           Securities Available for Sale

           The fair value of  securities,  except  certain  state and  municipal
           securities,  is estimated based on bid prices  published in financial
           newspapers or bid quotations  received from securities  dealers.  The
           fair value of certain state and  municipal  securities is not readily
           available  through  market sources other than dealer  quotations,  so
           fair value  estimates  are based on quoted  market  prices of similar
           instruments,  adjusted for differences between the quoted instruments
           and the instruments being valued.

           Loans

           Fair  values are  estimated  for  portfolios  of loans  with  similar
           financial  characteristics.  Loans  are  segregated  by type  such as
           one-to-four family  residential loans,  consumer loans and commercial
           loans.  Each  loan  category  is  further  segmented  into  fixed and
           adjustable  rate interest terms and by performing and  non-performing
           categories.


<PAGE>


           The fair  value of  performing  loans is  calculated  by  discounting
           scheduled cash flows through the estimated  maturity using  estimated
           market  discount rates that reflect the credit and interest rate risk
           inherent  in the  loan.  The  estimate  of  maturity  is based on the
           contractual term of the loans to maturity,  taking into consideration
           certain prepayment assumptions.

           The  fair  value  for  significant  non-performing  loans is based on
           recent  external   appraisals  and  discounted  cash  flow  analyses.
           Estimated cash flows are discounted  using a rate  commensurate  with
           the  risk  associated  with the  estimated  cash  flows.  Assumptions
           regarding   credit  risk,   cash  flows,   and  discount   rates  are
           judgmentally   determined  using  available  market  information  and
           specific borrower information.

           Deposit Liabilities

           The  fair  value  of  deposits  with  no  stated  maturity,  such  as
           non-interest-bearing  demand deposits, savings accounts, NOW accounts
           and money market accounts,  is the amount payable on demand. The fair
           value  of  time  deposits  is  based  on  the  discounted   value  of
           contractual  cash  flows,   taking  into   consideration   any  early
           withdrawal penalties.  The discount rate is estimated using the rates
           currently offered for deposits with similar remaining maturities.

           The fair  value  estimates  above do not  include  the  benefit  that
           results from the low-cost funding provided by the deposit liabilities
           compared to the cost of borrowing funds in the market.

           FHLB Long-Term  Advances  and  Securities  Sold Under  Agreements  to
           Repurchase

           The fair value of FHLB long-term  advances and securities  sold under
           agreements to repurchase is estimated by  discounting  scheduled cash
           flows  based on current  rates  available  to the Company for similar
           types of borrowing arrangements.

           Other Items

           The following  items are considered to have a fair value equal to the
           carrying value due to the nature of the financial  instrument and the
           period  within  which it will be settled or  repriced:  cash and cash
           equivalents, FHLB stock, accrued interest receivable, FHLB short-term
           borrowings,  advances  from  borrowers for taxes and  insurance,  and
           accrued interest payable.


<PAGE>


       The carrying  values and  estimated  fair values of financial  assets and
       liabilities as of December 31, 2000 and 1999 were as follows:

<TABLE>
<CAPTION>
                                                                   2000                           1999
                                                      ----------------------------     ----------------------------
                                                                         Estimated                        Estimated
                                                         Carrying          Fair             Carrying        Fair
                                                           Value           Value              Value         Value
                                                           -----           -----              -----         -----
                                                                                (In thousands)
<S>                                                 <C>                     <C>              <C>             <C>
         Financial assets:
              Cash and cash equivalents             $       78,497          78,497           29,611          29,611
              Securities available for sale                138,990         138,990          212,145         212,145
              FHLB stock                                     8,870           8,870            8,748           8,748

              Loans                                        465,703         456,603          470,986         452,232
                Less:  Allowance for loan losses            (5,745)             -            (5,509)             -
                                                       -----------     -----------      -----------     -----------
                  Loans receivable, net                    459,958         456,603          465,477         452,232
                                                       ===========     ===========      ===========     ===========

              Accrued interest receivable                    4,103           4,103            4,411           4,411

         Financial liabilities:
              Deposits:
                  Demand, savings, money market,
                    and NOW accounts                       229,718          229,718         229,798         229,798
                  Time deposits                            248,874          250,126         220,336         220,336
              FHLB short-term borrowings                     5,000            5,000          71,200          71,200
              FHLB long-term advances                       66,435           66,682          20,965          20,956
              Securities sold under agreements to
                  repurchase                                72,500           72,885         112,740         110,755
              Advances from borrowers for
                  taxes and insurance                        3,402           3,402            3,641           3,641
              Accrued interest payable                       1,108           1,108            1,508           1,508
</TABLE>

