UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q



(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
ACT 1934. For the quarterly period ended September 30, 1998
                                         -------------- 
                                       or

[ ] TRANSITION  REPORT  PURSUANT TO  SECTION 13 OR 15(d) OF THE  SECURITIES  AND
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
                                                    -----------------------

     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
filing requirements for the past 90 days. [X] Yes [ ] No

     Indicate the number of shares  outstanding of each of the issuer's class of
common stock, as of the latest practicable date.


           Class                                Outstanding at November 13, 1998
-----------------------------                -----------------------------------
Common Stock, $.01 Par Value                             4,095,164

<PAGE>


AMBANC HOLDING CO., INC. AND SUBSIDIARIES
FORM 10-Q
September 30, 1998



                                      Table of Contents


Part I.   FINANCIAL INFORMATION

Item 1.        Consolidated Interim Financial Statements (unaudited):

               Consolidated Interim Statements of Income for the three months
               and nine months ended September 30, 1998 and 1997.............. 3

               Consolidated Interim Statements of Financial Condition at
               September 30, 1998 and December 31, 1997....................... 4

               Consolidated Interim Statements of Cash Flows for the nine months
               ended September 30, 1998 and 1997.............................. 5

               Summarized Notes to Consolidated Interim Financial Statements.. 7

Item 2.        Management's Discussion and Analysis of Financial Condition
               and Results of Operations......................................10

Item 3.        Quantitative and Qualitative Disclosures About Market Risk.....21

Part II.   OTHER INFORMATION..................................................21

Item 1.        Legal Proceedings..............................................21

Item 6.        Exhibits and Reports on Form 8-K...............................22

SIGNATURES....................................................................23

EXHIBITS INDEX................................................................25


<PAGE>
Part I.   Financial Information

Item 1.  Financial Statements
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>                                                       Nine Months         Three Months
                                                             Ended September 30,  Ended September 30,
                                                              1998       1997      1998       1997
                                                             -----------------    ----------------- 
Interest and dividend income:
<S>                                                          <C>       <C>        <C>       <C>   
   Loans ................................................   $17,473    $15,359   $ 6,321    $ 5,415
   Securities available for sale ........................    10,082     10,394     3,349      3,237
   Federal funds sold ...................................       262        377       172        119
   Federal Home Loan Bank stock .........................       242        145       113         56
                                                            -------    -------   -------    -------
     Total interest and dividend income .................    28,059     26,275     9,955      8,827
                                                            -------    -------   -------    -------
Interest Expense:
   Deposits .............................................    10,072     10,017     3,268      3,566
   Borrowings ...........................................     6,192      4,349     2,602      1,380
                                                            -------    -------   -------    -------
     Total interest expense .............................    16,264     14,366     5,870      4,946
                                                            -------    -------   -------    -------
     Net interest income ................................    11,795     11,909     4,085      3,881
Provision for loan losses ...............................       675        863       225        225
                                                            -------    -------   -------    -------
     Net interest income after provision
       for loan losses ..................................    11,120     11,046     3,860      3,656
                                                            -------    -------   -------    -------
Non-interest income:
   Service charges on deposit accounts ..................       714        580       250        204
   Net gains (losses) on securities transactions ........      (165)       505       (60)       328
   Other ................................................       223        190        49         45
                                                            -------    -------   -------    -------
     Total non-interest income ..........................       772      1,275       239        577
                                                            -------    -------   -------    -------
Non-interest expense:
   Salaries, wages and benefits .........................     4,713      4,418     1,558      1,527
   Occupancy and equipment ..............................     1,197      1,131       386        420
   Data processing ......................................       941        875       328        290
   Federal deposit insurance premium ....................        31         29        10         10
   Correspondent bank processing fees ...................       104         95        37         31
   Real estate owned and repossessed assets expenses, net        19        291        (2)        48
   Professional fees ....................................       507        365       147        109
   Consulting and termination cost of former executive...       399          0         0          0
   Other ................................................     2,225      1,964       856        610
                                                            -------    -------   -------    -------
     Total non-interest expenses ........................    10,136      9,168     3,320      3,045
                                                            -------    -------   -------    -------
Income  before taxes ....................................     1,756      3,153       779      1,188
Income tax expense ......................................       735      1,193       301        452
                                                            -------    -------   -------    -------
     Net income .........................................   $ 1,021    $ 1,960   $   478    $   736
                                                            -------    -------   -------    -------
Net income per common share - basic .....................   $  0.27    $  0.49   $  0.13    $  0.19
Net income per common share - diluted ...................   $  0.27    $  0.49   $  0.13    $  0.19
</TABLE>
See accompanying notes to consolidated interim financial statements.

                                       3
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition (unaudited)
(dollars in thousands)                                  Sept. 30,   December 31,
                                                           1998        1997
                                                        ------------------------
                              Assets

Cash and due from banks ...............................$   5,985    $  10,225
Federal funds sold ....................................    8,100         --
                                                        --------     --------
     Cash and cash equivalents ........................   14,085       10,225

Securities available for sale, at fair value ..........  193,991      205,842
Loans receivable, net of unamortized fees .............  334,573      284,930
     Allowance for loan losses ........................   (4,199)      (3,807)
                                                        --------      -------
     Loans receivable, net ............................  330,374      281,123
                                                        --------      -------
Accrued interest receivable ...........................    3,260        3,734
Premises and equipment, net ...........................    2,752        3,121
Federal Home Loan Bank of New York stock, at cost .....    6,650        3,291
Real estate owned and repossessed assets ..............       98          143
Other assets ..........................................    3,044        2,965
                                                        --------      -------
     Total assets .....................................$ 554,254    $ 510,444
                                                       =========    =========

               Liabilities and Shareholders' Equity

Liabilities:
   Deposits ...........................................$ 314,233    $ 333,265
   Advances from borrowers for taxes and insurance ....      900        1,902
   Advances from FHLB .................................   20,000       12,300
   Securities repurchase agreements....................  155,450       99,250
   Accrued interest payable ...........................    1,521          819
   Accrued expenses and other liabilities .............    2,052        1,706
                                                        --------      -------
     Total liabilities ................................  494,156      449,242
                                                        --------      -------
Shareholders' equity:
   Preferred stock $.01 par value. Authorized 5,000,000
    shares; none outstanding at September 30, 1998 and
    December 31, 1997 .................................      --           --
   Common stock $.01 par value. Authorized 15,000,000
    shares; 5,422,250  shares issued at September 30,
    1998 and December 31, 1997 ........................       54           54
   Additional paid in capital .........................   52,735       52,385
   Retained earnings, substantially restricted ........   26,731       26,458
   Treasury Stock, at cost (1,317,086 shares at September
    30, 1998  and  1,115,832 shares at December 31, 1997)(16,510)     (12,585)
   Common stock acquired by ESOP ......................   (2,937)      (3,303)
   Unearned RRP shares issued .........................   (1,195)      (1,533)
   Accumulated other comprehensive income .............    1,220         (274)
                                                        --------      -------
     Total shareholders' equity .......................   60,098       61,202
                                                        --------      ------- 
     Total liabilities and shareholders' equity .......$ 554,254    $ 510,444
                                                       =========    =========

See accompanying notes to consolidated interim financial statements.

