<PAGE>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-Q

  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                                  Act of 1934

               For the quarterly period ended September 30, 1995
                                              ------------------

                         Commission File Number 0-18513
                                                -------
                           CENTER BANKS INCORPORATED
                           -------------------------
             (Exact name of registrant as specified in its charter)


                          Delaware                  16-1368745
                          --------                  ----------
            (State or other jurisdiction of       (I.R.S. Employer
           incorporation or organization)         Identification No.)


                33 E. Genesee St., Skaneateles, New York, 13152
                -----------------------------------------------
               (Address of principal executive offices-Zip code)


        Registrant's telephone number, including area code 315-685-2265
                                                           ------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  sections  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


Yes   X   No
     ---     ----

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


        Class                                    Outstanding at November 9, 1995
        ------------------------------------------------------------------------
         Common Stock (par value $.01 per share)      930,079 Shares



<PAGE>
<TABLE>
<S> <C>

PART I. FINANCIAL INFORMATION                                                           Page
-----------------------------                                                           ----

         Item 1.  Consolidated Financial Statements
         ------
                    1.  Consolidated Balance Sheets                                        4

                    2.  Consolidated Statements of Income                                  5

                    3.  Consolidated Statements of  Stockholders' Equity                   6

                    4.  Consolidated Statements of Cash Flows                              7

                    5.  Notes to Consolidated Financial Statements                         8

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


PART II.  OTHER INFORMATION
---------------------------

         Item 1.  Legal Proceedings                                                       17
         -------

         Item 2.  Changes in Securities                                                   17
         -------

         Item 3.  Defaults Upon Senior Securities                                         17
         -------                                                                                   

         Item 4.  Submission of Matters to a Vote of Security Holders                     17
         -------                                                                                   

         Item 5.  Other Information                                                       17
         -------

         Item 6.  Exhibits and Reports on Form 8-K                                        17
         -------                                                                                   


SIGNATURES                                                                                18
----------
</TABLE>
<PAGE>

<TABLE>
CENTER BANKS INCORPORATED
CONSOLIDATED BALANCE SHEETS
<S>                                                                                  <C>                   <C>
                                                                                     September 30,         December 31,
ASSETS                                                                                    1995                 1994
-----------------------------------------------------------------------------------------------------------------------
                                                                                    (In Thousands, Except Share Data)
Cash and due from banks                                                                 $1,072               $2,143
Federal funds sold                                                                       1,300                1,200
Securities available for sale                                                            6,047               17,276
Securities held to maturity, fair value of
  $18,900 in 1995 and $4,479 in 1994                                                    18,552                4,595
Federal Home Loan Bank stock, at cost                                                    1,303                1,200
Mortgage loans receivable                                                              143,164              138,579
Other loans receivable                                                                  28,119               28,430
-----------------------------------------------------------------------------------------------------------------------
                                                                                       171,283              167,009
Less:Unearned discount and net deferred fees                                              (25)                   48
        Allowance for loan losses                                                        3,004                3,040
-----------------------------------------------------------------------------------------------------------------------
           Loans receivable, net                                                       168,304              163,921
Premises and equipment, net                                                              5,995                5,606
Real estate owned, net                                                                     975                  984
Accrued interest receivable                                                              1,318                1,161
Other assets                                                                             2,026                  773
-----------------------------------------------------------------------------------------------------------------------
                                                                                      $206,892             $198,859
=======================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------------------------------------------------------------------------------------------
Liabilities:
   Interest bearing deposits                                                           166,836              161,154
   Demand deposits                                                                       9,633                7,645
-----------------------------------------------------------------------------------------------------------------------
       Total deposits                                                                  176,469              168,799
   Advance payments by borrowers for property
      taxes and insurance                                                                1,071                1,897
   Borrowings                                                                           14,402               13,984
   Accrued expenses and other liabilities                                                  441                  388
-----------------------------------------------------------------------------------------------------------------------
            Total liabilities                                                          192,383              185,068
-----------------------------------------------------------------------------------------------------------------------

