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. All references to the Company,  unless otherwise indicated, at or
before December 26, 1995 refer to the Bank.
<TABLE>
<CAPTION>
                                                             December 31,
                                        1999        1998         1997         1996        1995
                                     ---------   ---------     ---------    ---------   --------
     Selected Consolidated                                  (In thousands)
     Financial Condition Data:
<S>                                  <C>         <C>          <C>          <C>         <C>
Total assets .....................   $ 740,672   $ 735,472    $ 510,444    $ 472,421   $ 438,944
Securities available for sale ....     212,145     244,241      205,808      200,539      74,422
Loans receivable, net ............     465,477     420,933      281,123      248,094     249,991
Deposits .........................     450,134     461,413      333,265      298,082     311,239
Borrowed funds ...................     204,905     173,810      111,550      108,780        --
Shareholders' equity .............      75,593      85,893       61,202       61,518      76,015

                                                         Years Ended December 31,
                                         1999        1998        1997         1996        1995
                                      ---------   ---------    ---------    ---------   --------
    Selected Consolidated                    (Dollars in thousands, except per share data)
    Operations Data:
Total interest and dividend income    $48,767     $38,973     $  35,566    $  32,348   $  25,582
Total interest expense ...........     26,319      22,441        19,654       16,435      12,746
                                      -------     -------     ---------    ---------   ---------
Net interest income ..............     22,448      16,532        15,912       15,913      12,836
Provision for loan losses ........        790         900         1,088        9,450       1,522
                                      -------     -------     ---------    ---------   ---------
Net interest income after
 provision for loan losses .......     21,658      15,632        14,824        6,463      11,314
Non-interest income ..............      1,803       1,144         1,819          908       1,512
Non-interest expense..............     16,063      15,075        12,190       13,136      11,383
                                      -------     -------     ---------    ---------   ---------
Income (loss) before taxes .......      7,398       1,701         4,453       (5,765)      1,443
Income tax expense (benefit) .....      3,095         670         1,693       (1,929)        586
                                      -------     -------     ---------    ---------   ---------
Net income (loss) ................    $ 4,303     $ 1,031     $   2,760    ($  3,836)  $     857
                                      =======     =======     =========    =========   =========
Basic earnings (loss) per share* .    $  0.88     $  0.26     $    0.70    ($   0.81)        N/A
                                      =======     =======     =========    =========   =========
Diluted earnings (loss) per share*    $  0.87     $  0.26     $    0.69    ($   0.81)        N/A
                                      =======     =======     =========    =========   =========
Dividend payout ratio ............       38.6%       96.1%         14.3%         N/A         N/A
                                      =======     =======     =========    =========   =========
</TABLE>
     *Earnings  per share were not  calculated  for 1995 and prior periods since
the  Company  had no stock  outstanding  prior to its  initial  public  offering
completed on December 26, 1995.

<PAGE>


<TABLE>
<CAPTION>
                                                    At or for the years ended December 31,
                                                   1999    1998    1997     1996     1995
                                                   ----    ----    ----     ----     ----
Selected Consolidated Financial
Ratios and Other Data:
<S>                                                <C>     <C>     <C>     <C>      <C>
Performance Ratios:
Return (loss) on average assets (1) .......        0.59%   0.18%   0.56%   (0.84)%   0.25%
Return (loss) on average equity (1) .......        5.26    1.64    4.52    (5.24)    3.00
Interest rate information:
   Interest rate spread during year .......        2.57    2.32    2.58     2.74     3.36
   Net interest margin during year (2) ....        3.21    3.04    3.36     3.66     3.87
Efficiency ratio (3) ......................       63.79   74.44   69.81    62.50    68.18
Ratio of average earning assets to
   average interest-bearing liabilities ...      117.24  117.28  118.93   124.26   113.31

Asset Quality Ratios:
Non-performing assets to total assets (1) .        0.61    0.45    0.67     1.18     2.72
Non-performing loans to total loans .......        0.89    0.68    1.16     1.94     3.48
Allowance for loan losses to
  non-performing loans ....................      130.86  168.42  117.07    70.47    30.10
Allowance for loan losses to total loans ..        1.17    1.15    1.34     1.37     1.05

Capital Ratios:
Equity to total assets at end of period (1)       10.21   11.68   11.99    13.02    17.32
Average equity to average assets (1) ......       11.29   11.18   12.42    15.95     8.30

Other Data:
Number of full-service offices ............        17      18       12       9        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 certain
non-recurring  expenses in 1998 totaling  approximately $1.7 million,  primarily
related  to  costs  associated  with  the  merger,   costs  asociated  with  the
termination and consulting agreements entered into with the former President and
CEO, costs  incurred to defend  against and settle legal actions  initiated by a
shareholder,  and costs associated with the core system  conversion)  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 (the "Conversion").

On November 16, 1998, the Company acquired AFSALA Bancorp,  Inc.  ("AFSALA") and
its wholly owned  subsidiary,  Amsterdam  Federal  Bank.  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" (the "Bank"). See "Acquisition of AFSALA Bancorp, Inc."

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 Bank 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. At December 31, 1999, the Bank's loans receivable, net,
to assets  ratio was  62.8%,  up from 57.2% at  December  31,  1998.  The Bank's
portfolio of one- to four-family  residential mortgage and home equity loans was
85.2% of total loans at December  31,  1999,  compared to 84.3% at December  31,
1998.

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.

Acquisition Of AFSALA Bancorp, Inc.

On November 16, 1998, the Company  acquired AFSALA Bancorp,  Inc. 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.

The acquisition  was accounted for using purchase  accounting in accordance with
APB  Opinion  No. 16,  "Business  Combinations"  (APB No.  16).  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.  See  Note  2 to  the  consolidated  financial
statements for further information regarding the acquisition of AFSALA.

Many of the fluctuations  noted below,  including  increases in average balances
and certain  income and expenses,  are the result of AFSALA's  operations  being
included for all of 1999 but for only approximately a month and a half in 1998.

Financial Condition

Comparison  of Financial  Condition at December 31, 1999 and 1998.  Total assets
increased by $5.2 million,  or 0.7%, to $740.7 million at December 31, 1999 from
$735.5  million at  December  31,  1998,  primarily  due to  increases  in loans
receivable,  net,  Federal  Home Loan Bank of New York (FHLB)  stock,  and other
assets of $44.5 million, $1.5 million, and $3.7 million, respectively, offset by
decreases in cash and cash  equivalents  and  securities  available  for sale of
$13.2 million and $32.1 million, respectively.

Cash and cash equivalents decreased by $13.2 million, or 30.8%, to $29.6 million
at December 31, 1999 from $42.8 million at December 31, 1998  primarily due to a
decrease in federal  funds sold from $30.2 million at December 31, 1998 to $0 at
December  31, 1999,  partially  offset by an increase in cash and due from banks
from $9.2  million at December  31, 1998 to $26.4  million at December 31, 1999.
The increase 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.  Vault cash  returned to more normal  levels in
early 2000.  Securities available for sale decreased $32.1 million, or 13.1%, to
$212.1  million at December  31, 1999 from $244.2  million at December  31, 1998
resulting  primarily  from  the  maturities  and  calls  of  securities  and the
reinvestment  of the  proceeds  in the loan  portfolio.  Loans  receivable,  net
increased  $44.5  million from $420.9  million at December  31, 1998,  to $465.5
million at  December  31,  1999,  an  increase  of 10.6% due to  increased  loan
activity  primarily in residential  mortgage and home equity loans. The shift in
assets from lower-yielding  federal funds sold and securities available for sale
to higher-yielding loans is consistent with the Company's strategy to attempt to
increase its interest rate spread and net interest  margin,  while  limiting its
interest rate risk.

FHLB stock  increased  $1.5 million  from $7.2 million at December 31, 1998,  to
$8.7  million at December  31,  1999,  an increase of 21.2% due to  purchases of
additional stock. In addition,  other assets increased $3.7 million,  or 111.7%,
to $7.0  million  at  December  31,  1999  due  primarily  to the  deferred  tax
consequences  related to the adjustment of securities available for sale to fair
value.

Deposits decreased by $11.3 million,  or 2.4%, to $450.1 million at December 31,
1999 from $461.4  million at December 31, 1998 due primarily to the  competitive
rate environment on time deposits and the Company's use of FHLB borrowings as an
alternative funding source. Likewise, securities repurchase agreements decreased
$39.7  million,  or 26.0%,  to $112.7  million at December  31, 1999 from $152.4
million at December  31,  1998,  due  primarily  to the  maturity of  repurchase
agreements and the replacement of the funding with FHLB borrowings. In addition,
due to brokers decreased $6.0 million to $0 at December 31, 1999, resulting from
the payment of amounts due to brokers from  purchases of securities  outstanding
in January  1999.  Offsetting  these  decreases  was an increase  in  short-term
borrowings  from  the  FHLB of $71.2  million.  See Note 10 to the  consolidated
financial statements for further information regarding the Company's borrowings.

Shareholders'  equity decreased $10.3 million,  or 12.0%,  from $85.9 million at
December 31, 1998 to $75.6  million at December 31,  1999,  due  primarily to an
increase  in treasury  stock  totaling  $7.1  million,  and the  increase in net
unrealized losses on securities available for sale, net of tax, of $6.7 million.
In addition,  the Company paid cash dividends of $1.8 million.  These  decreases
were partially  offset by net income of $4.3 million for the year ended December
31, 1999. Other  significant  items impacting  shareholders'  equity during 1999
were the release of ESOP shares, and the continued  amortization of the unearned
RRP shares.

