________________________________________________________________________________
1997 ANNUAL REPORT
________________________________________________________________________________















                                     [LOGO]
                            AMBANC HOLDING CO., INC.
                              AMSTERDAM, NEW YORK








<PAGE>


                               1997 ANNUAL REPORT
                                TABLE OF CONTENTS


President's Message to Shareholders ...........................................2

Selected Consolidated Financial Information ...................................3

Management's Discussion and Analysis of Financial Condition and
Results of Operations .........................................................5

Independent Auditors' Report .................................................22

Consolidated Statements of Financial Condition ...............................23

Consolidated Statements of Income ............................................24

Consolidated Statements of Changes in Shareholders' Equity ...................25

Consolidated Statements of Cash Flows ........................................26

Notes to Consolidated Financial Statements ...................................28

Corporate and Shareholder Information ........................................61

Directors and Executive Officers .............................................62




                                       1
<PAGE>


 MESSAGE FROM THE PRESIDENT


To Our Shareholders:


     I am pleased to present the third Annual Report to  shareholders  of Ambanc
Holding Co., Inc., the parent holding  company of Amsterdam  Savings Bank,  FSB.
During 1997,  as part of our ongoing  commitment  to expand the  Company's  core
business,  we opened our  fourth  and fifth  supermarket  branch  offices,  both
located  in  Saratoga  County,   N.Y.,  and  a  traditional  branch  located  in
Guilderland, Albany County, N.Y.

     The Company continues to focus on enhancing  shareholder  value.  Since the
Company's  initial  public  offering  ("IPO") in December  1995,  the  Company's
outstanding  shares of common  stock have been  reduced to  4,306,418  shares at
December 31, 1997 through stock  repurchases of 1,115,832  shares,  representing
20.6% of the  shares  issued in the IPO.  In  addition  to the stock  repurchase
programs,  the Company paid its first regular  quarterly cash dividend in August
1997 of $0.05 per share.  Total cash  dividends  paid in 1997 totaled  $0.10 per
share,  or 14.3% of 1997 basic earnings per share.  The Company's  closing stock
price increased to $18.75 at December 31, 1997 from $11.25 at December 31, 1996,
an increase of $7.50 per share, or 67%. The total return on the Company's stock,
including cash dividends, for the year ended December 31, 1997, was in excess of
67%. As we move further into our third year as a public  company,  your Board of
Directors,  officers and staff remain  dedicated to  maintaining  the  Company's
financial strength, expanding its core business and enhancing shareholder value.

     Your Company's directors, officers and staff are also committed to making a
positive  difference  in the  communities  in which they live and work.  Many of
these individuals are actively  involved in their  communities  participating in
service clubs and a variety of charitable civic and cultural organizations.

     We optimistically look forward to the future and, on behalf of the Board of
Directors,  I wish to thank  our  customers,  staff  and  shareholders  for your
continued support of Ambanc Holding Co., Inc.

Sincerely,


Robert J. Brittain
President and Chief Executive Officer



                                       2
<PAGE>

                   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,
                                        1997         1996         1995        1994        1993
                                     ---------     ---------    ---------   ---------   ---------
     Selected Consolidated                                 (In Thousands)
     Financial Condition Data:
<S>                                  <C>          <C>          <C>         <C>         <C>
Total assets .....................   $ 510,444    $ 472,421    $ 438,944   $ 343,334   $ 332,902
Securities available for sale ....     205,842      200,539       74,422        --          --
Investment securities ............        --           --           --        53,390      57,797
Loans receivable, net ............     281,123      248,094      249,991     261,581     220,647
Deposits .........................     333,265      298,082      311,239     293,152     294,780
Borrowed funds ...................     111,550      108,780         --        19,000        --
Shareholders' equity .............      61,202       61,518       76,015      27,414      25,464

                                                             Years Ended December 31,
                                         1997        1996         1995        1994        1993
                                      ---------    ---------    ---------   --------   ---------
    Selected Consolidated                                               (In Thousands)
    Operations Data:
Total interest and dividend income   $  35,566    $  32,348    $  25,582   $  23,806   $  23,789
Total interest expense ...........      19,654       16,435       12,746      10,192      10,885
                                     ---------    ---------    ---------   ---------   ---------
Net interest income ..............      15,912       15,913       12,836      13,614      12,904
Provision for loan losses ........       1,088        9,450        1,522       1,107       1,689
                                     ---------    ---------    ---------   ---------   ---------
Net interest income after
 provision for loan losses .......      14,824        6,463       11,314      12,507      11,215
Other income .....................       1,826          920        1,512         905       1,196
Other expenses ...................      12,197       13,148       11,383      11,340       9,659
                                     ---------    ---------    ---------   ---------   ---------
Income (loss) before taxes and
 cummulative effect of a change
 in accounting principle .........       4,453       (5,765)       1,443       2,072       2,752
Income tax provision (benefit) ...       1,693       (1,929)         586         122          71
Cummulative effect of a change in
 accounting principle related to
 SFAS No. 109 ....................        --           --           --          --           600
                                     ---------    ---------    ---------   ---------   ---------
Net income (loss) ................   $   2,760    ($  3,836)   $     857   $   1,950   $   2,681
                                     =========    =========    =========   =========   =========

Basic earnings (loss) per share* .   $    0.70    ($   0.81)         N/A         N/A         N/A
                                     =========    =========    =========   =========   =========
Diluted earnings (loss) per share*   $    0.69    ($   0.81)         N/A         N/A         N/A
                                     =========    =========    =========   =========   =========
Dividend payout ratio ............        14.3%         N/A          N/A         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.

                                       3
<PAGE>


<TABLE>
<CAPTION>
                                                             Years Ended December 31,
                                                   1997    1996       1995     1994     1993
                                                   ------------------------------------------
Selected Consolidated Financial
Ratios and Other Data:
<S>                                                <C>     <C>        <C>      <C>      <C>
Performance Ratios:
Return (loss) on average assets (1) .......        0.56%   (0.84)%    0.25%    0.59%    0.83%
Return (loss) on average equity (1) .......        4.52    (5.24)     3.00     7.36    11.00
Interest rate spread information:
   Average during period ..................        2.58     2.74      3.36     4.01     3.85
   Net interest margin (2) ................        3.36     3.66      3.87     4.34     4.19
Efficiency ratio (3) ......................       69.81    62.50     68.18    63.46    61.06
Ratio of other expenses to average
   total assets (1) .......................        2.48     2.86      3.37     3.38     2.97
Ratio of average interest-earning
  assets to average interest-bearing
  liabilities .............................      118.93   124.26    113.31   110.24   109.53

Asset Quality Ratios:
Non-performing assets to total assets
  at end of period (1) ....................        0.67     1.18      2.72     4.15     5.06
Non-performing loans to total loans .......        1.16     1.94      3.48     3.97     5.07
Allowance for loan losses to
  non-performing loans ....................      117.07    70.47     30.10    21.42    28.59
Allowance for loan losses to loans
  receivable ..............................        1.34     1.37      1.05     0.85     1.47

Capital Ratios:
Equity to total assets at end of period (1)       11.99    13.02     17.32     7.98     7.65
Average equity to average assets (1) ......       12.42    15.95      8.30     7.96     7.52

Other Data:
Number of full-service offices ............       12        9         9        7        6
<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 interest-earning assets.

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


                                       4
<PAGE>


               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

General


     Ambanc Holding Co., Inc. ("Ambanc" or the "Company"), a savings institution
holding  company is the parent  corporation of Amsterdam  Savings Bank, FSB (the
"Bank").  Ambanc  was  formed as a Delaware  Corporation  to act as the  holding
company  for the Bank upon the  completion  of the  Bank's  conversion  from the
mutual to stock form on  December  26,  1995 (the  "Conversion").  As such,  the
Company had no material  results of  operations  during 1995.  Accordingly,  the
discussion  herein for periods  prior to 1996  relates  primarily  to the Bank's
results of operations.

     The Company's  primary business,  through the Bank,  consists of attracting
deposits  from the general  public and  originating  real estate loans and other
types of investments.  The Bank services a five-county  area in upstate New York
through the Bank's main office,  eleven other banking offices and its operations
center.  The Company also has a wholly-owned  subsidiary,  ASB Insurance Agency,
Inc., which offers mutual funds,  annuity products and brokerage services to the
Bank's customers and the general public.

     Like all thrift  institutions,  the Bank's (and  therefore  the  Company's)
operations are materially affected by general economic conditions,  the monetary
and fiscal  policies of the federal  government  and the policies of the various
regulatory  authorities,  including the Office of Thrift Supervision (the "OTS")
and the Board of  Governors  of the Federal  Reserve  System  ("Federal  Reserve
Board").  Its results of operations are largely  dependent upon its net interest
income,  which is the  difference  between (i) the  interest its receives on its
loan portfolio and its securities portfolio and (ii) the interest it pays on its
deposit  accounts  and  borrowings.  The  operations  of the Company can also be
affected by the economic conditions in its market area, upstate New York.

     The Company's main office is located at 11 Division Street,  Amsterdam, New
York 12010. The Company's telephone number at this address is (518)842-7200.


Forward Looking Statements


     When used in this annual report, 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 -- including,  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 that could cause actual results to differ
materially  from  historical   earnings  and  those  presently   anticipated  or
projected.  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

                                       5
<PAGE>

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  release  publicly  the  result of any  revisions  that 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.


Year 2000


     The Company has established a committee (the "Y2K  Committee") to conduct a
comprehensive  review of its computer systems to identify the systems that could
be affected by the "Year 2000"  problem.  The Year 2000 problem is the result of
computer  programs being written using two digits rather than four to define the
applicable year. Any of the Company's programs that have time sensitive software
may recognize a date using "00" as the year 1900 rather that the year 2000. This
could result in a major system failure or  miscalculations.  The Company is also
aware of these  risks to third  parties,  including  vendors  (and to the extent
appropriate,  depositors and borrowers), and the potential adverse impact on the
Company resulting from failures by these parties to adequately  address the Year
2000  problem.  The  Company  has  been  communicating  with  its  outside  data
processing  service bureau,  as well as other third party service providers (and
to the extent appropriate,  depositors and borrowers),  to assess their progress
in evaluating their systems and implementing any corrective measures required by
them to be prepared for the year 2000. To date, the Company has not been advised
by any of its  primary  vendors  that they do not have plans in place to address
and  correct  the issues  associated  with the Year 2000  problem;  however,  no
assurance can be given as to the adequacy of such plans or to the  timeliness of
their  implementation.  The Y2K  Committee  reports on a quarterly  basis to the
Audit  Committee  of the Board of  Directors  as to the  Company's  progress  in
resolving any Year 2000 problems.

     Based on the Company's current knowledge and investigations, the expense of
the year 2000 problem as well as the related  potential  effect on the Company's
earnings is not expected to have a material  effect on the  Company's  financial
position  or  results  of  operations.  Furthermore,  the  Company  expects  any
corrective  measures required to be prepared for the Year 2000 to be implemented
on a timely basis.


Management Strategy


     Management's  primary goal is to improve the Company's  profitability while
minimizing its risks. To meet these goals,  the Company's  strategies  focus on:
(i) emphasizing  lending secured by one- to four- family residential  mortgages,
home equity,  and consumer  products,  especially  automobile  loans; (ii) asset
quality;  (iii)  increasing  the Bank's  presence in its market  area  primarily
through the establishment of low-cost  supermarket  branches;  and (iv) managing
interest rate risk.

                                       6
<PAGE>


     Emphasizing Lending Secured by One- to Four-Family  Residential  Mortgages,
     ---------------------------------------------------------------------------
     Home Equity and Consumer Products
     ---------------------------------


     The Bank has  emphasized  and plans to  continue to  emphasize  originating
traditional one- to four-family  residential mortgage,  home equity and consumer
loans in its primary market area.

     During 1997,  1996, and 1995,  the Bank  originated  $67.5  million,  $62.0
million and $16.2 million,  respectively, of loans secured by one-to four-family
residences,  including home equity loans,  and $14.7  million,  $7.7 million and
$18.4 million,  respectively,  of consumer loans. At December 31, 1997, the Bank
had $189.7  million of loans secured by one- to  four-family  residences,  $30.2
million of home equity loans and $27.1  million of consumer  loans  representing
66.9%, 10.7% and 9.6%, respectively, of the Bank's gross loan portfolio.


     Asset Quality
     -------------


     The  Bank's  loan  portfolio  consists  primarily  of one-  to  four-family
residential  and home equity loans,  which are considered to have less risk than
commercial  and  multi-family  real  estate  or  consumer  loans.  The  Bank has
de-emphasized  its commercial and  multi-family  real estate  lending,  with the
portfolio  shrinking as a percentage of the Bank's total loan portfolio to 10.8%
of total  loans at December  31, 1997 from 13.8% and 28.0% at December  31, 1996
and 1993,  respectively.  During the same period,  the Bank's portfolio of loans
secured by one- to  four-family  and home equity  mortgage  loans has grown as a
percentage  of the  Bank's  total  loan  portfolio  to 77.6%  of total  loans at
December  31,  1997  from  72.3%,  and  59.4% at  December  31,  1996 and  1993,
respectively.

     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.  Prior to 1997,  the  Company's  performance  had been
significantly  hampered by the level of its non-performing  assets. During 1996,
the Company decided to dispose of certain  non-performing and higher credit risk
performing assets in a bulk sale versus continuing to resolve the problems on an
asset  specific  basis in order to accelerate  the  reduction in loan  portfolio
credit  risk,  reduce the drag on  earnings  that  resulted  from these  assets,
enhance  overall  asset  quality and better  position the Company to achieve its
strategic goals.  The net sales proceeds  totaled $20.4 million,  resulting in a
pre-tax loss of $6.6 million,  which was charged  against the allowance for loan
losses  (approximately  $5.6  million)  and to other real estate  owned  expense
(approximately $1.0 million).

     Primarily as a result of the bulk sale in 1996, the ratio of non-performing
assets to total  assets  declined  from 2.72% at  December  31, 1995 to 1.18% at
December 31, 1996. This ratio experienced  further improvement in 1997, dropping
to 0.67% at December 31, 1997.

     In addition,  the Bank's ratios of non-performing  loans to total loans and
the allowance for loan losses to non-performing  loans also improved.  The ratio
of  non-performing  loans to total loans at December 31, 1997 was 1.16% compared
to 1.94% and 3.48% at December 31, 1996 and 1995, respectively. The ratio of the
allowance  for loan  losses  to  non-performing  loans  increased  to  117.1% at
December  31, 1997  compared  to 70.5% and 30.1% at December  31, 1996 and 1995,
respectively.

                                       7
<PAGE>

     Increasing  the Bank's  Presence in its Market Area  Primarily  through the
     ---------------------------------------------------------------------------
     Establishment of Low-Cost Supermarket Branches
     ----------------------------------------------


     Since   November   1994,  the  Bank  has  opened  five  branch  offices  in
supermarkets,  with one located in each of  Schenectady,  Albany and  Montgomery
Counties,  and two in Saratoga County, New York.  Management believes that these
supermarket  branch offices are an effective way to service its customers due to
their size, efficiency and convenient, high traffic locations.

     In addition to the two new  supermarket  branch  offices  opened in 1997 in
Saratoga County, the Bank also opened a "traditional" branch office in 1997.

     With the opening of the three branch offices in 1997, the Bank operates
12  full-service  branch  locations  in its primary  market  area,  all of which
provide customers with 24-hour access to ATMs. Two offsite ATMs were also placed
into service in 1997.