       Commitments to Extend Credit and Standby Letters of Credit

       The fair value of commitments to extend credit is estimated  based on the
       fees  currently  charged to enter into  similar  agreements,  taking into
       account  the  remaining   terms  of  the   agreements   and  the  present
       creditworthiness of the counterparties.  For fixed rate loan commitments,
       fair value also considers the difference  between current  interest rates
       and the committed  rates.  The fair value of standby letters of credit is
       based  on  fees  currently  charged  for  similar  agreements  or on  the
       estimated cost to terminate them or otherwise settle the obligations with
       the counterparties. The Company believes that the carrying value of these
       off-balance-sheet financial instruments equals fair value and the amounts
       are not significant.


<PAGE>


(15)   Regulatory Matters

       Office of Thrift  Supervision (OTS) capital  regulations  require savings
       institutions to maintain minimum levels of regulatory capital.  Under the
       regulations  in effect at December  31,  2000,  the Bank was  required to
       maintain a minimum ratio of tangible  capital to total tangible assets of
       1.5%; a minimum leverage ratio of core (Tier 1) capital to total adjusted
       tangible  assets of 3.0% to 4.0%;  and a minimum  ratio of total  capital
       (core capital and supplementary capital) to risk-weighted assets of 8.0%,
       of which 4.0% must be core (Tier 1) capital.

       Under the prompt  corrective action  regulations,  the OTS is required to
       take certain supervisory  actions (and may take additional  discretionary
       actions) with respect to an  undercapitalized  institution.  Such actions
       could  have  a  direct  material  effect  on an  institution's  financial
       statements.  The regulations establish a framework for the classification
       of  savings   institutions   into  five  categories:   well  capitalized,
       adequately capitalized, undercapitalized, significantly undercapitalized,
       and critically undercapitalized.  Generally, an institution is considered
       well capitalized if it has a core (Tier 1) capital ratio of at least 5.0%
       (based on average total assets); a core (Tier 1) risk-based capital ratio
       of at least 6.0%; and a total risk-based capital ratio of at least 10.0%.

       The foregoing  capital ratios are based in part on specific  quantitative
       measures of assets,  liabilities and certain  off-balance-sheet  items as
       calculated under  regulatory  accounting  practices.  Capital amounts and
       classifications  are also  subject to  qualitative  judgments  by the OTS
       about capital components, risk weightings and other factors.

       Management  believes that, as of December 31, 2000 and 1999, the Bank met
       all capital adequacy  requirements to which it was subject.  Further, the
       most recent OTS  notification  categorized the Bank as a well capitalized
       institution under the prompt corrective  action  regulations.  There have
       been no  conditions  or events since that  notification  that  management
       believes have changed the Bank's capital classification.


<PAGE>


       The  following  is a summary of the Bank's  actual  capital  amounts  and
       ratios  as of  December  31,  2000 and  1999.  Although  the OTS  capital
       regulations  apply at the Bank level  only,  the  Company's  consolidated
       capital  amounts and ratios are also  presented.  The OTS does not have a
       holding company capital requirement.

                                          2000                     1999
                                    ------------------     ---------------------
                                    Amount       Ratio     Amount        Ratio
                                    ------       -----     ------        -----
                                              (Dollars in thousands)
          Bank
          Tangible capital          $63,964         9.12%  $67,760         9.18%
          Tier 1 (core) capital      63,964         9.12    67,760         9.18
          Risk-based capital:
            Tier 1                   63,964        18.48    67,760        19.55
            Total                    68,309        19.73    72,108        20.80

          Consolidated
          Tangible capital           71,652        10.19    74,576        10.02
          Tier 1 (core) capital      71,652        10.19    74,576        10.02
          Risk-based capital:
            Tier 1                   71,652        20.80    74,576        21.40
            Total                    75,974        22.06    78,947        22.65

       The Bank's ability to pay dividends to the holding  Company is subject to
       various regulatory restrictions. Under current OTS regulations, while the
       Bank  must  provide  written  notice  to the OTS  prior  to any  dividend
       declaration,  an application  must be approved by the OTS if the total of
       all  dividends  declared in any year would  exceed the net profit for the
       year plus the retained net profits of the preceding  two years.  Based on
       the level of  dividends  paid  from the Bank to the  Holding  Company  in
       recent years, as of December 31, 2000, the Bank must obtain approval from
       the OTS prior to the payment of any dividends to the Holding Company.