<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>
                                                             1999                         1998                      1997
                                                ---------------------------  --------------------------- -------------------------
                                                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) .......................$ 442,802  $  32,578  7.36%  $ 322,335  $  24,623  7.64% $ 267,726  $  21,011   7.85%
  Securities available for sale (AFS) (2).....  239,439     15,245  6.37%    205,995     13,479  6.54%   194,111     13,957   7.19%
  Federal Home Loan Bank stock ...............    7,402        503  6.80%      5,048        364  7.21%     3,066        204   6.65%
  Federal funds sold and interest-
    bearing deposits .........................    9,319        441  4.73%     10,632        507  4.77%     8,162        394   4.83%
                                                -------     ------           -------     ------          -------     ------
      Total earning assets ...................  698,962     48,767  6.98%    544,010     38,973  7.16%   473,065     35,566   7.52%
                                                -------     ------           -------     ------          -------     ------
Allowance for loan losses ....................   (5,314)                      (4,220)                     (3,846)
Unrealized gain/(loss) on AFS securities .....   (3,176)                         225                        (884)
Other assets .................................   33,970                       21,191                      23,271
                                                -------                      -------                   ---------
Total average assets .........................$ 724,442                    $ 561,206                   $ 491,606
                                              =========                    =========                   =========
Interest-bearing liabilities
  Savings deposits ...........................$ 137,506      4,001  2.91%  $ 103,513      3,119  3.01%  $ 99,389    $ 3,016   3.03%
  NOW  deposits ..............................   36,703        567  1.54%     25,410        549  2.16%    19,990        543   2.72%
  Certificates of deposit ....................  223,551     11,242  5.03%    176,136      9,882  5.61%   172,319      9,882   5.73%
  Money market accounts ......................   24,628        945  3.84%      8,481        272  3.21%     7,159        204   2.85%
  Borrowed funds .............................  173,803      9,564  5.50%    150,335      8,619  5.73%    98,927      6,009   6.07%
                                                -------     ------           -------     ------          -------     ------
      Total interest-bearing liabilities .....  596,191     26,319  4.41%    463,875     22,441  4.84%   397,784     19,654   4.94%
                                                -------     ------           -------     ------          -------     ------
Other liabilities ............................   46,458                       34,590                      32,757
                                                -------                      -------                      ------
Total liabilities ............................  642,649                      498,465                     430,541
Shareholders' equity .........................   81,793                       62,741                      61,065
                                                -------                      -------                      ------
Total average liabilities & equity ...........$ 724,442                    $ 561,206                   $ 491,606
                                              =========                    =========                   =========
    Net interest income ......................           $  22,448                    $  16,532                    $ 15,912
                                                           =======                      =======                     =======
    Interest rate spread .....................                      2.57%                        2.32%                        2.58%
                                                                   ======                       ======                       ======
    Net earning assets ....................... $ 102,771                   $  80,135                  $  75,281
                                               =========                    =========                  =========
    Net interest margin ......................                      3.21%                        3.04%                        3.36%
                                                                   ======                       ======                       ======
    Average earning assets/Average
      interest-bearing liabilities ...........    117.24%                     117.28%                    118.93%
                                               ==========                  ==========                 ==========
<FN>
(1) Calculated net of deferred loan fees and costs,  loan discounts and loans in
process.
(2) Securities available for sale exclude securities pending settlement.
</FN>
</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>
                                           ----------------------------------------------------------------------
                                                          1999 vs. 1998                        1998 vs. 1997
                                           ---------------------------------    ---------------------------------
                                                   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 .....................   $ 8,826     $  (871)    $  7,955     $ 4,154     $  (542)    $  3,612
  Securities available for sale ........     2,118        (352)       1,766       1,018      (1,496)        (478)
  Federal Home Loan Bank stock .........       159         (20)         139         142          18          160
  Federal funds sold and interest-
    bearing deposits ...................       (61)         (5)         (66)        118          (5)         113
                                           -------      -------     -------     -------      -------     -------
      Total earning assets .............    11,042      (1,248)       9,794       5,432      (2,025)       3,407
                                           -------      -------     -------     -------      -------     -------

Interest-Bearing Liabilities
  Savings deposits .....................       985        (103)         882         124         (21)         103
  NOW  deposits ........................        50         (32)          18          24         (18)           6
  Certificates of deposit ..............     2,212        (852)       1,360         216        (216)          --
  Money market accounts ................       610          63          673          40          28           68
  Borrowed funds .......................     1,273        (328)         945       2,926        (316)       2,610
                                           -------      -------     -------     -------      -------     -------
      Total interest-bearing liabilities   $ 5,130     $(1,252)     $ 3,878     $ 3,330      $ (543)     $ 2,787
                                           -------      -------     -------     -------      -------     -------

    Net interest income ................   $ 5,912     $     4      $ 5,916     $ 2,102     $(1,482)     $   620
                                           =======     ========     =======     =======      =======     =======
</TABLE>



<PAGE>

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%.

Earning assets primarily consist of loans receivable,  securities  available for
sale, federal funds sold, FHLB of New York stock, and interest-bearing deposits.
Interest-bearing  liabilities  primarily 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,  increased
to 2.57% for the year ended  December  31,  1999,  from 2.32% for the year ended
December 31, 1998.  Likewise,  the net interest  margin  increased from 3.04% in
1998 to 3.21% in 1999. The increase in the interest rate spread and net interest
margin from 1998 to 1999 was due primarily to three factors.  First, during 1999
the  Company  redeployed  assets  from  lower-yielding  federal  funds  sold and
securities available for sale to the higher-yielding loan portfolio. Second, the
average cost of the Company's  interest-bearing deposits decreased from 4.40% in
1998 to 3.97% in 1999.  This was due primarily to a decrease in the average rate
paid on time  deposits,  which  decreased  from  5.61% in 1998 to 5.03% in 1999.
Third, the average cost of the Company's  borrowed funds decreased from 5.73% in
1998 to 5.50% for 1999.  However,  many of the Company's  securities  repurchase
agreements  contain call  features.  If these  repurchase  agreements are called
(which is likely if interest  rates continue to increase) and the Company cannot
replace the  funding at a similar or lower  interest  rate,  the  interest  rate
spread and net interest margin are likely to decrease.  For further  information
regarding the Company's  borrowings,  see Note 10 to the consolidated  financial
statements.

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 Company's  growing  customer base provides  Ambanc
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
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.  For further  information
regarding  changes in market  interest rates and its impact on the interest rate
spread and net interest margin, please refer to "Market Risk".

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 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, historical loss experience, current economic
conditions,  estimated fair value of underlying collateral,  delinquencies,  and
other  factors.  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.  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. The expense related to the ESOP for 1999 was $73 thousand lower than 1998
due to the lower stock price in 1999 relative to 1998.

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.  As noted  previously,  goodwill is
being amortized to expense over fifteen years using the straight-line method.

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.


<PAGE>



Comparison of Operating Results for the Years Ended December 31, 1998 and 1997.

Net Income.  Net income decreased by $1.7 million,  or 62.6%, for the year ended
December 31, 1998 to $1.0 million from $2.8 million for the year ended  December
31, 1997. Net income for the year ended December 31, 1998 was reduced  primarily
as a result of increased  non-interest  expenses and a decrease in  non-interest
income,  offset in part by increased  net interest  income and a decrease in the
provision for loan losses.  These and other changes are discussed in more detail
below.

Net Interest Income.  Net interest income  increased $620 thousand,  or 3.9%, to
$16.5  million for the year ended  December 31, 1998 from $15.9  million for the
year ended December 31, 1997. The increase in net interest  income was primarily
due to an increase of $70.9 million, or 15.0%, in the average balance of earning
assets,  offset  by an  increase  in the  average  balance  of  interest-bearing
liabilities  of $66.1  million,  or 16.6%,  and a decrease in the interest  rate
spread  from 2.58% for the year ended  December  31,  1997 to 2.32% for the year
ended December 31, 1998.

The interest rate spread decreased to 2.32% for the year ended December 31, 1998
from 2.58% for the year ended  December 31,  1997.  The decrease in the interest
rate spread was  primarily  the result of the  decrease in the average  yield on
earning  assets  being  greater  than  the  decrease  in  the  average  cost  of
interest-bearing liabilities.

Interest  and  Dividend  Income.  Interest  and  dividend  income  increased  by
approximately  $3.4  million,  or 9.6%,  to  $39.0  million  for the year  ended
December 31, 1998 from $35.6 million for the year ended  December 31, 1997.  The
increase was largely the result of an increase of $70.9  million,  or 15.0%,  in
the  average  balance of  earning  assets to $544.0  million  for the year ended
December 31, 1998 as compared to $473.1  million for the year ended December 31,
1997. The increase in the average balance of earning assets consisted  primarily
of increases in the average  balance of loans  receivable of $54.6  million,  or
20.4%, securities available for sale of $11.9 million, or 6.1%, FHLB of New York
stock of $2.0 million,  or 64.6 %, and federal  funds sold and  interest-bearing
deposits of $2.5  million,  or 30.3%.  Partially  offsetting  the effects of the
increase in the average  balance of earning assets was a 36 basis point decrease
in the average yield on total earning assets.

The yield on the average  balance of earning  assets was 7.16% and 7.52% for the
years ended December 31, 1998 and 1997, respectively.

Interest and fees on loans  increased $3.6 million,  or 17.2%,  to $24.6 million
for the year ended December 31, 1998.  This increase was primarily the result of
an increase  in the average  balance of net loans  receivable  of $54.6  million
partially offset by a 21 basis point decrease in the average yield.

Interest  income on securities  available for sale decreased  $478 thousand,  or
3.4%, to $13.5  million for the year ended  December 31, 1998 from $14.0 million
for the previous year. This decrease is primarily the result of a 65 basis point
decrease in the average yield on securities  available for sale partially offset
by an increase in the average balance of $11.9 million.

Interest Expense. Total interest expense increased by $2.8 million, or 14.2%, to
$22.4  million for the year ended  December 31, 1998 from $19.7  million for the
year  ended  December  31.  1997.  Total  average  interest-bearing  liabilities
increased by $66.1  million,  or 16.6%,  to $463.9  million in 1998  compared to
$397.8  million  in 1997.  During the same  periods,  the  average  rate paid on
interest-bearing liabilities decreased by 10 basis points to 4.84% from 4.94% in
1997.

Total interest expense for the year ended December 31, 1998 increased  primarily
due to an  increase  in the average  balance of total  borrowed  funds to $150.3
million from $98.9 million,  partially  offset by a decrease of 34 basis points,
to 5.73%, in the average rate paid for these funds during the year. The increase
in the average balance of borrowed funds was used primarily to fund the increase
in loans,  including  the purchase of $31.9 million in  residential  real estate
loans.

Provision  for Loan  Losses.  The  provision  for loan losses for the year ended
December 31, 1998 decreased $188 thousand to $900 thousand from $1.1 million for
the year  ended  December  31,  1997.  The  decrease  in the  provision  was due
primarily  to the  decrease in  non-performing  loans  during the year from $3.3
million at December 31,  1997,  to $2.9 million at December 31, 1998, a decrease
of 10.9%.

Non-Interest  Income.  Total non-interest income decreased by $675 thousand,  or
37.1%,  to $1.1  million for the year ended  December 31, 1998 from $1.8 million
for the year ended  December 31, 1997  primarily due to net losses on securities
transactions  of $165 thousand in 1998 compared to net gains of $775 thousand in
1997.  This  decrease  in net gains  (losses)  on  securities  transactions  was
partially  offset by an increase in service charges on deposit  accounts of $226
thousand from 1997 to 1998. The increase in service charges on deposit  accounts
is primarily  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 merger.

Non-Interest  Expenses.  Non-interest expenses increased $2.9 million, or 23.7%,
to $15.1 million for the year ended December 31, 1998 from $12.2 million for the
year ended  December 31, 1997.  Non-interest  expenses in 1998 were  impacted by
significant non-recurring expenses totaling approximately $1.7 million primarily
related  to  costs  associated  with  the  merger  of the two  companies,  costs
associated with the termination and consulting  agreements entered into with the
former  President  and CEO,  costs  incurred to defend  against and settle legal
actions  initiated by a shareholder,  and costs  associated with the core system
conversion. These and other changes are discussed in more detail below.