     Managing Interest Rate Risk
     ---------------------------


     The Bank has an asset/liability  management  committee that meets weekly to
develop,  implement and review  policies to manage  interest rate risk. The Bank
has  endeavored  to manage  its  interest  rate risk  through  the  pricing  and
diversification of its loans,  including the introduction of new, first mortgage
loan  products with shorter  terms to maturity or with  different  interest rate
adjustment periods, the origination of consumer loans with shorter average lives
or which reprice at shorter  intervals than fixed and  adjustable-rate,  one- to
four-family  residential loans and, from time to time, the purchase of short- to
intermediate-term securities available for sale.


Financial Condition


     Comparison  of  Financial  Condition  at December  31,1997 and December 31,
1996.  Total assets at December 31, 1997,  were $510.4  million,  an increase of
$38.0 million,  or 8.1%,  compared to total assets of $472.4 million at December
31,  1996.  The growth in total  assets was  primarily  attributable  to a $33.4
million, or 13.3%,  increase in loans receivable,  including net deferred costs,
fees and loan discounts.  One-to  four-family  mortgage loans increased by $31.5
million,  or 19.9% and home equity  loans  expanded by $7.4  million,  or 32.6%.
Partially   offsetting   these   increases   were   declines  in   multi-family,
non-residential and construction loans.

     An increase of $1.4 million,  or 5.3%, in consumer  loans,  primarily  auto
loans  which  increased  by $3.8  million,  or 30.8% also  contributed  to total
growth.  These  increases  were  partially  offset by a net decline in all other
consumer loan categories,  mainly loans for recreational vehicles which declined
by $2.6 million.

     Total deposits at December 31, 1997,  were $333.3  million,  an increase of
$35.2  million,  or 11.8%,  compared to $298.1 million at December 31, 1996. The
increase in total deposits was  attributable  primarily to a $31.4  million,  or
20.7%,  increase in  certificates  of deposit.  "NOW"  accounts  increased  $3.8
million,  or 20.4%,  to $22.7 million and demand deposits grew to $22.7 million,
an increase of $2.5 million,  or 12.2% increase.  These increases were partially
offset by a $2.5 million or 2.4% decline in savings and money market accounts.

                                       8
<PAGE>


Results of Operations


Comparison of Fiscal Years Ended December 31, 1997 and 1996


     General.  The Company  recorded  net income of $2.8  million for the fiscal
year ended  December  31, 1997  compared  to a net loss of $3.8  million for the
prior  year.  Net  interest  income  for 1997 and  1996 was  unchanged  at $15.9
million.  The net loss in 1996 was due  primarily to the $9.5 million  provision
for loan losses and the $2.6 million of expenses incurred in connection with the
Company's  real estate owned and  repossessed  assets.  The large  provision was
necessitated  to replenish and increase the Company's  allowance for loan losses
which was depleted as a result of write-offs  associated with the Company's bulk
sale  of  certain  loans  in  1996  and  the  commercial  bankruptcy  of a large
commercial  borrower.  See "Management Strategy - Asset Quality" and "Results of
Operations - Provision for Loan Losses."

     Interest and Dividend  Income.  Interest and dividend income increased $3.2
million,  or 9.9%,  to $35.5  million  in 1997 from $32.3  million in 1996.  The
increase in interest income resulted from a $38.5 million,  or 8.9%, increase in
the Company's average  interest-earning  assets,  primarily securities available
for sale,  which  increased  $38.0 million,  or 24.3% in 1997, to $194.1 million
compared to $156.1  million in 1996.  The increase in  securities  available for
sale was primarily funded with increased borrowings.

     The average yield earned on  interest-earning  assets  increased by 8 basis
points  to 7.52% in 1997 from  7.44% in the  prior  year.  The  increase  in the
average yield earned was attributable  primarily to a change in the composition,
or mix, of the Company's  interest-earning  assets,  mainly  average  securities
available  for sale which  increased in 1997 to 41.0% of total  interest-earning
assets from 35.9% in 1996. The average yield earned on the Company's  securities
also increased by 19 basis points to 7.19% in 1997 compared to 7.00% in 1996.

     Interest Expense.  Interest expense increased by $3.2 million, or 19.6%, to
$19.6   million  in  1997   compared   to  $16.4   million   in  1996.   Average
interest-bearing  liabilities  increased by $48.1 million,  or 13.8%,  to $397.8
million in 1997  compared to $349.7  million  during the prior year.  During the
same periods, the average rate paid on interest-bearing liabilities increased by
24 basis points to 4.94% from 4.70%.

     The  increase in interest  expense was  attributable  primarily  to a $31.3
million,  or 46.4%,  increase in the average  balance of borrowed funds to $98.9
million from $67.6  million in 1996 and an increase in average  certificates  of
deposit which grew by $22.0  million,  or 14.7%,  to $172.3  million from $150.3
million.  The average rates paid on borrowed funds and  certificates  of deposit
during 1997 also  increased over 1996 by 13 basis points on borrowed funds and 8
basis  points on  certificates  of deposit.  Borrowings  consisted  primarily of
securities sold under agreements to repurchase,  with an increase in the average
balance of $37.5 million,  or 64.9%, to $95.3 million in 1997 from $57.8 million
in 1996, partially offset by a decline in average advances from the Federal Home
Loan Bank ("FHLB") of New York.  These borowings were primarily used to fund the
growth in the Company's securities available for sale.

     Net Interest  Income.  Net interest income before provision for loan losses
was  $15.9  million  for 1997 and  1996.  During  1997,  the  Company's  average
interest-earning  assets grew by $38.5 million, or 8.9%, to $473.1 million.  The

                                       9
<PAGE>

average yield on these assets also increased when compared to 1996, improving by
8  basis  points  to  7.52%  from  7.44%.   However,  the  increase  in  average
interest-bearing  liabilities  exceeded  the growth in average  interest-earning
assets,  increasing  by $48.1  million to $397.8  million.  The  increase in the
average  interest-bearing  liabilities  was  accompanied  by  a 24  basis  point
increase  in the  average  rate paid on these funds to 4.94% for 1997 from 4.70%
for 1996.

     Ambanc Holding Co., Inc. 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, net
interest rate spread and the net interest margin. This is especially true during
periods  when the growth in  interest-earning  assets  lags behind the growth in
interest-bearing  liabilities,  the environment that the Company  experienced in
1997.   However,   management   does  not  want  to   discourage,   by  offering
noncompetitive  interest rates,  the creation of new customer  relationships  or
jeopardize  existing  relationships  thereby  curtailing  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.

     Provision for Loan Losses.  The provision  for loan losses  decreased  $8.4
million  to $1.1  million  in 1997 from $9.5  million  during  1996.  The higher
provision in 1996 resulted  primarily  from the  Company's  bulk sale of certain
performing  and  non-performing  loans  in the  fourth  quarter  of 1996 and the
aggregate  lending  relationship  with the Bennett Funding Group, a company that
filed for  Chapter  11  bankruptcy  protection  on March 29,  1996.  In order to
accelerate  its  objective  of reducing  credit risk in the loan  portfolio  and
better  position  the  Company  to  achieve  its  strategic  goals,   management
considered it to be prudent to complete the bulk sale of certain  non-performing
and  performing   commercial  loans  and  manufactured  home  loans  (which  are
considered a higher credit risk consumer  product) at a loss,  versus continuing
to address these problem assets on an asset specific basis.

     The  Company's  provision for loan losses is based upon its analysis of the
adequacy of the allowance for loan losses. 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 concentrations of credit,
historical loss experience, current economic conditions, estimated fair value of
underlying collateral, delinquencies, and other factors.

     At December 31, 1997,  the Bank's  allowance  for loan losses  totaled $3.8
million, or 1.3% of total loans and 117.1% of non-performing  loans, compared to
$3.4  million,  or 1.4% of total  loans  and  70.5% of  non-performing  loans at
December 31, 1996.

     Other Income.  Other income increased  $906,000,  or 98.5%, to $1.8 million
for the year ended December 31, 1997,  from $920,000 in 1996. The primary reason

                                       10
<PAGE>

for the increase in other income was the net gains on securities transactions of
$775,000,  compared to a net loss of $102,000 in 1996.  As the general  level of
interest rates declined during 1997, management decided that it would be prudent
to sell securities and record the net gains on the  transactions.  One condition
adhered to in determining  the selection and timing of the securities to be sold
was that the yield obtained on the  reinvestment  of the sale proceeds would not
be significantly  lower than the foregone yield. A second condition was that the
credit rating of the replacement  securities  would be no lower than the quality
of the securities sold.

     Other  Expenses.  Other  expenses  decreased  $951,000,  or 7.2%,  to $12.2
million for the year ended December 31, 1997 from $13.1 million in the same 1996
period. The primary reason for the improvement was a $2.2 million decline in the
net costs  associated  with the  Company's  real  estate  owned and  repossessed
assets.  The decrease in these expenses  resulted from one-time  charges in 1996
related to the bulk sale of certain  foreclosed real estate  properties.

     Excluding the expenses related to real estate owned and repossessed assets,
other expenses  increased $1.2 million,  or 11.9%, to $11.8 million in 1997 from
$10.6  million in 1996,  mainly  due to a higher  level of  salaries,  wages and
benefits which increased  $989,000,  or 19.4%, to $6.1 million from $5.1 million
the prior year.  Salaries,  wages and benefits increased $250,000 as a result of
the opening of three branch offices in May 1997. Also contributing to the higher
level  of  salaries,   wages  and  benefits  was  a  $239,000  increase  in  the
compensation  costs related to the Employee  Stock  Ownership  Plan (ESOP) and a
$137,000  expense  associated  with  awards of Company  common  stock  under the
Recognition and Retention Plan (RRP) to officers.  The remainder of the increase
was attributable to higher payroll taxes, employee insurance premiums and normal
cost of living and merit increases.

     Occupancy and equipment  expenses  increased  $211,000,  or 15.9%,  to $1.5
million,  as a  result  of the  opening  of three  branch  offices  in 1997.  In
addition,  other  expenses  increased  $135,000 in 1997 as a result of awards of
Company Common Stock under the RRP to directors.

     Income Tax  Expense.  Income tax  expense  increased  $3.6  million to $1.7
million  in 1997  due to a  pre-tax  loss of $5.8  million  incurred  in 1996 as
compared to pre-tax income of $4.5 million in 1997.


Results of Operations


Comparison of Fiscal Years Ended December 31, 1996 and 1995


     General.  For the fiscal year ended December 31, 1996, the Company recorded
a net loss of $3.8  million  compared  to net income of  $857,000  for the prior
year. The net loss for 1996 was attributable primarily to the provision for loan
losses of $9.5 million;  which was primarily related to the bulk sale of certain
performing  and  non-performing   loans  and  the  Company's  aggregate  lending
relationship  with the Bennett Funding Group  ("Bennett").  See "--Provision for
Loan Losses."

     Interest and Dividend  Income.  Interest and dividend income increased $6.8
million,  or 26.4%,  to $32.3  million in 1996 from $25.6  million in 1995.  The

                                       11
<PAGE>

increase in interest income resulted from a $103.2 million,  or 31.2%,  increase
in the Company's average interest-earning assets, primarily securities available
for sale, which increased $106.5 million,  or 214% in 1996, to $156.1 million at
December 31, 1996,  compared to $49.6 million of securities  held to maturity in
1995.  The average yield earned on the Company's  securities  increased 89 basis
points to 7.00% in 1996 compared to 6.11% in 1995.

     However,  overall  the  average  yield  earned on  interest-earning  assets
decreased  28 basis  points to 7.44% in 1996 from 7.72% in the prior  year.  The
decrease in the average  yield earned was mainly the result of the change in the
mix of average  interest-earning assets with lower yielding securities available
for sale  increasing as a percent of the total mix,  rising to 36.4% during 1996
from  15.5% in 1995,  while the  percentage  of higher  yielding  loans to total
interest-earning assets declined to 60.3% from 78.9% for the same periods.

     Interest Expense.  Interest expense increased by $3.7 million, or 28.9%, to
$16.4   million  in  1996   compared   to  $12.7   million   in  1995.   Average
interest-bearing  liabilities  increased  $57.3  million,  or  19.6%,  to $349.7
million in 1996  compared to $292.4  million  during the prior year.  During the
same periods, the average rate paid on interest-bearing liabilities increased by
34 basis points to 4.70% from 4.36%.  The  increase in interest  expense was due
primarily  to a $62.7  million  increase in the average  outstanding  balance of
borrowed funds to $67.6 million from $4.9 million in 1995, mainly resulting from
an increase in securities sold under agreements to repurchase,  which grew $56.8
million to $57.8  million in 1996 from $1.0  million in 1995.  Average  borrowed
funds,   with  an  average   rate  of  5.94%,   increased   to  19.3%  of  total
interest-bearing liabilities for 1996 up from 1.7% in 1995 while average savings
accounts, with an average rate of 3.04% in 1996, declined to 29.5% from 37.2% in
1995 and average certificates of deposit, with an average rate of 5.65% in 1996,
decreased to 43.0% of the funding mix in 1996 from 50.4% the prior year.

     Net Interest  Income.  Net interest income before provision for loan losses
increased $3.1 million,  or 24.0%,  to $15.9 million for the year ended December
31, 1996,  compared to $12.8 million for 1995. As a result of  implementing  the
Company's  strategy to enhance net interest income through the  restructuring of
its balance sheet through the use of leveraged  reverse  repurchase  agreements,
net interest income increased  approximately $1.4 million.  Partially offsetting
the  increased  net interest  income  attributable  to average net earning asset
growth was a decline in the net yield on average  interest-earning  assets of 21
basis  points to 3.66% in 1996 from 3.87% in 1995,  primarily  the result of the
changes in the  composition  of  average  interest-earning  assets  and  average
interest-bearing    liabilities    as   discussed    above.    See    "Financial
Condition","Interest   Income",   "Interest   Expense"   and  "Asset   Liability
Management" herein.

     Provision for Loan Losses.  The provision  for loan losses  increased  $8.0
million to $9.5  million in 1996 from $1.5  million  during  1995.  The increase
resulted  primarily  from the  Company's  bulk sale of  certain  performing  and
non-performing  loans in the  fourth  quarter  of  1996,  (see  "Asset  Quality"
herein),  the aggregate  lending  relationship with the Bennett Funding Group, a
company that filed for Chapter 11  bankruptcy  protection  on March 29, 1996, as
well as the  Company's  continual  review  of its  loan  portfolio.  In order to
accelerate  its  objective  of reducing  credit risk in the loan  portfolio  and
better  position  the  Company  to  achieve  its  strategic  goals,   management
considered  it to  be  more  prudent  to  complete  the  bulk  sale  of  certain
non-performing  commercial  type loans and  manufactured  home loans  (which are
considered a higher credit risk consumer product),  versus continuing to address
these assets on an asset specific basis (see "Asset Quality" herein).

                                       12
<PAGE>

     The Bank records a provision for loan losses based upon its analysis of the
adequacy of the allowance for loan losses. 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 concentrations of credit,
historical loss experience, current economic conditions, estimated fair value of
underlying collateral, delinquencies, and other factors.

     While the increase in the 1996  provision for loan losses was primarily due
to the Bennett  relationship  and the result of the bulk loan sale,  it was also
due to weaknesses in the economy in the Bank's primary market area, decreases in
the value of real estate (the  primary  collateral  securing  many loans) in the
region, as well as increases in charge-offs, even after excluding the effects of
the bulk loan sales and the Bennett relationship.

     At December 31, 1996,  the Bank's  allowance  for loan losses  totaled $3.4
million, or 1.4% of total loans and 70.5% of non-performing  loans,  compared to
$2.6  million,  or 1.1% of total  loans  and  30.1% of  non-performing  loans at
December 31, 1995.