                                       4
<PAGE>


AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
(dollars in thousands)                                      For the nine months
                                                            ended September 30,
                                                              1998         1997
                                                            -------------------
Increase (decrease) in cash and cash equivalents:
 Cash flows provided by operating activities:
  Net income ............................................   $ 1,021     $ 1,960
  Adjustments to reconcile net income  to net
   cash provided by operating activities: 
   Depreciation and amortization ........................       504         473
   Provision for loan losses ............................       675         863
   Provision for losses and writedowns on
    real estate owned and repossessed assets ............         7         169
   ESOP compensation expense ............................       635         551
   RRP expense ..........................................       338           0
   Net (gains) losses on securities transactions ........       165        (505)
   Net (gain) loss on sale of real estate owned
    and repossessed assets ..............................        (7)         17
   Net amortization on  securities ......................       827         230
   (Increase) decrease in accrued interest receivable
    and other assets ....................................      (556)      2,041
   Decrease (increase) in due from broker ...............       --      (19,442)
   Increase (decrease) in accrued interest payable
    and other liabilities ...............................     1,048         425
   Increase (decrease) in due to broker .................       --       31,071
   Increase (decrease) in advances from borrowers
    for taxes and insurance .............................    (1,002)     (1,040)
                                                            -------     -------
    Net cash provided by operating activities ...........     3,657      16,813
                                                            -------     ------- 
Cash flows from investing activities:
   Proceeds from sales and redemptions of
    securities available for sale ........................  119,301     131,895
   Purchases of securities available for sale ............ (142,641)   (179,136)
   Proceeds from principal paydowns and
    maturities of securities available for sale ..........   36,689      37,277
   Purchase of FHLB stock ................................   (3,359)     (1,262)
   Net increase in loans made to customers ...............  (18,256)    (29,326)
   Loans purchased .......................................  (31,888)        --
   Purchases of premises and equipment....................     (105)       (931)
   Proceeds from sale of real estate owned and
    repossessed assets ...................................      262         459
                                                           --------    --------
   Net cash used by investing activities .................  (39,997)    (41,024)
                                                           --------    -------- 
(Continued)

                                       5
<PAGE>



AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued (unaudited)
(dollars in thousands)                                   For the nine months
                                                         ended September 30,
                                                          1998        1997
                                                         -------------------
Cash flows from financing activities:
 Net increase (decrease) in deposits ...............    (19,032)     32,576
 Advances from (repayments on)  FHLB borrowings, net      7,700      (2,000)
 Increase (decrease) in securities repurchase 
     agreements.....................................     56,200      (2,830)  
 Purchase of treasury stock ........................     (3,976)     (3,488)
 Dividends paid ....................................       (748)       (215)
 Exercise of stock options .........................         56         --
 
                                                        -------     -------
Net cash provided by financing activities ..........     40,200      24,043
                                                        -------     -------    
Net increase (decrease) in cash and cash equivalents      3,860        (168)
Cash and cash equivalents at beginning of period....     10,225      10,887
                                                        -------     ------- 
Cash and cash equivalents at end of period .........    $14,085     $10,719
                                                        =======     =======


Supplemental disclosures of cash flow information-
 cash paid during the year for:

      Interest .....................................    $15,563     $14,516
                                                        =======     =======

      Income taxes .................................    $   838     $ 1,045
                                                        =======     =======


Noncash investing activity:
 Net reduction in loans receivable resulting
 from the transfer to real estate owned and
 repossessed assets ................................    $   218     $   157
                                                        =======     =======

Adjustment of securities available for sale to
 fair value, net of tax ............................    $ 1,494    ($   121)
                                                        =======     =======

Noncash operating activity:
 Tax benefit from vesting of RRP shares ............    $    76         --
                                                        =======     =======

See accompanying notes to consolidated interim financial statements.
           
                                       6
<PAGE>


     SUMMARIZED NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(1)  In  management's opinion,  the financial  information,  which is unaudited,
reflects all adjustments,  consisting  solely of normal  recurring  adjustments,
necessary for a fair presentation of the financial information as of and for the
nine month periods ended September 30, 1998 and September 30, 1997 in conformity
with generally accepted  accounting  principles.  These  consolidated  financial
statements  should be read in conjunction  with Ambanc Holding Co., Inc.'s ("the
Company"  herein) 1997 Annual Report on Form 10-K. The results of operations for
the interim periods are not necessarily  indicative of the results of operations
to be expected for the full fiscal year ended December 31, 1998.

(2)  Amounts in the prior periods' consolidated interim financial statements are
reclassified whenever necessary to conform to the current period presentation.