Salaries,  wages and benefits expense  increased by $307 thousand,  or 5.0%, due
primarily to increased costs as a result of the merger, the opening of three new
branches  during 1997,  increased  costs  associated with the Company's ESOP, as
well as general cost of living and merit raises to employees.

During 1998, the Company incurred  certain  non-recurring  termination  benefits
totaling  approximately $608 thousand.  The non-recurring  termination  benefits
related to the  termination  and  consulting  agreements  entered  into with the
Company's  former  President  and CEO, and  severance  packages for three former
officers.

Occupancy and equipment increased $270 thousand, or 17.5%,  primarily due to the
acceleration  of  depreciation  and  amortization  of  equipment  and  leasehold
improvements  as a result  of the  merger.  In  addition,  rent and  maintenance
expense  increased as a result of the branch offices opened in 1997 and the four
additional branches acquired through the merger.

Data   processing   increased  $520  thousand,   or  44.5%,   primarily  due  to
non-recurring  expenses related to the core system conversion  subsequent to the
merger.  The non-recurring  expenses relate to the conversion of the core system
(loans and deposits) and the  termination of the network  contract for automated
teller machine (ATM) processing.  The non-recurring expenses associated with the
conversion of the core system and the termination of the ATM processing contract
were  approximately  $368 thousand.  Also  contributing  to the increase in data
processing  expense was the increase in the number of loan and deposit  accounts
due to the merger.

Professional fees increased $306 thousand, or 71.3%, primarily due to charges of
$219 thousand  related to legal costs  incurred to defend  against legal actions
initiated by a shareholder.

Real estate owned and repossessed  assets expenses  decreased $294 thousand,  or
82.8%,  to $61 thousand in 1998 as compared to $355  thousand in 1997  primarily
due to a decrease in net costs associated with foreclosed real estate properties
and  repossessed  assets.  This decrease was largely the result of a decrease of
$298  thousand,  or 69.1%,  in the  average  balance  of real  estate  owned and
repossessed assets during the year.

Non-interest  expenses for 1998 included the  amortization of goodwill  totaling
approximately $67 thousand.

Other non-interest  expenses increased  approximately $1.1 million, or 43.4%, to
$3.6 million for the year ended  December 31, 1998 when  compared to 1997.  This
increase was primarily due to  merger-related  costs which included  advertising
related to promoting the new bank, the replacement of supplies and the write-off
of software duplication between the banks, additional courier services for check
processing due to the added branches,  and an increase in postage due to special
mailings to  depositors  and  shareholders  related to the merger.  In addition,
costs   associated  with  the  settlement  of  legal  actions   initiated  by  a
shareholder,  and costs  related to a one-time  charge to  substantially  modify
repurchase agreements contributed to this increase.

Income Tax Expense.  Income tax expense decreased by $1.0 million,  or 60.4%, to
$670  thousand  for the year ended  December  31, 1998 from $1.7 million for the
year ended  December 31, 1997.  The  decrease  was  primarily  the result of the
decrease in income before taxes.

Asset Quality

The Bank's loan portfolio consists  primarily of one-to four-family  residential
mortgages  and home equity loans which as a percentage  of the Bank's total loan
portfolio were 85.2% at December 31, 1999.  This percentage has grown from 84.3%
and 77.6% at December 31, 1998 and 1997,  respectively.  During  1999,  the Bank
also began to re-emphasize commercial lending. Commercial loans, in nature, tend
to be of a shorter  term  than  one-to-four  family  residential  mortgages.  In
addition,  the interest rate charged on these loans  generally  adjusts within a
period of five years or less. The growth in commercial  loans should improve the
interest rate risk position of the Bank. The commercial  and  multi-family  real
estate  portfolio  increased  $4.1 million to $31.8 million at December 31, 1999
from $27.7 million at December 31, 1998, an increase of 14.9%.

The Bank'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, 1999 were $4.5
million,  or 0.61% of total assets,  compared with $3.3 million and $3.4 million
at  December   31,  1998  and  1997,   respectively.   The   increase  in  total
non-performing assets was due to a $1.3 million increase in total non-performing
loans. Total non-performing loans increased to $4.2 million at December 31, 1999
from $2.9 million at December 31,  1998.  This  increase was due to increases in
non-accruing loans and accruing loans delinquent more than 90 days. Non-accruing
loans and accruing  loans  delinquent  more than 90 days increased $966 thousand
and $488 thousand, to $2.6 million and $1.1 million,  respectively,  at December
31, 1999. The Bank's ratio of non-performing  loans to total loans and allowance
for loan losses to non-performing loans were 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 Bank'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 Bank 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 Bank's  needs for funds and on a
review of rates  offered by other  financial  institutions  in the Bank's market
areas. Interest rates on loans are primarily based on the interest rates offered
by other  financial  institutions in the Bank's primary market areas, as well as
the Bank's cost of funds.

The  committee  manages the interest  rate  sensitivity  of the Bank 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  Bank's
liquidity needs, growth, and capital adequacy.  The Bank'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  Bank  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  Bank  believes  it is
important to manage the effect  interest  rates have on the Bank'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,  1999,  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.

                                                              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       19,534     (52,501)         (73)%         2.91%  -693 bp
        +200 bp       36,655     (35,380)         (49)          5.31   -454 bp
        +100 bp       63,278     (12,638)         (24)          7.66   -219 bp
           0 bp       72,035                                    9.85
        -100 bp       87,416      15,381           21          11.65   181 bp
        -200 bp      100,062      28,025           39          13.06   322 bp
        -300 bp      112,221      40,186           56          14.36   452 bp

-------------------------------------------------------------------------------
(1)  Represents  the excess  (deficiency)  of the  estimated  NPV  assuming  the
     indicated  change in interest  rates minus 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 Bank has been that net  interest  income  declines  with
increases  in  interest  rates  and  that net  interest  income  increases  with
decreases in interest rates.  Generally,  during periods of increasing  interest
rates, the Bank's interest rate sensitive liabilities would re-price faster than
its interest rate sensitive assets causing a decline in the Bank's interest rate
spread and net interest margin. This would result from an increase in the Bank's
cost of funds that would not be  immediately  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 is evident in 1999 when interest  rates  generally  began to
increase  during the second half of the year.  This  increase in interest  rates
caused a decline in the net  interest  margin from 3.36% for the  quarter  ended
September  30,  1999,  to 3.19% for the quarter  ended  December  31,  1999.  If
interest rates continue to increase,  management expects the net interest margin
to decline.

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 28.36% and 31.97% at
December 31, 1999 and 1998, 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 Bank  invests  excess funds in
overnight 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,  1999 and 1998,  the  Company  had  $92.2  and $21.4  million,
respectively,  in  outstanding  borrowings  from the FHLB and $112.7 million and
$152.4 million,  respectively,  in securities  repurchase  agreements,  the vast
majority  of which  are  also  with the  FHLB.  See note 10 to the  consolidated
financial statements for further information regarding the Company's borrowings.

As of  December  31, 1999 and 1998,  the  Company had $212.1  million and $244.2
million,  respectively,  of securities  classified  as available  for sale.  The
liquidity of the securities  available for sale  portfolio  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, 1999,  the Bank's  capital  exceeded  each of the
regulatory  capital  requirements of the OTS. The Bank is "well  capitalized" at
December 31, 1999 according to regulatory definition.  At December 31, 1999, the
Bank's  tangible and core capital levels were both $67.8 million (9.18% of total
adjusted assets) and its total risk-based capital level was $72.1 million (20.8%
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 16 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  543,000  shares.  During 1999,  the
Company  repurchased 459,000 shares of the Company's common stock in open-market
transactions at a total cost of $7.4 million.

Year 2000

The Year 2000 issue  confronting  the Company  centered on the inability of some
computer systems to properly  recognize the year 2000. The Company  formulated a
plan to  address  the Year  2000  issue.  Since the  inception  of the Year 2000
project,  the costs  incurred  by the  Company to address  year 2000  compliance
totaled  approximately  $181 thousand,  of which $135 thousand were hardware and
software  upgrades which were  capitalized  and will be depreciated or amortized
over their  estimated  useful  lives of three to five  years.  The  Company  has
experienced no material  operational or financial problems relating to year 2000
compliance.  The  Company  continues  to monitor its systems for any latent year
2000 compliance problems but does not expect any material problems or costs.

Effect of Inflation and Changing Prices

The  Company's  consolidated  financial  statements  and related data  presented
herein have been  prepared in  accordance  with  generally  accepted  accounting
principles,  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 FASB 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.  Management  is currently  evaluating  what impact,  if any, this
Statement will have on the Company's consolidated financial statements.

<PAGE>



<TABLE>
<CAPTION>

Unaudited Consolidated Quarterly Financial Information
                                                                1999                                        1998
                                           -----------------------------------------   -----------------------------------------
                                              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 .......       $11,964    $11,957    $12,334    $12,512     $9,009     $9,095     $9,955    $10,914

Net Interest Income ................         5,393      5,506      5,892      5,657      3,862      3,848      4,085      4,737

Provision for Loan Losses ..........           255        240        175        120        225        225        225        225

Income (Loss) Before Taxes .........         1,816      1,868      2,200      1,514        808        169        779       ( 55)

Net Income .........................         1,035      1,092      1,257        919        446         97        478         10

Earnings per share - Basic .........          0.21       0.22       0.26       0.20       0.12       0.03       0.13       0.00
Earnings per share - Diluted .......          0.20       0.22       0.26       0.19       0.11       0.03       0.13       0.00

Average Shares Outstanding - Basic .     5,009,031  4,993,494  4,838,482  4,673,154  3,828,636  3,759,045  3,701,018  4,371,881
Average Shares Outstanding - Diluted     5,060,835  5,058,050  4,894,297  4,731,445  3,927,904  3,861,896  3,745,764  4,417,751
</TABLE>
<PAGE>





                          Independent Auditors' Report

The 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,
1999 and 1998,  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, 1999. 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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  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, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1999,  in  conformity  with  generally  accepted  accounting
principles.