       As part of the conversion of the former Amsterdam  Savings Bank, FSB, and
       the former  Amsterdam  Federal  Bank from  mutual  institutions  to stock
       institutions,  liquidation  accounts were  established for the benefit of
       eligible depositors who continue to maintain their deposit accounts after
       conversion.  In the unlikely event of a complete liquidation of the Bank,
       each  eligible  depositor  will be  entitled  to  receive  a  liquidation
       distribution from the liquidation  accounts,  in the proportionate amount
       of the then current adjusted  balance for deposit  accounts held,  before
       distribution  may be made with respect to the Bank's capital  stock.  The
       Bank may not declare or pay a cash dividend to the Holding Company on, or
       repurchase  any of, its capital  stock if the effect  thereof would cause
       the retained earnings of the Bank to be reduced below the amount required
       for the liquidation accounts. Except for such restrictions, the existence
       of the  liquidation  accounts does not restrict the use or application of
       retained earnings.



<PAGE>


(16)   Holding Company Financial Information

       The Holding  Company's  statements of financial  condition as of December
       31, 2000 and 1999,  and the related  statements  of income and cash flows
       for the years ended  December  31,  2000,  1999 and 1998,  are  presented
       below. These financial  statements should be read in conjunction with the
       Company's consolidated financial statements and notes thereto.

<TABLE>
<CAPTION>
                           Statements of Financial Condition

                                                                    2000         1999
                                                                   -------     -------
                                                                      (In thousands)
                                      Assets
<S>                                                                 <C>             <C>
          Cash and cash equivalents                                 $ 3,734         977
          Securities available for sale*                              5,264       5,017
          Loan receivable from subsidiary                             2,169       2,603
          Accrued interest receivable                                    56          49
          Investment in subsidiary                                   69,502      68,923
          Other assets                                                  637         917
                                                                    -------     -------

                   Total assets                                     $81,362      78,486
                                                                    =======     =======
                         Liabilities and Shareholders' Equity
          Liabilities:
               Securities sold under agreements to repurchase**     $  --         2,740
               Loan payable to subsidiary                             3,978        --
               Other liabilities                                        262         153

          Shareholders' equity                                       77,122      75,593
                                                                    -------     -------

                   Total liabilities and shareholders' equity       $81,362      78,486
                                                                    =======     =======
<FN>


       *   As  of  December  31,  2000,  consisted  of  U.S.  Government  agency
           securities,   mortgage-backed   securities  and   marketable   equity
           securities.  As of December  31, 1999,  consisted of U.S.  Government
           agency securities and mortgage-backed securities. the debt securities
           had a  contractual  weighted-average  maturity  of 8.5  years and 8.9
           years at December 31, 2000 and 1999,  respectively  (none callable at
           either date).

       **  Weighted-average  rate at December 31, 1999 was 5.96% with a maturity
           date of February 15, 2000.

</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                        Statements of Income

                                                             2000          1999          1998
                                                           --------      --------      --------
                                                                      (In thousands)

     Income:
<S>                                                        <C>              <C>           <C>
              Dividends from bank subsidiary               $  8,000         1,500         5,000
              Interest and dividend income                      573           571           649
              Gains on securities transactions                1,689          --            --
              Other income                                        1            28             1
                                                           --------      --------      --------
                   Total income                              10,263         2,099         5,650
                                                           --------      --------      --------
          Expenses:
              Interest expense                                  303            58            34
              RRP expense                                       317           317           371
              Other expenses                                    764           496           735
                                                           --------      --------      --------
                   Total expenses                             1,384           871         1,140
                                                           --------      --------      --------
          Income before taxes and effect of subsidiary
             earnings and distributions                       8,879         1,228         4,510

          Income tax expense (benefit)                          352           (99)         (199)
                                                           --------      --------      --------
          Income before effect of subsidiary earnings
             and distributions                                8,527         1,327         4,709
          Effect of subsidiary earnings and
             distributions:
                Distributions in excess of earnings          (4,985)         --          (3,678)
                Equity in undistributed earnings               --           2,976          --
                                                           --------      --------      --------