(3)  Earnings Per Share

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

     Calculations  of basic earnings per share (basic EPS) and diluted  earnings
per share (diluted EPS) are as follows:

                                                            Weighted
                                                 Net         Average   Per Share
                                                Income       Shares     Amount
                                                  (Dollars in thousands, 
                                                 except per share amounts) 

For the nine months ended September 30, 1998

Basic EPS
Income available to common shareholders      $ 1,021       3,762,432     $ 0.27
                                              ======                      =====
Effect of Dilutive Securities
Stock options                                                54,833
RRP shares                                                   27,455
                                                             ------
Diluted EPS
Income available to common shareholders
  plus assumed conversions                     1,021       3,844,720       0.27
                                               =====       =========       ==== 

                                       7
<PAGE>

For the nine months ended September 30, 1997

Basic EPS
Income available to common shareholders      $ 1,960       3,977,375     $ 0.49
                                              ======                      =====
Effect of Dilutive Securities
Stock options                                                 13,178
RRP shares                                                     8,629
                                                              ------            
Diluted EPS
Income available to common shareholders
  plus assumed conversions                     1,960       3,999,182       0.49
                                               =====       =========       ====

For the three months ended September 30, 1998

Basic EPS
Income available to common shareholders      $   478       3,701,018     $ 0.13
                                                ====                      =====
Effect of Dilutive Securities
Stock options                                                 31,083
RRP shares                                                    13,663
                                                              ------
Diluted EPS
Income available to common shareholders
  plus assumed conversions                       478       3,745,764       0.13
                                                 ===       =========       ==== 

For the three months ended September 30, 1997

Basic EPS
Income available to common shareholders      $   736       3,897,492     $ 0.19
                                                ====                      =====
Effect of Dilutive Securities
Stock options                                                 36,300
RRP shares                                                    23,642
                                                              ------
Diluted EPS
Income available to common shareholders
  plus assumed conversions                      736        3,957,434       0.19
                                                ===        =========       ====

(4)  Comprehensive Income

     On January 1, 1998,  the Company  adopted the  provisions  of  Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive  Income." This
statement  establishes  standards  for  reporting  and display of  comprehensive
income and its components. Comprehensive income includes the reported net income
of a company  adjusted  for items  that are  currently  accounted  for as direct
entries to equity, such as the mark to market adjustment on securities available
for sale, foreign currency items and minimum pension liability  adjustments.  At
the Company, comprehensive income represents net income plus other comprehensive
income,  which  consists  of the net  change  in  unrealized  gains or losses on
securities  available for sale,  net of tax, for the period.  Accumulated  other
comprehensive income represents the net unrealized gains or losses on securities
available for sale as of the balance sheet dates.

     Comprehensive income (loss) for the three-month periods ended September 30,
1998 and 1997 was $1.7 million and $954,000, respectively.

                                       8
<PAGE>

     Comprehensive  income (loss) for the nine-month periods ended September 30,
1998 and 1997 was $2.5 million and $1.8  million,  respectively.  The  following
summarizes the components of other comprehensive income:

                                                           The nine months ended
                                                                September 30,
                                                               1998       1997
                                                           ---------------------
                                                               (In thousands)
Unrealized gains (losses) on Securities:
Unrealized net holding gains (losses) arising during
 the nine months ended September 30, 1998 and 1997
 respectively,  net of tax (pre-tax amount of $2,325
 and $303), respectively) .................................   $1,395   $  182
Reclassification adjustment for net (gains) losses
 realized in net income during the nine months ended
 September 30, 1998 and 1997, net of tax (pre-tax
 amount of $165 and ($505), respectively) .................       99     (303)
                                                              ------   ------
Other comprehensive income (loss)  during the nine
 months ended September 30, 1998 and 1997, respectively ...   $1,494   ($ 121)
                                                              ======   ======

                                                          The three months ended
                                                                September 30,
                                                               1998       1997
                                                          ----------------------
                                                               (In thousands) 
Unrealized gains (losses) on Securities:
Unrealized net holding gains (losses) arising during
 the three months ended September 30, 1998 and 1997
 respectively,  net of tax (pre-tax amount of $1,932
 and $692, respectively) .................................    $1,159   $  415
Reclassification adjustment for net (gains) losses
 realized in net income during the three months ended
 September 30, 1998 and 1997, net of tax (pre-tax
 amount of $60 and ($328), respectively) .................        36     (197)
                                                              ------   ------
Other comprehensive income (loss)  during the three
 months ended September 30, 1998 and 1997, respectively ..    $1,195   $  218
                                                              ======   ======

(5)  SFAS 125

     Effective  January 1, 1998 the Company adopted the remaining  provisions of
SFAS No. 125,  "Accounting  for Transfers and Servicing of Financial  Assets and
Extinguishments  of Liabilities,"  which relate to the accounting for securities
lending,  repurchase agreements,  and other secured financing activities.  These
provisions,  which were delayed for implementation by SFAS No. 127, did not have
a material impact on the Company.  

(6)  SFAS 131

     In June 1997, the FASB issued SFAS No. 131,  "Disclosure  about Segments of
an Enterprise and Related  Information".  SFAS No. 131 establishes standards for
reporting  by  public  companies  of  operating  segments  within  the  company,
disclosures  about products and services,  geographic areas and major customers.
This statement is effective for the Company's 1998 annual  financial  reporting.
Management believes that the adoption of SFAS No. 131 will not have an impact on
the Company's consolidated financial statements.

                                       9
<PAGE>

(7)  SFAS 132

     In February  1998,  the FASB issued SFAS No. 132,  "Employers'  Disclosures
about Pensions and Other  Postretirement  Benefits," which amends the disclosure
requirements of SFAS No. 87, "Employers' Accounting for Pensions,  "SFAS No. 88,
"Employers'  Accounting for  Settlements  and  Curtailments  of Defined  Benefit
Pension  Plans and for  Termination  Benefits,"  and SFAS No.  106,  "Employers'
Accounting for Postretirement  Benefits Other Than Pensions."  Statement No. 132
standardizes the disclosure requirements of Statements No. 87 and No. 106 to the
extent  practicable and recommends a parallel format for presenting  information
about pensions and other postretirement  benefits.  This statement is applicable
to all entities and addresses disclosure only. The Statement does not change any
of the measurement or recognition  provisions  provided for in Statement No. 87,
No. 88, or No. 106. The Statement is effective for fiscal years  beginning after
December 15, 1997. Management  anticipates providing the required disclosures in
the December 31, 1998 consolidated financial statements.

(8)  SFAS 133

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging Activities," which establishes  accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other  contracts,  and for hedging  activities.  This  Statement  is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management is currently evaluating the impact of this Statement on the Company's
consolidated financial statements.

(9)  Acquisition

     On April 23, 1998, the Company signed an agreement to merge AFSALA Bancorp,
Inc.  (AFSALA) with the Company.  Under the terms of the agreement,  each AFSALA
share will be converted  into 1.07 shares of the Company in a tax-free stock for
stock  exchange.  The  shareholders  of Ambanc and AFSALA approved the merger at
special meetings held on September 1 and 3, 1998, respectively.  On October 27,
1998, the Office of Thrift Supervision approved the merger.