                                  /s/ KPMG LLP

Albany, New York
February 16, 2000




<PAGE>
<TABLE>
<CAPTION>
                    AMBANC HOLDING CO., INC. AND SUBSIDIARIES
                 Consolidated Statements of Financial Condition
                                                                     December 31,
                                                                   1999         1998
                                                                ---------    ---------
                                                                    (In thousands)
    Assets
<S>                                                             <C>              <C>
Cash and due from banks .....................................   $  26,380        9,225
Interest-bearing deposits ...................................       3,231        3,390
Federal funds sold ..........................................          --       30,200
                                                                ---------    ---------
     Cash and cash equivalents ..............................      29,611       42,815
Securities available for sale, at fair value ................     212,145      244,241
Federal Home Loan Bank of New York stock, at cost ...........       8,748        7,215
Loans receivable, net .......................................     465,477      420,933
Accrued interest receivable .................................       4,411        4,115
Premises and equipment, net .................................       5,593        4,537
Real estate owned and repossessed assets ....................         322          399
Goodwill ....................................................       7,390        7,923
Other assets ................................................       6,975        3,294
                                                                ---------    ---------
     Total assets ...........................................   $ 740,672      735,472
                                                                =========    =========
    Liabilities and Shareholders' Equity
Liabilities:
 Deposits ...................................................     450,134      461,413
 Federal Home Loan Bank short-term borrowings ...............      71,200           --
 Federal Home Loan Bank long-term advances ..................      20,965       21,410
 Securities sold under agreements to repurchase .............     112,740      152,400
 Advances from borrowers for taxes and insurance ............       3,641        2,436
 Accrued interest payable ...................................       1,508        1,426
 Accrued expenses and other liabilities .....................       4,891        4,494
 Due to brokers .............................................          --        6,000
                                                                ---------    ---------
     Total liabilities ......................................     665,079      649,579
                                                                ---------    ---------
Commitments and contingent liabilities (note 14)

Shareholders' equity:
 Preferred stock $.01 par value. Authorized 5,000,000 shares;
   none issued at December 31, 1999 and 1998 ................          --           --
 Common stock $.01 par value.  Authorized 15,000,000 shares;
   5,432,245 shares issued at December 31, 1999 and 1998 ....          54           54
 Additional paid-in capital .................................      63,314       63,019
 Retained earnings, substantially restricted ................      28,879       26,356
 Treasury stock, at cost (465,155 shares at December 31, 1999
   and 23,908 shares at December 31, 1998 ...................      (7,486)        (329)
 Unallocated common stock held by ESOP ......................      (2,353)      (2,818)
 'Unearned RRP shares .......................................        (443)        (759)
 Accumulated other comprehensive (loss) income ..............      (6,372)         370
                                                                ---------    ---------
     Total shareholders' equity .............................      75,593       85,893
                                                                ---------    ---------
     Total liabilities and shareholders' equity .............   $ 740,672      735,472
                                                                =========    =========
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,
                                                            1999       1998      1997
                                                           -------   -------    -------
                                                   (In thousands, except per share amounts)
Interest and dividend income:
<S>                                                        <C>        <C>        <C>
 Loans receivable ......................................   $32,578    24,623     21,011
 Securities available for sale .........................    15,245    13,479     13,957
 Federal funds sold and interest-bearing deposits ......       441       507        394
 Federal Home Loan Bank stock ..........................       503       364        204
                                                           -------   -------    -------
     Total interest and dividend income ................    48,767    38,973     35,566
                                                           -------   -------    -------
Interest expense:
 Deposits ..............................................    16,755    13,822     13,645
 Borrowings ............................................     9,564     8,619      6,009
                                                           -------   -------    -------
     Total interest expense ............................    26,319    22,441     19,654
                                                           -------   -------    -------
     Net interest income ...............................    22,448    16,532     15,912
Provision for loan losses ..............................       790       900      1,088
                                                           -------   -------    -------
     Net interest income after provision for loan losses    21,658    15,632     14,824
                                                           -------   -------    -------
Non-interest income:
 Service charges on deposit accounts ...................     1,376     1,012        786
 Net (losses) gains on securities transactions .........        --      (165)       775
 Other .................................................       427       297        258
                                                           -------   -------    -------
     Total non-interest income .........................     1,803     1,144      1,819
                                                           -------   -------    -------
Non-interest expenses:
 Salaries, wages and benefits ..........................     8,027     6,423      6,113
 Non-recurring termination benefits ....................        --       608         --
 Occupancy and equipment ...............................     2,307     1,809      1,539
 Data processing .......................................     1,360     1,688      1,168
 Real estate owned and repossessed assets expenses, net         60        61        355
 Professional fees .....................................       536       735        429
 Amortization of goodwill ..............................       533        67         --
 Other .................................................     3,240     3,684      2,586
                                                           -------   -------    -------
     Total non-interest expenses .......................    16,063    15,075     12,190
                                                           -------   -------    -------
Income before taxes ....................................     7,398     1,701      4,453
Income tax expense .....................................     3,095       670      1,693
                                                           -------   -------    -------
     Net income ........................................   $ 4,303     1,031      2,760
                                                           =======   =======    =======
Basic earnings per share ...............................   $  0.88      0.26       0.70
                                                           =======   =======    =======
Diluted earnings per share .............................   $  0.87      0.26       0.69
                                                           =======   =======    =======
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, 1999, 1998 and 1997
                 (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, 1996 ..........................   $    54    52,128     24,436    (11,208)
Comprehensive income:
 Net income ...........................................        --        --      2,760         --
 Other comprehensive loss, net of tax:
   Unrealized net holding gains on securities available
     for sale arising during the year (pre-tax $452)
   Reclassification adjustment for net gains realized
     in net income during the year (pre-tax $775)
 Other comprehensive loss .............................        --        --         --         --
      Comprehensive income
Purchase of treasury shares (216,890 shares) ..........        --        --         --     (3,488)
Release of ESOP shares (50,561 shares) ................        --       257         --         --
Issuance of RRP shares (131,285 shares) ...............        --        --       (306)     2,111
RRP shares vested .....................................        --        --         --         --
Cash dividends - $0.10 per share ......................        --        --       (432)        --
                                                           -------  ----------  --------   --------
Balance at December 31, 1997 ..........................        54    52,385     26,458    (12,585)
Comprehensive income:
 Net income ...........................................        --        --      1,031         --
 Other comprehensive loss, net of tax:
   Unrealized net holding gains on securities available
     for sale arising during the year (pre-tax $908)
   Reclassification adjustment for net gains 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 earned ..............        --        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 earned ..............        --        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)
                                                          =======  ==========  ========   ========
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, 1999, 1998 and 1997
                (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, 1996 ..........................   $(3,812)        --        (80)     61,518
Comprehensive income:
 Net income ...........................................        --         --         --       2,760 $      2,760
 Other comprehensive loss, net of tax:
   Unrealized net holding gains on securities available
     for sale arising during the year (pre-tax $452) ..                                                      271
   Reclassification adjustment for net gains realized
     in net income during the year (pre-tax $775) .....                                                     (465)
                                                                                                         -------
 Other comprehensive loss .............................        --         --       (194)       (194)        (194)
                                                                                                         -------
      Comprehensive income ............................                                             $      2,566
                                                                                                         =======
Purchase of treasury shares (216,890 shares) ..........        --         --         --      (3,488)
Release of ESOP shares (50,561 shares) ................       509         --         --         766
Issuance of RRP shares (131,285 shares) ...............        --     (1,805)        --          --
RRP shares vested .....................................        --        272         --         272
Cash dividends - $0.10 per share ......................        --         --         --        (432)
                                                       -----------  ---------- ------------ --------
Balance at December 31, 1997 ..........................    (3,303)    (1,533)      (274)     61,202
Comprehensive income:
 Net income ...........................................        --         --         --       1,031        1,031
 Other comprehensive loss, net of tax:
   Unrealized net holding gains on securities available
     for sale arising during the year (pre-tax $908) ..                                                      545
   Reclassification adjustment for net gains 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 earned ..............        --         --         --          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 earned ..............        --         --         --          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
                                                       ===========  ========== ============ ========
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,
                                                              1999        1998       1997
                                                            -------     -------     -------
                                                                     (In thousands)

Increase  (decrease)  in cash and cash  equivalents:
Cash flows from operating activities:
<S>                                                        <C>            <C>         <C>
   Net income ..........................................   $  4,303       1,031       2,760
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation and amortization of premises and
          equipment ....................................        888         735         606
       Amoritization of goodwill .......................        533          67          --
       Net amoritization of purchase accounting
          adjustments ..................................       (204)        (36)         --
       Net amortization of premium on securities .......        734       1,094         320
       Provision for loan losses .......................        790         900       1,088
       Provision for losses and writedowns on real
          estate owned and repossessed assets ..........          6           7         171
       Net (gains) losses on sales of real estate
          owned and repossessed assets .................         --          (7)         38
       ESOP compensation expense .......................        744         816         766
       RRP expense .....................................        433         371         272
       Net losses (gains) on securities transactions ...         --         165        (775)
       Decrease in accrued interest
          receivable and other assets ..................        539          65         877
       Increase in accrued interest payable and
          accrued expenses and other liabilities .......        479       1,423         187
                                                            -------     -------     -------
               Net cash provided by operating activities      9,245       6,631       6,310
                                                            -------     -------     -------
 Cash flows from investing activities:
   Proceeds from sales and redemptions of
     securities available for sale .....................     12,500     126,846     194,210
   Purchases of securities available for sale ..........    (60,296)   (157,188)   (247,390)
   Proceeds from principal paydowns and
     maturities of securities available for sale .......     61,885      53,743      48,029
   Purchases of FHLB stock .............................     (1,533)     (3,359)     (1,262)
Net increase in loans made to customers ................    (46,025)    (26,391)    (34,384)
Purchases of loans .....................................          0     (31,888)         --
Purchases of premises and equipment ....................     (1,944)       (422)     (1,004)
   Proceeds from sales of real estate owned and
     repossessed assets ................................        419         270         631
   Net cash acquired in acquisition ....................         --      24,996          --
                                                            -------     -------     -------
       Net cash used in investing activities ...........    (34,994)    (13,393)    (41,170)
                                                            -------     -------     -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                    AMBANC HOLDING CO., INC. AND SUBSIDIARIES
                Consolidated Statements of Cash Flows, Continued
                                                                Years ended December 31,
                                                              1999        1998       1997
                                                            -------     -------     -------
 Cash flows from financing activities:                               (In thousands)
<S>                                                      <C>            <C>          <C>
   Net (decrease) increase in deposits ...............   $  (10,709)    (16,533)     35,183
   Net increase (decrease) in FHLB short-term
     borrowings ......................................       71,200     (12,300)      6,300
   Proceeds from FHLB long-term advances .............           --      20,000          --
Repayments of FHLB long-term advances ................         (432)        (35)         --
Proceeds from repurchase agreements ..................       15,550     142,575      66,570
Repayments of repurchase agreements ..................      (55,210)    (89,425)    (70,100)
   Increase in advances from borrowers for taxes and
     insurance .......................................        1,205         150         199
   Purchases of treasury stock .......................       (7,438)     (4,111)     (3,488)
Exercises of stock options ...........................          139         130          --
   Dividends paid ....................................       (1,760)     (1,133)       (432)
                                                            -------     -------     -------
       Net cash provided by financing activities .....       12,545      39,318      34,232
                                                            -------     -------     -------
Net (decrease) increase in cash and cash equivalents .      (13,204)     32,556        (628)
Cash and cash equivalents at beginning of year .......       42,815      10,259      10,887
                                                            -------     -------     -------
Cash and cash equivalents at end of year .............   $   29,611      42,815      10,259
                                                            =======     =======     =======
Supplemental  disclosures  of cash flow  information -
 cash paid during the year for:
   Interest ..........................................   $   26,237      21,834      19,912
                                                            =======     =======     =======
   Income taxes ......................................   $    2,866       1,429       1,770
                                                            =======     =======     =======
Noncash investing and financing activities:
 Net transfer of loans to real estate owned and
   repossessed assets ................................   $      348         386         268
                                                            =======     =======     =======
 Increase (decrease) in amounts due to brokers for
   purchases of securities available for sale ........   $   (6,000)      6,000          --
                                                            =======     =======     =======
 Fair value of non-cash assets acquired in acquisition   $       --     142,820          --
                                                            =======     =======     =======
 Fair value of liabilities assumed in acquisition ....   $       --     148,565          --
                                                            =======     =======     =======
 Issuance of RRP shares ..............................   $      121          --       2,111
                                                            =======     =======     =======
 Tax benefit related to vesting of RRP shares ........   $       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, 1999, 1998 and 1997

(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 generally accepted  accounting  principles and to
          general practice within the banking industry.

