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

                                    FORM 10-K

[X] ANNUAL  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
    ACT OF 1934
            For the fiscal year ended December 31, 1996
                                       OR
[ ] TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d) OF THE  SECURITIES
    EXCHANGE ACT OF 1934 
    For the transition period from___________________ to ______________________
            Commission file number: 0-27036

                            AMBANC HOLDING CO., INC.
______________________________________________________________________________
             (Exact name of registrant as specified in its charter)

            Delaware                                  14-1783770
_____________________________________     _____________________________________
  (State or other jurisdiction of         (I.R.S. Employer Identification No.)
    incorporation or organization)

11 Division Street, Amsterdam, New York                          12010-4303
_______________________________________________________________________________
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code:       (518)842-7200
                                                    ___________________________

         Securities Registered Pursuant to Section 12(b) of the Act:
                                      None
         Securities Registered Pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value
                                (Title of class)

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
requirements for the past 90 days. YES X . NO __.

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     The aggregate  market value of the voting stock held by  non-affiliates  of
the  registrant,  computed  by  reference  to the average of the closing bid and
asked prices of such stock on the Nasdaq  National  Market as of April 11, 1997,
was  $57,539,688.  (The  exclusion  from such amount of the market  value of the
shares owned by any person  shall not be deemed an  admission by the  registrant
that such person is an affiliate of the registrant.)

      As of April 11,  1997, there were issued and outstanding  4,392,023 shares
of the Registrant's Common Stock.
<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE


      Parts  II  and IV of  Form  10-K  -  Portions  of  the  Annual  Report  to
Stockholders for the year ended December 31, 1996.


      Part III of Form 10-K -  Portions  of the Proxy  Statement  for the Annual
Meeting of Stockholders for the year ended December 31, 1996.

                                     PART I


Item 1.  Description of Business


General


     Ambanc  Holding  Co.,  Inc.  (the  "Company")  was  formed  as  a  Delaware
corporation  in June 1995 to act as the holding  company for  Amsterdam  Savings
Bank, FSB (the "Bank") upon the completion of the Bank's  conversion from mutual
to stock form (the "Conversion").  The Company received approval from the Office
of Thrift Supervision (the "OTS") to acquire all of the common stock of the Bank
to be  outstanding  upon  completion  of  the  Conversion.  The  Conversion  was
completed on December 26, 1995. The Company's  Common Stock trades on The Nasdaq
Stock Market under the symbol  "AHCI".  All  references  to the Company,  unless
otherwise indicated, at or before December 26, 1995 refer to the Bank.



      At  December  31,  1996,  the  Company  had $ 472.4  million of assets and
stockholders' equity of $61.5 million (or 13.0%) of total assets.


     The  Bank,  organized  in  1886,  is a  federally  chartered  savings  bank
headquartered  in  Amsterdam,  New  York.  The  principal  business  of the Bank
consists of attracting  retail  deposits from the general public and using those
funds,  together with borrowings and other funds, to originate primarily one- to
four-family  residential  mortgage loans,  home equity loans and consumer loans,
and to a lesser extent,  commercial and multi-family real estate, and commercial
business loans in the Bank's  primary market area. See "-Market  Area." The Bank
also  invests  in  mortgage-backed   securities,   U.S.  Government  and  agency
obligations and other  permissible  investments.  Revenues are derived primarily
from interest on loans, mortgage-backed and related securities and investments.


     The Bank  offers a  variety  of  deposit  accounts  having a wide  range of
interest  rates and terms.  The Bank is a member of the Bank Insurance Fund (the
"BIF"), which is administered by the Federal Deposit Insurance  Corporation (the
"FDIC").  Its deposits are insured up to  applicable  limits by the FDIC,  which
insurance  is  backed  by  the  full  faith  and  credit  of the  United  States
Government.  The Bank primarily solicits deposits in its primary market area and
currently does not have brokered  deposits.  The Bank is a member of the Federal
Home Loan Bank (the "FHLB") System.


      The  Company's and the Bank's  executive  office is located at 11 Division
Street,  Amsterdam,  New York,  12010-4303,  and its  telephone  number is (518)
842-7200.
<PAGE>

     When used in this annual  Report on Form 10-K,  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 Company's  financial  performance  and
could cause the Company's actual results for future periods to differ materially
from any opinions or statements  expressed with respect to future periods in any
current statements.


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


Market Area


      The  Company's  primary  market  area  is  comprised  of  Albany,  Fulton,
Montgomery,  Saratoga and Schenectady  Counties in New York,  which are serviced
through the Bank's main office,  eight other banking  offices and its operations
center.  The Company's primary market area consists  principally of suburban and
rural communities with manufacturing  serving as the basis of the local economy.
Trade,  service  and  government  related  industries  comprise  the other major
components of the Company's primary market area economy.


     Consistent with the trend throughout the United States,  the service sector
has been  increasing  as a  percentage  of the total  employment  in the  Bank's
primary  market  area with  State and local  government  accounting  for a large
percentage of such employment.  The manufacturing  sector of the economy is very
diverse,  with a large  majority  of the  manufacturers  having  fewer  than 200
employees. Employers in Montgomery County include St. Mary's Hospital, Amsterdam
Memorial Hospital, Amsterdam Printing and Litho Corp., Hasbro, Inc. and Kasson &
Keller/Keymark. 


     Montgomery County,  where the main office of the Company is located, is the
least populated county in the Company's primary market area with a population of
approximately  52,600. Albany County, where the Bank opened a new branch, is the
most  populated  county  in the  Company's  market  area  with a  population  of
approximately 293,700. The unemployment rate in Montgomery County as of December
1996 was 6.9%, down from 7.0% as of October 1995; the unemployment  rate for New
York State was 5.9%, down from 6.0% as of the same dates.

<PAGE>

Lending Activities


      General


     The  Company  primarily  originates  fixed- and  adjustable  rate,  one- to
four-family  mortgage  loans.  The  Company's  general  policy  is to  originate
mortgages with terms between 15 and 30 years for retention in its portfolio. The
Company also originates  fixed and adjustable  rate consumer  loans.  Adjustable
rate mortgage ("ARM"), home equity and consumer loans are originated in order to
maintain loans with more frequent terms to repricing or shorter  maturities than
fixed-rate,   one-  to  four-family   mortgage  loans.  See  "-  Loan  Portfolio
Composition"  and "- One- to Four-Family  Residential  Real Estate  Lending." In
addition,  the Company  originates  commercial  and  multi-family  real  estate,
construction and commercial business loans in its primary market area; although,
the originations of these types of loans has recently been  de-emphasized by the
Bank.  Beginning in 1997 the Company will initiate an FHA loan program primarily
directed at  low-to-moderate  income  borrowers with terms up to 30 years.  Loan
originations  are generated by the Company's  marketing  efforts,  which include
print and radio advertising,  lobby displays and direct contact with local civic
and  religious  organizations,  as well as by the Company's  present  customers,
walk-in  customers and referrals from real estate agents,  brokers and builders.
At December 31, 1996, the Company's net loan portfolio totaled $248.1 million.


     Loan  applications are initially  considered and approved at various levels
of authority, depending on the type, amount and loan-to-value ratio of the loan.
Bank employees with lending  authority are  designated,  and their lending limit
authority  defined,  by the Board of Directors of the Bank.  The approval of the
Bank's Board of Directors is required for any loan  relationship that includes a
commercial real estate or commercial  business loan whose  aggregate  borrowings
exceed $250,000, and for all other loan relationships whose aggregate borrowings
exceed $500,000.  The Bank also has an Officer/Director Loan Committee which has
authority to approve loans between  $250,000 and $500,000 and meets as needed to
approve loans between Board meetings.


      The  aggregate  amount of loans that the Bank is  permitted  to make under
applicable federal regulations to any one borrower,  including related entities,
or the aggregate amount that the Bank could have invested in any one real estate
project is  generally  the greater of 15% of  unimpaired  capital and surplus or
$500,000.  See  "Regulation - Federal  Regulation of Savings  Associations."  At
December  31, 1996,  the maximum  amount which the Bank could have loaned to any
one borrower and the borrower's related entities was approximately $6.9 million.
At such  date,  the Bank did not have any loans or  series  of loans to  related
borrowers with an outstanding balance in excess of this amount.


     At December 31, 1996, the Company's  largest lending  relationship  totaled
$1.9 million (net of $1.7  million  charged off in 1996) and  consisted of eight
loans secured by various  office  equipment and the  equipment  lease  contracts
between the borrower and its lessees. These loans were in default as of December
31,  1996 as a result of a  bankruptcy  filing on March 29,  1996.  For  further
discussion,  see "Asset Quality - Non-Performing Assets" herein, and "Management
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations":
contained in the Company's  Annual  Report to  Stockholders  attached  hereto as
Exhibit 13 ("Annual Report").
<PAGE>

     The next three largest lending relationships at December 31, 1996 consisted
of a $1.3  million  loan  secured by a motel,  a $1.2  million loan secured by a
strip shopping center, and a $1.1 million loan secured by a day treatment center
for mentally retarded and developmentally disabled individuals.  At December 31,
1996, there were only three other loans or lending  relationships equal to or in
excess of $1 million.  All of the  foregoing  loans were current at December 31,
1996.

<PAGE>

      Loan  Portfolio  Composition.


     The following table presents information  concerning the composition of the
Company's loan portfolio in dollar amounts and in percentages (before deductions
for  deferred  fees and  discounts  and  allowances  for losses) as of the dates
indicated.


<TABLE>
<CAPTION>

                                                                                December 31,
                                       --------------------------------------------------------------------------------------------
                                             1996               1995               1994               1993               1992
                                        Amount  Percent    Amount  Percent    Amount  Percent    Amount  Percent    Amount  Percent
                                       --------  ------   --------  ------   --------  ------   -------  -------   -------  ------
                                                                          (Dollars in Thousands)
<S>                                    <C>        <C>     <C>        <C>     <C>        <C>     <C>        <C>     <C>       <C>
Real Estate Loans:
     One- to four-family               $158,182   63.15%  $133,468   53.20%  $140,418   53.63% $116,441    52.18% $136,554   55.22%
     Home Equity                         22,817    9.11     17,519    6.98     16,715    6.39    16,135     7.23    15,777    6.38
     Multi Family                         4,724    1.88      8,176    3.26      8,718    3.33    10,978     4.92    10,499    4.25
     Commercial                          29,947   11.96     41,929   16.71     46,736   17.85    51,528    23.09    58,674   23.72
     Construction                         2,234    0.89      1,073    0.43      4,809    1.84       812     0.36     2,280    0.92
                                       --------  ------   --------  ------   --------  ------   -------  -------   -------  ------
        Total Real Estate               217,904   86.99    202,165   80.58    217,396   83.04   195,894    87.78   223,784   90.49
                                       --------  ------   --------  ------   --------  ------   -------  -------   -------  ------
Other Loans:
 Consumer Loans
     Auto Loans                          12,417    4.96      9,337    3.72     4,765     1.82     1,147     0.52     1,362    0.55
     Recreational Vehicles                9,416    3.76     12,881    5.13    12,352     4.72     7,908     3.54     6,949    2.81
     Manufactured Homes                     620    0.25     13,484    5.37    15,161     5.79     5,751     2.58     1,616    0.66
     Other Secured                        1,866    0.74      2,020    0.81     2,065     0.79     3,867     1.73     3,793    1.53
     Unsecured                            1,445    0.58      1,299    0.52     1,398     0.53     1,499     0.67     1,564    0.63
                                       --------  ------   --------  ------   --------  ------   -------  -------   -------  ------
        Total Consumer Loans             25,764   10.29     39,021   15.55    35,741    13.65    20,172     9.04    15,284    6.18
                                       --------  ------   --------  ------   --------  ------   -------  -------   -------  ------
Commercial Business Loans:
     Secured                              6,199    2.47      9,346    3.73     8,332     3.18     6,810     3.05     7,857    3.18
     Unsecured                              620    0.25        350    0.14       339     0.13       279     0.13       379    0.15
                                       --------  ------   --------  ------   --------  ------   -------  -------   -------  ------
        Total Commercial
        Business Loans                    6,819    2.72      9,696    3.87     8,671     3.31     7,089     3.18     8,236    3.33
                                       --------  ------   --------  ------   --------  ------   -------  -------   -------  ------
Total Loan Portfolio, Gross             250,487  100.00%   250,882  100.00%  261,808   100.00%  223,155   100.00%  247,304  100.00%
                                                 ======             ======              ======             ======            ======
Less:
 Unamortized discount and
    deferred loan fees                   (1,045)            (1,756)           (2,008)              (741)              (222)
 Allowance for Loan Losses                3,438              2,647             2,235              3,249              3,089
                                       --------           --------          --------           --------           --------
Total Loans Receivable, Net            $248,094           $249,991          $261,581           $220,647           $244,437
                                       ========           ========          ========           ========           ========

</TABLE>
<PAGE>
      The following  table shows the composition of the Company's loan portfolio
by fixed- and adjustable-rate at the dates indicated.

<TABLE>
<CAPTION>
                                                                              December 31,
                                   ------------------------------------------------------------------------------------------------
                                          1996                1995                1994                1993                1992
                                   -------------------------------------------------------------------------------------------------
                                    Amount   Percent    Amount   Percent    Amount   Percent    Amount   Percent    Amount   Percent
                                   --------  -------   --------  -------   --------  -------   --------  -------   --------  -------
                                                                        (Dollars in thousands)
<S>                                <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>
Fixed Rate Loans:
Real Estate:
     One- to Four-Family           $111,841   44.65%   $ 91,528   36.48%   $ 91,299   34.87%   $ 68,377   30.64%   $ 86,529   34.99%
     Home Equity                     15,234    6.08%      8,405    3.35%      6,689    2.56%      5,586    2.50%      5,133    2.08%
     Commercial and Multi Family      2,590    1.03%      2,633    1.05%     13,144    5.02%     17,918    8.03%     17,268    6.98%
     Construction                     1,840    0.73%        633    0.25%      4,809    1.84%        812    0.36%      2,280    0.92%
                                   --------  -------   --------  -------   --------  -------   --------  -------   --------  -------
Total Real Estate                   131,505   52.49%    103,199   41.13%    115,941   44.29%     92,693   41.53%    111,210   44.97%
Consumer                             25,110   10.03%     33,343   13.29%     28,027   10.70%     15,644    7.01%     15,284    6.18%
Commercial Business                   3,124    1.24%      4,476    1.79%      3,480    1.33%      2,387    1.07%      8,236    3.33%
                                   --------  -------   --------  -------   --------  -------   --------  -------   --------  -------
Total fixed-rate loans              159,739   63.76%    141,018   56.21%    147,448   56.32%    110,724   49.61%    134,730   54.48%
                                   --------  -------   --------  -------   --------  -------   --------  -------   --------  -------

Adjustable Rate Loans:
Real Estate:
     One- to Four-Family             46,341   18.50%     41,940   16.72%     49,119   18.76%     48,064  21.54%      50,025   20.23%
     Home Equity                      7,583    3.03%      9,114    3.63%     10,026    3.83%     10,549   4.73%      10,644    4.30%
     Commercial and Multi Family     32,081   12.81%     47,472   18.92%     42,310   16.16%     44,588  19.98%      51,905   20.99%
     Construction                       394    0.16%        440    0.18%        ---    ----%       ---    ----%        ---     ----%
                                   --------  -------   --------  -------   --------  -------   --------  -------   --------  -------
Total Real Estate                    86,399   34.50%     98,966   39.45%    101,455   38.75%    103,201  46.25%     112,574   45.52%
Consumer                                654    0.26%      5,678    2.26%      7,714    2.95%      4,528   2.03%        ---     ----%
Commercial Business                   3,695    1.48%      5,220    2.08%      5,191    1.98%      4,702   2.11%        ---     ----%
                                   --------  -------   --------  -------   --------  -------   --------  -------   --------  -------
Total adjustable-rate loans          90,748   36.24%    109,864   43.79%    114,360   43.68%    112,431  50.39%     112,574   45.52%
                                   --------  -------   --------  -------   --------  -------   --------  -------   --------  -------
Total Loan Portfolio, Gross         250,487  100.00%    250,882  100.00%    261,808  100.00%    223,155 100.00%     247,304  100.00%
                                             ======              ======              ======             ======               ======
Less:
Unamortized discount and
  deferred loan fees                 (1,045)             (1,756)             (2,008)               (741)               (222)
Allowance for Loan Loss               3,438               2,647               2,235               3,249               3,089
                                   --------            --------            --------            --------            --------
Total Loans Receivable, Net        $248,094            $249,991            $261,581            $220,647            $244,437
                                   ========            ========            ========            ========            ========
</TABLE>
<PAGE>
      The following table illustrates the contractual  maturity of the Company's
loan  portfolio  at  December  31,  1996.  Mortgages  which have  adjustable  or
renegotiable interest rates are shown as maturing in the period during which the
contract  is due.  The  schedule  does  not  reflect  the  effects  of  possible
prepayments or enforcement of due-on-sale clauses.