     The  closing  for the  merger is  scheduled  for  November  16,  1998.  The
acquisition  will be  accounted  for under the  purchase  method of  accounting.
Accordingly,  the results of  operations  of AFSALA  will be  included  with the
Company's  beginning  with the date of acquistion.  In addition,  the assets and
liabilities of AFSALA will be recorded by the Company at their  respective  fair
values at the date of  acquistion.  As of September  30, 1998,  AFSALA had total
assets of $166.7 million.


Item 2


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

     The following  discussion and analysis  should be read in conjunction  with
the unaudited  consolidated  interim financial  statements and related notes and
with the statistical  information and  consolidated  financial data appearing in
this report as well as the Company's 1997 Annual Report on Form 10-K.


Forward Looking Statements

     When used in this quarterly Report on Form 10-Q, the words or phrases "will

                                       10
<PAGE>

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 or
losses 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.


Acquisition

     On April 23, 1998, the Company signed an agreement to merge AFSALA Bancorp,
Inc.  (AFSALA) with the Company.  Under the terms of the agreement,  each AFSALA
share will be converted  into 1.07 shares of the Company in a tax-free stock for
stock exchange.  The  shareholders  of Ambanc and AFSALA approved the merger at
special meetings held on September 1 and 3, 1998, respectively.  On October 27,
1998, the Office of Thrift Supervision approved the merger.

     The  closing  for the  merger is  scheduled  for  November  16,  1998.  The
acquisition  will be  accounted  for under the  purchase  method of  accounting.
Accordingly,  the results of  operations  of AFSALA  will be  included  with the
Company's  beginning  with the date of acquistion.  In addition,  the assets and
liabilities of AFSALA will be recorded by the Company at their  respective  fair
values at the date of  acquistion.  As of September  30, 1998,  AFSALA had total
assets of $166.7 million.

     A Form S-4 was filed  electronically  with the SEC on July 23, 1998 and can
be accessed at  www.sec.gov,  under EDGAR  Database.  The Form S-4 contains more
detailed  information  pertaining  to the  pending  merger.  Upon  closing,  the
Company's  federal  savings bank  subsidiary  will operate under the name Mohawk
Community Bank.


Settlement With Shareholder

     On August 11, 1998, the Company and AFSALA  announced that they had reached
an agreement with Seymour Holtzman,  a stockholder of both companies,  regarding
the pending merger of the two companies.

     Mr. Holtzman agreed to drop all litigation against Ambanc, refrain from any
future  litigation  against both companies until at least January 1, 2000, fully
support  and vote for the  merger of Ambanc  and  AFSALA  and vote for  Ambanc's
nominees for director and avoid becoming  involved with any other hostile action
at the annual meeting of Ambanc stockholders to be held in 1999.

                                       11
<PAGE>

     In return,  Ambanc agreed to retain Sandler  O'Neill & Partners,  L.P., its
regular investment banker, to seek ways to maximize  shareholder value following
completion  of the  merger,  including  the  possible  merger  of  the  combined
companies  with a third  party.  If  Ambanc  has not  entered  into a merger  or
acquisition agreement with a third party acquiror on or before April 1, 1999, or
a merger or acquistion is not  consummated,  Ambanc has agreed to appoint to the
Ambanc board two persons  from a list of at least four  persons  selected by Mr.
Holtzman.  Finally,  Ambanc and AFSALA have  agreed to  reimburse  Mr.  Holtzman
$80,000 for a portion of his expenses incurred in the litigation with Ambanc and
his actions with respect to the merger.

     
Year 2000 ("Y2K") Issues

     Year 2000 issues are the result of computer  programs  having been  written
using two digits  rather  than four to define the  applicable  year.  Any of the
Company's  programs that have time sensitive software may recognize a date using
"00" as the year 1900 rather than year 2000. This could result in a major system
failure or  miscalculations.  The  Company is also aware of these risks to third
parties,  including  vendors  (and to the  extent  appropriate,  depositors  and
borrowers),  and the potential  adverse  impact on the Company that could result
from failures by these parties to adequately address the Year 2000 issues.

     The  Company has  established  a Y2K  Committee  to conduct a review of its
computer  systems to  identify  the  systems  that could be  affected by the Y2K
problem.  The Y2K Committee reports on a monthly basis to the Board of Directors
as to the Company's status in resolving any Year 2000 issues.

     To  date,   the  Y2K   Committee   has   received   Year  2000   compliance
certifications/progress  forms from  approximately 70% of the Company's vendors.
Of the responses  received,  60% of the vendors have certified that they are Y2K
compliant  with the remaining  40%  informing the Company of their  progress and
anticipated  compliance  dates;  however,  no  assurance  can be given as to the
adequacy of such plans or to the timeliness of their  implementation.  Responses
have been received from all mission  critical  vendors and periodic updates will
be requested.
                                       
     Final  versions of the  Company's  Y2K  customer  evaluation  forms and the
associated risk analysis have been completed. A majority of the mission critical
borrowers  have been  contacted to ensure that they complete the  evaluation and
risk analysis. To date, the majority of those contacted have indicated that they
are not heavily reliant on computer systems and are,  therefore,  evaluated as a
low risk  pertaining to Y2K. A spreadsheet is being developed that will list all
mission critical  borrowers and their level of risk and will be monitored by the
Company's Asset Classification Committee.

     The Company conducted its Y2K test with its primary outside data processing
service bureau in August 1998. However, due to the Company's pending merger with
AFSALA and certain  issues  pertaining  to  software  and vendors to be retained
post-merger,  the Company will  complete a limited  testing  program  during the
remainder of 1998 on other software applications.

     The Y2K Committee has initiated the  development  of  contingency  plans to
address the actions that may be needed to be taken by the Company  under various
"what  if"  scenarios,  e.g.  "what  if"  the  Company's  primary  outside  data
processing  service  bureau failed to be Y2K  compliant on January 1, 2000.  The
target date for  completion  of the  contingency  plans is December 31, 1998. In
addition,  the Company's  contingency plans will be modified as appropriate when
decisions pertaining to the pending merger with AFSALA are finalized.