     (b)  Use of Estimates

          The preparation of the consolidated financial statements in conformity
          with generally accepted  accounting  principles 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.

          Material  estimates that are  particularly  susceptible to significant
          change in the near-term  relate to the  determination of the allowance
          for loan losses. In connection with the determination of the allowance
          for loan losses, management obtains appraisals for significant assets.

          Management  believes  that the  allowance for loan losses is adequate.
          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  Bank's  allowance  for  loan  losses.  Such
          agencies may require the Bank 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, the Company
          considers all highly liquid debt instruments with original  maturities
          of three months or less to be cash equivalents.
<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, 1999 and 1998,  the Company had no securities  classified
          as held to maturity.

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

          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. Gains and losses on the sale and redemption
          of securities  available  for sale are based on the amortized  cost of
          the specific  security  sold or redeemed.  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.  Receivables
          and payables from unsettled transactions are shown as due from brokers
          or  due  to  brokers  in  the  consolidated  statements  of  financial
          condition.

    (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 the related 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  current and  prospective  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  subsequent to January 1, 1995, management
          excludes  large groups of smaller  balance  homogeneous  loans such as
          residential  mortgages  and  consumer  loans  which  are  collectively
          evaluated  for  impairment.  Impairment  losses,  if any, are recorded
          through a charge to the provision for loan losses.

    (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 "cost"  (defined as the
          fair value at initial foreclosure or repossession). When a property is
          acquired or identified as an in-substance  foreclosure,  the excess of
          the loan balance over fair value is charged to the  allowance for loan
          losses. Subsequent writedowns to carry the property at fair value less
          costs to sell are included in noninterest  expense.  Costs incurred to
          develop or improve properties are capitalized, while holding costs are
          charged to expense.

          At December  31,  1999 and 1998,  real  estate  owned and  repossessed
          assets   consisted   primarily  of  one-to-four   family   residential
          properties,   commercial   properties,   recreational   vehicles   and
          automobiles.  The Company had no in-substance foreclosures at December
          31, 1999 or 1998.

    (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 respective  original lease terms without
          regard to lease renewal options.

    (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 $600,000 and $67,000 at December
          31, 1999 and 1998, 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  transfers  the
          underlying  securities  to a  third  party  custodian's  account  that
          explicitly recognizes the Company's interest in the securities.  These
          agreements  are  accounted  for  as  secured  financing   transactions
          provided the Company 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. The
          Company's   agreements  are  accounted  for  as  secured   financings;
          accordingly,  the transaction  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  recognized  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 recognized.  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
          and estimates of future taxable income.

    (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." 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
          defined in 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.  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 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  into common stock or
          resulted in the issuance of common stock.

    (o)   Official Bank Checks

          The Company's official bank checks (including  expense checks),  which
          are drawn upon the Bank and are  ultimately  paid  through  the Bank's
          Federal Reserve Bank of New York correspondent  account,  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 12(d).

    The  acquisition  was accounted for using purchase  accounting in accordance
    with APB  Opinion  No.  16,  "Business  Combinations"  (APB No.  16).  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  term  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 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  years  ended  December  31,  1999 and 1998,  the  impact of the net
    amortization  of the premiums  was to increase  net income by  approximately
    $122,000 and $21,000, respectively.


<PAGE>


(3) Conversion to Stock Ownership

    On December 26, 1995, the Holding  Company sold  5,422,250  shares of common
    stock at  $10.00  per  share  to  depositors  and  employees  of the  former
    Amsterdam  Savings  Bank,  FSB. Net  proceeds  from the sale of stock of the
    Holding Company,  after deducting  conversion expenses of approximately $2.0
    million, were $52.2 million and are reflected as common stock and additional
    paid-in capital in the accompanying  consolidated financial statements.  The
    Company  utilized  $26.0  million of the net  proceeds to acquire all of the
    capital stock of the former Amsterdam Savings Bank, FSB.

    As part of the conversion of the former Amsterdam Savings Bank, FSB, and the
    former Amsterdam Federal Bank, 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.

(4) Reserves and Investments Required by Law

    The Company is required to maintain certain reserves of cash and/or deposits
    with the  Federal  Reserve  Bank.  The amount of this  reserve  requirement,
    included in cash and due from banks, was approximately $4.4 million and $2.4
    million at December 31, 1999 and 1998, respectively.

    The Company is required to maintain  certain  levels of stock in the Federal
    Home Loan Bank.  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 from the Federal Home Loan Bank of New York.


<PAGE>


(5) Securities Available for Sale

    The amortized cost, gross  unrealized  gains and losses,  and estimated fair
    values of securities available for sale at December 31, 1999 and 1998 are as
    follows:

                                                         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
                                        ========   =======   ========   ========


                                                         1998
                                                    Gross      Gross   Estimated
                                      Amortized   unrealized unrealized  fair
                                        cost        gains      losses    value
                                        --------   -------   --------   --------
                                                     (In thousands)
U.S. Government and agency securities   $ 83,665       400        (65)    84,000
Mortgage-backed securities ..........     96,140       253       (137)    96,256
Collateralized mortgage obligations .     62,000       244        (96)    62,148
States and political subdivisions ...      1,819        18       --        1,837
                                        --------   -------   --------   --------
        Total .......................   $243,624       915       (298)   244,241
                                        ========   =======   ========   ========


<PAGE>


    The amortized cost and estimated fair value of debt securities available for
    sale at  December  31,  1999,  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 ...................   $    281        279
          Due after one year through five years .     19,139     18,645
          Due after five years through ten  years     57,071     54,006
          Due after ten years ...................    146,274    139,215
                                                    --------   --------
               Totals ...........................   $222,765    212,145
                                                    ========   ========


    The  following  table  sets  forth  information  with  regard  to  sales  of
    securities available for sale for the years ended December 31:

                                            1999         1998        1997
                                                    (In thousands)

              Proceeds from sale      $        -        79,101      174,010
              Gross realized gains             -           154        1,017
              Gross realized losses            -           319          242

    Securities  available  for sale with a fair  value of  approximately  $122.3
    million and $163.2 million at December 31, 1999 and 1998, respectively, were
    pledged to secure securities repurchase agreements.


<PAGE>


(6) Loans Receivable, Net

    Loans receivable consisted of the following at December 31, 1999 and 1998:

                                                           1999          1998
                                                         ---------    ---------
                                                             (In thousands)
        Loans secured by real estate:
          1 - 4 family ................................  $ 306,665      273,523
          Home equity .................................     92,605       83,949
          Commercial ..................................     27,910       23,506
          Multi-family ................................      3,881        4,165
          Construction ................................      4,924        3,600
                                                         ---------    ---------
                  Total loans secured by real estate ..    435,985      388,743
                                                         ---------    ---------
        Other loans:
          Consumer loans:
              Auto loans ..............................     11,641       14,146
              Recreational vehicles ...................      3,551        4,990
              Other secured ...........................      4,697        6,289
              Unsecured ...............................      5,918        3,712
              Manufactured homes ......................        249          385
                                                         ---------    ---------
                  Total consumer loans ................     26,056       29,522
                                                         ---------    ---------
          Commercial loans:
              Secured .................................      5,562        5,101
              Unsecured ...............................      1,063          508
                                                         ---------    ---------
                  Total commercial loans ..............      6,625        5,609
                                                         ---------    ---------
                  Total loans receivable ..............    468,666      423,874
        Deferred costs, net of deferred fees and discounts   2,320        1,950
        Allowance for loan losses ........................  (5,509)      (4,891)
                                                         ---------    ---------
                  Loans receivable, net ...............  $ 465,477      420,933
                                                         =========    =========

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

                                            1999      1998       1997
                                          -------    -------    -------
                                                  (In thousands)
        Balance at beginning of year ..   $ 4,891      3,807      3,438
        Provision charged to operations       790        900      1,088
        Charge-offs ...................      (463)    (1,226)    (1,214)
        Recoveries ....................       291        295        495
        Allowance acquired ............      --        1,115       --
                                          -------    -------    -------
        Balance at end of year ........   $ 5,509      4,891      3,807
                                          =======    =======    =======
<PAGE>
    The following  table sets forth  information  with regard to  non-performing
    loans at December 31:

                                                    1999     1998     1997
                                                   ------   ------   ------
                                                        (In thousands)
        Non-accrual loans ......................   $2,576    1,610    1,876
        Loans  contractually  past  due 90 days
          or  more  and  still accruing interest    1,068      580      451
        Restructured loans .....................      566      714      931
                                                   ------   ------   ------
             Total non-performing loans ........   $4,210    2,904    3,258
                                                   ======   ======   ======

    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  $194,000,  $118,000  and  $277,000  in 1999,  1998 and  1997,
    respectively.  Approximately $304,000,  $238,000 and $192,000 of interest on
    the above  non-performing  loans was collected  and  recognized as income in
    1999, 1998 and 1997, respectively.

    At December  31, 1999 and 1998,  the recorded  investment  in loans that are
    considered  to be impaired  totaled  approximately  $572,000  and  $328,000,
    respectively,   for  which  the  related   allowance  for  loan  losses  was
    approximately $61,000 and $44,000, respectively. As of December 31, 1999 and
    1998,  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, 1999, 1998 and 1997 was approximately $481,000,  $688,000
    and  $1,445,000,  respectively.  For the years ended December 31, 1999, 1998
    and 1997, the Company recognized  interest income on those impaired loans of
    approximately  $52,000,  $78,000 and $15,000,  respectively,  which included
    $26,000,  $50,000 and $0, 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, 1999 and 1998.