     Other Income.  Other income  decreased by $592,000 to $920,000 for the year
ended December 31, 1996,  from $1.5 million in 1995. The primary reasons for the
decline in  non-interest  income were the receipt by the Bank of a non-recurring
FDIC deposit  insurance  premium  refund of $189,000 in 1995,  net losses on the
sale of securities available for sale of $102,000 in 1996 compared to a net gain
in the prior year of $225,000 and the receipt in 1995 of non-recurring insurance
proceeds related to a fire loss on a real estate owned property in the amount of
$76,000. In late 1995, the Bank's securities portfolio was yielding below market
rates.  As a result,  the Bank decided in early January 1996 to sell $34 million
of its  holdings and  reinvest  the  proceeds in then  current  higher  yielding
securities,  based  on a  projection  that  the  losses  on the  sales  would be
recovered in approximately six-months.

     Other  Expense.  Other expense  increased $1.8 million to $13.1 million for
the year ended  December 31, 1996,  an increase of 15.5%,  from $11.4 million in
1995. The primary  reasons for the increase were a $962,000  increase in the net
costs associated with the Bank's real estate owned and repossessed assets and an
increase in salaries,  wages, and benefits of $694,000,  or 15.8% over the prior
year.

     The increase in the expenses  related to real estate owned and  repossessed
assets resulted  primarily from the bulk sale of certain  foreclosed real estate
properties  at  an  amount  below  book  value,   which  increased  expenses  by
approximately  $1.0  million.  Although  these  assets had been  carried at fair
value,  the Bank was  willing to accept a price lower than book value as part of
this  bulk sale in order to  reduce  the drag on  earnings  that  resulted  from
carrying these  non-performing  assets.  This increase was partially offset by a
decline in other  write-downs  of real estate  owned of $377,000 to $877,000 for
1996 compared to $1.3 million during 1995. Also contributing to the increase was
an increase in expenses related to holding these assets.

     The increase in salaries, wages, and benefits was primarily attributable to
the Company's  Employee Stock  Ownership Plan ("ESOP"),  that was established at
the time of conversion.  The year ended December 31, 1996, was the first year in
which the Company was required to recognize  compensation expense related to the

                                       13
<PAGE>

ESOP.  The amount of the expense  recorded for 1996 was $527,000.  Excluding the
ESOP expense, salaries, wages, and benefits increased $167,000, or 3.8%, to $4.6
million  from $4.4 million in 1995 due mainly to normal cost of living and merit
increases.

     All other  non-interest  expenses  increased by $109,000,  or 2.0%, to $5.5
million in 1996 from $5.4 million the prior year. Increases related to occupancy
and equipment,  data  processing,  professional  fees, and certain other expense
categories  totaling  $974,000  were  offset  almost  entirely by  decreases  of
$865,000 in certain other expense  categories,  primarily FDIC deposit insurance
premiums, which declined by $531,000 from $533,000 in 1995 to $2,000 in 1996 due
to a decrease in the rates  charged to  well-capitalized,  Bank  Insurance  Fund
(BIF) member  institutions  such as the Bank, and the recording of non-recurring
expenses of  $205,000 in 1995  pertaining  to the  seizure  and  liquidation  of
Nationar by the Superintendent of Banks of N.Y.S.

     Income Tax Expense.  Due to the pre-tax  loss of $5.8  million  incurred in
1996 as compared to pre-tax income of $1.4 million in 1995, the Company recorded
a tax  benefit of $1.9  million  for 1996  compared to an expense of $586,000 in
1995.

                                       14
<PAGE>
Average Balances, Interest Rates and Yields

     The  following  table  presents for the periods  indicated the total dollar
amount of  interest  income  earned on average  interest-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>
                                                                1997                      1996                       1995
                                                   --------------------------- -------------------------  --------------------------
                                                   Average    Interest  Yield/ Average  Interest  Yield/  Average  Interest   Yield/
                                                   Balance    Inc./Exp. Rate   Balance  Inc./Exp.  Rate   Balance  Inc./Exp.   Rate
                                                   -------    --------- ------ -------  --------- ------  -------  ---------  ------
Interest-Earning Assets                                                         (Dollars in Thousands)
<S>                                              <C>        <C>         <C>   <C>        <C>        <C>   <C>      <C>         <C>
  Loans receivable ...........................   $ 267,726  $  21,011   7.85% $ 262,193  $20,557    7.84% $261,482 $  21,385   8.18%
  Securities available for sale ..............     194,111     13,957   7.19%   156,093   10,921    7.00%     --        --      --
  Investment securities ......................        --         --      --        --       --       --     49,598     3,028   6.11%
  Federal Home Loan Bank Stock ...............       3,066        204   6.65%     2,013      130    6.46%    1,867       143   7.66%
  Federal funds sold and interest-
    bearing deposits .........................       8,162        394   4.76%    14,218      740    5.12%   18,352     1,026   5.59%
                                                   -------     ------           -------   ------           -------    ------
      Total interest-earning assets ..........     473,065     35,566   7.52%   434,517   32,348    7.44%  331,299    25,582   7.72%
                                                   -------     ------           -------   ------           -------    ------
Allowance for Loan Losses ....................      (3,846)                      (3,686)                    (2,598)
Due from Brokers .............................       7,121                       14,221                        --
Unrealized Gain/(Loss)-AFS Securities ........        (884)                      (1,475)                       --
Other Assets .................................      16,150                       15,616                     13,620
                                                 ---------                    ---------                -----------
Total Average Assets .........................   $ 491,606                    $ 459,193                $   345,021
                                                 =========                    =========                ===========
Interest-Bearing Liabilities
  Savings deposits ...........................    $ 99,389    $ 3,016   3.03%  $103,931  $ 3,162    3.04% $108,747   $ 3,300   3.03%
  NOW  deposits ..............................      19,990        543   2.72%    19,124      527    2.76%   18,640       511   2.74%
  Certificates of deposit ....................     172,319      9,882   5.73%   150,300    8,492    5.65%  147,348     8,272   5.61%
  Money Market Accounts ......................       7,159        204   2.85%     8,765      243    2.77%   10,362       285   2.75%
  Borrowed Funds .............................      98,927      6,009   6.07%    67,572    4,011    5.94%    4,880       299   6.13%
  Advances from borrowers for taxes and
    insurance, and stock subscription proceeds        --          --     --         --       --      --      2,402        79   3.28%
                                                   -------     ------           -------   ------           -------    ------
      Total interest-bearing liabilities .....     397,784     19,654   4.94%   349,692   16,435    4.70%  292,379    12,746   4.36%
                                                   -------     ------           -------   ------           -------    ------
Other Liabilities ............................      32,757                       36,255                     24,017
                                                    ------                       ------                     ------
Total Liabilities ............................     430,541                      385,947                    316,369
Shareholders' Equity .........................      61,065                       73,246                     28,625
                                                    ------                       ------                     ------
Total Average Liabilities & Equity ...........   $ 491,606                    $ 459,193                  $ 345,021
                                                 =========                    =========                  ==========
    Net interest income ......................               $ 15,912                   $ 15,913                    $ 12,836
                                                             ========                   ========                    ========
    Net interest rate spread .................                          2.58%                       2.74%                      3.36%
                                                                       ======                      ======                      =====
    Net earning assets .......................   $  75,281                    $  84,825                  $  38,920
                                                 =========                    =========                  ==========
    Net yield on average
     interest-earning assets .................                          3.36%                       3.66%                      3.87%
                                                                       ======                      ======                      =====
    Average interest-earning assets/
      Average interest/bearing liabilities ...      118.93%                      124.26%                    113.31%
                                                 ==========                   ==========                 ==========
</TABLE>

                                       15
<PAGE>

Rate/Volume Analysis of Net Interest Income


     The  following  table  presents  the dollar  amount of changes in  interest
income and interest expense for major components of interest-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   interest-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>
                                           ----------------------------------------------------------------------------
                                                          1997 vs. 1996                       1996 v. 1995
                                           ---------------------------------    ---------------------------------------
                                                   Increase                            Increase
                                                  (Decrease)                          (Decrease)
                                                    Due to           Total              Due to            Total
                                              -----------------     Increase    ------------------       Increase
                                              Volume       Rate     Decrease    Volume        Rate       Decrease
                                           ----------   -------    ---------   --------    ---------   -----------
Interest-Earning Assets                                            (Dollars in thousands)
<S>                                        <C>         <C>         <C>         <C>         <C>         <C>
  Loans receivable (1) .................   $    434    $     20    $    454    $     58    ($   886)   ($   828)
  Securities available for sale (2) ....      2,726         310       3,036      10,921         --       10,921
  Investment securities ................        --          --          --       (3,028)        --       (3,028)
  Federal Home Loan Bank Stock .........         70           4          74          13         (26)        (13)
  Federal funds sold and interest-
    bearing deposits ...................       (298)        (48)       (346)       (219)        (67)       (286)
                                           --------    --------    --------    --------    --------    --------
      Total interest-earning assets ....      2,932         286       3,218       7,745        (979)      6,766
                                           --------    --------    --------    --------    --------    --------

Interest-Bearing Liabilities
  Savings deposits .....................       (138)         (9)       (147)       (145)          7        (138)
  NOW  deposits ........................         23          (6)         17          13           3          16
  Certificates of deposit ..............      1,261         129       1,390         167          53         220
  Money Market Accounts ................        (46)          7         (39)        (44)          2         (42)
  Borrowed Funds .......................      1,902          96       1,998       3,720          (8)      3,712
  Advances from borrowers for
    taxes and insurance, and stock
    subscription proceeds ..............       --          --          --           (45)        (34)        (79)
                                           --------    --------    --------    --------    --------    --------
      Total interest-bearing liabilities   $  3,003    $    216    $  3,219    $  3,666    $     23    $  3,689
                                           --------    --------    --------    --------    --------    --------

    Net interest income ................                           ($     1)                           $  3,077
                                                                   ========                            ========
</TABLE>

(1) Calculated  net of deferred loan fees,  loan discounts and loans in process.
(2) Net of securities  available for sale pending  settlement and net unrealized
    gains/(losses).

                                       16
<PAGE>

Market Risk


     Interest rate risk ("IRR") 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 control 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,  like other financial  institutions,  is subject to interest rate
risk to the extent that its interest-bearing  liabilities reprice on a different
basis or at a different pace from 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,  as of December  31,  1997,  is an analysis of the Bank's
interest rate risk as  calculated by the OTS,  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 400 basis points.

                               Net Portfolio Value
              Change in
            Interest Rate      $ Amount           $ Change           % Change
            -------------      ---------          --------           --------
           (Basis Points)         (Dollars in Thousands)
               +400             $ 9,223          $(46,322)             (83)%
               +300              20,659           (34,887)             (63)
               +200              32,638           (22,908)             (41)
               +100              44,675           (10,871)             (20)
               ----              55,546             ----                --
               -100              63,988             8,443               15
               -200              70,552            15,007               27
               -300              77,133            21,588               39
               -400              85,695            30,150               54

     Certain assumptions utilized by the OTS in assessing the interest rate risk
of savings  institutions  were employed in preparing the foregoing 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,  a change in Treasury rates in the designated  amounts
accompanied  by a change in the shape of the  Treasury  yield  curve would cause
significantly  different  changes to the NPV than indicated above. In evaluating
the Bank's exposure to interest rate risk, certain shortcomings  inherent in the
method of analysis  presented in the  foregoing  table must be  considered.  For
example,  although certain assets and liabilities may have similar maturities or
periods to repricing,  they may react in different  degrees to changes in market
interest  rates.  Also,  the  interest  rates on  certain  types of  assets  and
liabilities may fluctuate in advance of changes in market interest rates,  while

                                       17
<PAGE>

interest rates on other types may lag behind  changes in market rates.  Further,
in the event of a change in interest  rates,  prepayments  and early  withdrawal
levels would likely deviate  significantly from those assumed in calculating the
table. Finally, the ability of many borrowers to service their debt may decrease
in the event of an interest  rate  increase.  As a result,  the actual effect of
changing interest rates may differ from that presented in the foregoing table.

     The Bank  maintains  an  asset/liability  committee  which meets  weekly to
review  interest  rate  risk  management  strategy  and  to  review  the  Bank's
investment strategy for loans and securities, monitor investment performance and
to take any actions  necessary for adjusting  future  investment  direction.  In
managing its  asset/liability  mix, and  depending on the  relationship  between
long- and short-term interest rates, market conditions and consumer  preference,
the Bank may  place  more  emphasis  on  limiting  interest  rate  risk  than on
enhancing its net interest income.  Management believes that the stability which
can be obtained by limiting interest rate risk can more than offset the benefits
which can be  derived  from  seeking  to enhance  the net  interest  margin on a
short-term basis.

     In managing its asset/liability  mix, the Bank, at times,  depending on the
relationship  between long- and short-term interest rates, market conditions and
consumer  preference,  may place greater emphasis on maximizing its net interest
margin  than on  matching  the  interest  rate  sensitivity  of its  assets  and
liabilities, in an effort to improve or maintain its spread. Management believes
that the increased net income  resulting  from a mismatch in the maturity of its
asset and  liability  portfolios  can,  during  periods of  declining  or stable
interest   rates,   provide  high  enough   returns  to  justify  the  increased
vulnerability  to sudden and  unexpected  increases in interest  rates which can
result from such a mismatch.  As a result, the Bank may at certain times be more
vulnerable  to rapid  increases in interest  rates than some other  institutions
which  concentrate  principally  on matching the  maturities of their assets and
liabilities.

     The Bank also  utilizes the FHLB's  Interest  Rate Risk Service in managing
its IRR. In most cases, the FHLB has followed OTS methodology,  however, because
of differences  in modeling  techniques  and  assumptions,  the FHLB results may
differ from the  estimates  generated  by the OTS for  changes in NPV.  The FHLB
simulation  model,  in addition to estimating  NPV changes,  also  estimates the
effect on net interest  income ("NII") and net interest  margin ("NIM") from the
assumed  changes in interest rates and compares the Bank's changes to those of a
similar asset size peer group.

     Management believes that the strategy related to the purchase of securities
with  borrowed  funds  and the  simultaneous  pledging  of those  securities  as
securities sold under agreements to repurchase does not expose the Company's NII
and its NIM to an  unacceptable  level of sensitivity  to changes,  either up or
down, in interest  rates.  See "Financial  Condition" and "Net Interest  Income"
herein.  Management  is aware,  however,  that by  pursuing  the  balance  sheet
strategy it followed during 1997, that the Bank's NPV would be more sensitive to

                                       18
<PAGE>

changes in interest  rates.  Based on the FHLB's Peer Group  Report for December
31, 1997,  if rates  increased  200 basis  points,  the Bank's NPV would decline
31.5%  from its base NPV  (compared  to the OTS  calculated  41.0% in the  table
above) while the median decline for its peers would be 20.5%.

     When the Bank is  compared to its peers by the FHLB in regard to changes in
NII, the Bank is less interest rate  sensitive  than its peer group.  With a 200
basis  point  increase  in interest  rates,  the Bank's NII would  decline by an
estimated  8.2% compared to its peer group's  average  decline of 8.9%. If rates
increased 400 basis points, the Bank's NII would decline by 18.2% compared to an
average decline of 20.4% for its peer group.

     Given a 200 basis point increase in interest rates as of December 31, 1997,
the Bank's NIM would  decline 22 basis points from its base margin rate of 2.78%
to 2.56%,  compared to a peer group decline from 2.79% to 2.64%, a decline of 15
basis points. If interest rates increased 400 basis points, the Bank's NIM would
decline 50 basis  points to 2.28% from the base  margin  rate of 2.78% while the
peer group's NIM would decline by 39 basis points to 2.40% from 2.79%.