<TABLE>
<CAPTION>

                                       Real Estate
                    --------------------------------------------------
                      One- to            Multi-
                     Four-Family        Family and                                            Commercial
                    and Home Equity     Commercial       Construction(2)     Consumer          Business           Total
                    --------------    --------------    --------------    --------------    --------------    --------------
                          Weighted          Weighted          Weighted          Weighted          Weighted          Weighted
                           Average           Average           Average           Average           Average           Average
                    Amount  Rate      Amount  Rate      Amount  Rate      Amount  Rate      Amount  Rate      Amount  Rate
Due During          ------  ----      ------  ----      ------  ----      ------  ----      ------  ----      ------  ----
Periods Ending
December 31,

<C>                 <C>      <C>      <C>      <C>      <C>       <C>      <C>     <C>       <C>     <C>      <C>      <C>
1997 (1)            $1,711   9.34%    $1,443   9.49%    $ -----   ----%    $2,088   9.64%    $1,574   9.92%    $6,816   9.60%
1998                 1,277   8.60      2,288   8.36      ------   ----      1,681   9.16      1,541   8.86      6,787   8.72
1999                 2,300   8.40      3,839   9.75      ------   ----      4,970   8.37      1,638   9.20     12,747   8.90
2000 and 2001        6,740   8.40     12,012   7.07      ------   ----      8,376   8.35      1,331   7.53     28,459   7.78
2002 to 2006        19,748   8.13      7,282   9.38      ------   ----      4,185  11.15         91   9.13     31,306   8.82
2007 to 2011        65,389   7.76      1,012   9.10         924   7.59      4,419  10.56        255  10.98     71,999   7.96
2012 and following  83,834   7.53      6,795   9.15       1,310   6.78         45   8.39        389  10.37     92,373   7.65

<FN>
--------------------- 

(1) Includes demand loans, loans having no stated maturity and overdraft loans.

(2)  Construction  loan terms are generally  less than one year,  however,  upon
completion of the  construction  phase,  the loans are generally  converted to a
permanent mortgage with a term not to exceed thirty years, thereby extending the
contractual maturity.  Accordingly, the maturity on these loans are shown at the
final expected maturity of the permanent financing.


</FN>
</TABLE>

     As of December 31, 1996,  the total amount of loans due after  December 31,
1997 which have fixed interest rates was $ 158.0 million, while the total amount
of loans due after such date which have  floating or adjustable  interest  rates
was $85.6 million.

<PAGE>

One- to Four-Family Residential Real Estate Lending


     The Company's residential first mortgage loans consist primarily of one- to
four-family,  owner-occupied  mortgage  loans.  At  December  31,  1996,  $158.2
million,  or 63.2%,of the Company's gross loans consisted of one- to four-family
residential first mortgage loans.  Approximately  70.7% of the Company's one- to
four-family residential first mortgage loans provide for fixed rates of interest
and for repayment of principal  over a fixed period not to exceed 30 years.  The
Company's  fixed-rate one- to four-family  residential mortgage loans are priced
competitively with the market. Accordingly,  the Company attempts to distinguish
itself from its competitors based on quality of service.


     The  Company  generally  underwrites its  fixed-rate, one- to  four-family,
residential, first mortgage loans using Federal  National  Mortgage  Association
("FNMA") secondary market standards.  The Company generally holds for investment
all one- to four-family  residential  first  mortgage  loans it  originates.  In
underwriting  one- to four-family  residential first mortgage loans, the Company
evaluates both the borrower's  ability to make monthly payments and the value of
the property  securing the loan.  Properties  securing real estate loans made by
the Company are appraised by independent fee appraisers approved by the Board of
Directors.  The Company requires  borrowers to obtain title insurance,  and fire
and property  insurance  (including flood insurance,  if necessary) in an amount
not less than the amount of the loan.


     The Company  currently  offers one, three,  five and seven year residential
ARM loans with an interest rate that adjusts  annually in the case of a one-year
ARM loan, and every three,  five or seven years in the case of a three,  five or
seven year ARM loan, respectively,  based on the change in the relevant Treasury
constant maturity index. These loans provide for up to a 2.0% periodic cap and a
lifetime cap of 6.0% over the initial rate. As a consequence  of using caps, the
interest  rates on these loans may not be as rate  sensitive as is the Company's
cost of funds.  Borrowers  of  one-year  residential  ARM  loans  are  generally
qualified  at a rate  2.0%  above  the  initial  interest  rate.  The  Company's
residential ARM loans may be modified into fixed-rate loans. ARM loans generally
pose greater credit risks than fixed-rate  loans,  primarily because as interest
rates rise, the required periodic payment by the borrower rises,  increasing the
potential  for default.  However,  as of December 31, 1996,  the Company had not
experienced   higher  default  rates  on  these  loans.  See  "Asset  Quality  -
Non-Performing Assets."


      The Company's one- to four-family mortgage loans do not contain prepayment
penalties and do not permit  negative  amortization  of  principal.  Real estate
loans  originated  by the  Company  generally  contain  a "due on  sale"  clause
allowing  the  Company to declare the unpaid  principal  balance due and payable
upon the sale of the security  property.  The Company has waived the due on sale
clause on loans held in its portfolio from time to time to permit assumptions of
the loans by qualified borrowers.

<PAGE>

     The Company does not currently originate  residential mortgage loans if the
ratio of the loan amount to the value of the  property  securing the loan (i.e.,
the  "loan-to-value"  ratio) exceeds 95%, with the exception of FHA loans, which
are fully insured by the Federal Government.  If the loan-to-value ratio exceeds
80%, the Company requires that borrowers  obtain private  mortgage  insurance in
amounts intended to reduce the Company's exposure to 80% or less of the lower of
the appraised value or the purchase price of the real estate security. See "Loan
Originations and Sales."


      The Company makes  construction  loans to individuals for the construction
of their residences. The Company has occasionally made loans to builders for the
construction of residential homes,  provided the builder has a sales contract to
sell the home upon completion.  No construction loan is approved unless there is
evidence  of a  commitment  for  permanent  financing  upon  completion  of  the
residence,  whether  through  the  Company  or  another  financial  institution.
Construction loans generally will require  construction stage inspections before
funds may be released to the borrower.  Such inspections are generally performed
by outside fee appraisers.


      At December 31, 1996, the Company's  construction  loan portfolio  totaled
$2.2 million,  or 0.9% of its gross loan portfolio.  Substantially  all of these
construction  loans were to individuals  intending to occupy such residences and
were  secured by property  located  within the  Company's  primary  market area.
Although no construction  loans were classified as non-performing as of December
31, 1996, these loans do involve a higher level of risk than  conventional  one-
to four-family  residential  mortgage  loans.  For example,  if a project is not
completed  and the  borrower  defaults,  the  Company  may have to hire  another
contractor to complete the project at a higher cost.


Home Equity Lending


      The Company's  home equity loans and lines of credit are secured by a lien
on the borrower's  residence and generally do not exceed  $200,000.  The Company
uses the same  underwriting  standards for home equity loans as it uses for one-
to  four-family  residential  mortgage  loans.  Home equity loans are  generally
originated in amounts which, together with all prior liens on such residence, do
not exceed 90% of the  appraised  value of the property  securing the loan.  The
interest  rates for home  equity  loans  and lines of credit  adjust at a stated
margin  over the prime rate or, in the case of loans (but not lines of  credit),
have  fixed  interest  rates.  Home  equity  lines of credit  generally  require
interest  only payments on the  outstanding  balance for the first five years of
the  loan,  after  which  the  outstanding  balance  is  converted  into a fully
amortizing,  adjustable-rate  loan with a term not in excess of 15 years.  As of
December 31, 1996,  the Company had $22.8 million in home equity loans and lines
of credit  outstanding,  with an  additional  $4.0 million of unused home equity
lines of credit.

<PAGE>

Commercial and Multi-Family Real Estate Lending


     The Company has engaged in commercial and multi-family  real estate lending
secured  primarily  by apartment  buildings,  small  office  buildings,  motels,
warehouses,  nursing homes,  strip shopping  centers and churches located in the
Company's primary market area, although the origination  of these types of loans
has recently been  de-emphasized  by the Bank. At December 31, 1996, the Company
had $29.9  million and $4.7 million of commercial  real estate and  multi-family
real estate loans, respectively, which represented 12.0% and 1.9%, respectively,
of the Company's gross loan portfolio at that date. See "Management's Discussion
and  Analysis of  Financial  Condition  and Results of  Operations  - Management
Strategy - Asset  Quality" and  "Provision for Loan Losses" in the Annual Report
for a discussion of the Bank's bulk sale of certain  multi-family and commercial
loans.



     The Bank's  commercial and  multi-family  real estate loans  generally have
adjustable  rates  and  terms to  maturity  that do not  exceed  20  years.  The
Company's current lending guidelines  generally require that the multi-family or
commercial  income-producing property securing a loan generate net cash flows of
at least  125% of debt  service  after the  payment of all  operating  expenses,
excluding  depreciation,  and a loan-to-value  ratio not exceeding 65%. Prior to
September 1990, the Company  originated  commercial and multi-family  loans with
loan-to-value  ratios  of up to  75%.  Due to  declines  in the  value  of  some
properties  as a result of the  economic  conditions  in the  Company's  primary
market area,  however,  the current  loan-to-value  ratio of some commercial and
multi-family real estate loans in the Company's portfolio may exceed the initial
loan-to-value  ratio.  Adjustable rate commercial and  multi-family  real estate
loans  provide for interest at a margin over a designated  index,  with periodic
adjustments at frequencies of up to five-years.  The Company generally  analyzes
the financial  condition of the borrower,  the borrower's  credit  history,  the
reliability  and  predictability  of the cash flows  generated  by the  property
securing the loan and the value of the property  itself.  The Company  generally
requires  personal  guarantees  of the  borrowers  in addition  to the  security
property  as  collateral  for such  loans.  Appraisals  on  properties  securing
commercial  and  multi-family  real estate loans  originated  by the Company are
performed by independent fee appraisers approved by the Board of Directors.


     At December 31, 1996, the Company's largest multi-family or commercial real
estate lending relationship consisted of a $1.3 million loan secured by a motel.
The next largest  multi-family or commercial  lending  relationships at December
31, 1996 were a $1.2 million loan secured by a strip shopping center, and a $1.1
million  loan  secured by a day  treatment  center  for  mentally  retarded  and
developmentally  disabled individuals,  all of which were current as of December
31,  1996.  At  December  31,  1996,  $1,726,000  , or  4.98% of  the  Company's
multi-family and commercial real estate loan portfolio was  non-performing.  See
"Asset Quality - Non-Performing Assets".


<PAGE>

     Multi-family  and commercial real estate loans  generally  present a higher
level of risk than loans secured by one- to four-family residences. This greater
risk is due to several  factors,  including the  concentration of principal in a
limited number of loans and borrowers, the effect of general economic conditions
on income  producing  properties and the increased  difficulty of evaluating and
monitoring these types of loans. Furthermore,  the repayment of loans secured by
multi-family  and  commercial  real  estate  is  typically  dependent  upon  the
successful  operation of the related real estate project.  If the cash flow from
the project is reduced (for example, if leases are not obtained or renewed, or a
bankruptcy  court  modifies a lease term, or a major tenant is unable to fulfill
its lease obligations), the borrower's ability to repay the loan may be impaired
and the value of the  property  may be reduced.  The  balances of these types of
loans have declined  over the past five years with a  significant  decrease from
$50.1  million at December 31, 1995 to $34.7  million at December 31, 1996,  due
primarily to the bulk sale of certain performing and  non-performing  loans. See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  -  Management  Strategy  Asset  Quality" in the Annual  Report.  The
Company   currently  plans  to  continue  to  de-emphasize  the  origination  of
commercial and multi-family real estate loans,  thereby reducing its credit risk
exposure associated with these types of loans.


Consumer Lending


     The Company offers a variety of secured  consumer  loans,  including  loans
secured by automobiles and  recreational  vehicles  ("RV's").  In addition,  the
Company offers other secured and unsecured consumer loans. The Company currently
originates  substantially  all of its consumer loans in its primary market area.
The Company originates  consumer loans on a direct basis only, where the Company
extends  credit  directly to the  borrower.  At December 31, 1996 the  Company's
consumer  loan  portfolio  totaled  $25.8  million,  or 10.3% of the gross  loan
portfolio.  At December 31, 1996,  97.5% of the  Company's  consumer  loans were
fixed-rate loans and 2.5% were adjustable-rate loans.


     Consumer  loan terms vary  according  to the type and value of  collateral,
length of contract and creditworthiness of the borrower. Terms to maturity range
up to 15 years for  manufactured  homes and certain RV's and up to 60 months for
other secured and unsecured  consumer  loans.  The Company offers both open- and
closed-end credit.  Open-end credit is extended through lines of credit that are
generally tied to a checking account. These credit lines currently bear interest
up to 18% and are generally limited to $10,000. The Company no longer originates
manufactured home loans.


     The  underwriting  standards  employed by the Company  for  consumer  loans
include,  a determination of the applicant's  payment history on other debts and
an  assessment  of ability to meet  existing  obligations  and  payments  on the
proposed  loan.  Although   creditworthiness  of  the  applicant  is  a  primary
consideration,  the underwriting process also includes a comparison of the value
of the security, if any, in relation to the proposed loan amount.


     At December 31, 1996,  automobile  loans and RV loans (such as motor homes,
boats,  motorcycles,  snowmobiles  and  other  types of  recreational  vehicles)
totaled $12.4 million and $9.4 million or 48.2% and 36.5% of the Company's total
consumer  loan  portfolio,  and  5.0%  and  3.8% of its  gross  loan  portfolio,
respectively.
<PAGE>

     During 1996,  the Company  placed more emphasis on  originating  automobile
loans  secured  by  both  new  and  used   automobiles,   thereby   experiencing
approximately $3 million in net growth. In the past, originations were generated
primarily  through  advertising and lobby displays.  The Company,  over the past
year,  has  increased  the  number  of   relationships   with  local  automobile
dealerships in order to further enhance  automobile  originations  through their
referrals. The Company's maximum loan-to-value ratio on new automobiles is 100%
of the  borrower's  cost  including  sales tax, and on used  automobiles up to 5
years old, 100% of the vehicle  average  retail value,  based on NADA  (National
Auto  Dealers  Association)  valuation.  Non-performing  automobile  loans as of
December  31,  1996  totaled  $39,000  or  .2% of the  Company's  consumer  loan
portfolio.


     Of the RV loan balance, approximately $6.5 and $2.9 million were secured by
new and used RVs,  respectively.  Approximately 75% of the RV portfolio consists
of loans that were  originated  through the  Company's  relationship  with Alpin
Haus, Inc., a retail RV dealer formerly owned by one of the Company's directors.
The Company's maximum loan-to-value ratio on new and used RV loans is the lesser
of (i) 85% of the  borrower's  cost,  which includes such items as sales tax and
dealer  options or (ii) 115% of either the  factory  invoice for a new RV or the
wholesale  value,  plus sales tax, for a used RV. In the case of used RV's,  the
wholesale value is determined using published guide books. At December 31, 1996,
RV  loans   totaling   $175,000  or  1.9%  of  the  total  RV  portfolio,   were
non-performing.