<PAGE>


(7) Accrued Interest Receivable

    Accrued interest receivable consisted of the following at December 31:

                                                          1999     1998
                                                        ------   ------
                                                         (In thousands)
                Loans .......................           $2,204    2,031
                Securities available for sale            2,207    2,084
                                                        ------   ------
                                                        $4,411    4,115
                                                        ======   ======


(8) Premises and Equipment

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

                                                           1999        1998
                                                         --------    --------
                                                            (In thousands)
        Land and buildings ...........................   $  3,520       3,342
        Furniture, fixtures and equipment ............      5,200       4,182
        Leasehold improvements .......................      2,071       1,614
        Construction in progress .....................        486         195
                                                         --------    --------
                                                           11,277       9,333
        Less accumulated depreciation and amortization     (5,684)     (4,796)
                                                         --------    --------
                                                         $  5,593       4,537
                                                         ========    ========

    Amounts charged to depreciation and amortization  expense were approximately
    $888,000,  $735,000 and $606,000 for the years ended December 31, 1999, 1998
    and 1997, respectively.


<PAGE>


(9) Deposits

    Deposits are summarized as follows at December 31:
                                                                1999      1998
                                                              --------  --------
                                                                 (In thousands)
Savings accounts (2.73%-3.00% at December 31, 1999
     and 2.92%-3.00% at December 31, 1998) ................   $129,359   136,921
                                                              --------  --------
Time deposits:
     3.01 to 4.00% ........................................      1,042     1,806
     4.01 to 5.00% ........................................    120,458    61,030
     5.01 to 6.00% ........................................     76,084   140,676
     6.01 to 7.00% ........................................      9,452    11,432
     7.01 to 8.00% ........................................     13,300    13,061
                                                              --------  --------
                                                               220,336   228,005
                                                              --------   -------
NOW accounts (1.23% at December 31, 1999 and 1.73%-2.75% at
     December 31, 1998) ...................................     35,884    38,814
Money market accounts (2.19%-4.34% at December 31, 1999
     and 2.25%-4.87% at December 31, 1998) ................     29,009    21,359
Demand accounts (non-interest bearing) ....................     35,546    36,314
                                                              --------  --------
         Total deposits ...................................   $450,134   461,413
                                                              ========  ========

     The approximate  amount of contractual  maturities of time deposits for the
     years subsequent to December 31, 1999 are as follows:

                                                    (In thousands)
          Years ending December 31,
              2000                              $          159,247
              2001                                          46,290
              2002                                           6,994
              2003                                           4,899
              2004                                           2,906
                                                   ---------------
                                                $          220,336
                                                   ===============

    The aggregate amount of time deposits with a balance of $100,000 or more was
    approximately $30.4 million and $25.9 million at December 31, 1999 and 1998,
    respectively.


<PAGE>


    Interest expense on deposits for the years ended December 31, 1999, 1998 and
    1997, is summarized as follows:
                                          1999      1998     1997
                                        -------   -------   -------
                                               (In thousands)

                Savings accounts ....   $ 4,001     3,119     3,016
                Time deposits .......    11,242     9,882     9,882
                NOW accounts ........       567       549       543
                Money market accounts       945       272       204
                                        -------   -------   -------
                      Total .........   $16,755    13,822    13,645
                                        =======   =======   =======


(10) Borrowed Funds

    At December 31, 1999,  the Company had short-term  borrowings  from the FHLB
    totaling  $71.2  million.  This included  $24.2  million and $12.0  million,
    respectively,  outstanding on a $27.4 million overnight line of credit and a
    $27.4  million 30 day line of credit.  The Company also had $35.0 million in
    additional  short-term  borrowings with the FHLB with interest rates tied to
    LIBOR and adjusted monthly. These additional borrowings of $35.0 million had
    a weighed-average  remaining maturity of 68 days at December 31, 1999. 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).

    At December  31, 1998,  the Company had a $26.2  million  overnight  line of
    credit  and a $26.2  million  30 day line of  credit  with the  FHLB.  As of
    December 31, 1998, the Company had no amounts  outstanding on these lines of
    credit.

    The Company also had long-term advances with the FHLB totaling $21.0 million
    at December 31, 1999, and $21.4 million at December 31, 1998. These advances
    consisted   of  the   following:   (i)  $20.0   million  of   interest-only,
    non-prepayable,  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; and (ii)  adjustable rate amortizing  advances
    of  $1.0   million  and  $1.4   million  at  December  31,  1999  and  1998,
    respectively,  with  interest  rates ranging from 6.00% to 7.97% at December
    31, 1999, and from 5.91% to 7.91% at December 31, 1998;  final maturities on
    these advances range from April 2000 to September 2004.


<PAGE>


    The  following  table  presents the detail of the Company's  borrowings  and
    weighted-average  interest  rates  thereon for the years ended  December 31,
    1999, 1998 and 1997:
                                                               Securities
                                         FHLB        FHLB      Sold Under
                                      Short-Term   Long-Term   Agreements
                                      Borrowings   Advances   to Repurchase
                                      ----------  ----------  -------------
                                            (Dollars in thousands)
         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

        1997:
     Balance at December 31 ........   $ 12,300    $   --      $ 99,250
     Average balance during the year      3,667        --        95,261
     Maximum month-end balance .....     14,400        --        99,410
     Weighted-average interest rate:
         At December 31 ............       6.38%       --          6.04%
         During the year ...........       5.43        --          6.01



<PAGE>


    Information  concerning  outstanding  securities repurchase agreements as of
    December 31, 1999 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 ................. $  2,740         20     5.96%      $  2,844
After 90 days but within
        one year ...............    --         --         --           --
After one year but within
        five years .............   30,000        416     5.75         30,169
After five years but within
        ten years ..............   80,000        645     5.41         90,541
                                 --------   --------     ----       --------
         Total ................. $112,740      1,081     5.51%      $123,544
                                 ========   ========     ====       ========

    (1) The weighted-average  remaining term to final maturity was approximately
        6.7 years at December 31, 1999. At December 31, 1999,  $110.0 million of
        the securities  repurchase  agreements  contained call  provisions.  The
        weighted-average  rate at December 31, 1999 on the  callable  securities
        repurchase  agreements  was  5.50%,  with a  weighted-average  remaining
        period of 1.5 years to the call date. At December 31, 1999, $2.7 million
        of the securities repurchase agreements did not contain call provisions.
        The  weighted-average  rate at  December  31,  1999 on the  non-callable
        securities repurchase agreements was 5.96%, with a weighted-average term
        to maturity of 46 days.

    (2) Represents  the fair value of the  securities  subject to the repurchase
        agreements,  plus accrued  interest  receivable  of  approximately  $1.2
        million at December 31, 1999.

       At December 31, 1999,  the "amount at risk" (defined as the excess of the
       fair value of the securities transferred plus accrued interest receivable
       over  the  amount  of the  repurchase  liability  plus  accrued  interest
       payable)   with  the   FHLB   was   approximately   $8.6   million.   The
       weighed-average remaining term to final maturity at December 31, 1999 was
       8.5   years   on   securities   repurchase   agreements   with  the  FHLB
       (weighted-average remaining term of 1.9 years to the call date).


<PAGE>


(11) Income Taxes

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

                                          1999     1998      1997
                                         ------   ------    ------
                                              (In thousands)
         Current tax expense:
             Federal .................   $2,534      763     1,389
             State ...................      429       13       270
                                         ------   ------    ------
                                          2,963      776     1,659
        Deferred tax expense (benefit)      132     (106)       34
                                         ------   ------    ------
             Total income tax expense    $3,095      670     1,693
                                         ======   ======    ======

    Actual  income tax expense for the years ended  December 31, 1999,  1998 and
    1997 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:
                                               1999       1998      1997
                                             -------    -------    -------
                                                     (In thousands)

        Expected tax expense .............   $ 2,516        578      1,514
        State taxes, net of Federal income
               tax benefit ...............       325          1        178
        Non-deductible portion of ESOP
               compensation expense ......        95        113         89
        Goodwill amortization ............       181         23       --
        Other items, net .................       (22)       (45)       (88)
                                             -------    -------    -------
                                             $ 3,095        670      1,693
                                             =======    =======    =======


<PAGE>
        The tax effects of temporary  differences  that give rise to significant
        portions of the deferred tax assets and liabilities at December 31, 1999
        and 1998 are presented below:
                                                               1999      1998
                                                             -------    -------
                                                               (In thousands)
      Deferred tax assets:
           Allowance for loan losses .....................   $ 2,140      1,939
           Deferred compensation .........................       315        469
           Unvested RRP shares ...........................        76         76
           Purchase accounting adjustments ...............         4        237
           Other deductible temporary differences ........       141        148
                                                             -------    -------
               Total deferred tax assets .................     2,676      2,869
                                                             -------    -------
      Deferred tax liabilities:
           Net deferred loan costs .......................      (842)      (681)
           Purchase accounting adjustments ...............      (470)      (626)
           Prepaid pension cost ..........................      (199)      (245)
           Property and equipment ........................       (91)       (91)
           Tax bad debt reserve ..........................       (77)       (98)
           Other prepaid expenses ........................       (59)       (61)
           Other taxable temporary differences ...........      (186)      (183)
                                                             -------    -------
               Total deferred tax liabilities ............    (1,924)    (1,985)
                                                             -------    -------
               Net deferred tax asset at end of year .....       752        884
               Net deferred tax asset at beginning of year       884        867
                                                             -------    -------
                                                                 132        (17)
           Net deferred tax asset acquired ...............      --          285
           Initial net deferred tax liability for purchase
             accounting adjustments ......................      --         (374)
                                                             -------    -------
               Deferred tax expense (benefit) ............   $   132       (106)
                                                             =======    =======

        In addition to the  deferred  tax items  shown in the table  above,  the
        Company  also had a deferred  tax asset of $4.2  million at December 31,
        1999,  and a deferred tax  liability of ($247,000) at December 31, 1998,
        relating to the net unrealized  (gain) loss on securities  available for
        sale.

        There was no valuation allowance for deferred tax assets at December 31,
        1999  and  1998.   Management  believes  that  the  realization  of  the
        recognized  net deferred tax asset at December 31, 1999 and 1998 is more
        likely than not,  based on  historical  taxable  income,  available  tax
        planning strategies and expectations as to future taxable income.


<PAGE>


        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.

        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 $12.6 million,  respectively,
        at  December  31,  1999,  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, 1999 with respect to the Federal
        base-year  reserve was  approximately  $1.8  million.  The  unrecognized
        deferred  tax  liability  at December 31, 1999 with respect to the state
        base-year reserve was approximately $750,000 (net of Federal benefit).