                                       12
<PAGE>

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

     
General

     The results of operations of the  Company's  subsidiary  Bank are dependent
primarily on net interest  income,  which is the  difference  between the income
earned on its  loans and  securities  and its cost of funds,  consisting  of the
interest  paid on  deposits  and  borrowings.  Results  of  operations  are also
affected by the Bank's  provision  for loan losses,  net expenses on  foreclosed
assets and by general economic and competitive conditions,  particularly changes
in interest rates,  government  policies and actions of regulatory  authorities.
Future  changes in  applicable  law,  regulations  or  government  policies  may
materially  impact the  financial  condition  and results of  operations  of the
Company and the Bank.

     Unless otherwise noted,  discussion of operating  results for the three and
nine-months  ended  September  30,  1998,  are  based on a  comparison  with the
corresponding periods in 1997.

     The Company recorded net income of $478,000, or $0.13 per diluted share and
$1.0 million,  or $0.27 per diluted share,  for the three and nine-months  ended
September 30, 1998,  respectively.  In the  corresponding  periods in 1997,  the
Company  had net  income of  $736,000,  or $0.19  per  diluted  share,  and $2.0
million, or $0.49 per diluted share.

     The declines in net income for the three and  nine-months  ended  September
30, 1998 were primarily  attributable  to losses on securities  transactions  in
1998  (compared to net gain in 1997) and certain  nonrecurring  charges  against
earnings in 1998.  During the quarter  ended  September  30,  1998,  the Company
recorded net losses on the sales of securities of $60,000  compared to net gains
of $328,000 in 1997.  Also  contributing to the decline in earnings in the third
quarter of 1998 were charges  against  operating  results of $132,000  that were
incurred by the Company to defend against and settle legal actions  initiated by
a  shareholder  and  a  one-time  charge  of  $67,000  to  substantially  modify
repurchase agreements.

     During the nine-months  ended September 30, 1998, the Company  incurred net
losses on securities  transactions of $165,000  compared to net gains in 1997 of
$505,000. Also contributing to the decline in earnings for the nine-months ended
September  30, 1998 were charges of $291,000  related to the  shareholder  legal
action and  settlement,  $399,000  related  to the  termination  and  consulting
agreements  entered into with the  Company's  former  President and CEO, and the
$67,000 one-time modification charge on repurchase agreements.

     For the three months ended  September  30, 1998,  the Company's net income,
excluding  nonrecurring  items and the effects of securities  transactions,  was
approximately  $637,000,  an increase of $104,000,  or 19.5%,  with net interest
income  increasing  by $204,000,  or 5.3%,  to $4.1  million.  However,  for the
nine-months  ended  September  30,  1998,  the  Company's  net income  excluding
nonrecurring  items and the  effects  of  securities  transactions  declined  to
approximately  $1.6 million from $1.7 million in 1997.  Net interest  income for
the  nine-months   ended  September  30,  1998  experienced  a  slight  decline,
decreasing by $114,000, or 1.0%, to $11.8 million.

                                       13
<PAGE>
                             RESULTS OF OPERATIONS

Comparison of Operating  Results for the Quarters  Ended  September 30, 1998 and
1997.

     Unless otherwise  noted, the discussion of operating  results for the three
months ended September 30, 1998, is based on a comparison with the corresponding
period in 1997.


Net Interest Income

     Net interest income before  provision for loan losses for the quarter ended
September 30, 1998 was $4.1  million,  an increase of $204,000,  or 5.3%.  Total
interest and dividend income  increased by $1.1 million,  partially offset by an
increase of $924,000 in total interest  expense.  The increase in total interest
and dividend income resulted primarily from an increase in the average volume of
loans to $330.5 million,  a growth of $53.7 million,  or 19.4%.  The increase in
total average loan volume  resulted  primarily from an increase of $16.3 million
in average home equity loans and a $27.7 million  increase in the average volume
of purchased  residential mortgages located outside of the Bank's primary market
area. The higher average volume of loans,  partially  offset by a decrease of 17
basis points in the average rate earned on loans to 7.59%, increased loan income
by  $906,000.  Interest  and dividend  income on other  interest-earning  assets
(other IEA),  which includes  securities,  FHLB stock and federal funds sold and
other money  market  instruments,  increased by  $222,000,  primarily  due to an
increase  in the  average  volume of other  IEA.  The  positive  revenue  effect
produced by the increase in the average volume of other IEA was partially offset
by a  decline  by 70 basis  points  to  6.51%  in the  average  rate  earned  on
securities.

     The increase in total interest expense resulted  primarily from an increase
in the  average  volume of total  borrowed  funds to $183.3  million  from $89.7
million,  partially  offset  by a  decline  of 48 basis  points  to 5.63% in the
average rate paid for these funds.  The increase in the average  volume of total
borrowed  funds was used to fund  growth  of $86.6  million,  or  18.4%,  in the
average  volume of total  interest-earning  assets  and to  partially  replace a
decline in the average volume of time deposits,  which  decreased $16.7 million.
See also "Liquidity and Funding."


Provision For Loan Losses

     The provision  for loan losses of $225,000 for the quarter ended  September
30,  1998 was  unchanged  from  1997  based on  management's  evaluation  of the
adequacy of the Company's allowance for loan losses as of September 30, 1998.


Non-interest Income

     Total  non-interest  income  decreased  by  $338,000  due to net  losses on
securities transactions of $60,000 compared to net gains of $328,000 in 1997. An
increase of $46,000 in service charges on deposit accounts  partially offset the
decline  from  securities  transactions.  The  increase  in service  charges was
primarily  attributable to  restructuring of services charges on certain deposit
products.


Non-interest Expenses

     Total  non-interest  expenses increased by $275,000 to $3.3 million for the

                                       14
<PAGE>
quarter ended September 30, 1998, primarily  attributable to charges of $132,000
to defend  against and settle legal  actions  initiated by a  shareholder  and a
one-time  charge of  $67,000  to  substantially  modify  repurchase  agreements.
Excluding  these items,  non-interest  expenses  increased by $76,000,  or 2.5%,
primarily  attributable to a $31,000, or 1.1%,  increase in salaries,  wages and
benefits and a $38,000  increase in data  processing  expenses.  The increase in
salaries,  wages and benefits was due to salary increases  related to promotions
and normal merit and cost of living adjustments. The increase in data processing
fees was mainly the result of $27,000 in expenses  incurred to date to deconvert
the deposit and loan  processing  systems from the Bank's  current  processor in
preparation for the migration to the post-merger  processor for Mohawk Community
Bank.  Also  contributing  to the total increase in data  processing fees was an
increase of $12,000 in statement  imaging  expenses,  the result of increases in
the number of items captured and statements rendered.