     Consumer loans may entail greater credit risk than do residential  mortgage
loans,  particularly  in the case of consumer  loans which are  unsecured or are
secured by rapidly depreciable  assets, RVs and automobiles.  In such cases, any
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment of the outstanding  loan balance as a result of high initial
loan-to-value ratios,  repossession,  rehabilitation and carrying costs, and the
greater likelihood of damage, loss or depreciation of the underlying collateral.
In  addition,   consumer  loan  collections  are  dependent  on  the  borrower's
continuing  financial  stability,  and thus are more  likely to be  affected  by
adverse personal circumstances.  Furthermore, the application of various federal
and state laws,  including  bankruptcy and insolvency laws, may limit the amount
which can be recovered on these  loans.  In the case of RV loans,  which tend to
have loan  balances in excess of the resale value of the  collateral,  borrowers
may abandon  the  collateral  property  making  repossession  by the Company and
subsequent  losses more  likely.


     During 1996, the Company sold certain performing and  non-performing  loans
as part of a bulk sale,  including  a  majority  of its  manufactured  home loan
portfolio,  as well as  certain RV loans,  thereby  significantly  reducing  its
credit  risk  exposure  on these  types of loans  (see  "Loan  Originations  and
Sales").  However,  management  expects that  delinquencies in its consumer loan
portfolio  may  increase as RV loans  continue to season.  At December 31, 1996,
$318,000,  or 1.2%, of the Company's  consumer loan portfolio was non-performing
and $56,000 or 0.2% of such loans were restructured.  There can be no assurances
that additional delinquencies will not occur in the future.

<PAGE>

Commercial Business Lending


     The  Company  also  originates  commercial  business  loans,  although  the
origination of these types of loans has recently been de-emphasized by the Bank.
At December 31, 1996,  commercial business loans comprised $6.8 million, or 2.7%
of the Company's gross loan portfolio. Most of the Company's commercial business
loans have been extended to finance local businesses and include primarily short
term loans to finance machinery and equipment purchases and, to a lesser extent,
inventory and accounts receivable.  Loans made to finance inventory and accounts
receivable  will  only be made if the  borrower  secures  such  loans  with  the
inventory  and/or  receivables  plus  additional  collateral  acceptable  to the
Company,  generally real estate.  Commercial loans also involve the extension of
revolving credit for a combination of equipment acquisitions and working capital
in expanding  companies.  At December 31, 1996, the largest commercial  business
lending  relationship  consisted  of eight loans to the Bennett  Funding  Group,
aggregating  $3.6 million secured by various office  equipment and the equipment
contracts  between the borrower and its lessees.  These loans were in default as
of December 31, 1996 as a result of a bankruptcy  filing on March 29, 1996,  and
the Bank  reduced  its  recorded  value  to $1.9  million  for such  loans as of
December 31, 1996. For further  discussion,  see "Asset Quality - Non-Performing
Assets" herein, and "Management  Discussion and Analysis of Financial  Condition
and Results of Operations" contained in the Company's Annual Report.
 

     The terms of loans  extended on machinery  and  equipment  are based on the
projected  useful life of such machinery and equipment,  generally not to exceed
seven years.  Secured,  non-mortgage  lines of credit are available to borrowers
provided that the outstanding  balance is paid in full (i.e.,the credit line has
a zero  balance) for at least 30 days every year. In the event the borrower does
not meet this 30 day requirement, the line of credit is generally terminated and
the outstanding balance is converted into an amortizing loan.


     Unlike residential mortgage loans, which generally are made on the basis of
the  borrower's  ability to make  repayment from his or her employment and other
income and which are secured by real property,  the value of which  tends  to be
more easily  ascertainable,  commercial business loans typically are made on the
basis of the  borrower's  ability  to make  repayment  from the cash flow of the
borrower's business. As a result, the availability of funds for the repayment of
commercial  business loans may be substantially  dependent on the success of the
business itself (which,  in turn, is often  dependent upon the general  economic
environment).  The  Company's  commercial  business  loans are usually,  but not
always,  secured by business assets.  However, the collateral securing the loans
may  depreciate  over time,  may be difficult  to appraise and may  fluctuate in
value based on the success of the business.  As part of its commercial  business
lending  policy,  the Company  generally  requires all borrowers with commercial
business  loans to submit annual  financial  statements to the Company.


     The Company's  commercial  business  lending  policy  includes  credit file
documentation  and analysis of the borrower's  character,  capacity to repay the
loan,  the  adequacy  of the  borrower's  capital and  collateral  as well as an
evaluation of conditions affecting the borrower. Consideration of the borrower's
cash flows is also an important aspect of the Company's current credit analysis.
The Company  generally  obtains personal  guarantees on its commercial  business
loans.  Nonetheless,  such loans are believed to carry  higher  credit risk than
more traditional thrift institution investments.

<PAGE>

     The  balances of these types of loans have  declined  from $9.7  million in
1995 to $6.8  million  in  1996,  due  primarily  to the  bulk  sale of  certain
performing  and  non-performing  loans,  the partial  charge-off  of the Bennett
Funding Group loan relationship, as well as the general de-emphasis of this loan
type.  See  "Management's  Discussion  and Analysis of Financial  Condition  and
Results of  Operations  -  Management  Strategy - Asset  Quality"  in the Annual
Report.  The Company  plans to  continue  to  de-emphasize  the  origination  of
commercial business loans,  thereby reducing its credit risk exposure associated
with this type of lending.


Loan Originations and Sales


     Loan  originations  are developed from continuing  business with depositors
and borrowers, soliciting realtors, dealerships and mortgage brokers, as well as
walk-in customers.  Loans are originated by the Company's staff of salaried loan
officers.


     While the Company  originates both fixed- and  adjustable-rate  loans,  its
ability to  originate  loans is  dependent  upon demand for loans in its market.
Demand is  affected by the local  economy and  interest  rate  environment.  The
Company currently retains  fixed-rate and  adjustable-rate  real estate loans it
originates in its portfolio. As a regular part of its business, the Company does
not sell  loans and has not  purchased  any loans  since  1989,  except  for one
$200,000  residential  ARM loan it  purchased  from a  mortgage  banker in 1994.
During  1996,  the Company  completed  the bulk sale of certain  performing  and
nonperforming  loans  in  order  to  improve  the  credit  quality  of its  loan
portfolio.  See "Management  Discussion and Analysis of Financial  Condition and
Results of Operations" contained in the Company's  Annual Report.


     For the year ended December 31, 1996, the Company  originated $81.4 million
of  loans  compared  to $50.2  million  and  $91.2  million  in 1995  and  1994,
respectively.  Management  attributes the high level of originations during 1994
to the  sustained low interest rate  environment  prevalent  during 1993 and the
first half of 1994,  which caused many  individuals  to  refinance  their loans.
Similarly,  management  attributes the decrease in or the "leveling off" of loan
originations  for 1995 to the  sharp  decline  in  refinancing  as a result of a
generally  rising  interest rate  environment  since mid 1994.  During 1996, the
Company increased its originations of one- to four-family  mortgages through the
referrals of several local brokers.  Primarily,  these originations  reflected a
     resurgence of refinancings, which comprised approximately 67% of the Bank's
total
originations  of one- to four family  mortgages.  Of the one- to four-family and
home equity originations,  approximately $26.5 million were adjustable rate, and
$35.5 million were fixed rate loans.


     In periods of economic  uncertainty,  the  Company's  ability to  originate
large  dollar  volumes  of  real  estate  loans  with  acceptable   underwriting
characteristics  may be  substantially  reduced or  restricted  with a resultant
decrease in operating earnings. 

<PAGE>

     The  following  table shows the loan  origination, loan sale and  repayment
activities of the Company for the periods indicated.

                                              Years Ended December 31,
                                             --------------------------
                                               1996      1995      1994
                                             --------------------------
Origination by Type:                                (In Thousands)

Real estate-one- to four-family              $47,691  $  8,269   $56,014
                    -home equity              14,291     7,921     7,876
                    -multi-family                190       134       510
                    -non-residential           2,838     2,014     3,437
Non-real estate-consumer                       7,735    18,359    17,207
               -commercial business            8,681    13,472     6,174
                                              ------    ------    ------
Total loans originated                        81,426    50,169    91,218

Repayments:
Principal repayments                          52,741    58,374    48,504
Proceeds from sale of loans                   18,929       ---       ---
Other decreases, net (1)                      11,653     3,385     1,780
                                              ------    ------    ------
Net increase (decrease)                     ($ 1,897) ($11,590)  $40,934
                                              =======  =======    ======

-----------------------------------

(1) Includes net  charge-offs,  transfers to real estate owned, and additions to
loan loss allowances.



Asset Quality


     Generally,  when a  borrower  fails to make a  required  payment  on a loan
secured by residential real estate or consumer  products,  the Company initiates
collection  procedures by mailing a  delinquency  notice after the account is 15
days delinquent.  At 30 days delinquent,  a personal letter is generally sent to
the  customer  requesting  him or her to make  arrangements  to  bring  the loan
current.  If the  delinquency  is not cured by the 45th  day,  the  customer  is
generally  contacted by telephone and another  personal letter is sent, with the
same procedure being repeated if the loan becomes 60 days delinquent. At 90 days
past due, a demand letter is generally  sent.  If there is no response,  a final
demand  letter for payment in full is sent,  and unless  satisfactory  repayment
arrangements  are  made  subsequent  to  the  final  demand  letter,   immediate
repossession or foreclosure procedures are commenced.

     Similar collection  procedures are employed for loans secured by commercial
real estate and commercial  business  collateral,  except when such loans are 60
days  delinquent,  a letter is generally sent  requesting  rectification  of the
delinquency within seven days, otherwise foreclosure or repossession procedures,
as applicable, are commenced.

<PAGE>

      The following table sets forth the Company's loan  delinquencies  by type,
by amount and by percentage of type at December 31, 1996.
<TABLE>
<CAPTION>

                           ---------------------------------------------------------------          Total Loans Delinquent
                                      60-89 Days                     90 Days and Over                  60  Days or More
                           ---------------------------------------------------------------   ------------------------------
                                                % of Loan                       % of Loan                        % of Loan
                            Number     Amount    Category    Number     Amount   Category    Number     Amount    Category
                           --------   -------   ---------   --------   -------   --------   --------   --------   ---------
                                                          (Dollars in Thousands)
<S>                          <C>      <C>           <C>        <C>     <C>         <C>         <C>     <C>          <C>   
Real Estate:
  One-to four-family          ---     $  ---        ----%       16     $  410       0.26%       16     $  410        0.26%
  Home Equity                   1         21        0.09%      ---        ---       ----%        1         21        0.09%
  Multi-family                ---        ---        ----%      ---        ---       ----%      ---        ---        ----%
  Commercial                    2        108        0.36%        7        907       3.03%        9      1,015        3.39%
Consumer                       21        184        0.71%       33        262       1.02%       54        446        1.73%
Commercial Business             5         85        1.25%       15      2,269      33.27%       20      2,354       34.52%
                           --------   -------   ---------   --------   -------   --------   --------   --------   ---------
     Total                     29       $398        0.16%       71     $3,848       1.54%      100     $4,246        1.70%
                           ========   =======   =========   ========   =======   ========   ========   ========   =========

</TABLE>

<PAGE>

Non-Performing  Assets

     The table  below sets forth the amounts and  categories  of  non-performing
assets in the Company's total assets at the dates indicated. Loans are generally
placed  on  non-accrual  status  when the loan is more  than 90 days  delinquent
(except for FHA  insured  and VA  guaranteed  loans) or when the  collection  of
principal and/or interest in full becomes doubtful. When loans are designated as
non-accrual,  all accrued but unpaid interest is reversed against current period
income  and,  as long as the loan  remains on  non-accrual  status  interest  is
recognized  only when received.  Foreclosed  assets  include assets  acquired in
settlement of loans. For further  discussion of non-performing  assets,  and the
bulk sale of certain  non-performing  assets,  see "Management's  Discussion and
Analysis of  Financial  Condition  and Results of  Operations  - Asset  Quality"
contained in the Annual Report.

<TABLE>
<CAPTION>
                                                            December 31,
                                       ----------------------------------------------------------
                                         1996        1995        1994        1993        1992
                                       ----------  ----------  ----------  ----------  ----------
                                                            (In thousands)
<S>                                         <C>       <C>         <C>         <C>           <C>
Non-accruing loans:
   One- to four-family (1)                  $259      $1,525      $1,130      $1,705        $448
   Multi-family                              ---          77         563       1,354         ---
   Commercial real estate                    339       1,549       4,096       2,937       2,669
   Consumer                                  256         605         111         286         331
   Commercial Business                     2,269         743         404         684       1,563
                                       ----------  ----------  ----------  ----------  ----------
     Total                                 3,123       4,499       6,304       6,966       5,011
                                       ----------  ----------  ----------  ----------  ----------
Accruing loans delinquent more 
 than 90 days:
   One- to four-family (1)                   151         261         480         396         803
   Multi-family                              ---         ---         ---          54         ---
   Commercial real estate                    568         ---         ---          67       1,230
   Consumer                                    6         ---         ---         ---           2
   Commercial Business                       ---         ---         ---         ---         ---
                                       ----------  ----------  ----------  ----------  ----------
     Total                                   725         261         480         517       2,035
                                       ----------  ----------  ----------  ----------  ----------
Troubled debt restructured loans:
   One- to four-family (1)                    88          89          90          91           0
   Multi-family                               38       1,626       1,645       1,709       1,169
   Commercial real estate                    781       2,185       1,758       1,547       1,890
   Consumer                                   56          84          62           3          23
   Commercial Business                        68          51          95         527         336
                                       ----------  ----------  ----------  ----------  ----------
     Total                                 1,031       4,035       3,650       3,877       3,418
                                       ----------  ----------  ----------  ----------  ----------
Total non-performing loans:                4,879       8,795      10,434      11,360      10,464
                                       ----------  ----------  ----------  ----------  ----------
Foreclosed assets:
   One- to four-family (1)                   194         459         102         346         373
   Multi-family                              282         926       1,792       2,405         502
   Commercial real estate                    ---       1,503       1,799       2,707       3,983
   Consumer                                  239         281         111          42          64
   Commercial Business                       ---         ---         ---         ---         ---
                                       ----------  ----------  ----------  ----------  ----------
     Total                                   715       3,169       3,804       5,500       4,922
                                       ----------  ----------  ----------  ----------  ----------
Total non-performing assets               $5,594     $11,964     $14,238     $16,860     $15,386
                                       ==========  ==========  ==========  ==========  ==========
Total as a percentage of total assets       1.18%       2.72%       4.15%       5.06%       4.76%
<FN>
--------------------------------------
(1) Includes home equity loans
</FN>
</TABLE>

<PAGE>

     For the year ended  December 31, 1996,  gross  interest  income which would
have  been  recorded  had the  year  end  non-accruing  loans  been  current  in
accordance  with their original terms amounted to $477,000.  The amount that was
included in interest income on such loans was $149,000, which represented actual
receipts.


     Similarly,  for the year ended  December 31, 1996,  gross  interest  income
which  would  have been  recorded  had the year end  restructured  loans paid in
accordance  with their original terms amounted to $127,000.  The amount that was
included in interest income for the year ended December 31, 1996 was $80,000.


Non-Accruing Assets


     At December 31, 1996, the Company had $3.1 million in  non-accruing  loans,
which  constituted  1.2%  of the  Company's  gross  loan  portfolio.  Except  as
discussed  immediately  below,  there were no  non-accruing  loans or  aggregate
non-accruing loans-to-one-borrower in excess of $500,000.


     The largest non-accruing loan or aggregate lending relationship at December
31, 1996,  consisted of eight loans secured by various office  equipment and the
equipment  lease  contracts  between the borrower and its lessees.  On March 29,
1996, the borrower,  Bennett Funding Group, filed Chapter 11 bankruptcy. At that
time,  the loan  balances  aggregated  $3.6  million.  During 1996,  the Company
established reserves totaling $2.8 million. In the fourth quarter,  $1.7 million
was charged against this reserve, reducing the recorded amount of these loans to
$1.9 million.  Negotiations with the Bennett  bankruptcy  trustee related to the
Bank's total Bennett  relationship are in process, and based upon discussions to
date, management believes that the remaining $1.1 million reserve is adequate.