(12) Employee Benefit Plans

    (a) Pension Plan

        The  Bank  maintains  a  non-contributory  pension  plan  with  the  RSI
        Retirement Trust,  covering  substantially all employees age 21 and over
        with 1 year of service,  with the  exception  of hourly paid  employees.
        Benefits are  computed as two percent of the highest  three year average
        annual earnings  multiplied by credited  service,  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.  Contributions  are
        intended to provide not only for benefits attributed to service to date,
        but also for those  expected to be earned in the  future.  Assets of the
        plan are primarily invested in pooled equity and fixed income funds.


<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, and a  reconciliation  of the plan's funded
        status at December 31:

                                                               1999       1998
                                                              -------    -------
                                                                 (In thousands)
        Changes in the projected benefit obligation:
            Projected benefit obligation at January 1 .....  $ 5,256      4,508
                Service cost ..............................      251        219
                Interest cost .............................      332        318
                Benefits paid .............................     (242)      (224)
                Plan amendments ...........................       77       --
                Actuarial (gain) loss .....................     (768)       435
                                                             -------    -------
            Projected benefit obligation at December 31 ...    4,906      5,256
                                                             -------    -------
        Changes in the fair value of plan assets:
            Fair value of plan assets at January 1 ........    5,760      5,994
                Actual return (loss) on plan assets .......    1,013        (10)
                Benefits paid .............................     (242)      (224)
                Employer contributions ....................     --         --
                                                             -------    -------
            Fair value of plan assets at December 31 ......    6,531      5,760
                                                             -------    -------
        Funded status:
            Funded status at December 31 ..................    1,625        504
            Unrecognized portion of net asset at transition     --          (39)
            Unrecognized prior service cost ...............        5          9
            Unrecognized net (gain) loss ..................   (1,120)       131
                                                             -------    -------
                Prepaid pension asset .....................  $   510        605
                                                             =======    =======

        The following table provides the components of net periodic pension cost
        for the years ended December 31:
                                                        1999     1998     1997
                                                        -----    -----    -----
                                                            (In thousands)

        Service cost .................................. $ 251      219      183
        Interest cost .................................   332      318      304
        Expected return on plan assets ................  (452)    (471)    (398)
        Amortization of unrecognized net asset at
                transition ............................   (39)     (46)     (46)
        Amortization of unrecognized prior service cost     4        3        3
        Amortization of unrecognized net actuarial gain  --        (22)    --
                                                        -----    -----    -----
            Net periodic pension cost ................. $  96        1       46
                                                        =====    =====    =====


<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  assumptions  used in the  measurement  of the  Company's  projected
        benefit obligation are shown in the table below:

                                                            1999    1998    1997
                                                            ----    ----    ----
              Weighted-average assumptions at December 31:

       Discount rate ................................      7.75%   6.50%   7.25%
       Rate of increase in future compensation levels      5.50    4.50    5.00
       Expected return on plan assets ...............      8.00    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.  Prior to March 1, 1997,  the Company
        matched 50% of employee contributions that were less than or equal to 3%
        of the  employee's  salary.  After  that date,  there  were no  matching
        contributions  made by the Company.  Total expense related to the 401(k)
        plan matching  contributions  during 1997 was approximately $5,000 (none
        in 1999 or 1998).

    (c) Employee Stock Ownership Plan

        As part of the  conversion  discussed  in  note  3,  an  employee  stock
        ownership  plan  (ESOP) was  established  to provide  substantially  all
        employees of the Company the  opportunity  to become  shareholders.  The
        ESOP  borrowed  $4.3  million  from the  Company  and used the  funds to
        purchase   433,780   shares  of  Company  common  stock  issued  in  the
        conversion.  The loan is being  repaid  principally  from the  Company's
        contributions  to the ESOP over a period of ten years.  At December  31,
        1999 and 1998, the loan had an  outstanding  balance of $2.6 million and
        $3.0 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  $744,000,
        $816,000 and $766,000 of compensation expense related to the ESOP during
        the years ended December 31, 1999, 1998 and 1997, respectively.

        The shares in the ESOP as of December 31, 1999 were as follows:

                   Allocated shares                             113,436
                   Shares released for allocation                46,434
                   Unallocated shares                           235,323
                                                       ----------------
                                                                395,193
                                                       ================
                   Market value of unallocated shares
                         at December 31, 1999        $        3,471,014
                                                       ================

    (d) Stock Option Plan

        On May 23,  1997,  the  Company's  shareholders  approved the 1997 Stock
        Option and Incentive Plan ("Stock Option Plan").  The primary  objective
        of the Stock  Option Plan 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,  542,225  authorized  but  unissued  shares are
        reserved for issuance  upon option  exercises.  The Company also has the
        alternative to fund the Stock Option Plan with treasury  stock.  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  expire no later  than ten years  following  the date of
        original grant.

        Upon  shareholder  ratification  of the Stock  Option  Plan,  options to
        purchase  373,974 shares were awarded at an exercise price of $13.75 per
        share.  These options have a ten year term and vest at a rate of 25% per
        year from the grant date.  During 1998, 2,000 options were awarded at an
        exercise  price of $13.50.  These  options have a ten year term and were
        immediately exercisable.


<PAGE>
        In  addition,  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.

        A summary of the stock option  activity for the years ended December 31,
        1999, 1998 and 1997 is presented below:
                                                                   Weighted-Avg.
                                                          No. of      Exercise
                                                          Shares        Price
                Granted on May 23, 1997 and outstanding
                         at December 31, 1997             373,974   $   13.75
                      Granted                               2,000       13.50
                      Exercised                            (9,489)      13.75
                      Forfeited                           (77,947)      13.75
                      Issued in acquisition               154,203       12.97
                                                         ---------    -------
                Outstanding at December 31, 1998          442,741       13.48
                      Exercised                           (10,167)      13.75
                      Forfeited                            (2,710)      13.75
                                                         ---------    -------
                Outstanding at December 31, 1999          429,864   $   13.47
                                                         =========    =======

        The following  table  summarizes  information  about the Company's stock
        options at December 31, 1999:

            Weighted-Avg.
              Exercise                        Remaining
                Price       Outstanding   Contractual Life  Exercisable

               $12.97          154,203       7.4 years        154,203
                13.50            2,000       8.9 years          2,000
                13.75          273,661       7.4 years        136,831
                             ---------                      ---------
                               429,864                        293,034
                             =========                      =========

        All options  have been  granted at an  exercise  price equal to the fair
        value of the common stock at the grant date,  except 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
        1998  and  1997:  dividend  yield  of 1.32%  for  both  years;  expected
        volatility  of 30% in 1998 and 41% in 1997;  risk-free  interest rate of
        4.54% in 1998 and 5.48% in 1997; and expected option life of 5 years for
        both years.  The estimated fair value of the options granted in 1998 and
        1997 was $4.09 and $5.30 per share, respectively.


<PAGE>


        Pro-forma  disclosures  for the Company for the years ended December 31,
        1999, 1998 and 1997 are as follows:

                                      (In thousands, except per share data)
                                        1999          1998          1997
                                        ----          ----          ----
              Net income:
                  As reported      $    4,303         1,031         2,760
                  Pro-forma             4,040           731         2,533

              Basic EPS:
                  As reported            0.88          0.26          0.70
                  Pro-forma              0.83          0.19          0.64

              Diluted EPS:
                  As reported            0.87          0.26          0.69
                  Pro-forma              0.82          0.18          0.64

        The full impact of  calculating  compensation  expense for stock options
        under SFAS No. 123 is not reflected in the pro-forma net income  amounts
        presented  above  because  compensation  expense is  reflected  over the
        options' vesting period, if any.

        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

        On May 23, 1997,  the  Company's  shareholders  also approved the Ambanc
        Holding Co., Inc.  Recognition and Retention Plan (RRP).  The purpose of
        the plan 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 fund  the RRP with  treasury
        stock.

        On May 23, 1997,  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.


<PAGE>


        During  1999,  7,586  additional  shares  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.  The shares  vested
        monthly  throughout  the year and were fully  vested as of December  31,
        1999.

    (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.  The
        annual health insurance increase and discount rate used to calculate the
        transition  obligation were 6.0% and 8.5%,  respectively.  The estimated
        transition obligation at January 1, 1995 was $260,000. There are no plan
        assets. The net periodic  postretirement  benefit cost in 1999, 1998 and
        1997 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 Bank 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  after 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
        $598,000 and $616,000 at December 31, 1999 and 1998,  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  $224,000 and $221,000 at December 31, 1999
        and  1998,  respectively,  and  is  included  in  other  assets  in  the
        consolidated statements of financial condition.


<PAGE>


(13) Earnings Per Share

    The calculation of basic EPS and diluted EPS is as follows:

                                                            Weighted
                                                    Net      Average Per Share
                                                  Income     Shares    Amount
                                                  ------    -------- ---------
                                 (In thousands, except share and per share data)
 For the year ended December 31, 1999
   Basic EPS
   Net income available to common shareholders  $   4,303   4,877,510  $ 0.88
                                                 ========              ======
   Effect of Dilutive Securities
   Stock options                                               43,083
   Unvested RRP shares                                         14,534
                                                            ---------
   Diluted EPS
   Net income available to common shareholders
        plus dilutive securities               $    4,303   4,935,127  $ 0.87
                                                 ========   =========  ======

                                                            Weighted
                                                    Net      Average Per Share
                                                  Income     Shares    Amount
                                                  ------    -------- ---------
                                 (In thousands, except share and per share data)
 For the year ended December 31, 1998

   Basic EPS
   Net income available to common shareholders  $   1,031   3,916,047  $ 0.26
                                                 ========              ======
   Effect of Dilutive Securities
   Stock options                                               49,043
   Unvested RRP shares                                         24,155
                                                            ---------
   Diluted EPS
   Net income available to common shareholders
        plus dilutive securities                $   1,031   3,989,245  $ 0.26
                                                 ========   =========  ======


<PAGE>
                                                            Weighted
                                                    Net      Average Per Share
                                                  Income     Shares    Amount
                                                  ------    -------- ---------
                                 (In thousands, except share and per share data)
 For the year ended December 31, 1997

   Basic EPS
   Net income available to common shareholders  $   2,760   3,940,867  $ 0.70
                                                  =======              ======
   Effect of Dilutive Securities
   Stock options                                               24,285
   Unvested RRP shares                                         16,374
                                                           ----------
   Diluted EPS
   Net income available to common shareholders
        plus dilutive securities                $   2,760   3,981,526  $ 0.69
                                                  =======  ==========  ======


(14) 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.  In the
        best judgments of management, the consolidated financial position of the
        Company  and its  subsidiaries  will not be affected  materially  by the
        outcome of any pending legal proceedings.