          Net income                                       $  3,543         4,303         1,031
                                                           ========      ========      ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                       Statements of Cash Flows


                                                                               2000         1999          1998
                                                                              -------      -------      -------
                                                                                       (In thousands)
<S>                                                                           <C>            <C>          <C>
        Increase (decrease) in cash and cash equivalents:
          Cash flows from operating activities:
            Net income                                                        $ 3,542        4,303        1,031
            Adjustments to reconcile net income to net cash
              provided by operating activities:
                   Equity in undistributed earnings of subsidiary                --         (2,976)        --
                   Distributions in excess of subsidiary earnings               4,985         --          3,678
                   Gains on securities transactions                            (1,689)        --           --
                   RRP expense                                                    317          317          371
                   Decrease (increase) in accrued interest receivable and
                       other assets                                               226          788       (1,124)
                   increase (decrease) in other liabilities                       109          (34)         157
                                                                              -------      -------      -------
                         Net cash provided by operating activities              7,490        2,398        4,113
                                                                              -------      -------      -------
          Cash flows from investing activities:
            Purchases of securities available for sale                         (4,291)        --         (7,998)
            Proceeds from principal paydowns, maturities and
                calls of securities available for sale                            487          833       11,338
            Proceeds from sales of securities available for sale                5,372         --           --
            Payments received on loan receivable from
                subsidiary                                                        434          433          434
            Net cash acquired in acquisition                                     --           --          2,297
                                                                              -------      -------      -------
                         Net cash provided by investing activities              2,002        1,266        6,071
                                                                              -------      -------      -------
          Cash flows from financing activities:
            Net (decrease) increase in securities sold under
                agreements to repurchase                                       (2,740)       2,740       (2,600)
            Proceeds from loan payable to subsidiary                            4,331         --           --
            Repayments of loan payable to subsidiary                             (353)        --           --
            Purchases of treasury stock                                        (5,717)      (7,438)      (4,111)
            Issuance of treasury stock to subsidiary related
                to RRP                                                            167          116         --
            Exercises of stock options                                           --            139          130
            Dividends paid                                                     (2,423)      (1,760)      (1,133)
                                                                              -------      -------      -------
                         Net cash used in financing activities                 (6,735)      (6,203)      (7,714)
                                                                              -------      -------      -------
          Net increase (decrease) in cash and cash equivalents                  2,757       (2,539)       2,470
          Cash and cash equivalents:
              Beginning of year                                                   977        3,516        1,046
                                                                              -------      -------      -------
              End of year                                                     $ 3,734          977        3,516
                                                                              =======      =======      =======

</TABLE>
<PAGE>

                      CORPORATE AND SHAREHOLDER INFORMATION

Company and Bank Address
11 Division Street
Amsterdam, New York 12010-4303
Telephone:  (518) 842-7200
Fax:        (518) 842-7500


Stock Price Information


     The Company's  stock is traded on The Nasdaq  National  Market System under
the symbol "AHCI". The table below shows the range of high and low bid prices of
the Company's  Common Stock during 1999 and 2000. The  information  set forth in
the table  below was  provided  by The Nasdaq  Stock  Market.  Such  information
reflects  interdealer prices,  without retail mark-up,  mark-down or commission,
and may not represent actual transactions.

                                        Dividends
                      High       Low    Per Share
1999 First Quarter   17.8125   15.0625    $0.07
1999 Second Quarter  18.1250   15.1250     0.08
1999 Third Quarter   16.7500   15.3750     0.09
1999 Fourth Quarter  18.7500   14.0000     0.10

2000 First Quarter   14.8651   11.9408    $0.11
2000 Second Quarter  16.8263   12.7937     0.12
2000 Third Quarter   17.0979   14.3085     0.13
2000 Fourth Quarter  16.8750   14.8677     0.14

For information regarding restrictions on dividends, see Note 15 to the Notes to
Consolidated Financial Statements.

As of March 21, 2000, the Company had approximately 1,260 shareholders of record
and 4,532,433 outstanding shares of Common Stock.