Income Taxes

     Income tax expense  decreased by $151,000 to $301,000 due  primarily to the
decline in income before taxes to $799,000 from $1.2 million.

Comparison of Operating Results for the Nine Months Ended September 30, 1998 and
1997.

     Unless  otherwise  noted,  the  discussion  of  operating  results  for the
nine months  ended  September  30,  1998,  is  based  on a  comparison  with the
corresponding period in 1997.

Net Interest Income

     Net interest income for the nine-months  ended September 30, 1998 was $11.8
million,  a decline of $114,000,  or 1.0%.  Total interest and dividend  income
increased  by $1.8  million  while  total  interest  expense  increased  by $1.9
million.

     The increase in total interest and dividend income resulted  primarily from
growth of $41.0  million,  or 15.6%,  in the  average  volume of loans to $303.3
million.  The positive revenue effect derived from the increased loan volume was
partially  offset by a decline in the  average  rate  earned to 7.70% from 7.83%
resulting in an increase in interest on loans of $2.1 million.

     The  increase  in loan  interest  was  partially  offset by a  decrease  of
$312,000 in interest  earned on securities,  the result of a decline of 65 basis
points to 6.59% in the average  rate  earned that more than offset the  positive
income  effect  from an increase of $12.6  million in the  average  volume.  The
reduced rate earned on securities  was  attributable  to the general  decline in
market  interest rates from  September 1997 to 1998. The lower rate  environment
produced an acceleration in mortgage  prepayments on mortgage backed  securities
and  redemptions on callable  securities.  The  reinvestments  of the cash flows
generated  from  securities  were made at the lower  interest rates that were in
effect on the dates of the reinvestments.

     The increase in total interest expense resulted  primarily from an increase
in the  average  volume of total  borrowed  funds to $142.4  million  from $95.7
million,  partially  offset  by a  decline  of 26 basis  points  to 5.81% in the
average rate paid for these funds.  The increase in the average  volume of total
borrowed  funds was used to fund  growth  of $52.1  million,  or  11.2%,  in the
average  volume  of  total  interest-earning  assets.  See also  "Liquidity  and
Funding."
                                       15
<PAGE>
Provision For Loan Losses

     The provision for loan losses decreased by $188,000 to $675,000, the result
of the improved quality of the Company's loan portfolio.

Non-interest Income

     Total non-interest  income declined by $503,000 due primarily to net losses
on  securities  transactions  of  $165,000  compared  to net  gains  in  1997 of
$505,000.

     Service charges on deposit  accounts  increased by $134,000,  or 23.1%, due
primarily to restructuring of services charges on certain deposit products.

Non-interest Expenses

     Total  non-interest  expenses  increased  by $968,000,  or 10.6%,  to $10.1
million.  The increase  resulted  primarily from the  previously  mentioned (see
"General")  $399,000  cost  incurred  in  connection  with the  termination  and
consulting  agreements  entered  into with the  former  President  and CEO,  the
$291,000 related to the shareholder legal action and settlement, and the $67,000
one-time modification charge on repurchase agreements.

     Salaries,  wages and payroll  taxes  increased by $154,000 to $3.4 million.
Salaries and wages  related to the three branch  offices  opened in May and June
1997 accounted for  approximately  $47,000 of the total increase in salaries and
wages.  The  remainder of the increase was  attributable  to other  additions to
staff,  salary  increases  related to  promotions,  and normal merit and cost of
living adjustments. Expenses related to employee benefits increased by $138,000,
or  11.6%,  to  $1.3  million.  This  increase  resulted  from  increased  costs
associated with stock based compensation plans partially offset by a net decline
in all other employee benefit costs.

     Total  occupancy  and  equipment  expense  increased  by $66,000,  or 5.8%,
primarily related to the opening of three branch offices during the three months
ended June 30, 1997.

     Total data processing  expenses increased by $66,000,  or 7.5%. The Company
incurred  a charge  of  $27,000  to  deconvert  from its loan and  deposit  data
processor in preparation for the utilization of a single, post-merger processor.
Also  contributing  to the higher expenses was an increase of $26,000 in charges
related to  statement  imaging,  the result of  increases in the number of items
captured and statements rendered.

Income Taxes
     
     Income tax expense for the nine-months ended September 30, 1998,  decreased
by $458,000 due  primarily to the decline in income before taxes to $1.8 million
from $3.2 million.

                               FINANCIAL CONDITION

     The Company's total assets at September 30, 1998,  were $554.3 million,  an
increase of $43.8 million,  or 8.6%,  compared to total assets of $510.4 million
at December 31, 1997. The growth in total assets was primarily  attributable  to
increases in loans and federal funds sold,  which increased by $49.6 million and
$8.1 million, respectively. See also "Liquidity and Funding."

     Total deposits at September 30, 1998,  were $314.2  million,  a decrease of
$19.0 million,  or 5.7%,  from $333.3 million at December 31, 1997. The decrease

                                       16
<PAGE>
in total  deposits  was  attributable  primarily to a $22.6  million,  or 12.3%,
decrease in time deposits.

     Total  shareholders'  equity  decreased  $1.1  million  to  $60.1  million,
primarily due to the  repurchase  of common stock  totaling $4.0 million and the
payment of cash  dividends  of $748,000  partially  offset by net income of $1.0
million and an increase of $1.5  million in other  comprehensive  income for the
nine months ended  September  30, 1998.  Including  unallocated  ESOP shares and
unvested  restricted  RRP  shares as  outstanding,  the book value per share was
$14.64  at  September  30,  1998  compared  to  $14.21  at  December  31,  1997.
Additionally, excluding the tax-effected unrealized gains (losses) on securities
available  for sale,  the book value per share at September  30, 1998 was $14.34
compared to $14.28 at December 31, 1997.

Liquidity and Funding

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

     The primary  investing  activities  of the Company are the  origination  of
loans and the purchase of securities,  and to a lesser  extent,  the purchase of
loans.  During the nine  months  ended  September  30,  1998,  the  Bank's  loan
originations  totaled $66.9 million.  The Company purchased securities available
for sale of $142.6 million and also purchased whole loans of approximately $31.9
million  during the same nine month  period.  The purchased  loans  consisted of
residential loans generally located outside of the Bank's primary market area.