Accruing Loans Delinquent More than 90 Days


     As of  December  31,  1996,  the Company  had  $725,000  of accruing  loans
delinquent  more than 90 days.  Of these loans,  $151,000 were FHA insured or VA
guaranteed  one-  to  four-family  residential  loans.  The  remaining  $568,000
represented  three  commercial real estate loans for which  management  believes
that all contractual  payments are collectible.  Subsequent to December 31, 1996
these three loans were brought current.


Restructured Loans


     As of December 31, 1996, the Company had restructured loans of $1.0 million
with one loan or  aggregate  lending  relationship  over  $500,000 as  discussed
below. The balance of the Company's restructured loans at that date consisted of
one one- to four-family  residential mortgage loan, one multi-family real estate
loan, four commercial real estate loans, two consumer loans and three commercial
business loans.

<PAGE>

     The Company's largest restructured loan or lending relationship at December
31,  1996,  was a 58%  loan  participation  interest,  secured  by a  mixed  use
office/apartment  complex located in Syracuse, New York, on which the Company is
the lead  lender.  The loan  participation  was  originated  for $1.1 million in
February  1986  with a  loan  to  value  ratio  of  67.0%.  The  loan  had  been
experiencing  delinquencies  since June 1993 due to cash flow problems caused by
high vacancy  rates.  In December  1993,  the Company,  based on an October 1993
appraisal, wrote-down the loan balance to $609,000 and in July 1994 restructured
the loan to reduce the principal balance  outstanding and interest rate charged.
At December 31, 1996,  the  outstanding  balance on the Company's  participation
interest  was  $593,000.  The office and  apartment  portions of the property at
December  31, 1996 were approximately  50%  occupied.  The rooms are rented on a
daily  basis and the gross  income from room rental  increased  1% in 1996.  The
loan,  since being  restructured,  has  performed  according to the terms of the
restructuring.


Foreclosed  Assets


     As of December  31,  1996,  the Company had  $715,000 in carrying  value of
foreclosed assets.  Multi-family and commercial real estate represented 39.4% of
the Company's  foreclosed  property,  which  consisted  solely of a three story,
54-unit,  student housing project located in Morrisville,  New York. Repossessed
consumer  assets  represented  33.4%  of the  Company's  foreclosed  properties,
consisting primarily of 18 manufactured homes and 13 recreational vehicles.


     The student housing project loan referred to above was originated as a loan
to facilitate the sale of foreclosed property in 1985 for $1.4 million at a 100%
loan-to-value ratio. The Company reacquired this property through foreclosure in
April 1994. The apartment complex began  experiencing  vacancy problems when the
State  University  of New York at  Morrisville  stopped  referring  students  to
off-campus housing and began requiring students to live on campus. The occupancy
rate of the housing project was approximately 28% during the 1995-1996  academic
year.  Subsequent to December 31, 1996, the Company received a contract for sale
on this  property,  and  expects a closing  to take  place in April  1997.  This
property is being carried at a value equal to the estimated net sales proceeds.


Other Loans of Concern


     As of  December  31,  1996,  there  were $7.4  million  of other  loans not
included  in the table or  discussed  above where  known  information  about the
possible credit problems of borrowers caused management to have doubts as to the
ability of the borrower to comply with present loan repayment  terms.  Set forth
below is a description of the largest other loans of concern.


     The largest  other loan of concern at December  31,  1996,  consisted  of a
commercial real estate loan secured by a one-story light industrial  facility in
Gates,  New  York.  This loan was  originated  in May 1988 for  $930,000  with a
loan-to-value  ratio of 74.4%.  The  property has  recently  experienced  tenant
vacancies and based on recent financial  information  submitted by the borrower,
the cash flow generated by this property has deteriorated. However, the borrower
has been able to keep the loan current by utilizing other sources of funds. As a
result,  the  Bank  has  requested  additional  financial  information  from the
guarantors on this loan, to assess their  financial  position,  as the secondary
source of  repayment  on this lending  relationship.  At December 31, 1996,  the
principal balance was $886,000.
<PAGE>


     The second  largest  loan of concern at December  31, 1996,  consisted of a
commercial real estate loan secured by an office  building in Atlanta,  Ga. This
loan  was  originated  in 1987  with a  loan-to-value  ratio  of 74%.  Based  on
financial information submitted by the borrower, the cash flow generated by this
property is insufficient to cover the debt service on this loan. At December 31,
1996, the principal balance was $848,000. Subsequent to this date, this loan has
been paid in full.


     The third  largest  loan of concern at December  31,  1996,  consisted of a
single use  commercial  property (a bowling  facility and adjacent used car lot)
located  in  Schenectady,  New  York.  This loan was  originated  in 1992 with a
loan-to-value  ratio of 50%.  Although  the most  recent  financial  information
received  indicates that cash flow is adequate to service the debt on this loan,
the  borrower's  financial  position has shown  deterioration  over the last few
years. The Bank has requested more recent financial statements from the borrower
and will  continue  to  monitor  the cash  flow  trends  on this  property.  The
principal balance as of December 31, 1996 was $667,000.


     The fourth  largest loan of concern at December  31,  1996,  consisted of a
multi-family real estate loan secured by a 32-unit apartment building located in
LeRoy,  New York. This loan was originated in December 1989 with a loan-to-value
ratio of 72.2%.  Although the  property  was 97%  occupied  based on a 1996 rent
roll, the cash flow  generated by the property has  deteriorated.  However,  the
borrower has been able to keep the loan current by  utilizing  other  sources of
funds. As a result, the Bank has requested additional financial information from
the  guarantors  on this  loan,  to  assess  their  financial  position,  as the
secondary  source of repayment on this lending  relationship.  A recent property
inspection  also noted the  existence of deferred  maintenance.  At December 31,
1996, the principal balance was $645,000.


     The fifth  largest  loan of concern at December  31,  1996,  consisted of a
commercial real estate loan secured by a retail store/warehouse in Douglasville,
Georgia. This loan was originated in 1987 with a loan-to-value ratio of 78%. The
Bank has been unable to obtain current financial  information from the borrower,
and therefore,  cannot make any assumptions  regarding the borrowers  ability to
continue  to service  this debt in the  future.  The Bank  continues  to request
current financial information from the borrower. Also, a property inspection has
been completed subsequent to December 31, 1996 which indicates that the property
is in  excellent  condition  and the  value has  remained  stable,  providing  a
loan-to-value  ratio at December  31, 1996 of 62%. At  December  31,  1996,  the
principal balance was $549,000.



      All of the above mentioned loans were current at December 31, 1996.


     There  were no other  loans  with a balance  in excess  of  $500,000  being
specially monitored by the Company as of December 31, 1996. The balance of other
loans of concern at that date consisted of 15 commercial and  multi-family  real
estate loans  totaling $3.1 million,  nine  commercial  business  loans totaling
$484,000 and six one- to four-family  mortgages totaling  $193,000.  These loans
have been  considered  by  management  in  conjunction  with the analysis of the
adequacy of the allowance for loan losses.

<PAGE>

Classified Assets


     Federal  regulations  provide  for the  classification  of loans  and other
assets,  such as debt and equity securities  considered to be of lesser quality,
as "substandard,"  "doubtful" or "loss." An asset is considered "substandard" if
it is inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. "Substandard" assets include those
characterized by the "distinct  possibility"  that the insured  institution will
sustain "some loss" if the deficiencies are not corrected.  Assets classified as
"doubtful"   have  all  of  the   weaknesses   inherent   in  those   classified
"substandard,"  with the added  characteristic  that the weaknesses present make
"collection or liquidation in full," on the basis of currently  existing  facts,
conditions,  and values, "highly questionable and improbable." Assets classified
as "loss" are those  considered  "uncollectible"  and of such little  value that
their continuance as assets without the establishment of a specific loss reserve
is not warranted.


     When an insured institution classifies problem assets as either substandard
or doubtful,  it may increase  general  allowances  for loan losses in an amount
deemed  prudent by  management  to address  the  increased  risk of loss on such
assets. General allowances represent loss allowances which have been established
to recognize the inherent risk  associated with lending  activities,  but which,
unlike  specific  allowances,  have not been  allocated  to  particular  problem
assets. When an insured  institution  classifies problem assets as "loss," it is
required  either to establish a specific  allowance  for losses equal to 100% of
that  portion  of the asset so  classified  or to  charge  off such  amount.  An
institution's  determination  as to the  classification  of its  assets  and the
amount of its valuation  allowances  is subject to review and  adjustment by the
OTS and the  FDIC,  which  may order  increases  in  general  or  specific  loss
allowances.


      In connection with the filing of its periodic  reports with the OTS and in
accordance  with its  classification  of assets  policy,  the Company  regularly
reviews the problem  assets in its  portfolio  to  determine  whether any assets
require classification in accordance with applicable  regulations.  On the basis
of  management's  review of its assets,  at December 31,  1996,  the Company had
classified $10.9 million as substandard, none as doubtful or loss.


 Allowance for Loan Losses


     The allowance for loan losses is  established  through a provision for loan
losses  based  on  management's  evaluation  of the  risk  inherent  in its loan
portfolio and changes in the nature and volume of its loan  activity,  including
those  loans  which  are  being  specifically  monitored  by  management.   Such
evaluation,  which includes a review of loans for which full  collectibility may
not  be  reasonably   assured,   considers   among  other   matters,   the  loan
classifications  discussed  above,  the  estimated  fair  value, less  estimated
disposal costs, of the underlying  collateral, economic  conditions,  historical
loan loss  experience,  and other factors that warrant  recognition in providing
for an adequate loan loss allowance.

<PAGE>

     Real estate  properties  acquired through  foreclosure are recorded at fair
value,  less estimated  disposal costs. If fair value at the date of foreclosure
is lower than the book  balance of the  related  loan,  the  difference  will be
charged to the allowance for loan losses at the time of transfer.  Valuations of
the property are periodically updated by management and if the value declines, a
specific  provision  for losses on such property is  established  by a charge to
operations and the asset's recorded value is written down accordingly.


     Although management believes that it uses the best information available to
determine  the  allowances,   unforeseen   market  conditions  could  result  in
adjustments and net earnings could be  significantly  affected if  circumstances
differ  substantially  from the assumptions used in determining the level of the
allowance.  Future  additions to the Company's  allowances will be the result of
periodic loan,  property and collateral  reviews and thus cannot be predicted in
advance. In addition,  federal regulatory  agencies,  as an integral part of the
examination  process,  periodically  review  the  Company's  allowance  for loan
losses.  Such  agencies  may require the Company to  recognize  additions to the
allowance based upon their judgment of the information  available to them at the
time of their  examination.  At  December  31,  1996,  the  Company  had a total
allowance  for  loan  losses  of  $3.4  million,  representing  70.5%  of  total
non-performing  loans.  See  Note  5 of  the  Notes  to  Consolidated  Financial
Statements.


<PAGE>
      The following table sets forth an analysis of the Company's  allowance for
loan losses.

<TABLE>
<CAPTION>
                                                          For the year
                                                        ended December 31,
                                      1996        1995        1994        1993        1992
                                   ----------- ----------- ----------- ----------- -----------
                                                        (In thousands)
<S>                                    <C>         <C>         <C>         <C>         <C>
Balance at beginning of period         $2,647      $2,235      $3,248      $3,089      $3,294

Charge-offs:
     One- to four-family (1)             (530)        (31)        (28)        (24)        ---
     Multi Family                      (1,174)       (171)       (668)       (257)        ---
     Commercial Real Estate            (2,564)       (568)     (1,336)       (641)       (593)
     Consumer                          (1,834)       (400)       (196)       (409)       (181)
     Commercial Business               (2,616)        (46)       (232)       (399)         (3)
                                   ----------- ----------- ----------- ----------- -----------
        Total Charge offs              (8,718)     (1,216)     (2,460)     (1,730)       (777)

Recoveries:
     One- to four-family (1)               10         ---          27          13         ---
     Multi Family                         ---          64         ---           1         ---
     Commercial Real Estate               ---           1         193         ---         ---
     Consumer                              49          41         110         128          78
     Commercial Business                  ---         ---          10          58           4
                                   ----------- ----------- ----------- ----------- -----------
        Total Recoveries                   59         106         340         200          82

Net Charge-offs                        (8,659)     (1,110)     (2,120)     (1,530)       (695)
Provisions charged to operations        9,450       1,522       1,107       1,689         490
                                   ----------- ----------- ----------- ----------- -----------
Balance at end of period                3,438       2,647       2,235       3,248       3,089
                                   =========== =========== =========== =========== ===========
Ratio of net charge-offs during
the period to average loans
outstanding during period                3.30%       0.42%       0.88%       0.65%       0.29%
                                        ======      ======      ======      ======      ======
Ratio of net charge-offs during
the period to average
non-performing assets                   55.57%       8.45%      13.43%       9.92%       4.81%
                                        ======      ======      ======      ======      ======
<FN>
-------------------------------------
(1) Includes home equity loans.
</FN>
</TABLE>

<PAGE>

      The  distribution  of the  Company's  allowance for losses on loans at the
dates indicated is summarized as follows:

<TABLE>
<CAPTION>
                                                                           December 31,
                           ---------------------------------------------------------------------------------------------------------
                                   1996                  1995                 1994                 1993                 1992
                           ---------------------------------------------------------------------------------------------------------
                                        Percent               Percent              Percent              Percent             Percent
                              Amount    of loans    Amount    of loans   Amount    of loans   Amount    of loans   Amount   of loans
                                of      in each       of      in each      of      in each      of      in each      of     in each
                               Loan     category     Loan     category    Loan     category    Loan     category    Loan    category
                               Loss     to total     Loss     to total    Loss     to total    Loss     to total    Loss    to total
                            Allowance    loans    Allowance    loans   Allowance    loans   Allowance    loans   Allowance   loans
                            --------------------------------------------------------------------------------------------------------

<S>                               <C>     <C>        <C>      <C>        <C>      <C>        <C>        <C>        <C>      <C>
One- to four-family (1)           $157    72.26%     $268     60.18%     $207     60.02%     $175       59.41%     $181     61.60%
Multi family and
   commercial real
    estate                       1,599    13.84%    1,097     19.97%    1,260     21.18%    2,607       28.01%    2,123     27.97%
Construction and
     development                   ---     0.89%      ---      0.43%      ---      1.84%      ---        0.36%      ---      0.92%
Consumer                           355    10.29%      718     15.55%      454     13.65%      330        9.04%      294      6.18%
Commercial Business              1,327     2.72%      268      3.87%      114      3.31%      127        3.18%      491      3.33%
Unallocated                        ---     ----%      296      ----%      200      ----%        9        ----%      ---      ----%
                                ------   -------   ------    -------   ------    -------   ------      -------   ------    -------
          Total                 $3,438   100.00%   $2,647    100.00%   $2,235    100.00%   $3,248      100.00%   $3,089    100.00%
                                ======   =======   ======    =======   ======    =======   ======      =======   ======    =======
<FN>
-------------------------------
(1) Includes home equity loans.
</FN>
</TABLE>
<PAGE>

Investment Activities


     The Bank must maintain minimum levels of investments that qualify as liquid
assets under OTS regulations.  Liquidity may increase or decrease depending upon
the  availability of funds and comparative  yields on investments in relation to
the return on loans.  Historically,  the Bank has  maintained  liquid  assets at
levels above the minimum  requirements  imposed by the OTS regulations and above
levels  believed  adequate  to  meet  the  requirements  of  normal  operations,
including potential deposit outflows. At December 31, 1996, the Bank's liquidity
ratio (liquid assets as a percentage of net  withdrawable  savings  deposits and
current  borrowings)  was 7.51%.  See  "Management's  Discussion and Analysis of
Financial  Condition and Results of  Operations"  contained in the Annual Report
and "Regulation - Liquidity" contained herein.


     In  December  1995  the  Company   reclassified  its  entire  portfolio  of
investment  and  mortgage-backed  securities to the available for sale category.
This reclassification was made in response to a one time transfer allowed by the
Financial Accounting Standards Board and the various federal banking regulators.
See Note 1(d) of the Notes to Consolidated Financial Statements contained in the
Annual Report.