Special Counsel

                  Malizia, Spidi & Fisch, PC
                  1100 New York Avenue,Suite 340 West
                  Washington, D.C. 20005
                  Telephone:  (202) 434-4660


<PAGE>
Independent Auditors

                  KPMG LLP
                  515 Broadway
                  Albany, NY  12207
                  Telephone:  (518) 427-4600


Investor Relations

Shareholders,  investors and analysts  interested in additional  information may
contact:

                  Sandra Hammond, Assistant Vice President
                  Executive Asst./Investor Relations
                  Ambanc Holding Co., Inc.
                  11 Division Street
                  Amsterdam, New York 12010-4303
                  Telephone:  (518) 842-7200
                  Fax:  (518) 842-1688


Annual Report on Form 10-K

     Copies of Ambanc Holding Co.,  Inc.'s Annual Report for year ended December
31, 2000 on Form 10-K filed with the  Securities  and  Exchange  Commission  are
available without charge to shareholders upon written request to:

                  Investor Relations
                  Ambanc Holding Co., Inc.
                  11 Division Street
                  Amsterdam, New York 12010-4303


Annual Meeting

     The annual  meeting of  shareholders  will be held at 10:00 a.m.,  New York
time,  on  Friday,  May 18,  2001 at the  Mohawk  Community  Bank  located at 11
Division Street, Amsterdam, New York.


Stock Transfer Agent and Registrar

     Ambanc Holding Co., Inc.'s transfer agent, American Stock Transfer & Trust,
maintains  all  shareholder  records  and can  assist  with stock  transfer  and
registration  address changes,  changes or corrections in social security or tax
identification numbers and 1099 tax reporting questions.  If you have questions,
please contact the stock transfer agent at the address below:

      American Stock Transfer & Trust
      40 Wall Street, 46th Floor
      New York, New York  10005
      Telephone:  (718) 921-8290

<PAGE>

Mohawk Community Bank Offices:

Corporate               11 Division Street
                        Amsterdam, N.Y. 12010
                        (518) 842-7200

Traditional Branches:

11 Division Street, Amsterdam, NY  12010
161 Church Street, Amsterdam, NY 12010
Route 30 & Maple Avenue, Amsterdam, NY  12010
Riverfront Center, Amsterdam, NY  12010
Grand Union Plaza, Route 50, Ballston Spa, NY  12020
9 Clifton Country Road, Village Plaza, Clifton Park, NY  12068
6021 State Highway 5, Palatine Bridge, NY  13428
Arterial at Fifth Avenue, Gloversville, NY 12078
5 New Karner Road, Guilderland, NY  12084


Supermarket Branches:

Price Chopper Supermarkets:
Sanford Farms Plaza, Amsterdam, NY  12010
873 New Loudon Rd., Latham, NY 12110
1640 Eastern Parkway, Schenectady, NY 12309
115 Ballston Avenue, Saratoga, NY  12866
Route 50, Saratoga, NY  12866
5631 State Highway 12, Norwich, NY  13815
W. Main Street, Cobleskill, NY  12043

Hannaford Supermarkets:
Route 28, Oneonta, NY  13850

Operations Center       35 East Main Street
                        Amsterdam, N.Y. 12010




<PAGE>
DIRECTORS AND OFFICERS


Board of Directors
------------------
(Ambanc Holding Co., Inc. and Mohawk Community Bank)


Lauren T. Barnett, President of Barnett Agency, Inc., Chairman of the Board
John M. Lisicki, President & Chief Executive Officer
James J. Bettini, Vice President of Farm Family Insurance
John J. Daly, Vice President of Alpin Haus
Dr. Daniel J. Greco, Retired, School Superintendent
Seymour Holtzman, Chairman & CEO of Jewelcor Management and Consulting, Inc.
Marvin R.  LeRoy, Jr., Alzheimers Association, Northeastern NY Chapter
Allan R. Lyons, CPA, Chairman & CEO of Piaker & Lyons, CPAs
Charles S. Pedersen, Independent Manufacturers' Representative
William L. Petrosino, Owner of wholesale beverage companies
Lawrence B. Seidman, Attorney and Manager, Seidman & Associates
Dr. Ronald S. Tecler, Dentist
John A. Tesiero, Jr., Owner of construction supply business
Charles E. Wright, President of WW Custom Clad


Executive Officers of Ambanc Holding Co., Inc. and Mohawk Community Bank
------------------------------------------------------------------------

John M. Lisicki            President/Chief Executive Officer
James J. Alescio           Sr.Vice President/Treasurer/Chief Financial Officer
Benjamin W. Ziskin         Sr.Vice President/Sr. Consumer Lending Officer
Thomas Nachod              Sr.Vice President/Sr. Commercial Lending Officer
Robert Kelly               Vice President/General Counsel/Secretary