    (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,
                      2000                       $           454
                      2001                                   434
                      2002                                   365
                      2003                                   327
                      2004                                   297
                      2005 and thereafter                  1,397
                                                   -------------
                                                 $         3,274
                                                   =============

<PAGE>


        Amounts charged to rent expense were  approximately  $553,000,  $385,000
        and $315,000 for the years ended December 31, 1999, 1998 and 1997.

    (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.

        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.


<PAGE>
        Contract amounts of financial instruments with off-balance-sheet  credit
        risk as of  December  31, 1999 and 1998 at fixed and  variable  interest
        rates are as follows:
                                               Fixed    Variable    Total
                                               -------   -------   -------
                                                      (In thousands)
           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
                                               =======   =======   =======
           1998:
                Commitments to extend credit   $12,004       514    12,518
                Unused lines of credit .....     2,665     3,375     6,040
                Standby letters of credit ..      --          30        30
                                               -------   -------   -------
                                               $14,669     3,919    18,588
                                               =======   =======   =======
(15) Fair Values of Financial Instruments

    A financial instrument is defined as cash, evidence of ownership interest in
    an entity, or a contract that imposes on one entity a contractual obligation
    to deliver cash or another  financial  instrument  to a second  entity or to
    exchange other financial instruments on potentially unfavorable terms with a
    second  entity and  conveys to that  second  entity a  contractual  right to
    receive  cash or another  financial  instrument  from the first entity or to
    exchange other financial instruments on potentially favorable terms with the
    first entity.

    Fair value estimates are made at a specific point in time, based on relevant
    market  information and information  about the financial  instrument.  These
    estimates  do not reflect any  premium or  discount  that could  result from
    offering for sale at one time the 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.
<PAGE>
    Financial Assets and Liabilities

    The specific  estimation methods and assumptions used can have a substantial
    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.

    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.  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.
<PAGE>
    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,  accrued interest payable and due to
    brokers.

    The  carrying  values and  estimated  fair  values of  financial  assets and
    liabilities as of December 31, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
                                                                   1999                      1998
                                                      ----------------------------  -----------------------
                                                                         Estimated                Estimated
                                                         Carrying          Fair     Carrying        Fair
                                                           Value           Value      Value         Value
                                                           -----           -----      -----         -----
                                                                            (In thousands)
   Financial assets:
<S>                                                        <C>             <C>         <C>          <C>
     Cash and cash equivalents .........................   $  29,611       29,611      42,815       42,815
     Securities available for sale .....................     212,145      212,145     244,241      244,241
     FHLB of New York stock ............................       8,748        8,748       7,215        7,215

     Loans .............................................     470,986      452,232     425,824      423,163
       Less:  Allowance for loan losses ................      (5,509)        --        (4,891)        --
                                                           ---------    ---------   ---------    ---------
         Loans receivable, net .........................     465,477      452,232     420,933      423,163
                                                           =========    =========   =========    =========
     Accrued interest receivable .......................       4,411        4,411       4,115        4,115

   Financial liabilities:
     Deposits:
         Demand, savings, money market, and NOW accounts     229,798      229,798     233,408      233,408
         Time deposits .................................     220,336      220,336     228,005      230,399
     FHLB short-term borrowings ........................      71,200       71,200        --           --
     FHLB long-term advances ...........................      20,965       20,956      21,410       21,419
     Securities sold under agreements to repurchase ....     112,740      110,755     152,400      153,340
     Advances from borrowers for taxes and insurance ...       3,641        3,641       2,436        2,436
     Accrued interest payable ..........................       1,508        1,508       1,426        1,426
     Due to brokers ....................................        --           --         6,000        6,000
</TABLE>
<PAGE>


    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.

(16) Regulatory Capital Requirements and Dividend Restrictions

    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,  1999,  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, 1999 and 1998, 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, 1999 and 1998. 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.

                                            1999                   1998
                                    --------------------  --------------------
                                      Amount       Ratio   Amount        Ratio
                                      ------       -----   ------        -----
                                               (Dollars in thousands)
              Bank

              Tangible capital        $67,760      9.18%   $63,509       8.83%
              Tier 1 (core) capital    67,760      9.18     63,509       8.83
              Risk-based capital:
                Tier 1                 67,760     19.55     63,509      20.73
                Total                  72,108     20.80     67,351      21.99

              Consolidated

              Tangible capital         74,576     10.02     77,600      10.68
              Tier 1 (core) capital    74,576     10.02     77,600      10.68
              Risk-based capital:
                Tier 1                 74,576     21.40     77,600      25.17
                Total                  78,947     22.65     81,442      26.42

     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.  At December 31,
     1999,  the  maximum  amount  that  could  have been paid by the Bank to the
     Holding Company without prior regulatory  approval was  approximately  $3.5
     million.



<PAGE>


(17) Holding Company Financial Information

    The Holding Company's  statements of financial  condition as of December 31,
    1999 and 1998,  and the related  statements of income and cash flows for the
    years ended  December 31, 1999,  1998 and 1997, are presented  below.  These
    financial  statements  should  be read in  conjunction  with  the  Company's
    consolidated financial statements and notes thereto.

                        Statements of Financial Condition

                                                       1999      1998
                                                      -------   -------
                                                         (In thousands)
               Assets

Cash and cash equivalents .........................   $   977     3,516
Securities available for sale* ....................     5,017     6,097
Loan receivable from subsidiary ...................     2,603     3,036
Accrued interest receivable .......................        49        64
Investment in subsidiary ..........................    68,923    71,797
Other assets ......................................       917     1,570
                                                      -------   -------

         Total assets .............................   $78,486    86,080
                                                      =======   =======

               Liabilities and Shareholders' Equity

Liabilities:
     Security sold under agreement to repurchase**    $ 2,740      --
     Other liabilities ............................       153       187

Shareholders' equity ..............................    75,593    85,893
                                                      -------   -------

         Total liabilities and shareholders' equity   $78,486    86,080
                                                      =======   =======


       *   The Holding Company's securities available for sale consisted of U.S.
           Government  agency securities and  mortgage-backed  securities with a
           contractual  weighted-average  maturity of 8.7 years (none  callable)
           and 9.1 years (2.2 years to call date) at December 31, 1999 and 1998,
           respectively.

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


<PAGE>


                              Statements of Income

                                                    1999       1998       1997
                                                   -------    -------    -------
                                                           (In thousands)
Income:
    Dividends from bank subsidiary .............   $ 1,500      5,000       --
    Interest income ............................       571        649        868
    Other income ...............................        28          1       --
                                                   -------    -------    -------
         Total income ..........................     2,099      5,650        868
                                                   -------    -------    -------

Expenses:
    Interest expense ...........................        58         34        170
    Net losses on securities transactions ......      --         --          153
    RRP expense ................................       433        371        272
    Other expenses .............................       380        735        221
                                                   -------    -------    -------
         Total expenses ........................       871      1,140        816
                                                   -------    -------    -------

Income before taxes and effect of subsidiary
    earnings and distributions .................     1,228      4,510         52

Income tax (benefit) expense ...................       (99)      (199)        21
                                                   -------    -------    -------

Income before effect of subsidiary earnings
    and distributions ..........................     1,327      4,709         31

Effect of subsidiary earnings and distributions:

      Distributions in excess of earnings ......      --       (3,678)      --
      Equity in undistributed earnings .........     2,976       --        2,729
                                                   -------    -------    -------

Net income .....................................   $ 4,303      1,031      2,760
                                                   =======    =======    =======



<PAGE>
<TABLE>
<CAPTION>

                            Statements of Cash Flows

                                                                     1999       1998       1997
                                                                    -------    -------    -------
                                                                            (In thousands)
Increase (decrease) in cash and cash equivalents:
     Cash flows from operating activities:
<S>                                                                 <C>          <C>        <C>
  Net income ....................................................   $ 4,303      1,031      2,760
  Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:
         Equity in undistributed earnings of subsidiary .........    (2,976)      --       (2,729)
         Distributions in excess of subsidiary earnings .........      --        3,678       --
         Net losses on securities transactions ..................      --         --          153
         RRP expense ............................................       433        371        272
         Decrease (increase) in accrued interest receivable and
             other assets .......................................       788     (1,124)      (274)
         (Decrease) increase in other liabilities ...............       (34)       157       (341)
                                                                    -------    -------    -------
                 Net cash provided by (used in)
                      operating activities ......................     2,514      4,113       (159)
                                                                    -------    -------    -------
Cash flows from investing activities:

  Purchases of securities available for sale ....................      --       (7,998)   (11,052)
  Proceeds from principal paydowns, maturities and redemptions of
      securities available for sale .............................       833     11,338      8,159
  Proceeds from sales of securities available for sale ..........      --         --        7,515
  Payments received on loan receivable from subsidiary ..........       433        434        434
  Net cash acquired in acquisition ..............................      --        2,297       --
                                                                    -------    -------    -------
                 Net cash provided by investing activities ......     1,266      6,071      5,056
                                                                    -------    -------    -------
Cash flows from financing activities:
  Net increase (decrease) in securities sold under agreements to
      repurchase ................................................     2,740     (2,600)      (400)
  Purchases of treasury stock ...................................    (7,438)    (4,111)    (3,488)
  Exercises of stock options ....................................       139        130       --
  Dividends paid ................................................    (1,760)    (1,133)      (432)
                                                                    -------    -------    -------
                 Net cash used in financing activities ..........    (6,319)    (7,714)    (4,320)
                                                                    -------    -------    -------
Net (decrease) increase in cash and cash equivalents ............    (2,539)     2,470        577
Cash and cash equivalents:
    Beginning of year ...........................................     3,516      1,046        469
                                                                    -------    -------    -------
    End of year .................................................   $   977      3,516      1,046
                                                                    =======    =======    =======
</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 1998 and 1999. 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
1998 First Quarter   19.3750   16.7500    $0.06
1998 Second Quarter  20.0000   16.5000     0.06
1998 Third Quarter   19.2500   11.7500     0.06
1998 Fourth Quarter  17.7500   12.0000     0.07

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

     For information regarding restrictions on dividends,  see Notes 3 and 16 to
the Notes to Consolidated Financial Statements.

As of March 27, 2000, the Company had approximately 1,335 shareholders of record
and 4,926,690 outstanding shares of Common Stock.


Special Counsel

                  Malizia, Spidi & Fisch, PC
                  One Franklin Square
                  1301 K Street, NW, Suite 700E
                  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, 1999 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 26, 2000 at the Best Western,  located at 10 Market 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
Lionel H. Fallows, Retired, Lieutenant Colonel
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
William A. Wilde, Jr., Amsterdam Printing and Litho Corp.
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 Ziskin            Sr. Vice President/Sr. Consumer Lending Officer
Thomas Nachod              Sr. Vice President/Sr. Commercial Lending Officer
Robert Kelly               Vice President/General Counsel/Secretary