Liquidity and Capital Resources


     The Bank's  primary  sources of funds for  operations are deposits from its
market area,  principal and interest payments on loans and securities  available
for sale, proceeds from the maturity of securities  available for sale, advances
from the FHLB of New York and proceeds  from the sale of  securities  sold under
agreements  to  repurchase  ("reverse  repo").  While  maturities  and scheduled
amortization of loans and securities are predictable  sources of funds,  deposit
flows and mortgage prepayments are greatly influenced by general interest rates,
economic conditions, and competition.

     The primary  investing  activities  of the Company are the  origination  of
loans and purchase of  securities.  During  1997,  1996 and 1995 the Bank's loan
originations   totaled  $91.5   million,   $81.4  million  and  $50.2   million,
respectively.  During 1995, the Bank  purchased  $47.0 million of securities and
classified  such  securities,   consistent  with  the  reclassification  of  all
investment and mortgage-backed securities at December 31, 1995, as available for
sale. In 1996, the Company purchased $192.6 million of securities and classified
such securities as available for sale. For the year 1997, the Company  purchased
$247.4  million of  securities,  all of which were  classified  as available for
sale.

     The primary  financing  activity of the Bank is the attraction of deposits.
During the years ended  December  31, 1997 and 1995,  the Bank  experienced  net
deposit  inflows of $35.2 million and $18.1 million,  respectively.  However for
the year ended  December  31, 1996,  the Bank had net deposit  outflows of $13.2
million.  Management  believes  that the  decrease  in  deposits in 1996 was the
result, in part, of some of the Bank's depositors deciding to pursue alternative
investment  opportunities,  such as stock mutual funds,  with a portion of their
investable funds. The increase in deposits during 1997 management believes was a
reversal of the 1996 situation as depositors  shifted investable funds back into
certificates  of deposit to take  advantage  of the higher  interest  rates that
prevailed in the Bank's market area during 1997.  During the year ended December
31, 1997, the Bank's  certificates  of deposit  increased by $31.4  million,  or
20.7%.  The net increase of $18.1  million in 1995  resulted from an increase of
$41.2  million in  certificates  of  deposit  which was the result of the Bank's
aggressive 1995 marketing  campaigns related,  in part, to the three supermarket
branches that the Bank opened since November 1994.

                                       19
<PAGE>

     The Bank is required to maintain minimum levels of liquid assets as defined
by OTS regulations.  This requirement,  which may be varied by the OTS depending
upon  economic  conditions  and deposit  flows,  is based upon a  percentage  of
deposits.  The required  minimum  liquidity  ratio is  currently  4%. The Bank's
average daily liquidity ratio for the month of December 1997 was 37.05%.

     The Bank's most liquid assets are cash and cash equivalents,  which consist
of federal funds sold and bank deposits.  The level of these assets is dependent
on the Bank's  operating,  financing and investing  activities  during any given
period.  At December 31, 1997, 1996 and 1995 cash and cash  equivalents  totaled
$10.2 million, $10.9 million and $84.6 million, respectively.

     The Bank  anticipates  that it will have sufficient funds available to meet
its current  commitments.  At December 31,  1997,  the Bank had  commitments  to
originate  loans of $4.2 million as well as undrawn  commitments of $5.4 million
on home  equity and other  lines of credit.  Certificates  of deposit  which are
scheduled  to mature in one year or less at December 31,  1997,  totaled  $139.1
million.  Management  believes that a significant  portion of such deposits will
remain  with  the  Bank.  However,  if the  Bank  is not  able to  maintain  its
historical  retention rate on maturing  certificates of deposit, it may consider
employing the following strategies:  (i) increase its borrowed funds position to
compensate for the deposit outflows;  (ii) increase the rates it offers on these
deposits in order to increase the  retention  rate on maturing  certificates  of
deposit   and/or  to  attract  new  deposits;   or  (iii)  attempt  to  increase
certificates  of deposit  through the use of deposit  brokers.  Depending on the
level of market  interest  rates on the  renewal  dates of the  certificates  of
deposit, the employment of one or a combination of these strategies could result
in higher or lower levels of NII and net income.

     The Company  also has a need for, and sources of,  liquidity.  Liquidity is
required  to fund its  operating  expenses,  as well as for the  payment  of any
dividends to shareholders.  The Company  currently has no significant  liquidity
commitments  as operating  costs are modest and  dividends to  shareholders  are
discretionary.  At December  31,  1997,  the Holding  Company had $9.4 in liquid
assets on hand, however,  the primary source of liquidity on an ongoing basis is
dividends  from the Bank. To date, no dividends  have been paid from the Bank to
the Company; however, it is anticipated that the Bank will pay a dividend to the
Company in 1998.

     Federally  insured savings  institutions are required to maintain a minimum
level of regulatory  capital.  The OTS has  established  standards,  including a
tangible capital requirement, a leverage ratio (or core capital) requirement and
a risk-based capital requirement applicable to such savings associations.  These
capital  requirements  must be generally as stringent as the comparable  capital
requirements  of national  banks.  The OTS is also  authorized to impose capital
requirements  in excess  of these  standards  on  individual  associations  on a
case-by-case  basis.  See  Note  15  of  the  Notes  to  Consolidated  Financial
Statements for information on the Bank's regulatory capital requirements.

                                       20
<PAGE>





<TABLE>
<CAPTION>

Unaudited Consolidated Interim Financial Information
                                                                1997                                        1996
                                           -----------------------------------------   ------------------------------------------
                                              3/31       6/30      9/30       12/31      3/31       6/30        9/30       12/31
                                           --------   --------   --------   --------   --------   --------   --------    --------
                                                               (Dollars in thousands, except per share data)
<S>                                         <C>        <C>        <C>        <C>        <C>        <C>        <C>         <C>
Interest Income ....................        $8,675     $8,773     $8,827     $9,291     $6,915     $7,562     $8,825      $9,046

Net Interest Income ................         4,020      4,008      3,881      4,003      3,653      3,881      4,231       4,147

Provision for Loan Losses ..........           363        275        225        225      1,628        433        549       6,840

Income/(Loss) Before Income Taxes ..         1,076        889      1,188      1,300       (535)       802        897      (6,929)

Net Income/(Loss) ..................           652        572        736        800       (314)       510        572      (4,604)

Earnings/(Loss)per share - Basic ...          0.16       0.14       0.19       0.21      (0.06)      0.10       0.12       (1.05)
Earnings/(Loss)per share - Diluted .          0.16       0.14       0.19       0.20      (0.06)      0.10       0.12       (1.05)

Average Shares Outstanding - Basic .     4,011,349  4,024,536  3,897,492  3,832,531  4,988,828  4,999,672  4,675,401   4,404,735
  Incremental Shares:
     Options .......................          --        3,233     36,300     57,608        --         --         --          --
     Unvested RRP Shares ...........          --        2,244     23,642     39,608        --         --         --          --
Average Shares Outstanding - Diluted     4,011,349  4,030,013  3,957,434  3,929,747  4,988,828  4,999,672  4,675,401   4,404,735
</TABLE>

                                       21
<PAGE>




                            AMBANC HOLDING CO., INC.
                                AND SUBSIDIARIES

                        Consolidated Financial Statements

                        As of December 31, 1997 and 1996
              and for the three year period ended December 31, 1997

                   (With Independent Auditors' Report Thereon)



                          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,
1997 and 1996,  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, 1997. 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  at December 31, 1997 and 1996,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1997,  in  conformity  with  generally  accepted  accounting
principles.


Albany, N.Y.
February 13, 1998

                                       22
<PAGE>


                    AMBANC HOLDING CO., INC. AND SUBSIDIARIES
                 Consolidated Statements of Financial Condition


                                                             December 31,
              Assets                                       1997       1996
                                                           ----       ----
                                                            (In thousands)

Cash and due from banks .............................   $ 10,225      6,387
Federal funds sold ..................................       --        4,500
                                                        --------   --------
          Cash and cash equivalents .................     10,225     10,887

Securities available for sale, at fair value (note 4)    205,842    200,539
Loans receivable, net (note 5) ......................    281,123    248,094
Accrued interest receivable (note 6) ................      3,734      3,201
Premises and equipment, net (note 7) ................      3,121      2,784
Federal Home Loan Bank of New York stock, at cost ...      3,291      2,029
Real estate owned and repossessed assets ............        143        715
Other assets ........................................      2,965      4,172
                                                        --------   --------
          Total assets ..............................   $510,444    472,421
                                                        ========   ========
          Liabilities and Shareholders' Equity

Liabilities:
     Deposits (note 8) ..............................   $333,265    298,082
     Advances from borrowers for taxes
       and insurance                                       1,902      1,703
     Borrowed funds (note 9) ........................    111,550    108,780
     Accrued interest payable .......................        819      1,077
     Accrued expenses and other liabilities .........      1,706      1,261
                                                        --------   --------
          Total liabilities .........................    449,242    410,903
                                                        --------   --------

Commitments and contingent liabilities (notes 10, 11 and 13)

Shareholders' equity:
     Preferred stock $.01 par value. Authorized
       5,000,000 shares; none outstanding at
       December 31, 1997 and 1996 ...................          -          -
     Common stock $.01 par value.  Authorized
       15,000,000; 5,422,250 shares issued at
       December 31, 1997 and 1996 ...................         54         54
     Additional paid-in capital .....................     52,385     52,128
     Retained earnings, substantially restricted ....     26,458     24,436
     Treasury stock, at cost, (1,115,832 shares
       at December 31, 1997 and 1,030,227 at
       December 31, 1996) ...........................    (12,585)   (11,208)
     Common stock acquired by ESOP ..................     (3,303)    (3,812)
     Unearned RRP shares issued .....................     (1,533)       --
     Net unrealized loss on securities available
       for sale, net of tax .........................       (274)       (80)
                                                       ---------  ---------
          Total shareholder's equity ................     61,202     61,518
                                                       ---------  ---------

          Total liabilities and shareholders' equity   $ 510,444    472,421
                                                       =========  =========

See accompanying notes to consolidated financial statements.

                                       23
<PAGE>
                   AMBANC HOLDING CO., INC. AND SUBSIDIARIES
                        Consolidated Statements of Income

                                                     Years ended December 31,
                                                    1997      1996         1995
                                                    ----      ----         ----
                                                          (In thousands,
                                                     except per share amounts)
Interest and dividend income:
     Loans ...................................    $21,011     20,557      21,385
     Securities available for sale ...........     13,957     10,921        --
     Investment securities ...................       --         --         3,028
     Federal funds sold ......................        394        740       1,026
     Federal Home Loan Bank stock ............        204        130         143
                                                  -------    -------     -------
       Total interest and dividend income ....     35,566     32,348      25,582
                                                  -------    -------     -------
Interest expense:
     Deposits (note 8) .......................     13,645     12,424      12,447
     Borrowings ..............................      6,009      4,011         299
                                                  -------    -------     -------
              Total interest expense .........     19,654     16,435      12,746
                                                  -------    -------     -------
              Net interest income ............     15,912     15,913      12,836

Provision for loan losses (note 5) ...........      1,088      9,450       1,522
                                                  -------    -------     -------
     Net interest income after
      provision for loan losses ..............     14,824      6,463      11,314
                                                  -------    -------     -------
Other income:
     Service charges on deposit accounts .....        786        764         783
     Net gains (losses) on securities
      transactions ...........................        775       (102)        225
     Other ...................................        265        258         504
                                                  -------    -------     -------
              Total other income .............      1,826        920       1,512
                                                  -------    -------     -------
Other expenses:
     Salaries, wages and benefits ............      6,086      5,097       4,403
     Occupancy and equipment .................      1,539      1,328       1,219
     Data processing .........................        923        843         728
     Federal deposit insurance premium .......         39          2         533
     Correspondent bank processing fees ......        126        116         245
     Provision for losses on Nationar
       related receivable ....................       --         --           205
     Real estate owned and repossessed
       assets expenses, net ..................        355      2,563       1,601
     Professional fees .......................        429        540         358
     Other ...................................      2,700      2,659       2,091
                                                  -------    -------     -------
              Total other expenses ...........     12,197     13,148      11,383
                                                  -------    -------     -------
Income (loss) before taxes ...................      4,453     (5,765)      1,443
Income tax expense (benefit) (note 10) .......      1,693     (1,929)        586
                                                  -------    -------     -------
              Net income (loss) ..............    $ 2,760     (3,836)        857
                                                  =======    =======     =======

Basic earnings (loss) per share ..............    $  0.70    $ (0.81)        N/A
                                                  =======    =======     =======

Diluted earnings (loss) per share ............    $  0.69    $ (0.81)        N/A
                                                  =======    =======     =======

See accompanying notes to consolidated financial statements.

                                       24
<PAGE>

                    AMBANC HOLDING CO., INC. AND SUBSIDIARIES

           Consolidated Statements of Changes in Shareholders' Equity

                  Years ended December 31, 1997, 1996 and 1995

                        (in thousands, except share data)
<TABLE>
<CAPTION>


                                                                                                      Net unrealized
                                                                                                      gain (loss) on
                                                                                    Common    Unearned  securities
                                                   Additional                       stock       RRP     available
                                           Common   paid-in   Retained   Treasury  acquired    shares   for sale,
                                           stock    capital   earnings    stock    by ESOP     issued   net of tax    Total
                                           -----    -------   ---------   -----    -------     ------   ----------    -----


<S>                                       <C>        <C>       <C>        <C>       <C>         <C>         <C>       <C>
Balance at December 31, 1994 ..........   $  --        --      27,415       --         --         --         --       27,415

Net income ............................      --        --         857       --         --         --         --          857
Common stock issued (5,422,250 shares)       54      52,127      --         --         --         --         --       52,181
Purchase of ESOP shares (433,780) .....      --        --        --         --       (4,338)      --         --       (4,338)
Change in net unrealized loss on
  securities available for sale,
  net of tax ..........................      --        --        --         --         --         --         (100)      (100)
                                          -------   -------   -------    -------    -------    -------    -------    -------
Balance at December 31, 1995 ..........      54      52,127    28,272       --       (4,338)      --         (100)    76,015

Net loss ..............................      --        --      (3,836)      --         --         --         --       (3,836)
Purchase of treasury shares (1,030,227)      --        --        --      (11,208)      --         --         --      (11,208)
Release of ESOP shares (52,964) .......      --           1      --         --          526       --         --          527
Change in net unrealized loss on
  securities available for sale, net of
  tax .................................      --        --        --         --         --         --           20         20

Balance at December 31, 1996 ..........      54      52,128    24,436    (11,208)    (3,812)      --          (80)    61,518
                                          -------   -------   -------    -------    -------    -------    -------    -------
Net income ............................      --        --       2,760       --         --         --         --        2,760
Release of ESOP shares (50,561) .......      --         257      --         --          509       --         --          766
Purchase of treasury shares (216,890) .      --        --        --       (3,488)      --         --         --       (3,488)
Issuance of RRP shares (131,285) ......      --        --        (306)     2,111       --       (1,805)      --         --
RRP shares earned .....................      --        --        --         --         --          272       --          272
Change in net unrealized loss on
  securities available for sale, net of
  tax .................................      --        --        --         --         --         --         (194)      (194)
Cash dividends $0.10 per share ........      --        --        (432)      --         --         --         --         (432)
                                          -------   -------   -------    -------    -------    -------    -------    -------
Balance at December 31, 1997 ..........   $  54      52,385    26,458    (12,585)    (3,303)    (1,533)      (274)    61,202
                                          =======   =======   =======   ========    =======    ========    =======   ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       25
<PAGE>