Stockholders' equity:
   Preferred stock, par value $.01 per share,
      authorized 500,000 shares, none issued                                                 0                    0
   Common stock, par value $.01 per share,
      authorized 2,500,000 shares, 1,030,863 and
      1,028,444 shares issued in 1995 and 1994, respectively                                10                   10
   Additional paid-in capital                                                            9,497                9,475
   Retained earnings                                                                     5,792                5,206
   Net unrealized holding loss on securities, net of tax effect                              0                    0
    of $51,000 and $141,000 in 1995 and 1994, respectively.                                (77)                (187)
   Treasury stock, at cost (102,700 shares)                                               (713)                (713)
-----------------------------------------------------------------------------------------------------------------------
            Total stockholders' equity                                                  14,509               13,791
-----------------------------------------------------------------------------------------------------------------------
                                                                                      $206,892             $198,859
=======================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>

<TABLE>
CENTER BANKS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
<S>                                                               <C>              <C>              <C>               <C>  
                                                                Three months ended Sept. 30,       Nine months ended Sept. 30,
                                                                    1995             1994             1995              1994
----------------------------------------------------------------------------------------------------------------------------
                                                                          (In Thousands, Except Per Share Data)
Interest income:
   Mortgage loans                                                 $2,838           $2,269           $8,365            $6,513
   Other loans                                                       710              619            2,119             1,792
   Securities                                                        441              359            1,232             1,105
   Federal funds sold                                                 60                0              143                 0
----------------------------------------------------------------------------------------------------------------------------
           Total interest income                                   4,049            3,247           11,859             9,410
----------------------------------------------------------------------------------------------------------------------------
Interest expense:
   Deposits                                                        2,004            1,373            5,650             3,956
   Borrowings                                                        238              198              735               590
            Total interest expense                                 2,242            1,571            6,385             4,546

            Net interest income                                    1,807            1,676            5,474             4,864
Provision for loan losses                                             30               90              210               270
----------------------------------------------------------------------------------------------------------------------------
            Net interest income after provision
               for loan losses                                     1,777            1,586            5,264             4,594
----------------------------------------------------------------------------------------------------------------------------
Other operating income :
   Net gain  (loss) on redemption of securities                      (83)               7              (99)                7
   Net gain (loss) on sale of loans                                    4                4                9                (7)
   Other income                                                      184              133              487               385
----------------------------------------------------------------------------------------------------------------------------
          Total other operating income                               105              144              397               385
----------------------------------------------------------------------------------------------------------------------------
                                                                   1,882            1,730            5,661             4,979
----------------------------------------------------------------------------------------------------------------------------
Other operating expenses:
   Salaries and employee benefits                                    678              585            2,032             1,678
   Building, occupancy and equipment                                 292              181              806               537
   Real estate owned, net                                            156              107              269               254
   Other                                                             467              544            1,597             1,576
----------------------------------------------------------------------------------------------------------------------------
            Total other operating expenses                         1,593            1,417            4,704             4,045
----------------------------------------------------------------------------------------------------------------------------
            Income before income taxes                               289              313              957               934
Income tax                                                            71               49              242               165
            Net income                                              $218             $264             $715              $769
----------------------------------------------------------------------------------------------------------------------------
Net income per common share                                        $0.23            $0.29            $0.77             $0.83
----------------------------------------------------------------------------------------------------------------------------
Weighted average common shares                                   927,798          925,279          926,659           924,917
----------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>

<TABLE>
CENTER BANKS INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<S>                                            <C>       <C>           <C>       <C>                <C>         <C>           <C>
                                                                                       Net
                                                                                    unrealized
                                                         Additional                  holding
                                               Common     paid-in-     Retained   gain (loss) on    Treasury    Loan to
                                               stock       capital     earnings     securities       stock         ESOP       Total
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                 (In Thousands)
-----------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1993                        $10       $9,468      $4,335           $215      ($713)       ($29)     $13,286

Net income                                            0            0         769              0          0           0          769

Sale of 700 shares under option                       0            4           0              0          0           0            4

Cash dividend declared on
Common stock ($.08 per share)                         0            0       (111)              0          0           0         (111)