     Federally  chartered  savings  institutions have the authority to invest in
various types of liquid assets,  including  United States Treasury  obligations,
securities  of various  federal  agencies,  certain  certificates  of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements  and  federal  funds.  Subject  to  various  restrictions,  federally
chartered savings  institutions may also invest their assets in investment grade
commercial  paper and corporate  debt  securities  and mutual funds whose assets
conform to the investments  that a federally  chartered  savings  institution is
otherwise authorized to make directly.


     Generally,  the  investment  policy of the Company is to invest funds among
various  categories of investments and maturities  based upon the Company's need
for liquidity, to achieve the proper balance between its desire to minimize risk
and maximize  yield,  to provide  collateral  for  borrowings and to fulfill the
Company's asset/liability management policies. To date, the Company's investment
strategy  has been  directed  toward  high-quality  mortgage-backed  securities.
Substantially  all of the  mortgage-backed  securities  owned by the Company are
issued, insured or guaranteed either directly or indirectly by a federal agency.
At December  31,  1996,  all of the  Company's  securities  were  classified  as
available for sale. The fair market value  (excluding  FHLB stock) and amortized
cost of the  Company's  securities  at December 31, 1996 was $200.5  million and
$200.7  million,  respectively.  For  additional  information  on the  Company's
securities,  see Note 4 of the Notes to Consolidated Financial Statements in the
Annual Report.

<PAGE>
     Mortgage-backed  securities generally increase the quality of the Company's
assets by virtue of the insurance or guarantees  that back them. Such securities
are more liquid than individual  mortgage loans and may be used to collateralize
borrowings or other  obligations  of the Company.  At December 31, 1996,  $113.8
million or 72.8% of the  Company's  mortgage-backed  securities  were pledged to
secure various obligations of the Company.


     While mortgage-backed securities carry a reduced credit risk as compared to
whole  loans,  such  securities  remain  subject to the risk that a  fluctuating
interest  rate  environment,  along with other  factors  such as the  geographic
distribution of the underlying  mortgage loans, may alter the prepayment rate of
such mortgage loans and so affect both the prepayment  speed, and value, of such
securities.  The prepayment risk associated with  mortgage-backed  securities is
monitored periodically,  and prepayment rate assumptions adjusted as appropriate
to   update   the   Company's   mortgage-backed    securities   accounting   and
asset/liability  reports.   Classification  of  the  Company's   mortgage-backed
securities portfolio as available for sale is designed to minimize that risk.


     At  December  31,  1996,  the  contractual  maturity of 88.8% of all of the
Company's  mortgage-backed  securities  was in excess of ten  years.  The actual
maturity  of the  mortgage-backed  security  is  typically  less than its stated
maturity due to prepayments of the underlying  mortgages.  Prepayments  that are
different than anticipated will affect the yield to maturity. The yield is based
upon the interest income and the amortization of any premium or discount related
to  the  mortgage-backed   security.   In  accordance  with  generally  accepted
accounting principles,  premiums and discounts are  amortized/accreted  over the
estimated lives of the securities,  which decrease and increase interest income,
respectively.    The    prepayment    assumptions    used   to   determine   the
amortization/accretion  period for  premiums  and  discounts  can  significantly
affect the yield of the  mortgage-backed  security,  and these  assumptions  are
reviewed  periodically to reflect actual  prepayments.  Although  prepayments of
underlying  mortgages  depend on many factors,  including the type of mortgages,
the  coupon  rate,  the  age of  mortgages,  the  geographical  location  of the
underlying  real estate  collateralizing  the  mortgages  and general  levels of
market  interest  rates,  the  difference  between  the  interest  rates  on the
underlying mortgages and the prevailing mortgage interest rates generally is the
most  significant  determinant  of the rate of  prepayments.  During  periods of
falling mortgage interest rates, if the coupon rate of the underlying  mortgages
exceeds  the  prevailing  market  interest  rates  offered for  mortgage  loans,
refinancing generally increases and accelerates the prepayment of the underlying
mortgages and the related security. Under such circumstances, the Company may be
subject  to  reinvestment   risk  because  to  the  extent  that  the  Company's
mortgage-backed  securities  amortize  or prepay  faster than  anticipated,  the
Company  may  not be able to  reinvest  the  proceeds  of  such  repayments  and
prepayments at a comparable rate.

<PAGE>
     The following table sets forth the composition of the Company's  securities
at the dates indicated.

<TABLE>
<CAPTION>
                                                                            December 31,
                                      -----------------------------------------------------------------------------------
                                                1996                         1995                        1994
                                      -----------------------------------------------------------------------------------
                                        Carrying                    Carrying                    Carrying          
                                        Value (1)    %of Total      Value (1)     %of Total     Value (1)     %of Total
                                      ------------    --------    ------------     --------    -----------     --------
<S>                                   <C>                <C>        <C>             <C>        <C>              <C>
Securities:
 Federal Agency Obligations            $   43,773        21.65%      $  9,967        13.06%     $ 10,000         18.17%
 Municipal Bonds                              505         0.25%           ---         ----%          239          0.43%
 Other investment securities (2)              ---         ----%        11,422        14.97%       16,635         30.22%
 Mortgage-backed securities               156,261        77.10%        53,033        69.49%       26,516         48.17%
                                      -----------     --------     ----------      --------    ---------       --------
 Total securities                         200,539        99.00%        74,422        97.52%       53,390         96.99%
FHLB stock                                  2,029         1.00%         1,892         2.48%        1,656          3.01%
                                      -----------     --------     ----------      --------    ---------       --------
 Total securities, and                  $ 202,568       100.00%     $  76,314       100.00%    $  55,046        100.00%
FHLB stock                             ==========      ========    ==========      ========    =========       ========

 Other interest-earning assets:
   Interest-bearing deposits with banks $   2,051        31.31%     $   5,259         6.39%     $    470           6.65%
   Federal Funds Sold                       4,500        68.69%        77,100        93.61%        6,600          93.35%
                                      -----------      --------    ----------      --------   ----------       --------
       Total                            $   6,551       100.00%     $  82,359       100.00%     $  7,070         100.00%
                                       ==========      ========    ==========      ========    =========       ========

<FN>
     ------------------------------------- 
(1)At  December 31, 1996 and 1995 debt security are  classified as available for
sale and are carried at fair value, and at December 31, 1994 debt securities are
classified as held to maturity and are carried at amortized cost. The FHLB stock
is non-marketable and accordingly is carried at cost.

(2)Primarily  comprised of debt  securities of Fortune 500  companies  initially
rated A or better.  These  securities  generally  contain greater risk than U.S.
Government securities and Federal agency obligations.
</FN>
</TABLE>

<PAGE>
     The composition and contractual maturities of the securities portfolio (all
of which are  categorized  as available  for sale),  excluding  FHLB stock,  are
indicated in the following table. The Company's securities portfolio at December
31, 1996,  contained no securities of any issuer with an aggregate book value in
excess of 10% of the  Company's  equity,  excluding  those  issued by the United
States  Government or its agencies.  Securities are stated at their  contractual
maturity date and does not reflect the effects of possible prepayments.
<TABLE>
<CAPTION>
                                                                     December 31, 1996
                               ---------------------------------------------------------------------------------------
                                                Over One       Over Five
                                   One Year    Year through   Years through    Over
                                    or less    Five Years      Ten Years     10 Years    Total Investment Securities
                               ---------------------------------------------------------------------------------------
                               Amortized Cost Amortized Cost Amortized Cost Amortized Cost Amortized Cost Fair  Value
                               ---------------------------------------------------------------------------------------
                                                                 (Dollars in Thousands)

<S>                              <C>            <C>            <C>            <C>            <C>            <C>
Federal agency obligations       $    ---       $ 18,000       $ 13,000       $ 12,968       $ 43,968       $ 43,773
Other investment securities           ---            250            250            ---            500            505
Mortgage-backed securities            ---         11,044          6,403        138,744        156,191        156,261
                                  -------        -------        -------        -------        -------        -------
Total investment securities      $    ---       $ 29,294       $ 19,653       $151,712       $200,659       $200,539
                                  =======        =======        =======        =======        =======        =======
Weighted average yield ....          ----%          5.99%          6.99%          7.72%          7.40%         7.40%
</TABLE>


Sources of Funds

     General

     The  Company's   primary   sources  of  funds  are  deposits,   borrowings,
amortization  and  prepayment of loan and  mortgage-backed  security  principal,
maturities of investment securities,  short-term investments, and funds provided
from operations.


      Deposit

     The Company offers a variety of deposit accounts having a range of interest
rates and terms.  The  Company's  deposits  consist of savings  accounts,  money
market  accounts,  transaction  accounts,  and  certificate  accounts  currently
ranging in terms  from 91 days to 60  months.  The  Company  primarily  solicits
deposits  from its primary  market area and at December 31,  1996,  did not have
brokered deposits. The Company relies primarily on competitive pricing policies,
advertising  and  customer  service to attract and retain  these  deposits.  The
Company  has  utilized  premiums  and  promotional  gifts  for new  accounts  in
connection with the opening of new branches or with club accounts.  At times the
Company also uses small advertising give-aways in the aisles of the supermarkets
where it maintains branches. For information regarding average balances and rate
information on deposit accounts,  see  "Management's  Discussion and Analysis of
Financial  Condition  and Results of  Operations"  in the Annual  Report and for
information  on the dollar  amount of  deposits  in the  various  deposit  types
offered  by the  Company,  see  Note 8 of the  Notes to  Consolidated  Financial
Statements in the Annual Report.

<PAGE>

     The flow of  deposits  is  influenced  significantly  by  general  economic
conditions,   changes  in  money  market  and  prevailing  interest  rates,  and
competition.  The variety of deposit accounts offered by the Company has allowed
it to be  competitive  in  obtaining  funds and to respond with  flexibility  to
changes  in  consumer  demand.  The  Company  has  become  more  susceptible  to
short-term fluctuations in deposit flows, as customers have become more interest
rate conscious.  The Company manages the pricing of its deposits in keeping with
its asset/liability management, liquidity and profitability objectives. Based on
its experience,  the Company believes that its savings accounts, and transaction
accounts are relatively stable sources of deposits.  However, the ability of the
Company to attract and  maintain  money market  accounts,  and  certificates  of
deposit and the rates paid on these  deposits  have been and will continue to be
significantly affected by market conditions.


     The following  table sets forth the savings flows at the Company during the
periods indicated.  The net increase in deposits for the year ended December 31,
1995,  was primarily the result of the Company's  having opened two new branches
in November 1994 and May 1995 and the  Company's  decision to raise the interest
rates offered on six month  certificates of deposit in order to replace borrowed
funds.  Management  believes  that the decrease in deposits  during 1996 was the
result, in part, to some of the Bank's depositors deciding to pursue alternative
opportunities,  such as stock mutual funds,  with a portion of their  investable
funds.


                                Years Ended December 31,
                            --------------------------------
                                1996      1995       1994
                            ----------  ---------  ---------
                                  (Dollars in thousands)

Opening balance               $311,238  $293,152   $294,780
Deposits                       860,011   841,042    807,373
Withdrawals                    885,591   835,404    818,885
Interest credited               12,424    12,448      9,884
                            ==========  =========  =========
Ending balance                $298,082  $311,238   $293,152
                            ==========  =========  =========

Net increase (decrease)       ($13,156)  $18,086    ($1,628)
                            ===========  ========  =========

Percent increase (decrease)     (4.23%)     6.17%    (0.55%)
                            ===========  ========  =========
<PAGE>


      The following table shows rate and maturity  information for the Company's
certificates of deposit as of December 31, 1996.

<TABLE>
<CAPTION>

Certificate Accounts          0.00-     4.01 -     6.01 -    8.01 -              Percent
Maturing in Quarter Ending:   4.00%     6.00%       8.00   or greater   Total   of Total
----------------------------------------------------------------------------------------

<S>                        <C>        <C>        <C>        <C>        <C>         <C>
March 31, 1997             $    979   $ 33,387   $  1,035   $    ---   $ 35,401     23.30%
June 30, 1997                     9     22,256        573        ---     22,838     15.03%
September 30, 1997              ---     17,006      1,625        ---     18,631     12.26%
December 31, 1997                 6     13,251        931        ---     14,188      9.34%
March 31, 1998                  ---     19,332        991        ---     20,323     13.38%
June 30, 1998                   ---      9,384      2,668        ---     12,052      7.93%
September 30, 1998              ---      3,220        372        ---      3,592      2.36%
December 31, 1998               ---      2,407         23        ---      2,430      1.60%
March 31, 1999                  ---      1,879        894        ---      2,773      1.83%
June 30, 1999                   ---      1,758        880        ---      2,638      1.74%
September 30, 1999              ---      2,326        167        ---      2,493      1.64%
December 31, 1999               ---      1,287      1,132        ---      2,419      1.59%
Thereafter                      ---      3,373      8,781        ---     12,154      8.00%

Total                      $    994   $130,866   $ 20,072   $    ---   $151,932    100.00%
                           ========   ========   ========   ========   ========    =======
Percent of Total               0.65%     86.13%     13.21%      ----%    100.00%
                           ========   ========   ========   ========   ========
</TABLE>

     The following table  indicates the amount of the Company's  certificates of
deposit by time remaining until maturity as of December 31, 1996.

<TABLE>
<CAPTION>
                                                             Maturity
                                                    Over       Over
                                        3 Months    3 to 6    6 to 12     Over
                                         or Less    Months     Months   12 Months    Total
                                       ---------   --------   --------   --------   --------
                                                          (In thousands)
<S>                                      <C>        <C>        <C>        <C>       <C>
Certificates of deposit
less than $100,000                       $34,114    $21,591    $29,918    $55,109   $140,732

Certificates of deposit
of $100,000 or more                        1,287      1,247      2,901      5,765     11,200
                                       ---------   --------   --------   --------   --------

Total certificates of deposit            $35,401    $22,838    $32,819    $60,874   $151,932
                                       =========   ========   ========   ========   ========
</TABLE>

<PAGE>

     Borrowings

     Although  deposits are the Company's primary source of funds, the Company's
policy  generally  has been to utilize  borrowings  when they are a less  costly
source of funds, can be invested at a positive  interest rate spread or when the
Company needs additional funds to satisfy loan demand.


     The Company's  borrowings  historically have consisted of advances from the
FHLB of New York. Such advances can be made pursuant to several different credit
programs,  each of which has its own interest rate and range of  maturities.  At
December 31, 1996, the Company had $6 million in FHLB advances. During 1996, the
Company significantly increased its other borrowings by $102.8 million. See Note
9 of the Notes to  Consolidate  Financial  Statements  contained  in the  Annual
Report.  These  borrowings were used to purchase various  investments  including
Federal  agency   obligations   and   mortgage-backed   securities   which  were
simultaneously  pledged as securities  sold under  agreements to repurchase.  At
December 31, 1996,  pledged  securities  totaled  $113.8  million.  The positive
interest rate spread  between these volumes of  investments  and  borrowings has
produced an increase of approximately $1.4 million in net interest income with a
narrowing in the Company's  overall net interest  margin from 3.87% for the year
ended  December  31, 1995 to 3.66% for the year ended  December  31,  1996.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Operating Results" contained in the Annual Report.


      The following table sets forth the maximum  month-end  balance and average
balance of FHLB  advances,  securities  sold under  agreements to repurchase and
other borrowings for the periods indicated.

                                                      Years Ended December 31,
                                                   -----------------------------
                                                     1996      1995      1994
                                                   --------  --------  --------
                                                            (In thousands)
Maximum Balance:
FHLB Advances                                      $  28,000   $15,000   $15,000
Securities sold under agreements to repurchase       102,780     4,000     4,000

Average Balance:
FHLB Advances                                          9,757     3,922     4,068
Securities sold under agreements to repurchase        57,815       958     1,403
<PAGE>

The  following  table  sets  forth  certain  information  as  to  the  Company's
borrowings at the dates indicated:


                                                             December 31,
                                                   -----------------------------
                                                     1996      1995      1994
                                                   --------  --------  --------
                                                       (Dollars in thousands)

FHLB advances                                       $  6,000  $    --- $  15,000
Securities sold under agreements to repurchase       102,780       ---     4,000
                                                   ---------  --------  --------
Total borrowings                                    $108,780  $    --- $  19,000
                                                   =========  ========  ========

Weighted average interest rate of FHLB advances        5.30%     ----%     5.65%

Weighted average interest rate of securities sold
  under agreements to repurchase                       5.96%     ----%     5.50%




Subsidiary and Other Activities


     General

     As a federally chartered savings association,  the Bank is permitted by OTS
regulations  to invest up to 2% of its assets,  or $9.2  million at December 31,
1996, in the stock of, or loans to, service corporation subsidiaries. As of such
date, the Bank had no investments in service corporation subsidiaries.  The Bank
may invest an  additional  1% of its assets in service  corporations  where such
additional funds are used for inner-city or community  development  purposes and
up to 50% of its total capital in conforming  loans to service  corporations  in
which it owns more than 10% of the capital stock.  Federal associations also are
permitted to invest an unlimited amount in operating subsidiaries engaged solely
in activities which a federal association may engage in directly.