                    AMBANC HOLDING CO., INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows


                                                        Years ended December 31,
                                                        1997     1996      1995
                                                        ----     ----      ----
                                                             (In thousands)
Increase  (decrease)  in cash and cash  equivalents:
 Cash flows from  operating activities:
  Net income (loss) ................................ $ 2,760    (3,836)     857
  Adjustments to reconcile net income (loss)
   to net cash provided (used)
   by operating activities:
    Depreciation and amortization ..................     652       558      496
    Provision for loan losses ......................   1,088     9,450    1,522
    Provision for losses and writedowns on
    real estate owned and repossessed assets ......      171       877    1,254
    Provisions for losses on Nationar
     related receivables ...........................     --        --       205
    Loss on sale of fixed assets ...................     --         64      --
    ESOP compensation expense ......................     766       527      --
    RRP expense ....................................     272       --       --
    Net loss (gains) on sale and redemptions
     of securities available for sale ..............    (775)      102     (225)
    Net loss on sale of other real estate owned ....      38     1,260       74
    Net amortization on securities .................     320       475       19
    (Increase) decrease in accrued interest
     receivable and other assets ...................     831    (3,316)    (560)
    Decrease (increase) in due from broker .........     --     18,128  (18,128)
    Increase (decrease) in accrued expenses
     and other liabilities .........................     187    (1,201)   2,225
    Increase (decrease) in due to broker ...........     --    (46,880)  46,880
    Increase (decrease) in advances from
     borrowers for taxes and insurance .............     199        11     (762)
                                                       -----   --------  -------
     Net cash provided (used) by operating
      activities ...................................   6,509   (23,781)  33,857
                                                       -----   --------  -------

Cash flows from investing activities:
 Proceeds from sales and redemptions of
  securities available for sale .................... 194,210    34,469   18,372
 Purchases of securities available for sale ........(247,424) (192,647)     --
 Proceeds from principal paydowns and
  maturities of securities available for sale ......  48,029    31,508      --
 Proceeds from principal paydowns and
  maturities of investment securities ..............     --        --     7,530
 Purchase of investment securities .................     --        --   (46,980)
 Purchase of FHLB stock ............................  (1,262)     (137)    (237)
 Proceeds from sale of loans .......................     --     18,929      --
 Net (increase) decrease in loans made
  to customers ..................................... (34,384)  (28,685)   8,205
 Capital expenditures ..............................  (1,004)     (341)    (692)
 Proceeds from sales of other real estate ..........     631     2,519    1,340
 Proceeds from the sale of fixed assets ............     --         25      --
                                                     -------- --------- --------
     Net cash used by investing activities ......... (41,204) (134,360) (12,462)
                                                     -------- --------- --------
                                                                 (Continued)

                                       26
<PAGE>
                 AMBANC HOLDING CO., INC. AND SUBSIDIARIES

             Consolidated Statements of Cash Flows, Continued

           For the years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>

                                                             1997        1996        1995
                                                             ----        ----        ----

  Cash flows from financing activities:
<S>                                                       <C>           <C>         <C>
      Purchase of ESOP shares .........................   $   --          --        (4,338)
      Net proceeds from common stock issued
        in stock conversion ...........................       --          --        52,181
      Purchase of treasury shares .....................     (3,488)    (11,208)       --
      Dividends paid ..................................       (432)       --          --
      Net increase (decrease) in deposits .............     35,183     (13,157)     18,087
      Advances from (repayments on) FHLB
        borrowings, net ...............................      6,300       6,000     (19,000)
      Increase (decrease) in other borrowed funds .....     (3,530)    102,780        --
                                                          --------    --------    --------
              Net cash provided by financing activities     34,033      84,415      46,930
                                                          --------    --------    --------

Net increase (decrease) in cash and cash equivalents ..       (662)    (73,726)     68,325
Cash and cash equivalents at beginning of year ........     10,887      84,613      16,288
                                                          --------    --------    --------
Cash and cash equivalents at end of year ..............   $ 10,225      10,887      84,613
                                                          ========    ========    ========

Supplemental disclosures of cash flow
  information - cash paid during the year for:
         Interest .....................................   $ 19,912      15,360      12,447
                                                          ========    ========    ========

         Income taxes .................................   $  1,770         306       1,000
                                                          ========    ========    ========

Noncash investing activities:
     Net reduction in loans receivable resulting
       from the transfer to real estate owned .........   $    268       2,203       1,864
                                                          ========    ========    ========
     Transfer of investment securities to
       securities available for sale ..................   $   --          --        45,736
                                                          ========    ========    ========
Noncash financing activities:
     Issuance of RRP shares ...........................   $  2,111        --          --
                                                          ========    ========    ========

</TABLE>

See accompanying notes to consolidated financial statements.

                                       27
<PAGE>
                    AMBANC HOLDING CO., INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1997 and 1996


(1)    Summary of Significant Accounting Policies

       Ambanc  Holding Co. Inc.  (the Holding  Company) was  incorporated  under
       Delaware  law in June 1995 as a Holding  Company to purchase  100% of the
       common  stock  of  Amsterdam  Savings  Bank,  FSB  (the  Bank).  The Bank
       converted from a mutual form to a stock institution in December 1995, and
       the Holding Company completed its initial public offering on December 26,
       1995, at which time the Holding  Company  purchased  all the  outstanding
       stock of the Bank.

       The following is a description  of the more  significant  policies  which
       Ambanc  Holding  Co.,  Inc.  follows  in  preparing  and  presenting  its
       consolidated financial statements.

       (a)    Basis of Presentation

              The accompanying  consolidated  financial  statements  include the
              accounts  of  Ambanc  Holding  Co.,  Inc.,  and its  wholly  owned
              subsidiaries,  Amsterdam  Savings Bank FSB,  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 thrift
              industry.

              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 and the  valuation  of real estate
              owned  and   repossessed   assets   acquired  in  connection  with
              foreclosures or in  satisfactions of loans. In connection with the
              determination  of the allowance for loan losses,  the valuation of
              real estate  owned,  and  estimates of fair value for  repossessed
              assets, management obtained appraisals for significant assets.

       (b)    Business

              A substantial portion of the Company's assets are loans secured by
              real estate in the upstate New York area.  In  addition,  all real
              estate owned is located in those same  markets.  Accordingly,  the
              ultimate collectibility of a considerable portion of the Company's
              loan  portfolio and the recovery of a  substantial  portion of the
              carrying  amount of real estate  owned are  dependent  upon market
              conditions in the upstate New York region.

                                       28
<PAGE>

(1) Summary of Significant Accounting Policies, Continued

              Management believes that the allowance for loan losses is adequate
              and that  other  real  estate  owned and  repossessed  assets  are
              properly valued.  While  management uses available  information to
              recognize  losses  on  loans  and  other  real  estate  owned  and
              repossessed   assets,   future   additions  to  the  allowance  or
              writedowns  of other  real  estate and  repossessed  assets 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  and   valuation  of  other  real  estate  owned  and
              repossessed   assets.  Such  agencies  may  require  the  Bank  to
              recognize  additions to the allowance or write downs of other real
              estate  and  repossessed  assets  based on their  judgments  about
              information  available  to them at the time of  their  examination
              which may not be currently available to management.

     (c)      Securities Available  for Sale, Investment  Securities 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
              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 as a separate  component of
              shareholders'  equity,  net of estimated income taxes. The Company
              does not  maintain a trading  portfolio,  and at December 31, 1997
              and 1996 the Company had no  securities  classified  as securities
              held to maturity.

              Unrealized  losses on  securities  that reflect a decline in value
              that is other than temporary are charged to income.

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

              Mortgage backed securities, which are guaranteed by the Government
              National  Mortgage  Association  ("GNMA"),  the Federal  Home Loan
              Mortgage  Corporation  ("FHLMC") or the Federal National  Mortgage
              Corporation ("FNMA"),  represent participation interests in direct
              pass-through  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. The cost of securities is adjusted for amortization
              of premium and 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  financial
              statements.


                                       29
<PAGE>

(1) Summary of Significant Accounting Policies, Continued

       (d)    Reclassification of Investment Securities

              In November 1995, the Financial  Accounting Standards Board (FASB)
              released  its  Special  Report  "A  Guide  to   Implementation  of
              Statement 115 on Accounting  for Certain  Investments  in Debt and
              Equity  Securities."  The Special  Report  contained,  among other
              things,  a unique  provision  that allowed  entities to, as of one
              date either  concurrent  with the initial  adoption of the Special
              Report  (November 15, 1995),  but no later than December 31, 1995,
              reassess  the   appropriateness  of  the  classifications  of  all
              securities  held at that  time.  In  accordance  with  the  FASB's
              Special Report, as of December 31, 1995, the Company  reclassified
              all investment securities held to maturity, with an amortized cost
              of $45,735,971, to securities available for sale.

       (e)    Loans Receivable and Loan Fees

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

              Non-performing loans include non-accrual 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 for the  recording of interest.
              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
              non-accrual  loans is  dependent  on the  expectation  of ultimate
              repayment  of the  loan.  If  ultimate  repayment  of the  loan is
              expected,  any payments  received are applied in  accordance  with
              contractual  terms.  If ultimate  repayment  of  principal  is not
              expected  or  management  judges  it to be  prudent,  any  payment
              received  on a  non-accrual  or an  impaired  loan is  applied  to
              principal until ultimate  repayment  becomes  expected.  Loans are
              removed  from  non-accrual  status when they are  estimated  to be
              fully  collectible as to principal and interest.  Amortization  of
              related  deferred  fees  is  suspended  when a loan is  placed  on
              non-accrual 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   present   portfolio,   the   level  of
              non-performing  loans, past loan loss experience,  estimated value
              of underlying  collateral,  and current and  prospective  economic
              conditions.  The  allowance is increased  by  provisions  for loan
              losses charged to operations.

                                       30
<PAGE>

(1) Summary of Significant Accounting Policies, Continued

       (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  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.  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  and  in-substance  foreclosures.   A  loan  is
              classified  as an  insubstance  foreclosure  when the  Company has
              taken  possession of the  collateral  regardless of whether formal
              foreclosure proceedings have taken place.

              Real estate owned and repossessed assets,  including  in-substance
              foreclosures,  are  recorded on an  individual  asset basis at net
              realizable  value which is the lower of fair value minus estimated
              costs to sell or  "cost"  (defined  as the fair  value at  initial
              foreclosure).  When  a  property  is  acquired  or  identified  as
              in-substance foreclosure, the excess of the loan balance over fair
              value is  charged to the  allowance  for loan  losses.  Subsequent
              write-downs 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, 1997 and 1996,  real estate owned and  repossessed
              assets  consisted  of  primarily  residential  one to four  family
              properties,  recreational  vehicles and boats.  The Company had no
              in-substance foreclosures at December 31, 1997 and 1996.

       (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.


                                       31
<PAGE>
(1) Summary of Significant Accounting Policies, Continued

       (i)    Income Taxes

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

       (j)    Pension Plan

              The  Company  has  a  defined   benefit   pension  plan   covering
              substantially all employees.  The Company's actuarially determined
              annual  contribution  to the  pension  plan meets or  exceeds  the
              minimum funding requirements set forth in the Employees Retirement
              Income Security Act of 1974.

       (k)    Off-Balance Sheet Risk

              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.

       (l)    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.


                                       32
<PAGE>


(1) Summary of Significant Accounting Policies, Continued

       (m)    Stock Based Compensation Plans

              The Company accounts for its stock option plans 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.

       (n)    Earnings per share

              On December 31, 1997,  the Company  adopted the provisions of SFAS
              No. 128, "Earnings Per Share". The statement supersedes Accounting
              Principles  Board Opinion No. 15, "Earnings Per Share" and related
              interpretations. SFAS No. 128 requires dual presentation of "Basic
              EPS" and Diluted EPS" on the face of the income  statement for all
              entities with complex capital structures and specifies  additional
              disclosure   requirements.   Basic  earnings  per  share  excludes
              dilution and is  calculated  by dividing  net income  available to
              common  shareholders  by the  weighted  average  number  of shares
              outstanding  during the period.  Unvested  restricted stock awards
              are  considered  outstanding  common  shares and  included  in the
              computation  of basic  EPS as of the  date  that  they  are  fully
              vested.  Diluted EPS reflects the  potential  dilution  that could
              occur if securities or other  contracts to issue common stock were
              exercised  into common stock or resulted in the issuance of common
              stock.  All prior period EPS data has been  restated to conform to
              the provisions of this  Statement.  The adoption of this Statement
              did not have a material effect on the Company's financial position
              or results of operations.

       (o)    Official Bank Checks

              The Company's  treasurer  checks  (including  expense  checks) are
              drawn upon the Bank and are  ultimately  paid  through  the Bank's
              Federal  Reserve  Bank of New York  correspondent  account and are
              included  in  accrued  expenses  and  other   liabilities  in  the
              consolidated statements of financial condition.


                                       33
<PAGE>

(1) Summary of Significant Accounting Policies, Continued

       (p)    Accounting  for Transfers and  Servicing of  Financial  Assets and
              Extinguishment of Liabilities

              In June 1996,  the  Financial  Accounting  Standards  Board (FASB)
              issued  SFAS No.  125  which  provides  accounting  and  reporting
              standards  for  transfers  and  servicing of financial  assets and
              extinguishments of liabilities based on consistent  application of
              a  financial  components  approach  that  focuses on  control.  It
              distinguishes  transfers of  financial  assets that are sales from
              transfers that are secured borrowings. Certain aspects of SFAS No.
              125 were amended by SFAS No. 127,  "Deferral of the Effective Date
              of Certain  Provision of FAS  Statement  No. 125." The adoption of
              SFAS  No.  125 did not have a  material  impact  on the  Company's
              consolidated financial statements.

       (q)    Reclassifications

              Amounts in the prior years' consolidated  financial statements are
              reclassified  whenever  necessary  to conform  to current  periods
              presentations.

       (r)    Recent Accounting Pronouncements

              In  June  1997,   the  FASB  issued   SFAS  No.  130,   "Reporting
              Comprehensive  Income".  SFAS No. 130  establishes  standards  for
              reporting and displaying of  comprehensive  income.  Comprehensive
              income  includes the  reported net income of the company  adjusted
              for items that are currently accounted for as equity transactions,
              such as market value adjustment for securities available for sale,
              foreign  currency  transactions,  and  minimum  pension  liability
              adjustments.   This   statement  is  effective  for  fiscal  years
              beginning  after December 15, 1997.  Management  believes that the
              adoption  of SFAS No. 130 will not have a  material  impact on the
              Company's consolidated financial statements.

              In June 1997,  the FASB  issued SFAS No.  131,  "Disclosure  about
              Segments of an Enterprise and Related  Information".  SFAS No. 131
              establishes   standards  for  reporting  by  public  companies  of
              operating segments within the company,  disclosures about products
              and services, geographic areas and major customers. This statement
              is  effective  for periods  beginning  after  December  15,  1997.
              Management  believes  that the  adoption  of SFAS No. 131 will not
              have a material  impact on the  Company's  consolidated  financial
              statements.


(2)    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 Bank.  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  December  31,  1997 and  1996  consolidated  statements  of
       financial  condition.  The  Company  utilized  $26.0  million  of the net
       proceeds to acquire all of the capital stock of the Bank.


                                       34
<PAGE>

(2)    Conversion to Stock Ownership, Continued

       As part of the conversion, the Bank established a liquidation account for
       the benefit of eligible depositors who continue to maintain their deposit
       accounts  in the  Bank  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
       account, 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  account.
       Except for such  restrictions,  the existence of the liquidation  account
       does not restrict the use or application of retained earnings.