Net unrealized holding
 loss on securities,
 net of tax effect of $237,000                        0            0           0           (314)         0           0         (314)
-----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1994                       $10       $9,472      $4,993           ($99)      ($713)      ($29)     $13,634
-----------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994                        $10       $9,475      $5,206          ($187)      ($713)        $0      $13,791

Net income                                            0            0         715              0           0          0          715

Sale of 1,945 shares under option                     0           15           0              0           0          0           15

Issuance of 474 shares of stock under
1995 Non-employee
Director's Stock Plan                                 0            7           0              0           0          0            7

Cash dividend declared on
Common stock ($.14 per share)                         0            0       (129)              0           0          0         (129)

Net unrealized holding
 gain on securities,
 net of tax effect of $73,000                         0            0           0            110           0          0          110
-----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995                       $10       $9,497      $5,792           ($77)      ($713)        $0      $14,509
-----------------------------------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>

<TABLE>
CENTER BANKS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S>                                                                                         <C>                    <C>
                                                                                        Nine months ended September 30,
                                                                                               1995                  1994
----------------------------------------------------------------------------------------------------------------------------
                                                                                                 (In Thousands)
Cash flows from operating activities:
  Interest received                                                                         $11,660                $9,458
  Fees and service charges received                                                             717                   836
  Interest paid                                                                              (6,385)               (4,514)
  Cash paid to employees and suppliers                                                       (4,651)               (4,454)
  Income taxes paid                                                                            (266)                 (465)
  Originations of loans held for sale                                                          (935)               (2,576)
  Proceeds from sales of loans held for sale                                                    876                 2,900
  Proceeds from sale of real estate owned                                                       130                   417
----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                                     1,146                 1,602
----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
  Proceeds from maturities and redemptions of securities                                      7,538                 1,590
  Proceeds from sales of securities                                                               0                 3,053
  Purchase of Federal Home Loan Bank stock                                                     (103)                 (140)
  Purchase of securities                                                                    (10,959)               (3,538)
  Principal collected on asset-backed securities                                                916                 1,876
  Net increase in loans made to customers                                                    (4,810)              (14,928)
  Purchase of property and equipment, net                                                      (797)                 (389)
----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                                        (8,215)              (12,476)
----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
  Net increase in time certificates                                                          13,925                 5,275
  Net increase (decrease) in other deposits                                                  (7,081)                  702
  Increase in overnight borrowings                                                              433                 4,775
  Net decrease in long-term borrowings                                                           (15)                  (60)
  Proceeds from issuance of stock pursuant to stock plan's                                       22                     4
  Dividends paid                                                                               (129)                  (74)
----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                                     7,155                10,622
----------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents                                                        86                  (252)
Reclassification of balance due from Nationar to other assets                                (1,057)                    0
Cash and cash equivalents at beginning of period                                              3,343                 1,120
----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                                   $2,372                  $868
----------------------------------------------------------------------------------------------------------------------------
Reconciliation of net income to net cash provided by operating activities:
  Net income                                                                                   $715                  $769
  Adjustments:
    Depreciation and amortization                                                               417                   272
    Provision for loan losses                                                                   210                   270
    Provision for losses on real estate owned                                                   240                   140
    Decrease (increase) in loans held for sale, net                                             (68)                  324
    Net amortization (accretion) of deferred expenses and premiums                              (48)                   31
    Proceeds from sale of real estate owned                                                     130                   417
    Net loss (gain) on sales and redemptions of securities                                       99                    (7)
    Net gain on sales of property and equipment                                                 (11)                   (1)
    Decrease (increase) in interest receivable                                                 (157)                   18
    Increase in other assets                                                                   (202)                 (379)
    Decrease in accrued expenses                                                                (28)                  (93)
    Other, net                                                                                 (151)                 (159)
----------------------------------------------------------------------------------------------------------------------------
      Total adjustments                                                                         431                   833
----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                                    $1,146                $1,602
----------------------------------------------------------------------------------------------------------------------------
Supplemental schedule of noncash investing activities:
   Transfer of securities available for sale to securities held to maturity                  $8,334                    $0
   Mortgage loans foreclosed and transferred to real estate owned                              $358                   $92
----------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>

                           Center Banks Incorporated
                   Notes to Consolidated Financial Statements

1.       Principles of Consolidation
         ---------------------------
         The consolidated  financial  statements  include the accounts of Center
         Banks  Incorporated  (the "Company") and its  wholly-owned  subsidiary,
         Skaneateles  Savings Bank (the "Bank").  All  significant  intercompany
         balances and transactions are eliminated in consolidation.