     The Bank organized a single service  corporation in 1984, which is known as
ASB Insurance  Agency,  Inc.  ("ASB  Insurance").  In November 1996, the Company
purchased the service corporation from the Bank for $1,000. ASB Insurance offers
mutual funds, annuity and brokerage services through a registered  broker-dealer
to the  Company's  customers  and members of the general  public.  ASB Insurance
recognized gross revenues of $67,500 for the year ended December 31, 1996.

<PAGE>

Regulation

     General

     The Bank,  organized in 1886, is a federally  chartered  savings bank,  the
deposits of which are federally  insured and backed by the full faith and credit
of the  United  States  Government.  Accordingly,  the Bank is  subject to broad
federal regulation and oversight extending to all its operations.  The Bank is a
member of the FHLB of New York and is subject to certain  limited  regulation by
the Board of Governors of the Federal Reserve System ("Federal  Reserve Board").
As the savings and loan holding company of the Bank, the Company also is subject
to federal  regulation  and  oversight.  The  purpose of the  regulation  of the
Company  and  other  holding   companies  is  to  protect   subsidiary   savings
associations.  The  Bank is a  member  of the  Bank  Insurance  Fund,  which  is
administered  by the FDIC.  Its deposits are insured up to applicable  limits by
the FDIC. As a result, the FDIC has certain regulatory and examination authority
over the Bank.


     Certain of these  regulatory  requirements  and restrictions are discussed
below or elsewhere in this document.


     Federal Regulation of Savings Association.

     The  OTS  has   extensive   authority   over  the   operations  of  savings
associations.  As part of this authority,  the Bank is required to file periodic
reports  with the OTS and is subject to periodic  examinations  by the OTS,  its
primary  federal  banking  regulator,   and  the  FDIC.  The  last  regular  OTS
examination  of the Bank was as of December 31, 1996.  When  these  examinations
are conducted by the OTS and the FDIC, the examiners,  if they deem appropriate,
may  require  the Bank to provide  for  higher  general  or  specific  loan loss
reserves.  All savings  associations  are subject to a  semi-annual  assessment,
based upon the savings association's total assets, to fund the operations of the
OTS. The Bank's OTS  assessment for the fiscal year ended December 31, 1996, was
$89,600.


     The OTS also has extensive  enforcement  authority over all federal savings
institutions  and their holding  companies,  including the Bank and the Company.
This enforcement  authority includes,  among other things, the ability to assess
civil  money  penalties,  to issue  cease-and-desist  or  removal  orders and to
initiate  injunctive  actions.  In  general,  these  enforcement  actions may be
initiated  for  violations  of  laws  and  regulations  and  unsafe  or  unsound
practices.  Other  actions or  inactions  may provide the basis for  enforcement
action,  including the filing of  misleading  or untimely  reports with the OTS.
Except under  certain  circumstances,  public  disclosure  of final  enforcement
actions by the OTS is required.


     In addition, the investment, lending and branching authority of the Bank is
prescribed by federal laws and it is prohibited  from engaging in any activities
not permitted by such laws. For instance,  no savings  institution may invest in
non-investment  grade corporate debt  securities.  In addition,  the permissible
level of investment by federal  associations in loans secured by non-residential
real property may not exceed 400% of total capital,  except with approval of the
OTS.  Federal  savings  associations  are also  generally  authorized  to branch
nationwide. The Bank is in compliance with the noted restrictions.

<PAGE>

     The Bank's general permissible lending limit for  loans-to-one-borrower  is
equal to the  greater of  $500,000  or 15% of  unimpaired  capital  and  surplus
(except for loans fully secured by certain  readily  marketable  collateral,  in
which case this limit is increased to 25% of unimpaired capital and surplus). At
December 31, 1996,  the Bank's  lending  limit under this  restriction  was $6.9
million.  Loans fully secured by certain  readily  marketable  collateral may be
made for up to 25% of unimpaired capital and surplus, or $11.6 million. The Bank
is in compliance with the loans-to-one-borrower limitation.


     The  OTS,  as well as the  other  federal  banking  agencies,  has  adopted
guidelines  establishing  safety and soundness standards on such matters as loan
underwriting  and  documentation,  asset quality,  earnings  standards, internal
controls and audit  systems,  interest rate risk exposure and  compensation  and
other  employee  benefits.  Any  institution  which  fails to comply  with these
standards must submit a compliance plan. A failure to submit a plan or to comply
with an  approved  plan will  subject  the  institution  to further  enforcement
action.  The OTS and the other  federal  banking  agencies  have  also  proposed
additional guidelines on asset quality and earnings standards.  No assurance can
be given as to whether or in what form the proposed regulations will be adopted.


     Insurance of Accounts and Regulation by the FDIC

     The  Bank is a member  of the  BIF,  which  is  administered  by the  FDIC.
Deposits are insured up to applicable  limits by the FDIC and such  insurance is
backed by the full faith and credit of the United States Government. As insurer,
the FDIC  imposes  deposit  insurance  premiums  and is  authorized  to  conduct
examinations of and to require reporting by FDIC-insured  institutions.  It also
may prohibit any FDIC-insured institution from engaging in any activity the FDIC
determines, by regulation or order, to pose a serious risk to the FDIC. The FDIC
also  has  the  authority  to  initiate   enforcement  actions  against  savings
associations,  after giving the OTS an opportunity to take such action,  and may
terminate  the deposit  insurance  if it  determines  that the  institution  has
engaged in unsafe or unsound practices, or is in an unsafe or unsound condition.


     The FDIC's  deposit  insurance  premiums are assessed  through a risk-based
system under which all insured  depository  institutions  are placed into one of
nine  categories  and  assessed  insurance  premiums,  based upon their level of
capital and supervisory evaluation. Under the system, institutions classified as
well  capitalized  (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to  risk-weighted  assets  ("Tier 1  risk-based  capital") of at
least 6% and a risk-based  capital ratio of at least 10%) and considered healthy
pay the  lowest  premium, while  institutions  that  are  less  than  adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based  capital  ratio  of less  than  8%)  and  considered  of  substantial
supervisory concern pay the highest premium.  Risk classification of all insured
institutions is made by the FDIC semi-annually.

<PAGE>

     As is the case  with  the  SAIF,  the  FDIC is  authorized  to  adjust  the
insurance premium rates for banks that are insured by the BIF, such as Amsterdam
Savings  Bank, in order to maintain the reserve ratio of the BIF at 1.25% of BIF
insured  deposits.  As a result of the BIF reaching its statutory reserve ratio,
the FDIC revised the premium schedule for BIF insured  institutions to provide a
range of 0.04% to 0.31% of deposits  effective in the third  quarter of 1995. In
addition, the BIF rates were further revised, effective January 1996, to provide
a range of 0% to 0.27% with a minimum annual assessment of $2,000. The insurance
premiums paid by institutions insured by the Savings Association  Insurance Fund
(the "SAIF") were not adjusted,  however,  and remained at the range  previously
applicable to both BIF and SAIF insured  institutions  which was .23% to .31% of
deposits.  In addition,  BIF insured  institutions are required to contribute to
the cost if financial bonds were issued to finance the cost of resolving  thrift
failures  in the 1980s.  Until the  earlier of the year 2000 or when the BIF and
SAIF are merged, BIF deposits will only be assessed at a rate of 20% of the rate
for SAIF deposits. The rate currently set for BIF and SAIF deposits is 1.3 basis
points and 6.5 basis points, respectively.


     On September  30, 1996 federal  legislation  was enacted that  required the
SAIF to be  recapitalized  with a  one-time  assessment  on  virtually  all SAIF
insured  institutions,  equal to 65.7  basis  points  on SAIF  insured  deposits
maintained  by  those  institutions  as of March  31,  1995.  All of the  Bank's
deposits are BIF insured, and therefore,  this one-time assessment had no impact
on the Bank.



     Regulatory Capital  Requirements

     Federally insured savings  associations,  such as the Bank, are required to
maintain a minimum level of regulatory capital.  The OTS has established capital
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  for 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.


     The  capital  regulations  require  tangible  capital  of at least  1.5% of
adjusted total assets (as defined by  regulation).  Tangible  capital  generally
includes  common   shareholders'   equity  and  retained  income,   and  certain
noncumulative  perpetual  preferred stock and related income.  In addition,  all
intangible  assets,  other than a limited amount of purchased mortgage servicing
rights,  must be deducted from tangible capital for calculating  compliance with
the  requirement.  At December  31, 1996,  the Bank did not have any  intangible
assets.


     The OTS  regulations  establish  special  capitalization  requirements  for
savings associations that own subsidiaries.  In determining  compliance with the
capital requirements,  all subsidiaries engaged solely in activities permissible
for national  banks or engaged in certain other  activities  solely as agent for
its customers are  "includable"  subsidiaries  that are consolidated for capital
purposes in proportion to the association's  level of ownership.  For excludable
subsidiaries the debt and equity  investments in such  subsidiaries are deducted
from  assets  and  capital.  At December 31, 1996, the Bank had no subsidiaries.

<PAGE>

     At December 31, 1996, the Bank had tangible  capital of $46.2  million,  or
10.0% of adjusted total assets,  which is approximately  $39.3 million above the
minimum requirement of 1.5% of adjusted total assets in effect on that date.


     The capital  standards  also require  core capital  equal to at least 3% of
adjusted total assets.  Core capital generally consists of tangible capital plus
certain intangible  assets,  including a limited amount of purchased credit card
relationships.  As a result of the prompt corrective action provisions discussed
below,  however, a savings  association must maintain a core capital ratio of at
least  4%  to  be  considered  adequately  capitalized  unless  its  supervisory
condition is such to allow it to maintain a 3% ratio.  At December 31, 1996, the
Bank had no intangibles which were subject to these tests.


     At December 31, 1996, the Bank had core capital equal to $46.2 million,  or
10.0% of  adjusted  total  assets,  which is $32.4  million  above  the  minimum
leverage ratio requirement of 3% as in effect on that date.


     The OTS risk-based  requirement requires savings associations to have total
capital of at least 8% of risk-weighted  assets.  Total capital consists of core
capital,  as defined above, and  supplementary  capital.  Supplementary  capital
consists of certain  permanent  and  maturing  capital  instruments  that do not
qualify as core capital,  plus general  valuation loan and lease loss allowances
up to a maximum of 1.25% of risk-weighted  assets.  Supplementary capital may be
used to satisfy the risk-based  requirement  only to the extent of core capital.
The OTS is also  authorized  to require a savings  association  to  maintain  an
additional  amount of total capital to account for  concentration of credit risk
and the risk of non-traditional  activities.  At December 31, 1996, the Bank had
$2.5 million of general loss  reserves  included in  risk-based  capital,  which
excludes $951,000 of general loss reserves which was in excess of the maximum of
1.25% of risk-weighted assets.


     Certain  exclusions from capital and assets are required to be made for the
purpose  of  calculating  total  capital.  Such  exclusions  consist  of  equity
investments  (as  defined  by  regulation)  and that  portion  of land loans and
nonresidential  construction  loans in excess of an 80% loan-to-value  ratio and
reciprocal  holdings of  qualifying  capital  instruments.  The Bank had no such
exclusions from capital and assets at December 31, 1996.


     In determining the amount of risk-weighted  assets,  all assets,  including
certain  off-balance sheet items,  will be multiplied by a risk weight,  ranging
from 0% to 100%,  based on the risk inherent in the type of asset.  For example,
the OTS has assigned a risk weight of 50% for prudently  underwritten  permanent
one- to four-family  first lien mortgage loans not more than 90 days  delinquent
and  having a loan to value  ratio of not more  than 80% at  origination  unless
insured to such ratio by an insurer approved by the FNMA or FHLMC.

<PAGE>

     OTS regulations also require that every savings  association with more than
normal  interest  rate risk  exposure  to deduct  from its  total  capital,  for
purposes of determining compliance with such requirement, an amount equal to 50%
of its  interest-rate  risk  exposure  multiplied  by the  present  value of its
assets. This exposure is a measure of the potential decline in the net portfolio
value of a savings  association,  greater  than 2% of the  present  value of its
assets,  based upon a  hypothetical  200 basis  point  increase  or  decrease in
interest rates (whichever results in a greater decline).  Net portfolio value is
the  present  value  of  expected  cash  flows  from  assets,   liabilities  and
off-balance  sheet  contracts.  The rule  provides for a two quarter lag between
calculating  interest rate risk and recognizing any deduction from capital.  The
rule will not become  effective  until the OTS  evaluates  the  process by which
savings  associations may appeal an interest rate risk deduction  determination.
It is  uncertain  as to when  this  evaluation  may be  completed.  Any  savings
association  with less than $300 million in assets and a total  capital ratio in
excess  of 12% is  exempt  from  this  requirement  unless  the  OTS  determines
otherwise.


      On  December  31,  1996,  the  Bank had  total  capital  of $48.7  million
(including  $46.2  million  in core  capital  and  $2.5  million  in  qualifying
supplementary  capital) and  risk-weighted  assets of $198.0 million  (including
$3.0 million in converted  off-balance sheet assets);  or total capital of 24.6%
of risk-weighted  assets. This amount was $32.9 million above the 8% requirement
in effect on that date.


      The OTS and the FDIC  are  authorized  and,  under  certain  circumstances
required, to take certain actions against savings associations that fail to meet
their  capital  requirements.  The OTS is  generally  required to take action to
restrict the activities of an "undercapitalized  association" (generally defined
to be  one  with  less  than  either  a 4%  core  capital  ratio,  a 4%  Tier  1
risked-based  capital  ratio  or an  8%  risk-based  capital  ratio).  Any  such
association  must  submit a  capital  restoration  plan and  until  such plan is
approved by the OTS may not increase its assets,  acquire  another  institution,
establish a branch or engage in any new  activities,  and generally may not make
capital   distributions.   The  OTS  is  authorized  to  impose  the  additional
restrictions that are applicable to significantly undercapitalized associations.


       As a  condition  to the  approval of the capital  restoration  plan,  any
company  controlling  an  undercapitalized  association  must agree that it will
enter  into  a  limited  capital  maintenance  guarantee  with  respect  to  the
institution's achievement of its capital requirements.


      Any savings  association  that fails to comply with its capital plan or is
"significantly undercapitalized" (i.e., Tier 1 risk-based or core capital ratios
of less  than 3% or a  risk-based  capital  ratio of less  than 6%) must be made
subject  to  one  or  more  of  additional   specified   actions  and  operating
restrictions  which may cover all aspects of its operations and include a forced
merger  or  acquisition  of  the   association.   An  association  that  becomes
"critically  undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly  undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator  with the concurrence of the FDIC) for a
savings  association,  with certain limited exceptions,  within 90 days after it
becomes critically  undercapitalized.  Any undercapitalized  association is also
subject to the general enforcement  authority of the OTS and the FDIC, including
the appointment of a conservator or a receiver.
<PAGE>

      The OTS is also generally  authorized to reclassify an association  into a
lower capital category and impose the  restrictions  applicable to such category
if the institution is engaged in unsafe or unsound  practices or is in an unsafe
or unsound condition.


     The  imposition by the OTS or the FDIC of any of these measures on the Bank
or the Company may have a substantial adverse effect on the Company's operations
and  profitability.  Company  shareholders  do not have preemptive  rights,  and
therefore, if the Company is directed by the OTS or the FDIC to issue additional
shares  of  Common  Stock,  such  issuance  may  result  in  the  dilution  of a
shareholder's percentage ownership of the Company.