       The Bank's capital exceeds all of the fully phased-in capital  regulatory
       requirements.  The Office of Thrift Supervision (OTS) regulations provide
       that an institution that exceeds all fully phased-in capital requirements
       before and after a  proposed  capital  distribution  could,  after  prior
       notice but without the approval by the OTS,  make  capital  distributions
       during the  calendar  year of up to 100% of its net income to date during
       the  calendar  year plus the amount  that would  reduce by  one-half  its
       "surplus  capital  ratio" (the excess  capital  over its fully  phased-in
       capital  requirements)  at  the  beginning  of  the  calendar  year.  Any
       additional capital distributions would require prior regulatory approval.
       At December 31, 1997, the maximum amount that could have been paid by the
       Bank to the Holding Company was approximately $17.5 million.

       Unlike the Bank, the Holding  Company is not subject to these  regulatory
       restrictions on the payment of dividends to its stockholders.


(3)    Reserves and Investments Required by Law

       The  Company is  required  to  maintain  certain  reserves of cash and or
       deposits  with the  Federal  Reserve  Bank.  The  amount of this  reserve
       requirement,  included  in cash and due  from  banks,  was  approximately
       $1,123,000 and $1,069,000 at December 31, 1997 and 1996, 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  advances  from the  Federal  Home Loan Bank of New
       York.


                                       35
<PAGE>
(4)    Securities Available for Sale

       The amortized cost,  gross unrealized gains and losses and estimated fair
       values of securities available for sale at December 31, 1997 and 1996 are
       as follows:

<TABLE>
<CAPTION>
                                                                  1997
                                                             (in thousands)
                                                             Gross      Gross    Estimated
                                               Amortized  unrealized unrealized    fair
                                                  cost        gains     losses     value

<S>                                            <C>              <C>      <C>       <C>
       U.S. Government and agency securities   $ 63,198         60       (113)     63,145
       Mortgage-backed securities ..........    142,312        100       (515)    141,897
       State and political subdivisions ....        755         11       --           766
                                                --------   --------   --------    --------
       Total debt securities ...............    206,265        171       (628)    205,808
                                               --------   --------   --------    --------

       Equity securities ...................         34       --         --            34
                                               --------   --------   --------    --------
       Total ...............................   $206,299        171       (628)    205,842
                                               ========   ========   ========    ========

                                                                 1996
                                                            (in thousands)
                                                            Gross      Gross    Estimated
                                              Amortized  unrealized  unrealized    fair
                                                 cost       gains      losses      value

       U.S. Government and agency securities   $ 43,968         69       (264)     43,773
       Mortgage-backed securities ..........    156,191        705       (635)    156,261
       State and political subdivisions ....        500          5       --           505
                                               --------   --------   --------    --------
       Total ...............................   $200,659        779       (899)    200,539
                                               ========   ========   ========    ========
</TABLE>

       The amortized cost and estimated fair value of debt securities  available
       for sale at December 31, 1997, by contractual  maturity,  are shown below
       (mortgage backed securities are included by final contractual  maturity).
       Expected  maturities  will differ  from  contractual  maturities  because
       borrowers  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 ...................   $  3,998        3,998
       Due after one year through five years .     13,755       13,712
       Due after five years through ten  years     36,633       36,591
       Due after ten years ...................    151,879      151,507
                                                 --------     --------
                 Totals ......................   $206,265      205,808
                                                 ========     ========

                                       36
<PAGE>
(4)    Securities Available for Sale, Continued

       The  following  table  sets  forth   information  with  regard  to  sales
       transactions of securities available for sale:


                                                   1997        1996        1995
                                                   ----        ----        ----
                                                           (In thousands)

       Proceeds from sale of securities ....    $174,010      34,469      18,372
       Gross realized gains from sale
        of securities ......................       1,017          14         319
       Gross realized losses from sale
        of securities ......................         242         116          94

       Securities  available  for sale carried at  $111,153,000  on December 31,
       1997 and at  $113,828,000  on December  31,  1996 were  pledged to secure
       repurchase agreements and other purposes.


(5)    Loans Receivable, Net

       Loans receivable consist of the following at December 31, 1997 and 1996:

                                                            December 31,
                                                          1997         1996
                                                           (In thousands)
       Loans secured by real estate:
       1 - 4 Family ................................   $ 189,666      158,182
       Home equity .................................      30,246       22,817
       Multi family ................................       4,152        4,724
       Non-residential .............................      26,585       29,947
       Construction ................................       2,081        2,234
                                                       ---------    ---------
             Total loans secured by real estate ..       252,730      217,904
                                                       ---------    ---------

       Other Loans:
        Consumer loans:
         Recreational vehicles .....................       6,775        9,416
         Auto loans ................................      16,237       12,417
         Other secured .............................       1,781        1,866
         Unsecured .................................       1,847        1,445
         Manufactured homes ........................         494          620
                                                       ---------    ---------
             Total consumer loans ..................      27,134       25,764
                                                       ---------    ---------
       Commercial loans:
         Secured ...................................       3,233        6,199
         Unsecured .................................         471          620
                                                       ---------    ---------
             Total commercial loans ................       3,704        6,819
                                                       ---------    ---------
                                                         283,568      250,487
                                                       ---------    ---------
       Allowance for loan losses ...................      (3,807)      (3,438)
       Deferred costs, net of deferred fees and
       discounts ...................................       1,362        1,045
                                                       ---------    ---------
       Total loans receivable, net                     $ 281,123      248,094
                                                       =========    =========


                                       37
<PAGE>
(5)    Loans Receivable, Net, Continued

       A summary of the allowance for loan losses is as follows:

                                                         December 31,
                                                   1997       1996       1995
                                                   ----       ----       ----
                                                        (In thousands)

       Balance at beginning of year ..........   $ 3,438      2,647      2,235
       Provision charged to operations .......     1,088      9,450      1,522
       Charge-offs ...........................    (1,214)    (8,718)    (1,216)
       Recoveries ............................       495         59        106
                                                 -------    -------    -------
       Balance at end of year ................   $ 3,807      3,438      2,647
                                                 =======    =======    =======

       The following table sets forth the information with regard to
       non-performing loans:

                                                       December 31,
                                                  1997     1996      1995
                                                  ----     ----      ----
                                                      (In thousands)

       Loans in a non-accrual status .........   $1,876    3,123    4,499
       Loans contractually past due 90 days
        or more and still accruing interest ..      451      725      261
       Restructured loans ....................      931    1,031    4,035
                                                 ------   ------   ------
       Total non-performing loans ............   $3,258    4,879    8,795
                                                 ======   ======   ======

       Accumulated  interest  on the  above  non-performing  loans of  $276,848,
       $375,459  and  $876,524 was not  recognized  as income in 1997,  1996 and
       1995,  respectively.  Approximately  $192,000,  $229,000  and $482,000 of
       interest  on  restructured  and  non-accrual   loans  was  collected  and
       recognized as income in 1997, 1996 and 1995, respectively.

       At  December  31,  1997,  the  recorded  investment  in  loans  that  are
       considered  to  be  impaired  totaled  $769,095  for  which  the  related
       allowance for loan losses is $337,865.  At December 31, 1996 the recorded
       investment in loans that were  considered  to be impaired was  $2,638,780
       for which the related  allowance  for loan losses was  $1,182,838.  As of
       December  31, 1997 and 1996,  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, 1997,  1996 and 1995
       was approximately $1,445,000,  $6,918,000, and $4,106,000,  respectively.
       For the years  ended  December  31,  1997,  1996,  and 1995,  the Company
       recognized  interest income on those impaired loans of $14,768,  $110,470
       and  $61,278,  respectively,  which  included  $0,  $13,633  and  $2,787,
       respectively,  of interest income  recognized using the cash basis method
       of income recognition.

       Certain directors and executive officers of the Company were customers of
       and had other  transactions  with the Company in the  ordinary  course of
       business.  Loans to these  parties  were 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 approximately
       $1,021,308  and  $887,696  at December  31, 1997 and 1996,  respectively.
       There were $182,750 in advances to the  directors and executive  officers
       during the year ended  December 31, 1997.  Total  payments  made on these
       loans were $49,138 during the year ended December 31, 1997.

                                       38
<PAGE>
(6)    Accrued Interest Receivable

       Accrued interest receivable consists of the following:

                                                       December 31,
                                                     1997     1996
                                                      (In thousands)

       Loans ....................................   $1,347    1,260
       Securities available for sale ............    2,387    1,941
                                                    ------   ------
                                                    $3,734    3,201
                                                    ======   ======

(7)    Premises and Equipment

       A summary of premises and equipment is as follows:

                                                      December 31,
                                                     1997     1996
                                                     (In thousands)

       Banking house and land ...................   $2,362    2,362
       Leasehold improvements ...................    1,100      700
       Furniture, fixtures and equipment ........    3,737    3,114
       Construction in progress .................      --        80
                                                    ------   ------
                                                     7,199    6,256
       Less accumulated depreciation and
        amortization ...........................    (4,078)  (3,472)
                                                   -------   ------
                                                    $3,121    2,784
                                                   =======   ======

       Amounts  charged to  depreciation  expense  were  $605,933,  $500,833 and
       $438,057 for the years ended December 31, 1997, 1996 and 1995.


(8)    Deposits

       Deposits are summarized as follows:
                                                  December 31,
                                               1997       1996
                                                (In thousands)

       Regular savings accounts (3.00% at
        December 31, 1997 and 1996) ......  $ 97,591     99,569

       Certificates of deposit:
         3.01 to 4.00% ...................     1,011        994
         4.01 to 5.00% ...................     6,688     42,824
         5.01 to 6.00% ...................   154,377     88,042
         6.01 to 7.00% ...................    10,801     11,330
         7.01 to 8.00% ...................    10,455      8,742
                                            --------   --------
                                             183,332    151,932
                                            --------   --------
       Money market accounts (2.96% at
        December 31, 1997 and 2.86% at
        December 31, 1996) ..............      6,877      7,433
       NOW accounts (2.75% at December
        31, 1997 and 1996) ..............     22,718     18,875
       Demand accounts ..................     22,747     20,273
                                            --------   --------
        Total deposits...................   $333,265    298,082
                                            ========   ========

                                       39
<PAGE>
(8) Deposits, Continued

       The  approximate  amount of  contractual  maturities of  certificates  of
       deposit for the years subsequent to December 31, 1997 are as follows:
                                                            (In thousands)
                Years ended December 31,
                         1998                                   $ 139,103
                         1999                                      22,019
                         2000                                      16,163
                         2001                                       3,688
                         2002                                       2,359
                                                                ---------
                                                                $ 183,332
                                                                =========

       The  aggregate  amount of  certificates  of  deposits  with a balance  of
       $100,000 or more were  approximately  $17.9  million and $11.2 million at
       December 31, 1997 and 1996, respectively.

       Interest expense on deposits for the years ended December 31, 1997, 1996
       and 1995, is summarized as follows:
                                             1997      1996      1995
                                                   (In thousands)

       Regular savings accounts ........   $ 3,016     3,162     3,300
       Certificate of deposits .........     9,882     8,492     8,272
       NOW accounts ....................       543       527       511
       Money market accounts ...........       204       243       285
       Common stock subscriptions escrow       --        --         79
                                           -------   -------   -------
        Total interest expense ..........  $13,645    12,424    12,447
                                           =======   =======   =======


(9)    Borrowed Funds

       At December 31, 1997,  the Company had a $24.2 million  overnight line of
       credit  and a $24.2  million  30 day line of credit  with the FHLB of New
       York.  As of December  31,  1997 the  Company had taken $12.3  million in
       advances on these lines of credit.  At December 31, 1996, the Company had
       a $22.4 million  overnight line of credit and a $22.4 million 30 day line
       of credit with the FHLB.  As of  December  31, 1996 the Company had taken
       $6.0  million in advances on these lines of credit.  Under the terms of a
       blanket  collateral  agreement with the FHLB, these outstanding  balances
       are  collateralized  by certain  qualifying  assets not otherwise pledged
       (primarily first mortgage loans).

       The Company enters into sales of securities under repurchase  agreements.
       Such  agreements  are  treated  as  financings,  and the  obligations  to
       repurchase  securities sold are reflected as liabilities on the Company's
       consolidated statements of financial condition. During the period of such
       agreements,  the underlying  securities are  transferred to a third party
       custodian's account that explicitly  recognizes the Company's interest in
       the securities.


                                       40
<PAGE>
(9) Borrowed Funds, Continued

       The  following  sets forth certain  information  related to the Company's
       borrowings,  consisting  of  FHLB  advances  and  securities  sold  under
       agreements to repurchase:
                                                   December 31,
                                                 1997        1996
                                                  (In thousands)

       FHLB advances ......................   $ 12,300       6,000
       Securities sold under agreements to
        repurchase ........................     99,250     102,780
                                               -------    --------
       Total borrowings ...................   $111,550     108,780
                                              ========    ========

       Weighted average interest rate of
       FHLB advances ......................      6.38%       6.88%
                                              ========    ========

       Weighted average interest rate of
        securities sold under agreements to
        repurchase ........................      6.04%       5.96%
                                              ========    ========

       The following  table sets forth the  maturities of securities  sold under
       agreements to repurchase,  including the weighted average interest rates,
       and the fair value of the securities sold under the repurchase agreements
       as of December 31, 1997:
                                                         Weighted    Fair Value
                                             Repurchase   Average  of Securities
                                             Liability Interest Rate    Sold
                                                    (In thousands)

          Due after 30 days up to 90 days    $  2,600      5.91%     $  5,402
          Due after 91 days up to 365 days     53,650      6.21%       58,370
          Due after 365 days .............     43,000      5.84%       47,381
                                             --------      ----      --------
                                             $ 99,250      6.04%     $111,153
                                             ========      ====      ========

       The following table sets forth the maximum month-end balances and average
       balances  of FHLB  advances  and  securities  sold  under  agreements  to
       repurchase for the periods indicated.
                                                       Years Ended December 31,
                                                     1997       1996      1995
                                                           (In thousands)
         Maximum Month-end Balance:
          FHLB advances .....................   $   14,400     28,000    15,000
                                                ==========    =======    ======
          Securities sold under agreements
           to repurchase ....................       99,410    102,780     4,000
                                                ==========    =======    ======
          Average Balance:
          FHLB advances .....................        3,667      9,757     3,922
                                                ==========    =======    ======
          Securities sold under agreements
           to repurchase ....................       95,261     57,815       958
                                                ==========    =======    ======
          Weighted average interest rate of
           FHLB advances ....................         5.43%      5.35%     6.06%
                                                ==========    =======    ======
          Weighted average interest rate of
           securities sold under agreement to
           repurchase .......................         6.01%      5.94%     6.30%
                                                ==========    =======    ======


                                       41
<PAGE>
(10)   Income Taxes

       The components of income tax expense (benefit) are as follows:

                                                          December 31,
                                                  1997       1996        1995
                                                  ----       ----        ----
                                                         (In thousands)
         Current tax (benefit) expense:
           Federal ..........................   $ 1,735     (1,421)       955
           State ............................       270          1        208
                                                -------    -------    -------
                                                  2,005     (1,420)     1,163
          Deferred tax benefit ..............      (312)      (509)      (577)
                                                -------    -------    -------
           Total income tax expense (benefit)   $ 1,693     (1,929)       586
                                                =======    =======    =======

       Actual tax expense  (benefit) for the years ended December 31, 1997, 1996
       and 1995  differs  from  expected  tax  expense  (benefit),  computed  by
       applying the Federal  corporate tax rate of 34% to income before taxes as
       follows:
                                                         December 31,
                                                 1997       1996        1995
                                                 ----       ----        ----
                                                        (In thousands)

          Expected tax expense (benefit) ...   $ 1,514     (1,960)   $   491
          State taxes, net of Federal income
           tax benefit .....................       178          1        103
          Other items ......................         1         30         (8)
                                               -------    -------    -------
                                               $ 1,693     (1,929)   $   586
                                               =======    =======    =======

       The tax effects of temporary  differences  that give rise to  significant
       portions of the  deferred  tax assets and  deferred  tax  liabilities  at
       December 31, 1997 are presented below:

                                                      Temporary    Temporary
                                                      Deductible    Taxable
                                                     Differences  Differences
                                                         (In thousands)

          Reserves for loan losses ..................   $1,508        216
          Nonqualified deferred compensation ........      227        --
          Loan accounting differences ...............      409        --
          Property and equipment ....................      --         113
          Prepaid expenses ..........................      --         243
          Other items ...............................      113        --
                                                        ------     ------
                                                         2,257        572
                                                         =====     ======

          Deferred tax liability ....................      572
                                                        ------
          Net deferred tax asset at December 31, 1997    1,685
          Net deferred tax asset at January 1, 1997 .    1,373
                                                        ------
          Deferred tax benefit for the year ended
           December 31, 1997 ........................   $  312
                                                         ======

                                       42
<PAGE>
(10) Income Taxes, Continued

       The tax effects of temporary  differences  that give rise to  significant
       portions of the  deferred  tax assets and  deferred  tax  liabilities  at
       December 31, 1996 are presented below:

                                                      Temporary    Temporary
                                                      Deductible    Taxable
                                                     Differences  Differences
                                                         (In thousands)

          Reserves for loan losses ..................   $1,358         65
          Nonqualified deferred compensation ........      233        --
          Loan accounting differences ...............      236        --
          Property and equipment ....................      --         113
          Prepaid expenses ..........................      --         330
          Other items ...............................       54        --
                                                        ------     ------
                                                         1,881        508
                                                         =====     ======

          Deferred tax liability ....................      508
                                                        ------
          Net deferred tax asset at December 31, 1996    1,373
          Net deferred tax asset at January 1, 1996 .      864
                                                        ------
          Deferred tax benefit for the year ended
           December 31, 1996 ........................   $  509
                                                        ======

       In addition to the deferred tax items  described in the preceding  table,
       the Company also has a deferred tax asset of  approximately  $183,000 and
       $40,000 at  December  31,  1997 and 1996,  respectively,  relating to the
       unrealized loss on securities available for sale.