     The primary  financing  activity of the Bank is the attraction of deposits.
However,  during the nine months ended  September 30, 1998, the Bank's  deposits
decreased by $19.0  million from  December 31,  1997,  primarily  time  deposits
(CDs), which decreased $22.6 million.  Management  believes that the decrease in
CDs during the nine months ended September 30, 1998 resulted  primarily from the
holders of maturing time deposits  pursuing  alternative  investments  to obtain
better returns.

     In the  event the  attraction  of  deposits  is not  sufficient  to fund an
expansion in interest  earning assets or when the level of market interest rates
for CDs is higher than the cost of borrowed funds, the Bank may utilize advances
from the Federal Home Loan Bank  ("FHLB")  and other types of borrowed  funds to
fund interest  earning asset growth.  During the nine months ended September 30,
1998, the Bank increased its borrowed funds by $63.9 million.  Advances from the
FHLB  increased  by  $7.7  million  and  securities  sold  under  agreements  to
repurchase  ("repos") increased by $56.2 million.  Since March 31, 1998 the Bank
has added $100  million in callable  repos with the FHLB to its  borrowed  funds
while reducing its obligations with other repo counterparties, to take advantage
of the lower rates offered by the FHLB on the dates of the borrowings.  The FHLB
repos all mature in 10 years with call dates ranging from one year to five years
and fixed  rates  that  range  from a low of 5.01% to a high of 5.59%.  The FHLB
repos were used primarily to fund the origination and purchase of whole loans.

     The Bank is required to maintain minimum levels of liquid assets as defined
by OTS regulations.  This requirement,  which may be varied by the OTS depending
upon  economic  conditions  and deposit  flows,  is based upon a  percentage  of
deposits and short-term  borrowings.  The required  minimum  liquidity  ratio is
currently  4%.  The  Bank's  average  daily  liquidity  ratio  for the  month of
September 1998 was 9.5%.
                                       17
<PAGE>

     The Bank's most liquid assets are cash and cash equivalents,  which include
federal funds sold and bank deposits.  The level of these assets is dependent on
the Bank's  operating,  financing,  and  investing  activities  during any given
period. At September 30, 1998, cash and cash equivalents  totaled $14.1 million,
compared to $10.2  million at December 31, 1997.  

     The Bank  anticipates  that it will have sufficient funds available to meet
its current  commitments.  At September 30, 1998,  the Bank had  commitments  to
originate loans of $10.9 million as well as undrawn  commitments of $6.6 million
on home  equity  and  other  lines of  credit.  The Bank had no  commitments  to
purchase  additional  loans  at  September  30,  1998.  Time  deposits  that are
scheduled to mature in one year or less at September  30, 1998,  totaled  $109.7
million.  Management  believes that a significant  portion of such deposits will
remain  with  the  Bank.  However,  if the  Bank  is not  able to  maintain  its
historical  retention rate on maturing time deposits,  it may consider employing
one or more of the following strategies: increase its borrowed funds position to
compensate  for the  deposit  outflows;  increase  the  rates it offers on these
deposits in order to maintain or increase  the  retention  rate on maturing  CDs
and/or to attract new deposits;  or,  attempt to increase time deposits  through
the use of deposit  brokers.  Depending on the level of market interest rates at
the CD  renewal  dates,  the  implementation  of one or a  combination  of these
strategies could result in higher or lower levels of net interest income and net
earnings.

     The Company  also has a need for, and sources of,  liquidity.  Liquidity is
required  to fund its  operating  expenses,  as well as for the  payment  of any
dividends to shareholders.  The primary source of the Company's  liquidity on an
ongoing basis is dividends  from the Bank. The Bank paid its first cash dividend
to the Company on March 31, 1998, in the amount of $5.0 million.


Capital

     Federally  insured savings  institutions 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.

     At  September  30,  1998,  the Bank had $46.6  million of tangible and core
capital,   respectively,   or  8.55%  of  adjusted   total  assets,   which  was
approximately $38.4 million and $30.2 million above the minimum  requirements of
1.5% and 3.0%,  respectively,  of the  adjusted  total  assets at that date.  On
September 30, 1998, the Bank had risk-based  capital of $49.5 million (including
$46.6  million in core  capital  and $2.9  million in  qualifying  supplementary
capital)  or  21.09% of  risk-weighted  assets of  $235.0  million.  The  Bank's
risk-weighted  capital was $30.7 million above the 8.0% requirement in effect on
that date. 
                                        

ASSET QUALITY
Non-Performing Assets

The table below sets forth the amounts and categories of  non-performing  assets
at the dates indicated.  Generally,  loans are placed on non-accrual status when
the loan is 90 days or more  delinquent or when  management has determined  that
the collection of principal  and/or interest in full has become  doubtful.  When

                                       18
<PAGE>

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.  Accruing loans delinquent 90
days or more include FHA insured loans, VA guaranteed  loans, and loans that are
in the process of negotiating a restructuring with the Bank,  excluding troubled
debt restructurings (TDRs), or where the Bank believes that the outstanding loan
balance  plus  accrued  interest  and late  fees will be  paid-in-full  within a
relatively  short period of time.  Foreclosed  assets include assets acquired in
settlement of loans.
                                             September 30,      December 31,
                                                 1998                1997
                                             -------------      ------------
                                                      (In thousands)
Non-accruing loans:
   One-to four-family ......................   $  606              $  843
   Multi-family ............................      125                  28
   Commercial real estate ..................      195                 265
   Consumer ................................      276                 293
   Commercial business .....................      286                 447
                                               ------              ------
     Total .................................    1,488               1,876
                                               ------              ------
Accruing loans delinquent more than 90 days:
   One-to four-family ......................      422                 280
   Multi-family ............................      138                 --
   Commercial real estate ..................      320                  13
   Consumer ................................      --                    2
   Commercial business .....................      --                  156
                                               ------              ------
     Total .................................      880                 451
                                               ------              ------
Troubled debt restructured loans:
   One-to four-family ......................       85                  86
   Multi-family ............................      --                   34
   Commercial real estate ..................      744                 761
   Consumer ................................      --                   --
   Commercial business .....................       95                  50
                                               ------              ------
     Total .................................      924                 931
                                               ------              ------
Total non-performing loans .................    3,292               3,258
                                               ------              ------
Foreclosed assets:
   One-to four-family ......................       46                  69
   Multi-family ............................      --                  --
   Commercial real estate ..................       30                 --
   Consumer ................................       22                  74
   Commercial business .....................      --                  --
                                               ------              ------
     Total .................................       98                 143
                                               ------              ------
Total non-performing assets ................   $3,390              $3,401
                                               ======              ======
Total as a percentage of total assets ......     0.61%               0.67%

     There have been no material changes in non-performing assets since December
31, 1997.