         The data in the  consolidated  balance  sheet for December 31, 1994 was
         derived from the  Company's  1994 Annual Report to  Stockholders.  That
         data, along with the other interim financial  information  presented in
         the consolidated  balance sheets,  statements of income,  statements of
         stockholders'  equity and cash flows should be read in conjunction with
         the  consolidated  financial  statements,  including the notes thereto,
         contained in the 1994 Annual Report to Stockholders.

2.       Capital Stock
         -------------
         The Company has 500,000 shares of preferred  stock,  par value $.01 per
         share,  authorized;  none have been issued.  The Company has  2,500,000
         shares of common stock, par value $.01 per share, authorized; 1,032,779
         shares are issued as of November 9, 1995, of which  102,700  shares are
         held as treasury stock.

3.       Securities
         ----------
         The Company  has  adopted the  provisions  of  Statement  of  Financial
         Accounting  Standards No. 115,  Accounting  for Certain  Investments in
         Debt and Equity  Securities  (Statement 115). Under Statement 115, debt
         and  equity  securities  are  classified  in one of  three  categories:
         trading,  available for sale, or held to maturity.  Trading  securities
         are bought and held  principally for the purpose of selling them in the
         near term.  Held to maturity  securities are those debt securities that
         the  Company has the  ability  and intent to hold until  maturity.  All
         other  securities  not  included  in  trading or held to  maturity  are
         classified as available-for-sale.  The Company currently classifies all
         securities either as held to maturity or available for sale.

         Available-for-sale    securities    are   recorded   at   fair   value.
         Held-to-maturity  securities are recorded at amortized  cost,  adjusted
         for the amortization or accretion of premiums or discounts.  Unrealized
         holding  gains  and  losses,   net  of  the  related  tax  effect,   on
         available-for-sale  securities  are  excluded  from  earnings  and  are
         reported  as  a  separate  component  of  stockholders'   equity  until
         realized.  Transfers of securities  between  categories are recorded at
         fair value at the date of transfer.  Unrealized holding gains or losses
         associated  with  transfers  of  securities  from  held-to-maturity  to
         available-for-sale   are   recorded   as  a   separate   component   of
         stockholders'  equity.  The unrealized holding gains or losses included
         in the separate  component of equity for  securities  transferred  from
         available-for-sale  to  held-for-maturity  are maintained and amortized
         into earnings over the remaining  life of the security as an adjustment
         to yield in a manner  consistent with the  amortization or accretion of
         premium or discount on the associated security.

         A  decline  in  the   market   value  of  any   available-for-sale   or
         held-to-maturity   security  below  cost  that  is  deemed  other  than
         temporary is charged to earnings  resulting in the  establishment  of a
         new cost basis for the security.

         Premiums and  discounts  are amortized or accreted over the life of the
         related security as an adjustment of yield using the effective interest
         method. Interest income is recognized when earned.  Purchases and sales
         are recorded on a trade date basis with  settlement  occurring  shortly
         thereafter.  Realized  gains and losses on securities  sold are derived
         using the specific  identification  method for  determining the cost of
         securities sold.

         On January 1, 1995 the Company  reclassified  its entire  portfolio  of
         mortgage-backed securities from available for sale to held to maturity,
         at the  securities'  fair value of $8.3  million.  The change  reflects
         management's  intention  to hold the  securities  to maturity  and will
         shield  equity  from  future  volatility  in  the  fair  value  of  the
         securities due to changes in market rates.

<PAGE>

4.       Loans Receivable and Loan Fees
         ------------------------------
         Loans receivable are reported at the principal amount outstanding,  net
         of unearned  discount,  net  deferred  fees and an  allowance  for loan
         losses.  Accrual of interest is  discontinued on a loan when management
         believes,  after  considering  economic  and  business  conditions  and
         collection efforts,  that the borrower's  financial condition precludes
         accrual.  Generally,  interest  income is not recognized on loans which
         are delinquent over 90 days.