       There was no valuation allowance or change in the valuation allowance for
       deferred  tax assets as of and for the years ended  December 31, 1997 and
       1996.  Management  believes that the  realization  of the  recognized net
       deferred tax asset at December 31, 1997 and 1996 is more likely than not,
       based on historical  taxable income,  available tax planning  strategies,
       and expectations as to future taxable income.

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

                                       43
<PAGE>

(10) Income Taxes, Continued

       Certain  amendments to the Federal and New York State tax laws  regarding
       bad debt  deductions  were enacted in July and August  1996.  The Federal
       amendments include elimination of the percentage of taxable income method
       for tax years  beginning  after  December 31, 1995,  and  imposition of a
       requirement   to  recapture   into  taxable  income  (over  a  period  of
       approximately six years) the bad debt reserves in excess of the base-year
       amounts. The Bank previously established,  and will continue to maintain,
       a deferred tax liability  with respect to such excess  Federal  reserves.
       The New York  State  amendments  redesignate  the  Bank's  state bad debt
       reserves at December  31, 1995 as the  base-year  amount and also provide
       for future  additions to the base-year  reserve  using the  percentage of
       taxable income method.

       Deferred tax  liabilities  have not been  recognized  with respect to the
       Federal base-year  reserve of approximately  $3.3 million at December 31,
       1997 and the state  base-year  reserve of  approximately  $5.9 million at
       December 31, 1997, since the Bank does not expect that these amounts will
       become taxable in the foreseeable  future.  Under New York State tax law,
       as  amended,  events  that would  result in  taxation  of these  reserves
       include the failure of the Bank to maintain a specified qualifying assets
       ratio  or meet  other  thrift  definition  tests  for tax  purposes.  The
       unrecognized  deferred tax liability at December 31, 1997 with respect to
       the  Federal  base-year  reserve  was  approximately  $1.1  million.  The
       unrecognized  deferred tax liability at December 31, 1997 with respect to
       the state  base-year  reserve was  approximately  $350  thousand  (net of
       Federal benefit).


(11)   Employee Benefit Plans

       (a)    Pension Plan

              The Bank  maintains a  non-contributory  pension plan with the RSI
              Retirement Trust, covering substantially all employees aged 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 funds and fixed income funds.


                                       44
<PAGE>

(11) Employee Benefit Plans, Continued

              The  following  table  sets  forth the  plan's  funded  status and
              amounts  recognized  in the Company's  consolidated  statements of
              financial condition at December 31, 1997 and 1996:
<TABLE>
<CAPTION>

                                                                           1997       1996
                                                                            (In thousands)
<S>                                                                      <C>         <C>
              Actuarial present value of benefit obligations:
              Accumulated benefit obligation, including vested
               benefits of $3.7 million in 1997 and $3.1
               million in 1996 .......................................   $(3,805)    (3,324)
                                                                         =======    =======

              Projected benefit obligation ...........................    (4,508)    (4,060)
              Plan assets at fair value ..............................     5,994      5,130
                                                                         -------    -------
              Projected plan assets in excess of benefit obligation ..     1,486      1,070
              Unrecognized net gain ..................................      (806)      (301)
              Unrecognized prior service cost ........................        12         15
              Unrecognized net asset being recognized over 10.71 years       (85)      (132)
                                                                         -------    -------
              Prepaid pension cost ...................................   $   607        652
                                                                         =======    =======

              Net pension  costs  recognized in the  consolidated  statements of
              income for the years ended  December 31,  1997,  1996 and 1995 are
              Summarized as follows:

                                                                            1997       1996       1995
                                                                            ----       ----       ----
                                                                                  (In thousands)
              Components of net pension cost:
<S>                                                                     <C>            <C>        <C>
              Service cost - benefits earned during the period ......   $   183        187        141
              Interest cost on estimated projected benefit obligation       304        288        268
              Actual return on plan assets ...........................    (1,104)      (627)      (783)
              Net amortization and deferral ..........................       663        222        437
                                                                         -------    -------    -------
              Net pension cost .......................................   $    46         70         63
                                                                         =======    =======    =======
</TABLE>

              Significant  assumptions used in determining the actuarial present
              value of the projected benefit obligation are as follows:
                                                      1997    1996    1995
                                                      ----    ----    ----

              Weighted average discount rate ....     7.25%   7.50%   7.50%
              Increase in future compensation ...     5.00%   5.50%   5.50%
              Expected long term rate of return .     8.00%   8.00%   8.00%


                                       45
<PAGE>

(11) Employee Benefit Plans, Continued

       (b)    401(k) Savings Plan

              The Bank  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.  The Bank had  matched  50% of
              employee  contributions  that were less than or equal to 3% of the
              employee's salary. As of March 1, 1997, the Bank no longer matched
              employee  contributions.  Total expense recorded during 1997, 1996
              and 1995 was $5,321, $37,671 and $33,181, respectively.

       (c)    Employee Stock Ownership Plan

              As part of the  conversion  discussed in note 2, 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 the common  stock of the  Company
              issued in the conversion. The loan will be repaid principally from
              the  Company's  discretionary  contributions  to the  ESOP  over a
              period of ten years.  At December 31, 1997 and 1996,  the loan had
              an   outstanding   balance  of  $3.5  million  and  $3.9  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.

              The Company  accounts for the ESOP in accordance with the American
              Institute of Certified Public  Accountants'  Statement of Position
              No. 93-6  "Employees'  Accounting For Stock Ownership  Plans" (SOP
              93-6). 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 $766,000 of compensation expense under the
              ESOP during the year ended December 31, 1997 and recorded $527,000
              of compensation expense for the year ended December 31, 1996.

              The ESOP shares as of December 31, 1997 were as follows:

               Allocated shares .............    52,964
               Shares released for allocation    50,561
               Unallocated shares ...........   330,255
                                                -------
                                                433,780
                                                =======
               Market value of unallocated
                shares at December 31, 1997  $6,192,281
                                             ==========


                                       46
<PAGE>

(11) Employee Benefit Plans, Continued

       (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
              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 shares have a ten-year term and vest at a
              rate of 25% per year from their respective grant dates. No options
              were  exercised,  cancelled  or  forfeited  during  the year ended
              December 31, 1997.  As of December 31, 1997 no options were vested
              and the weighted average remaining contractual life of the options
              was approximately 9.6 years.

              The Company applies APB Opinion No. 25 and related Interpretations
              in  accounting  for  its  Stock  Option  Plan.   Accordingly,   no
              compensation  cost has been  recognized for the Stock Option Plan.
              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 1997:  dividend
              yield of 1.32%;  expected volatility of 40.90%; risk free interest
              rate of 5.48% and expected  lives of 5 years.  The estimated  fair
              value of the options granted in 1997 was $5.30.

              Pro-forma  disclosures for the Company for the year ended December
              31, 1997 are as follows:

              (in thousands, except per share data)

              Net Income:
              As reported                                        $    2,760
              Pro-forma                                               2,578

              Earnings per Share:
              Basic EPS as reported                              $     0.70
              Pro-forma                                                0.65
              Diluted EPS as reported                                  0.69
              Pro-forma                                                0.65


                                       47
<PAGE>
(11) Employee Benefit Plans, Continued

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

              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 models,  in management's  opinion,  do not
              necessarily provide a reliable single measure of the fair value of
              its employee stock options.

       (e)    Recognition and Retention Plan

              On May 23, 1997,  the Company's  shareholders  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 was $1.8  million  at the  grant  date and is being
              amortized to  compensation  expense on a straight  line basis over
              the four year vesting period. Compensation expense of $272,000 was
              recorded during 1997 with the remaining unearned compensation cost
              of $1.5 million  shown as a reduction of  shareholder's  equity at
              December 31, 1997.

       (f)    Post Retirement  Benefits

              Certain   postretirement   health  insurance  benefits  have  been
              committed  to a closed  group of  eleven  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% and 8.5%, respectively. There are no plan assets. The estimated
              transition  obligation  at January 1, 1995 was  $260,000.  The net
              periodic  post retirement benefit costs in both 1997 and 1996 were
              approximately $26,000.

       (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 to fund the benefits on
              each  director  with  the Bank  listed  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 is included in other  liabilities  in the  consolidated
              balance  sheets.  The cash  surrender  value of the life insurance
              policies is included in other assets in the  consolidated  balance
              sheets.


                                       48
<PAGE>

(12)   Earnings Per Share

       Calculation of basic earnings per share (basic EPS) and diluted  earnings
       per share (diluted EPS) is as follows:
<TABLE>
<CAPTION>

                                                                       Weighted
                                                           Net         Average    Per Share
                                                      Income (loss)    Shares       Amount

                                                 (In thousands, except share and per share data)
                                                        For Year Ended December 31, 1997

       Basic EPS
<S>                                                   <C>            <C>            <C>
            Income available to common shareholders   $   2,760      3,940,867      0.70

          Effect of Dilutive Securities
            Stock Options .........................                     24,285
            RRP shares ............................                     16,374

          Diluted EPS
            Income available to common shareholders
             plus assumed conversions .............       2,760      3,981,526      0.69
                                                      =========      =========      ====

          For Year Ended December 31, 1996

          Basic EPS
            Income available to common shareholders   $  (3,836)     4,761,393     (0.81)

          Effect of Dilutive Securities
            No dilutive securities during 1996

          Diluted EPS
            Income available to common shareholders      (3,836)     4,761,393     (0.81)
                                                      =========      =========      ====
</TABLE>

       The Bank converted from a mutual form to a stock  institution in December
       1995, and the Holding  Company  completed its initial public  offering on
       December 26, 1995, at which time the Holding Company purchased all of the
       outstanding  stock of the Bank.  The  Company did not report EPS for 1995
       and therefore it is excluded from this footnote.


(13)   Commitments and Contingent Liabilities

       (a)    Legal Proceedings

              The  Company  and its  subsidiaries  may,  from  time to time,  be
              defendants in legal  proceedings  relating to the conduct of their
              business.  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.


                                       49
<PAGE>
(13) Commitments and Contingent Liabilities, Continued

               The Bank was a  defendant  in an  action  by the  current  owners
               of  F. H. Doherty Associates,  Inc. (the Bank  sold F. H. Doherty
               Associates, Inc. to the  current owners), seeking to  rescind the
               sale of stock, recover any additional capital contributions  made
               by the plaintiffs, punitive damages in the amount of  $1,000,000,
               and indemnification on a potential claim in the amount of $67,500
               resulting from a subsequent transfer of a portion of the stock by
               plaintiffs to a third party.  During 1996, the Bank stipulated to
               a settlement and  agreed to pay $262,500 to the  plaintiffs.  The
               Bank  charged $175,000  against  the allowance  for probable loss
               which  was  established for this  matter  in 1995. The  remaining
               $87,500 was charged to 1996 operations.

       (b)    Nationar Receivables

              On February 6, 1995, the  Superintendent of Banks for the State of
              New York ("Superintendent")  seized Nationar, a check-clearing and
              trust company,  freezing all of Nationar's  assets.  On that date,
              the Bank had: a demand account balance of $233,000, and a Nationar
              debenture of $100,000  collateralized  by a $1,000,000  investment
              security.  On  September  26,  1995,  the Company  entered  into a
              standby  letter of credit with the  superintendent  for $1,086,250
              which  replaced  the  $1,000,000  security  that  was  pledged  as
              collateral  for the capital  debenture  bonds.  As of December 31,
              1995, the Company  charged off the Nationar  debenture of $100,000
              and  established  an additional  reserve of $105,000 for potential
              losses of the demand  account and potential  losses related to the
              stand by letter of credit.

              During 1996 the Company  received a cash payment of $233,000  from
              the Superintendent relating to its Nationar claim. In addition, on
              June 10,  1996 the Company  issued a new standby  letter of credit
              for $150,000 to the Superintendent, and the initial standby letter
              of credit was canceled.  Concurrent with the new standby letter of
              credit, the Company was required to pay $58,000 under the original
              standby  letter of  credit  agreement.  This  amount  was  charged
              against  the  reserve  the  Company  had  previously  established.
              Subsequently,  the  Company was  informed by the  Superintendent's
              Office that the $150,000 standby letter of credit was canceled and
              that the Company will have no further liability in connection with
              its  agreement  with the  Superintendent.  During  1997,  the Bank
              received approximately $45,000 from the Superintendent of Banks as
              a partial  recovery of the amounts  previously  charged off and is
              included in Other Income.

       (c)    Lease Commitments

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

                Years ended December 31,
                                                     (In thousands)

                         1998                          $   330
                         1999                              266
                         2000                              212
                         2001                              182
                         2002                              128
                         2003 and thereafter             1,010
                                                       -------
                                                       $ 2,128
                                                       =======


                                       50
<PAGE>

(13) Commitments and Contingent Liabilities, Continued

              Amounts  charged  to rent  expense  were  approximately  $315,000,
              $225,000 and $203,000 for the years ended December 31, 1997,  1996
              and 1995.

       (d)    Off-Balance Sheet Financing 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  amount
              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.