     Limitations on Dividends and Other Capital Distributions

     OTS regulations  impose various  restrictions on savings  associations with
respect  to their  ability  to make  distributions  of  capital,  which  include
dividends,  stock  redemptions  or  repurchases,   cash-out  mergers  and  other
transactions  charged to the capital  account.  OTS regulations  also prohibit a
savings  association from declaring or paying any dividends or from repurchasing
any of its stock if, as a result,  the  regulatory  capital  of the  association
would be reduced below the amount  required to be maintained for the liquidation
account established in connection with its mutual to stock conversion.


      Generally,  savings associations,  such as the Bank, that before and after
the proposed  distribution  meet their  capital  requirements,  may make capital
distributions  during  any  calendar  year  equal to the  greater of 100% of net
income  for the  year-to-date  plus 50% of the amount by which the lesser of the
association's   tangible,   core  or  risk-based  capital  exceeds  its  capital
requirement  for such  capital  component,  as measured at the  beginning of the
calendar year, or 75% of its net income for the most recent four quarter period.
However,  an association deemed to be in need of more than normal supervision by
the OTS may have its dividend authority  restricted by the OTS. The Bank may pay
dividends in accordance with this general authority.

<PAGE>

     Savings  associations  proposing to make any capital distribution need only
submit  written  notice to the OTS 30 days prior to such  distribution.  Savings
associations  that do not,  or would  not meet  their  current  minimum  capital
requirements following a proposed capital distribution, however, must obtain OTS
approval  prior  to  making  such  distribution.  The  OTS  may  object  to  the
distribution  during that 30-day  notice  period  based on safety and  soundness
concerns. See "- Regulatory Capital Requirements."


     The OTS has  proposed  regulations  that would  revise the current  capital
distribution  restrictions.  Under the proposal a savings association may make a
capital  distribution  without notice to the OTS (unless it is a subsidiary of a
holding  company)  provided  that  it  has a  CAMEL  1 or 2  rating,  is  not of
supervisory concern, and would remain adequately  capitalized (as defined in the
OTS prompt corrective action regulations)  following the proposed  distribution.
Savings  associations  that would remain  adequately  capitalized  following the
proposed  distribution but do not meet the other noted  requirements must notify
the OTS 30 days prior to  declaring  a capital  distribution.  The OTS stated it
will generally regard as permissible that amount of capital  distributions  that
do not exceed 50% of the institution's excess regulatory capital plus net income
to date during the calendar year. A savings  association  may not make a capital
distribution  without  prior  approval  of  the  OTS  and  the  FDIC  if  it  is
undercapitalized  before,  or as a result of, such a distribution.  As under the
current  rule,  the  OTS  may  object  to a  capital  distribution  if it  would
constitute  an unsafe  or  unsound  practice.  No  assurance  may be given as to
whether or in what form the regulations may be adopted.


     Liquidity

     All savings  associations,  including the Bank, are required to maintain an
average daily balance of liquid assets equal to a certain  percentage of the sum
of its average daily balance of net withdrawable deposit accounts and borrowings
payable  in one year or less.  For a  discussion  of what the Bank  includes  in
liquid assets, see "Management's  Discussion and Analysis of Financial Condition
and Results of Operations Liquidity and Capital Resources" in the Annual Report.
This liquid asset ratio  requirement  may vary from time to time (between 4% and
10%)  depending  upon  economic  conditions  and  savings  flows of all  savings
associations. At the present time, the minimum liquid asset ratio is 5%.


     In addition,  short-term liquid assets (e.g.,  cash, certain time deposits,
certain bankers  acceptances and short-term United States Treasury  obligations)
currently must constitute at least 1% of the association's average daily balance
of net withdrawable  deposit accounts and current  borrowings.  Penalties may be
imposed  upon   associations   for  violations  of  either  liquid  asset  ratio
requirement.  At  December  31,  1996,  the Bank  was in  compliance  with  both
requirements,  with an  overall  liquid  asset  ratio of 7.51% and a  short-term
liquid assets ratio of 1.61%.


     Accounting

     An OTS policy statement  applicable to all savings  associations  clarifies
and re-emphasizes that the investment  activities of a savings  association must
be  in  compliance  with  approved  and  documented   investment   policies  and
strategies,  and must be accounted for in accordance with GAAP. Under the policy
statement,  management  must support its  classification  of and  accounting for
loans and securities (i.e.,  whether held for investment,  sale or trading) with
appropriate  documentation.  OTS accounting regulations,  which may be made more
stringent  than GAAP by the OTS,  require  that  transactions  be  reported in a
manner that best reflects their underlying  economic substance and inherent risk
and that financial reports must incorporate any other accounting  regulations or
orders  prescribed  by the OTS.  The Bank is in  compliance  with these  amended
rules.

<PAGE>

     Qualified  Thrift  Lender Test

     All  savings  associations,  including  the Bank,  are  required  to meet a
qualified  thrift  lender  ("QTL") test to avoid certain  restrictions  on their
operations. This test requires a savings association to have at least 65% of its
portfolio assets (as defined by regulation) in qualified thrift investments on a
monthly  average  for nine out of every 12  months  on a  rolling  basis.  As an
alternative,  the savings  association  may  maintain 60% of its assets in those
assets  specified under Section  7701(a)(19) of the Internal Revenue Code. Under
either test, such assets primarily consist of residential  housing related loans
and investments.  At December 31, 1996, the Bank met the test and has always met
the test since its effectiveness.


     Any savings  association  that fails to meet the QTL test must convert to a
national bank charter,  unless it requalifies as a QTL and thereafter  remains a
QTL. If an  association  does not  requalify  and  converts  to a national  bank
charter,  it must remain  SAIF-insured  until the FDIC permits it to transfer to
the BIF.  If such an  association  has not yet  requalified  or  converted  to a
national  bank,  its  new  investments  and  activities  are  limited  to  those
permissible  for both a  savings  association  and a  national  bank,  and it is
limited to national bank branching  rights in its home state.  In addition,  the
association is immediately  ineligible to receive any new FHLB borrowings and is
subject to national  bank limits for payment of dividends.  If such  association
has not requalified or converted to a national bank within three years after the
failure,  it must  divest  of all  investments  and  cease  all  activities  not
permissible  for a  national  bank.  In  addition,  it must repay  promptly  any
outstanding FHLB borrowings,  which may result in prepayment  penalties.  If any
association  that fails the QTL test is  controlled by a holding  company,  then
within one year after the failure,  the holding  company must register as a bank
holding  company  and  become  subject  to  all  restrictions  on  bank  holding
companies. See "- Holding Company Regulation."


     Community Reinvestment Act

     Under  the  Community   Reinvestment   Act  ("CRA"),   every  FDIC  insured
institution has a continuing and affirmative obligation consistent with safe and
sound banking  practices to help meet the credit needs of its entire  community,
including  low and moderate  income  neighborhoods.  The CRA does not  establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's  discretion to develop the types of products and services
that it believes are best suited to its particular  community,  consistent  with
the CRA. The CRA requires the OTS, in  connection  with the  examination  of the
Bank,  to assess the  institution's  record of meeting  the credit  needs of its
community  and to take such record  into  account in its  evaluation  of certain
applications, such as a merger or the establishment of a branch, by the Bank. An
unsatisfactory  rating may be used as the basis for the denial of an application
by the OTS.

<PAGE>

      The federal banking agencies, including the OTS, have recently revised the
CRA regulations and the methodology for determining an institution's  compliance
with the CRA. Due to the heightened attention being given to the CRA in the past
few years,  the Bank may be required to devote  additional  funds for investment
and  lending  in its  local  community.  The  Bank  was  last  examined  for CRA
compliance in June 1996 and received a rating of "satisfactory".


     Transactions with Affiliates

     Generally,  transactions  between a savings association or its subsidiaries
and its affiliates  are required to be on terms as favorable to the  association
as transactions with non-affiliates. In addition, certain of these transactions,
such  as  loans  to  an  affiliate,  are  restricted  to  a  percentage  of  the
association's  capital.  Affiliates  of the Bank  include  the  Company  and any
company  which is under  common  control with the Bank.  In addition,  a savings
association may not lend to any affiliate  engaged in activities not permissible
for a bank holding  company or acquire the  securities of most  affiliates.  The
Bank's  subsidiaries  are  not  deemed  affiliates;  however,  the  OTS  has the
discretion to treat subsidiaries of savings associations as affiliates on a case
by case basis.


     Certain  transactions with directors,  officers or controlling  persons are
also  subject to  conflict of interest  regulations  enforced by the OTS.  These
conflict of interest  regulations and other statutes also impose restrictions on
loans to such persons and their  related  interests.  Among other  things,  such
loans must be made on terms  substantially the same as for loans to unaffiliated
individuals.


     Holding  Company  Regulation

     The  Company  is a unitary  savings  and loan  holding  company  subject to
regulatory  oversight  by the OTS. As such,  the Company is required to register
and file reports with the OTS and is subject to regulation  and  examination  by
the OTS. In addition, the OTS has enforcement authority over the Company and its
non-savings  association  subsidiaries,  which  authority  permits  the  OTS  to
restrict or prohibit  activities that are determined to be a serious risk to the
subsidiary savings association.


<PAGE>
     As a unitary savings and loan holding company, the Company generally is not
subject to activity  restrictions.  If the Company  acquires  control of another
savings association as a separate subsidiary, it would become a multiple savings
and loan  holding  company,  and the  activities  of the  Company and any of its
subsidiaries  (other  than the Bank or any  savings  association)  would  become
subject to activity  restrictions unless such other associations each qualify as
a QTL and were acquired in a supervisory acquisition.


     If the Bank fails the QTL test, the Company must obtain the approval of the
OTS prior to  continuing  after such  failure,  directly  or  through  its other
subsidiaries,  any  business  activity  other than those  approved  for multiple
savings and loan holding companies or their  subsidiaries.  In addition,  within
one year of such failure the Company must  register as, and will become  subject
to, the  restrictions  applicable  to bank  holding  companies.  The  activities
authorized  for a bank holding  company are more limited than are the activities
authorized  for a unitary or multiple  savings  and loan  holding  company.  See
"Qualified Thrift Lender Test."


     The Company must obtain approval from the OTS before acquiring  control of
any savings  association.  Such  acquisitions  are generally  prohibited if they
result in a  multiple  savings  and loan  holding  company  controlling  savings
associations in more than one state. However,  such interstate  acquisitions are
permitted based on specific state authorization or in a supervisory  acquisition
of a failing savings association.


     Federal  Securities  Law

     The stock of the Company is  registered  with the SEC under the  Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Company is subject to
the  information,  proxy  solicitation,  insider trading  restrictions and other
requirements of the SEC under the Exchange Act.


     Company  stock  held by persons  who are  affiliates  (generally  officers,
directors and principal  shareholders)  of the Company may not be resold without
registration or unless sold in accordance with certain resale  restrictions  set
forth  under Rule 144 of the  Securities  Act. If the  Company  meets  specified
current public information  requirements,  each affiliate of the Company is able
to sell in the public market,  without registration,  a limited number of shares
in any three-month period.


     Federal Reserve System

     The Federal Reserve Board requires all depository  institutions to maintain
non-interest  bearing  reserves at specified  levels  against their  transaction
accounts (primarily checking, NOW and Super NOW checking accounts).  At December
31,  1996,  the Bank was in  compliance  with these  reserve  requirements.  The
balances  maintained  to meet the  reserve  requirements  imposed by the Federal
Reserve Board may be used to satisfy liquidity  requirements that may be imposed
by the OTS. See "Liquidity."

<PAGE>

      Savings  associations  are  authorized to borrow from the Federal  Reserve
Bank  "discount   window,"  but  Federal  Reserve  Board   regulations   require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Bank.


     Federal Home Loan Bank System

     The Bank is a member of the FHLB of New York,  which is one of 12  regional
FHLBs  that   administers   the  home  financing   credit  function  of  savings
associations.  Each FHLB  serves as a reserve  or central  bank for its  members
within its assigned  region.  It is funded  primarily from proceeds derived from
the sale of  consolidated  obligations  of the FHLB  System.  It makes  loans to
members (i.e.,  advances) in accordance with policies and procedures established
by the board of directors of the FHLB, which are subject to the oversight of the
Federal  Housing  Finance  Board.  All advances from the FHLB are required to be
fully secured by  sufficient  collateral as determined by the FHLB. In addition,
all long-term  advances are required to be used to provide funds for residential
home financing.


     As a member,  the Bank is required to purchase  and  maintain  stock in the
FHLB of New York. At December 31, 1996, the Bank had $2.0 million in FHLB stock,
which was in  compliance  with this  requirement.  In past  years,  the Bank has
received  substantial  dividends on its FHLB stock.  Over the past five calendar
years such dividends have averaged 8.0% and were $130,000 or 6.4% for 1996.

     Under  federal  law  the  FHLBs  are  required  to  provide  funds  for the
resolution  of  troubled  savings  associations  and to  contribute  to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income  housing
projects.  These  contributions  have  affected  adversely  the  level  of  FHLB
dividends  paid and could continue to do so in the future.  These  contributions
could also have an adverse  effect on the value of FHLB stock in the  future.  A
reduction  in value of the  Bank's  FHLB  stock may  result  in a  corresponding
reduction in the Bank's capital.


     Federal Taxation


     Savings  associations such as the Bank that meet certain definitional tests
relating to the  composition  of assets and other  conditions  prescribed by the
Internal  Revenue  Code of 1986,  as amended  (the  "Code"),  are  permitted  to
establish reserves for bad debts and to make annual additions thereto which may,
within specified  formula limits,  be taken as a deduction in computing  taxable
income for  federal  income  tax  purposes.  The amount of the bad debt  reserve
deduction is computed under the experience method.  Under the experience method,
the bad debt reserve  deduction is an amount  determined  under a formula  based
generally upon the bad debts actually sustained by the savings  association over
a period of years.

<PAGE>

      In addition to the regular  income tax,  corporations,  including  savings
associations  such as the Bank,  generally  are  subject  to a minimum  tax.  An
alternative  minimum tax is imposed at a minimum tax rate of 20% on  alternative
minimum  taxable  income,  which is the sum of a  corporation's  regular taxable
income (with certain  adjustments) and tax preference  items, less any available
exemption.  The alternative  minimum tax is imposed to the extent it exceeds the
corporation's  regular  income tax and net  operating  losses can offset no more
than 90% of alternative  minimum  taxable  income.  For taxable years  beginning
after 1986 and before 1996, corporations, including savings associations such as
the Bank, are also subject to an environmental  tax equal to 0.12% of the excess
of alternative  minimum taxable income for the taxable year (determined  without
regard to net operating losses and the deduction for the environmental tax) over
$2 million.


     To the extent prior years earnings  appropriated to a savings association's
bad debt reserves for "qualifying  real property loans" and deducted for federal
income tax purposes exceed the allowable amount of such reserves  computed under
the  experience  method  and to the  extent  of the  association's  supplemental
reserves for losses on loans  ("Excess"),  such Excess may not,  without adverse
tax  consequences,  be  utilized  for the  payment  of cash  dividends  or other
distributions   to  a  shareholder   (including   distributions  on  redemption,
dissolution or  liquidation) or for any other purpose (except to absorb bad debt
losses).  As of December 31, 1996,  the Bank's  Excess for tax purposes  totaled
approximately $162,000.

     The Bank and its subsidiaries file consolidated  federal income tax returns
on a fiscal  year basis  using the  accrual  method of  accounting.  The Company
intends to file  consolidated  federal  income tax returns with the Bank and its
subsidiaries.


     The Bank and its  consolidated  subsidiaries  have been  audited by the IRS
with respect to  consolidated  federal income tax returns  through  December 31,
1988.  With respect to years examined by the IRS, either all  deficiencies  have
been satisfied or sufficient  reserves have been established to satisfy asserted
deficiencies.  In the  opinion  of  management,  any  examination  of still open
returns  (including  returns of subsidiaries  and  predecessors  of, or entities
merged  into,  the Bank)  would not result in a  deficiency  which  could have a
material  adverse  effect  on the  financial  condition  of  the  Bank  and  its
consolidated subsidiaries.