                                       19
<PAGE>
Allowance for Loan Losses

     The  allowance  for loan losses is increased  through a provision  for loan
losses based on  management's  evaluation of the risks inherent in the Company's
loan  portfolio  and  changes in the  nature  and  volume of its loan  activity,
including those loans that 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 estimated fair
value of the  underlying  collateral  for collateral  dependent  loans,  the net
present  value of  estimated  future  cash  flows if the loan is not  collateral
dependent,  economic  conditions,  historical  loan loss  experience,  and other
factors  that  warrant  recognition  in  providing  for an  adequate  loan  loss
allowance. Management believes that the allowance for loan losses is adequate to
absorb  probable losses that are inherent in the loan portfolio at September 30,
1998. The following table sets forth an analysis of the Company's  allowance for
loan losses.

                                                   For the nine months
                                                   ended September 30,
                                                    1998         1997
                                                   -------------------
                                                  (Dollars in thousands)

Balance at beginning of period ................   $ 3,807      $ 3,438

Charge-offs:
     One- to four-family ......................       (13)         (11)
     Multi family .............................        (4)         (12)
     Commercial real estate ...................      (161)         (50)
     Consumer .................................      (194)        (254)
     Commercial business ......................      (188)        (260)
                                                  -------      -------
        Total charge offs .....................      (560)        (587)
                                                  -------      -------
Recoveries:
     One- to four-family ......................         1           1
     Multi family .............................       --          --
     Commercial real estate ...................        59           4
     Consumer .................................        43          46
     Commercial business ......................       174         382
                                                  -------     -------
        Total recoveries ......................       277         433
                                                  -------     -------
Net charge-offs ...............................      (283)       (154)

Provisions charged to operations ..............       675         863
                                                  -------     -------
Balance at end of period ......................   $ 4,199     $ 4,147
                                                  =======     =======

Ratio of net charge-offs during the period
 to average loans outstanding during
 period (annualized) ..........................      0.12%       0.08%

Ratio of allowance for loan losses to total
 loan at period end ...........................      1.26%       1.48%

Ratio of allowance for loan losses to 
 non-performing loans at period end ...........    127.55%     114.78%

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Item 3.

Quantitative And Qualitative Disclosures About Market Risk

     The composition of the Bank's balance sheet results in maturity mis-matches
between interest-earning assets and interest-bearing  liabilities. The scheduled
maturities of the Bank's fixed rate interest-earning assets are generally longer
than the scheduled  maturities of its fixed rate  interest-bearing  liabilities.
This  mis-match  exposes  the Bank to  interest  rate  risk.  In a  rising  rate
scenario,  as measured by the Office of Thrift Supervision ("OTS") interest rate
risk exposure  simulation  model, the estimated market or portfolio value ("PV")
of the Bank's assets would decline in value to a greater  degree than the change
in the PV of the  Bank's  liabilities,  thereby  reducing  net  portfolio  value
("NPV").

     As of  December  31,  1997,  under a rate shock  scenario of plus 200 basis
points ("bp"),  the Bank's pre-shock NPV ratio (NPV as of % of PV of assets) was
estimated in the OTS model to be 10.89%.  The post-shock NPV ratio was estimated
to be 6.78%,  a decline of 411 bp. As of June 30, 1998,  the most recent  report
available, the Bank's sensitivity to interest rate changes increased compared to
December 31, 1997. The post-shock ratio for a 200 bp increase in market interest
rates as of June 30, 1998 was  estimated to be 5.58%,  a decrease of 442 bp from
the pre-shock NPV ratio estimate of 9.99%.

     In order to  lessen  its  exposure  to  interest  rate  risk,  the Bank has
initiated   a  program   to   lengthen   the   maturities   of  its  fixed  rate
interest-bearing  liabilities through the use of callable repurchase  agreements
with the FHLB. See "Liquidity and Funding," herein.

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


Part II - Other Information

Item 1.  Legal Proceedings

     In the ordinary course of business, the Company and the Bank are subject to
legal actions which involve  claims for monetary  relief.  Management,  based on
advice of counsel,  does not believe  that any  currently  known legal  actions,
individually or in the aggregate will have a material effect on its consolidated
financial condition or results of operation.

     The  Company  has  incurred  significant  legal  costs in  connection  with
defending  against and settling legal actions  initiated by a  shareholder.  See
also  "Non-interest  expenses" for the three and nine months ended September 30,
1998 and 1997. The Company announced a settlement with the shareholder on August
11, 1998. See also "Settlement with Shareholder."


                                       21
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Item 6.  Exhibits and Reports on Form 8-K

    (a)   Exhibits as required by Item 601 of Regulation S-K.

            Financial data schedule, Exhibit #27

    (b)   Reports on Form 8-K

            Current reports on Form 8-K were filed July 1, July 7, August 11,
            August 19, September 2, and September 14.

      (i)   July 1, 1998, press release regarding Ambanc Holding Co., Inc.
            Retirement of President and CEO.
       
      (ii)  July 1, 1998, press release regarding Ambanc Holding Co., Inc.
            Change in Directors' Compensation. 

      (iii) July 7, 1998 press release regarding Ambanc Holding Co., Inc. 
            Freeze on Executive Managers' Compensation.
 
      (iv)  August 11, 1998, press release regarding Ambanc Holding Co., Inc.  
            settlement with Seymour Holtzman.        
      
      (v)   August 19, 1998, press release regarding Ambanc Holding Co., Inc.
            Second Quarter Earnings.

      (vi)  September 2, 1998, press release regarding Ambanc Holding Co., Inc. 
            Approves Merger with AFSALA.

      (vii) September 14, 1998, press release regarding Ambanc Holding Co., Inc.
            Regular Quarterly Cash Dividend.
      

                                       22
<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.



/s/Lauren T. Barnett

Lauren T. Barnett
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 13, 1998



/s/Betsy Darrow

Betsy Darrow
Acting Chief Financial Officer
(Principal Financial and Accounting Officer)
Date:  November 13, 1998

                                       23
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