                                       51
<PAGE>
(13) Commitments and Contingent Liabilities, Continued

              Contract  amounts of  financial  instruments  that  represent  the
              future  extension  of credit as of  December  31, 1997 and 1996 at
              fixed and variable interest rates are as follows:


                                                                1997
                                                      Fixed   Variable   Total
                                                            (In thousands)
                  Financial instruments whose
                   contract amounts represent
                   Credit risk:
                       Commitments to extend credit   $3,797      393    4,190
                       Unused lines of credit .....    1,025    4,336    5,361
                       Standby letters of credit ..     --        100      100
                                                      ------   ------   ------
                                                      $4,822    4,829    9,651
                                                      ======   ======   ======

                                                                 1996
                                                       Fixed   Variable  Total
                                                            (In thousands)
                  Financial instruments whose
                   contract amounts represent
                   Credit risk:
                       Commitments to extend credit   $1,076      826    1,902
                       Unused lines of credit .....      914    4,981    5,895
                       Standby letters of credit ..     --        100      100
                                                      ------   ------   ------
                                                      $1,990    5,907    7,897
                                                      ======   ======   ======

              The range of interest on fixed rate commitments was 5.50% to 8.75%
              at December 31, 1997 and 7.0% to 8.5% at December  31,  1996.  The
              range of  interest on  adjustable  rate  commitments  was 6.75% to
              7.25%  and  5.5%  to  9.75%  at   December   31,  1997  and  1996,
              respectively.


(14)   Fair Values

       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.

                                       52
<PAGE>
(14) Fair Values, Continued

       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 asset and property,  plant,  and  equipment.  In
       addition,  the  tax  ramifications  related  to  the  realization  of the
       unrealized  gains and losses can have a significant  effect on fair value
       estimates and have not been considered in the estimates of fair value. In
       addition  there are  significant  intangible  assets  that the fair value
       estimates do not  recognize,  such as the value of "core  deposits,"  the
       Company's  branch  network  and  other  items  generally  referred  to as
       "goodwill."

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

           Securities Available for Sale

           The carrying  amounts for  short-term  investments  approximate  fair
           value  because  they  mature  in 90 days or less  and do not  present
           unanticipated   credit  concerns.   The  fair  value  of  longer-term
           investments and mortgage-backed 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.  See note 4 for detail
           disclosure of securities available for sale.

           Loans

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

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


                                       53
<PAGE>


(14) Fair Values, Continued

           Deposit Liabilities

           The  fair  value  of  deposits  with  no  stated  maturity,  such  as
           non-interest bearing demand deposits, passbook accounts, NOW accounts
           and money  market  accounts  must be stated at the amount  payable on
           demand.  The fair  value of  certificates  of deposit is based on the
           discounted  value of  contractual  cash flows.  The discount  rate is
           estimated using the rates  currently  offered for deposits of similar
           remaining maturities.

           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.

           Borrowed Funds

           The fair  value of  borrowed  funds  due in 90 days or less,  or that
           reprice in 90 days or less is estimated to  approximate  the carrying
           amounts. The fair value of longer term borrowed funds 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 book
           value due to the nature of the  financial  instrument  and the period
           within which it will be settled or repriced: cash and due from banks,
           federal funds sold, accrued interest receivable, investments required
           by  law,  due to  broker,  advances  from  borrowers  for  taxes  and
           insurance, and accrued interest payable.


                                       54
<PAGE>

(14) Fair Values, Continued

       Table of Financial Instruments

       The carrying values and estimated fair values of financial instruments as
       of December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>

                                                           December 31, 1997       December 31, 1996
                                                      -----------------------   ----------------------
                                                                    Estimated                Estimated
                                                       Carrying       Fair      Carrying       Fair
                                                         Value        Value       Value        Value
                                                                        (in thousands)
         Financial assets:
<S>                                                   <C>             <C>         <C>          <C>
                    Cash and cash equivalents .....   $  10,225       10,225      10,887       10,887
                    Securities available for sale .     205,842      205,842     200,539      200,539
                    Federal Home Loan Bank of
                     New York stock ...............       3,291        3,291       2,029        2,029
                    Loans .........................     284,930      280,765     251,532      249,665
                    Less: Allowance for loan losses      (3,807)        --        (3,438)        --
                                                      ---------    ---------   ---------    ---------
                            Net loans .............     281,123      280,765     248,094      249,665
                    Accrued interest receivable ...       3,734        3,734       3,201        3,201

               Financial liabilities:
                    Deposits:
                        Demand, passbook, money
                         market, and NOW accounts .     149,933      149,933     146,150      146,150
                        Certificates of deposit ...     183,332      184,208     151,932      152,797
                    Borrowed funds ................     111,550      111,006     108,780      108,806
                    Accrued interest payable ......         819          819       1,077        1,077
                    Advances from borrowers
                     for tax and insurance ........       1,902        1,902       1,703        1,703
</TABLE>

       Commitments to Extend Credit and Standby Letters of Credit

       The fair value of  commitments  to extend  credit is estimated  using the
       fees  currently  charged to enter into  similar  agreements,  taking into
       account the  remaining  terms of the  agreements  and the present  credit
       worthiness of the counterparties.  For fixed rate loan commitments,  fair
       value also  considers the difference  between  current levels of interest
       rates and the  committed  rates.  The fair  value of  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.  Fees, such as these are not a major part of the
       Company's  business and in the  Company's  business  territory  are not a
       "normal  business  practice."  Therefore,  based upon the above facts the
       Company  believes  that book value  equals fair value and the amounts are
       not significant.


                                       55
<PAGE>

(15)   Regulatory Capital Requirements

       OTS capital regulations require savings  institutions to maintain minimum
       levels of regulatory capital. Under the regulations in effect at December
       31, 1997,  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, 1997 and 1996,  the Bank
       meets all capital adequacy requirements to which it is 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.

                                       56
<PAGE>

(15) Capital Requirements, Continued

       The  following  is a summary of the Bank's  actual  capital  amounts  and
       ratios  as of  December  31,  1997 and  1996.  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.
<TABLE>
<CAPTION>

                                             December 31, 1997         December 31, 1996
                                                  Actual                    Actual
                                             Amount     Ratio         Amount      Ratio
<S>                                     <C>              <C>          <C>         <C>
             Bank
              Tangible capital          $    49,722      9.88%        46,225      10.08%
              Tier 1 (core) capital          49,722      9.88         46,225      10.08
              Risk-based capital:
                Tier 1                       49,722     23.42         46,225      23.35
                Total                        52,390     24.68         48,712      24.61

                                                  Actual                    Actual
                                             Amount     Ratio         Amount      Ratio
              Consolidated
              Tangible capital          $    61,476     11.99%        61,598      13.04%
              Tier 1 (core) capital          61,476     11.99         61,598      13.04
              Risk-based capital:
                Tier 1                       61,476     28.79         61,598      30.66
                Total                        64,159     30.04         64,098      31.90


</TABLE>

                                       57
<PAGE>

(16)   Holding Company Financial Information

       The Holding Company began  operations on December 26, 1995 in conjunction
       with the Bank's  mutual-to-stock  conversion  and the  Company's  initial
       public offering of its common stock. The Holding Company's  statements of
       financial  condition  as of  December  31,  1997  and  1996  and  related
       statements  of income and cash  flows for the years  ended  December  31,
       1997,  1996 and for the period  from  inception  (December  26,  1995) to
       December 31, 1995 are as follows  (the  Holding  Company did not have any
       income or expenses for the period from  December 26, 1995 to December 31,
       1995):

                        Statements of Financial Condition

                                                                 At December 31,
                                                                 1997      1996
                                                                 (in thousands)
                                      Assets

            Cash and cash equivalents ......................   $ 1,046       469
            Securities available for sale* .................     9,400    13,956
            Loan receivable from subsidiary ................     3,470     3,904
            Accrued interest receivable ....................       115       163
            Investment in subsidiary .......................    49,467    46,312
            Other assets ...................................       335        85


                     Total assets ..........................   $63,833    64,889
                                                               =======   =======

                 Liabilities and Shareholders' Equity

            Liabilities:
                 Security sold under agreement to
                  repurchase**.............................    $ 2,600     3,000
                 Other liabilities ........................         30       371
                                                               -------   -------

            Shareholders' Equity ..........................     61,203    61,518
                                                               -------   -------

                     Total liabilities and
                      shareholders' equity ..................  $63,833    64,889
                                                               =======   =======


       *   The Holding Company's  securities  available for sale consist of U.S.
           Government  Agency and  mortgage  backed  securities  with a weighted
           average  maturity of 3.0 years and 5.0 years at December 31, 1997 and
           1996, respectively.

       **  Weighted  average rate at  December 31, 1997  and 1996  is 5.91%  and
           5.60% with a maturity  date of February 20, 1998  and March 26, 1997,
           respectively.

                                       58
<PAGE>


(16) Holding Company Financial Information, Continued

                                                          Statements of Income

                                                        Years ended December 31,
                                                         1997     1996     1995
                                                              (in thousands)

            Interest income ........................   $  868    1,128      --
            Interest expense .......................      170        2      --
                                                       ------   ------    ------
                 Net interest income ...............      698    1,126      --

            Non interest expense ...................      646      309      --
                                                       ------   ------    ------

            Income before income taxes and
             equity in undistributed earnings (loss)
             of subsidiary .........................       52      817      --
                                                       ------   ------    ------

            Income tax expense .....................       21      328      --
                                                       ------   ------    ------

            Income before equity in undistributed
             earnings (loss) of subsidiary .........       31      489      --
            Equity in undistributed (loss) earnings
             of subsidiary .........................    2,729   (4,325)      857
                                                       ------   ------    ------

            Net income (loss) ......................   $2,760   (3,836)      857
                                                       ======   ======    ======

                                       59
<PAGE>
(16) Holding Company Financial Information, Continued
<TABLE>
<CAPTION>

                                                            Statements of Cash Flows

                                                                             Years ended December 31,
                                                                           1997        1996         1995
                                                                                  (in thousands)
           Cash flows from operating activities:
<S>                                                                     <C>           <C>            <C>
                      Net income (loss) .............................   $  2,760      (3,836)        857
                      Adjustment to reconcile net income
                       (loss) to net cash (used by) provided
                       by operating activities:
                          Equity in undistributed loss
                           (earnings) of subsidiary .................     (2,729)      4,325        (857)
                          Net loss on sale and redemptions
                           of securities available for sale .........        153        --          --
                          RRP expense ...............................        272        --          --
                          (Decrease) increase in other
                           liabilities ..............................       (341)        371        --
                          Increase in accrued interest
                           receivable and other assets ..............       (274)       (163)       --
                                                                        --------    --------    --------
                                 Net cash (used by) provided by
                                  operating activities ..............       (159)        697        --
                                                                        --------    --------    --------

                 Cash flows from investing activities:
                      Decrease (increase) in loans receivable
                       from subsidiary ..............................        434         434      (4,338)
                      Investment in common stock of subsidiary ......       --          --       (26,090)
                      Purchases of securities available for sale ....    (11,052)    (19,985)       --
                      Proceeds from principal paydowns and
                       maturities of securities available for sale ..      8,159       3,984        --
                      Proceeds from sales of available for sale
                       securities ...................................      7,515       1,795        --
                                                                        --------    --------    --------
                                 Net cash provided by (used in)
                                  investing activities ..............      5,056     (13,772)    (30,428)
                                                                        --------    --------    --------

                 Cash flows from financing activities:
                      Net (decrease) increase in borrowed funds .....       (400)      3,000        --
                      Net proceeds from issuance of common stock ....       --          --        52,180
                      Dividends paid ................................       (432)       --          --
                      Purchase of treasury shares ...................     (3,488)    (11,208)       --
                                                                        --------    --------    --------
                                 Net cash provided by (used in)
                                  financing activities ..............     (4,320)     (8,208)     52,180
                                                                        --------    --------    --------

                 Net increase (decrease) in cash and cash equivalents        577     (21,283)     21,752

                 Cash and cash equivalents:
                      Beginning of period ...........................        469      21,752        --
                                                                        --------    --------    --------
                      End of period .................................   $  1,046         469      21,752
                                                                        ========    ========    ========

       These  financial  statements  should  be read  in  conjunction  with  the
       Company's consolidated financial statements and notes thereto.
</TABLE>


                                       60
<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 1996 and 1997. 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.

                      High       Low                           High         Low
1996 First Quarter   10.500     9.375    1997 First Quarter   14.875      11.125
1996 Second Quarter  10.000     9.375    1997 Second Quarter  10.000      12.500
1996 Third Quarter   10.625     9.500    1997 Third Quarter   16.625      15.125
1996 Fourth Quarter  11.750    10.000    1997 Fourth Quarter  19.750      15.375

For information regarding  restriction on dividends,  see Note 2 to the Notes to
Consolidated Financial Statements.

As of March 27, 1998, the Company had approximately 1,119 shareholders of record
and 4,258,148 outstanding shares of Common Stock.


Special Counsel

                  Silver, Freedman & Taff, L.L.P.
                  1100 New York Avenue, N.W.
                  Washington, D.C. 20005-3934
                  Telephone:  (202) 414-6100


                                       61(a)
<PAGE>
Investor Relations


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

                  Harold A. Baylor, Jr., CFO
                  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, 1997 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 22, 1998 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

                                       61(b)
<PAGE>

Amsterdam Savings Bank, FSB Offices

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

Amsterdam               Route 30N
                        Amsterdam, N.Y. 12010

                        Price Chopper Supermarket
                        Sanford Farms Plaza
                        Amsterdam, N.Y. 12010

Ballston Spa            Grand Union Plaza, Rte. 50
                        Ballston Spa, N.Y.  12020

Clifton Park            Village Plaza
                        Clifton Park, N.Y.  12065

Fort Plain              19 River Street
                        Fort Plain, N.Y. 13339

Gloversville            Arterial at Fifth Avenue
                        Gloversville, N.Y. 12078

Latham                  Price Chopper Supermarket
                        873 New Loudon Road
                        Latham, N.Y.  12110

Schenectady             Price Chopper Supermarket
                        1640 Eastern Parkway
                        Schenectady, N.Y.  12309

Saratoga                Price Chopper Supermarket
                        115 Ballston Avenue
                        Saratoga Springs, N.Y. 12866

Guilderland             5 New Karner Road
                        Guilderland, N.Y. 12084

Wilton                  Price Chopper Supermarket
                        Route 50
                        Saratoga Springs, N.Y. 12866

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




                                      62(a)
<PAGE>




DIRECTORS AND OFFICERS


Board of Directors
------------------
(Ambanc Holding Co., Inc. and                                     Year appointed
 Amsterdam Savings Bank, FSB)                                      to Bank Board

Paul W. Baker, Chairman of the Board                                    1963
Robert J. Brittain, President and Chief Executive Officer               1988
Lauren T. Barnett, Barnett Agency, Inc.                                 1966
John J. Daly, Alpin Haus                                                1988
Robert J. Dunning D.D.S., Dentist                                       1972
Lionel H. Fallows, Retired, Lieutenant Colonel                          1981
Marvin R.  LeRoy, Jr., Alzheimers Association, Northeastern NY Chapter  1996
Charles S. Pedersen, Independent Manufacturers' Representative          1977
Carl A. Schmidt, Jr., Sofco, Inc.                                       1974
William A. Wilde, Jr., Amsterdam Printing and Litho Corp.               1966


Executive Officers of Ambanc Holding Co., Inc.
----------------------------------------------

Robert J. Brittain              President/Chief Executive Officer
Harold A. Baylor, Jr.           Vice President/Treasurer/Chief Financial Officer
Robert Kelly                    Vice President/General Counsel/Secretary


Executive Officers of Amsterdam Savings Bank, FSB
-------------------------------------------------

Robert J. Brittain              President/Chief Executive Officer
Harold A. Baylor, Jr.           Vice President/Treasurer/Chief Financial Officer
Robert Kelly                    Vice President/General Counsel/Secretary
Nancy S. Virkler                Vice President of Operations
Richard C. Edel                 Vice President
Cynthia M. Proper               Vice President/Director of Lending


                                      62(b)
<PAGE>