<PAGE>
     New York Taxation

     The Bank and its  subsidiaries  that operate in New York are subject to New
York state taxation.  The Bank is subject to the New York State Franchise Tax on
Banking  Corporations  in an annual amount equal to the greater of (i) 9% of the
Bank's "entire net income"  allocable to New York State during the taxable year,
or (ii) the applicable  alternative  minimum tax. The alternative minimum tax is
generally the greater of (a) 0.01% of the value of the Bank's  assets  allocable
to New York State with certain modifications,  (b) 3% of the Bank's "alternative
entire net income"  allocable to New York State,  or (c) $250. In addition,  New
York also imposes a surtax of  approximately  3% on the applicable tax described
above.  The surtax is scheduled to expire in 1996.  Entire net income is similar
to federal taxable income, subject to certain modifications  (including the fact
that net  operating  losses  cannot be  carried  back or  carried  forward)  and
alternative  entire net income is equal to entire  net  income  without  certain
modifications.  The Bank and its consolidated  subsidiaries have been audited by
the New York State Department of Taxation and Finance through December 31, 1994.


     Delaware Taxation

     As a Delaware  holding  company,  the  Company is  exempted  from  Delaware
corporate  income tax but is required  to file an annual  report with and pay an
annual fee to the State of  Delaware.  The Company is also  subject to an annual
franchise tax imposed by the State of Delaware.


Competition


     The Company faces strong competition,  both in originating real estate and
other loans and in attracting  deposits.  Competition in originating real estate
loans comes primarily from other savings institutions,  commercial banks, credit
unions and mortgage  brokers  making loans secured by real estate located in the
Company's  primary market area. Other savings  institutions,  commercial  banks,
credit unions and finance  companies  provide  vigorous  competition in consumer
lending.


     The Company attracts  substantially  all of its deposits through its branch
offices,  primarily  from the  communities  in which  those  branch  offices are
located;  therefore,  competition for those deposits is principally  from mutual
funds and other savings institutions, commercial banks and credit unions located
in the same  communities.  The Company competes for these deposits by offering a
variety of deposit accounts at competitive rates, convenient business hours, and
convenient branch locations with interbranch deposit and withdrawal  privileges.
Automated teller machine facilities are also available.


Employees

      At December 31, 1996, the Company had a total of 172 employees,  including
28 part-time  employees.  The  Company's  employees are not  represented  by any
collective  bargaining group.  Management considers its employee relations to be
good.

<PAGE>

Executive Officers of the Company and the Bank Who Are Not Directors


      The following  information as to the business  experience  during the past
five years is supplied with respect to the executive officers of the Company and
the Bank who do not serve on the  Company's  or the Bank's  Board of  Directors.
There are no arrangements or  understandings  between such persons named and any
persons pursuant to which such officers were selected.


     Harold  A.  Baylor,  Jr.  Mr.  Baylor,  age 54, is  Vice President  and the
Treasurer  of the Company and the Bank,  positions  he has held with the Company
since June 1995 and with the Bank since 1990 and 1987, respectively.

     Robert Kelly.  Mr. Kelly,  age 50, is Vice President, Secretary and General
Counsel  to the  Company,  positions  he has held  with the  Company  since  its
incorporation  in June  1995.  Mr.  Kelly has been Vice  President  and  General
Counsel to the Bank since July 1994. In January 1995 he was appointed  Secretary
of the Bank.  Prior to joining the Bank in 1994, Mr. Kelly was  self-employed in
the general practice of law in the State of New York.

     Nancy S. Virkler.  Ms. Virkler,  age 47, is Vice President of Operations at
the Bank.  She was appointed Vice President in June 1994. Ms. Virkler has served
the Bank in various capacities since she began as a management trainee in 1977.

     Richard C. Edel.  Mr.  Edel,  age 47, is a Vice  President  of the Bank,  a
position  he has held since  1987.  Mr.  Edel is also  currently  serving as the
Community Reinvestment Act Officer of the Bank.

     Cynthia M. Proper.  Ms.  Proper,  age 34, was appointed  Vice President and
Director  of Lending of the Bank in July 1995.  Prior to such  appointment,  Ms.
Proper was the Director of Internal  Audit.  She also served the Bank in various
other  capacities,  primarily in the lending and savings  areas.  Ms. Proper has
been employed at the Bank since 1985.

     Michelle G. Brown. Ms. Brown, age 29, is Vice President and the Director of
Human  Resources of the Bank,  positions she has held since June 1994. Ms. Brown
joined the Bank in June 1992 as the Director of Internal Audit. Prior to joining
the Bank, Ms. Brown was a District  Financial  Examiner with the National Credit
Union Administration.



Item 2.    Description of Property


      The Company conducts its business at its main office,  eight other banking
offices and an operations office in its primary market area. The following table
sets forth information  relating to each of the Company's offices as of December
31, 1996. The Company also owns a parking lot located at 18-22 Division  Street,
Amsterdam,  New York,  which is used to service  the main  office.  The net book
value of the Company's  premises and  equipment  (including  land,  building and
leasehold  improvements  and furniture,  fixtures and equipment) at December 31,
1996 was $2.8 million. See Note 7 of Notes to Consolidated  Financial Statements
in the Annual  Report.  The Company  believes  that its current  facilities  are
adequate to meet the present and foreseeable  needs of the Bank and the Company,
subject to possible future expansion.
<PAGE>
<TABLE>
<CAPTION>
                                                                         Total
                                                 Owned    Lease       Approximate
                                       Date        or   Expiration       Square    Net Book
                                     Acquired    Leased    Date          Footage     Value
                                     --------    ------  --------       --------    -------

<C>                                     <C>     <C>          <C>         <C>         <C>
Location
Main Office:

11 Division Street                      1914     Owned        --         18,600   $  418,965
Amsterdam, New York

Branch Offices:

19 River Street                         1972     Leased     1997          2,000       19,554
Fort Plain, New York

Arterial at Fifth Avenue                1979     Owned        --          2,200      272,200
Gloversville, New York

Route 30N                               1972     Owned        --          2,700      249,828
Amsterdam, New York

Village Plaza                           1987     Leased     1997          4,000       46,643
Clifton Park, New York

Grand Union Plaza                       1988     Leased     2008          3,000      134,473
Route 50
Balston Spa, New York

Price Chopper Supermarket (1)           1994     Leased     1999            362      154,923
1640 Eastern Parkway
Schenectady, New York

Price Chopper Supermarket (1)           1995     Leased     2000            384      179,526
873 New Loudon Road
Latham, New York

Price Chopper Supermarket (1)           1995     Leased     2000            326      159,905
Sanford  Farms  Shopping Center
Amsterdam, New York

Operations Center:
35 East Main Street                     1993     Owned        --         10,800    1,148,050
Amsterdam, New York
<FN>
--------------------
(1) Banking  operations  are located inside of the  supermarkets.  Each of these
leases contains two 5 year renewal options.
</FN>
</TABLE>

     The Company  maintains an on-line data base with a service bureau servicing
financial  institutions.  The net book value of the data processing and computer
equipment utilized by the Company at December 31, 1996, was $292,473.

<PAGE>

Item 3.    Legal Proceedings


     The Company is involved as plaintiff or defendant in various  legal actions
arising in the normal  course of its  business.  While the  ultimate  outcome of
these  proceedings  cannot be  predicted  with  certainty,  it is the opinion of
management,  after  consultation  with counsel  representing  the Company in the
proceedings, that the resolution of these proceedings should not have a material
effect on the Company's results of operations.  For more  information,  see Note
13(a) of the Notes to Consolidated  Financial Statements contained in the Annual
Report.


Item 4.    Submission of Matters to a Vote of Security Holders


     No  matter  was  submitted  to a vote  of  security  holders,  through  the
solicitation  of proxies or  otherwise,  during the quarter  ended  December 31,
1996.




                                     PART II


Item 5.     Market for the Registrant's Common Stock and Related Security Holder
            Matters

      Page 58 of the Annual Report is herein incorporated by reference.


Item 6.     Selected Financial Data


      Pages 2 and 3 of the Annual Report is herein incorporated by reference.


Item 7.     Management's  Discussion  and  Analysis of Financial  Condition  and
            Results of Operations


     Pages 4  through  21  of the  Annual  Report  are  herein  incorporated  by
reference.


Item 8.     Financial Statements and Supplementary Data


     Pages 22  through  57 of the  Annual  Report  are  herein  incorporated  by
reference.


Item 9.     Changes in and  Disagreements  With  Accountants on  Accounting  and
            Financial Disclosure


     There has been no Current  Report on Form 8-K filed  within 24 months prior
to the  date of the most  recent  financial  statements  reporting  a change  of
accountants and/or reporting disagreements on any matter of accounting principle
or financial statement disclosure.

<PAGE>

                                    PART III




Item 10.     Directors and Executive Officers of the Registrant


     Information  concerning Directors of the Registrant is incorporated  herein
by reference from the  Corporation's  definitive  Proxy Statement for the Annual
Meeting  of  Shareholders  scheduled  to be  held on May 23,  1997,  except  for
information  contained  under  the  heading  "Compensation  Committee  Report on
Executive  Compensation" and "Shareholder  Return Performance  Presentation",  a
copy of which  will be filed  not  later  than 120 days  after  the close of the
fiscal year.


Item 11.     Executive Compensation


     Information  concerning  executive  compensation is incorporated  herein by
reference  from the  Corporation's  definitive  Proxy  Statement  for the Annual
Meeting  of  Shareholders  scheduled  to be  held on May 23,  1997,  except  for
information  contained  under  the  heading  "Compensation  Committee  Report on
Executive  Compensation" and "Shareholder  Return Performance  Presentation",  a
copy of which  will be filed  not  later  than 120 days  after  the close of the
fiscal year.


 Item 12.     Security  Ownership of Certain  Beneficial  Owners and Management

     Information  concerning security ownership of certain beneficial owners and
management is incorporated herein by reference from the Corporation's definitive
Proxy Statement for the Annual Meeting of  Shareholders  scheduled to be held on
May 23, 1997, except for information  contained under the heading  "Compensation
Committee Report on Executive  Compensation" and "Shareholder Return Performance
Presentation",  a copy of which  will be filed not later than 120 days after the
close of the fiscal year.


Item 13.     Certain Relationships and Related Transactions


     Information   concerning   certain   relationships   and  transactions   is
incorporated  herein  by  reference  from  the  Corporation's  definitive  Proxy
Statement for the Annual Meeting of Shareholders scheduled to be held on May 23,
1997, except for information contained under the heading "Compensation Committee
Report  on  Executive   Compensation"   and  "Shareholder   Return   Performance
Presentation",  a copy of which  will be filed not later than 120 days after the
close of the fiscal year.


<PAGE>


                                     PART IV




Item 14.     Exhibits,  Financial  Statement  Schedules, and Reports on Form 8-K



     (a) (1) Financial Statements:


     The following  information  appearing in the Registrant's Annual  Report to
Shareholders  for the year ended December 31, 1996, is incorporated by reference
in this Form 10-K Annual Report as Exhibit 13.

                                                                      Pages in
                                                                       Annual
     Annual Report Section                                             Report
     ---------------------                                            --------

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

Consolidated Statements of Financial Condition at
     December 31, 1996 and 1995 .....................................      23

Consolidated Statements of Operations for the years ended
     December 31, 1996, 1995 and 1994 ...............................      24

Consolidated Statements of Changes in Shareholders' Equity for 
     the years ended December 31, 1996, 1995 and 1994 ...............      25

Consolidated Statements of Cash Flows for the years ended
     December 31, 1996, 1995 and 1994 ...............................   26-27

Notes to Consolidated Financial Statements ..........................   28-57





     (a) (2)  Financial Statement Schedules:


     All financial  statement schedules have been omitted  as the information is
not required under the related instructions or is inapplicable.


<PAGE>
     (a) (3)  Exhibits:

<TABLE>
<CAPTION>
                                                                  Reference to 
Regulation                                                      Prior Filing or
S-K Exhibit                                                      Exhibit Number
  Number                  Document                              Attached Hereto
<S>     <C>                                                           <C>      
2       Plan of acquisition, reorganization, arrangement,             None     
        liquidation or succession
3       Certificate of Incorporation and Bylaws                        *       
4       Instruments defining the rights of security                    *       
        holders, including indentures
9       Voting trust agreement                                        None     
10.1    Employment Agreements of Robert J. Brittain,                   *       
        Harold A. Baylor, Jr., Richard C. Edel, Nancy
        S. Virkler, Cynthia M. Proper and Robert Kelly
10.2    Employee Stock Ownership Plan                                  *       
11      Statement re: computation of per share earnings               **       
12      Statement re: computation or ratios                       Not required 
13      Annual Report to Security Holders                              13      
16      Letter re: change in certifying accountants                   None     
18      Letter re: change in accounting principles                    None     
21      Subsidiaries of Registrant                                     21      
22      Published report regarding matters submitted to               None     
          vote of security holders
23      Consent of experts and counsel                                None     
24      Power of Attorney                                         Not Required 
27      Financial Data Schedule                                        27      
99      Additional exhibits                                           None     

<FN>
-------------------
     *Filed on  September  7, 1995,  as  exhibits to the  Registrant's  Form S-1
registration statement  (Registration No. 33-96654),  pursuant to the Securities
Act of 1933.  All of such  previously  filed  documents are hereby  incorporated
herein by reference in accordance with Item 601 of Regulation S-K.

     **See Notes to Consolidated  Financial  Statements,  Note 1(n) contained in
the Company's Annual Report.
</FN>
</TABLE>

      (b)  Reports on Form 8-K:

           Current reports on form 8-K were filed on November 4, 1996 for:

          (i)  October 25, 1996 press release regarding Ambanc Holding Co., Inc.
               earnings for the three and nine months ended September 30, 1996.

          Current reports on from 8-K were filed on  January 15, 1997 for:
          
          (ii)  December 13, 1996  press release  announcing  its  intentions to
                commence a 10% stock repurchase program;  and approval to open a
                new branch.

          (iii) December 23, 1996 press release announcing the sale of loans and
                foreclosed real estate and increased provisions for loan losses.

          (iv)  January 13, 1997 press release announcing the completion of  the
                10% stock repurchase.

<PAGE>



                                   SIGNATURES




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


                                          AMBANC HOLDING CO., INC.






Date:     April 15, 1997                  By: /s/ Robert J. Brittain
      ------------------------------          ----------------------
                                             Robert J. Brittain, President
                                             and Chief Executive Officer
                                            (Duly Authorized Representative)



<PAGE>



      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.



/s/ Robert J. Brittain                    /s/ Paul W. Baker
-----------------------------------       -------------------------------------
Robert J. Brittain , President            Paul W. Baker, Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)

Date:     April 15, 1997                  Date:     April 15, 1997
      -----------------------------            --------------------------------



/s/ William A. Wilde, Jr.                 /s/ Lauren T. Barnett
-----------------------------------       -------------------------------------
William A. Wilde, Jr., Director           Lauren T. Barnett, Director

Date:     April 15, 1997                  Date:     April 15, 1997
      -----------------------------            --------------------------------



/s/ Robert J. Dunning                     /s/ Carl A. Schmidt, Jr.
-----------------------------------       -------------------------------------
Robert J. Dunning, DDS, Director          Carl A. Schmidt, Jr., Director

Date:     April 15, 1997                  Date:     April 15, 1997
      -----------------------------            --------------------------------



/s/ Charles S. Pedersen                   /s/ Lionel H. Fallows
-----------------------------------       -------------------------------------
Charles S. Pedersen, Director             Lionel H. Fallows, Director

Date:     April 15, 1997                   Date:     April 15, 1997
      -----------------------------            --------------------------------



/s/ John J. Daly                          /s/ Harold A. Baylor, Jr.
-----------------------------------       -------------------------------------
John J. Daly, Director                    Harold A. Baylor, Jr., Vice
                                          President and Treasurer (Principal
                                          Financial and Accounting Officer)

Date:     April 15, 1997                   Date:     April 15, 1997
      -----------------------------            --------------------------------



<PAGE>


                                Index to Exhibits






                                                               
                                                               
                                                               
Exhibit                                                        
Number                                                         
-------                                                        



  13        Annual Report to Security Holders


  21        Subsidiaries of the Registrant


  27        Financial Data Schedule