         Net loan  fees and  costs  are  capitalized  as an  adjustment  of loan
         principal  and  amortized  over  the  life  of the  related  loan as an
         adjustment of yield using the interest method.

         The  Financial   Accounting   Standards  Board  issued   Statement  114
         Accounting  by  Creditors  for  Impairment  of a  Loan  as  amended  by
         Statement  118,  Accounting  by Creditors  for  Impairment  of a Loan -
         Income and Disclosure.  These statements prescribe recognition criteria
         for loan  impairment,  generally  related to commercial type loans, and
         measurement  methods  for  certain  impaired  loans and all loans whose
         terms are modified in troubled  debt  restructuring  subsequent  to the
         adoption of these statements.  A loan is considered impaired when it is
         probable that the borrower  will be unable to repay the loan  according
         to the original contractual terms of the loan agreement.

         As of January 1, 1995,  the Company has adopted the  provisions of SFAS
         No. 114 and SFAS No. 118 and has provided the required disclosures. The
         effect of  adoption  was not  material  to the  consolidated  financial
         statements.  As of January 1, 1995,  all of the Company's  in-substance
         foreclosed  assets  were  reclassified  into  impaired  loan  status as
         required by SFAS No. 114. For all prior periods presented,  all amounts
         related to in-substance foreclosures have also been reclassified. These
         reclassifications did not materially impact the Company's  consolidated
         financial condition or results of operations.

         As a result of the adoption of SFAS No. 114, the allowance for possible
         loan  losses   related  to  impaired  loans  that  are  identified  for
         evaluation  in  accordance  with SFAS No.  114 is based on the  present
         value of expected cash flows discounted at the loan's initial effective
         interest rate, except that as a practical expedient,  impairment may be
         measured at the loan's  observable  market price,  or the fair value of
         the  collateral  for  certain  loans  where  repayment  of the  loan is
         expected to be provided solely by the underlying collateral (collateral
         dependent loans).  The Company considers  estimated costs to sell, on a
         discounted  basis, when determining the fair value of collateral in the
         measurement  of  impairment  if those costs are  expected to reduce the
         cash flows available to repay or otherwise satisfy the loans.  Prior to
         the adoption of SFAS No. 114 and 118, the  allowance  for possible loan
         losses related to these loans was based on estimated  undiscounted cash
         flows or the fair value of the collateral, less estimated costs to sell
         for collateral dependent loans.

         Prior to the adoption of SFAS No. 114, other real estate owned included
         both formally  foreclosed and in-substance  foreclosed real properties.
         In  accordance   with  SFAS  No.  114,  a  loan  is  classified  as  an
         in-substance  foreclosure  when the Company has taken possession of the
         collateral  regardless of whether formal  foreclosure  proceedings have
         taken  place.  Prior to the  adoption of SFAS No. 114 and SFAS No. 118,
         in-substance  foreclosed properties included those properties where the
         borrower had little or no remaining equity in the property  considering
         its fair  value;  where  repayment  was only  expected to come from the
         operation  or  sale  of  the  property;  and  where  the  borrower  had
         effectively  abandoned  control of the property or it was doubtful that
         the borrower would be able to rebuild equity in the property.

         Cash receipts on impaired loans are generally  recorded as principal or
         interest according to the terms of the loan agreement.

         At  September  30,  1995,  the  recorded  investment  in loans that are
         considered  to be  impaired  under  SFAS No.  114  totaled  $3,837,000.
         Included in this amount is $3,318,000  of impaired  loans for which the
         related  allowance  for  credit  losses  is  $1,137,000.  In  addition,
         included in the total  impaired loans at September 30, 1995 is $519,000
         of  impaired  loans that do not have an  allowance  for  credit  losses
         determined  in  accordance  with SFAS No.  114.  The  average  recorded
         investment  in impaired  loans  during the three months and nine months
         ended September 30, 1995 was  approximately  $3,951,000 and $3,810,000,
         respectively.

<PAGE>

         For the three months and nine months ended  September  30, 1995 the
         Company recognized  interest  income of  $83,000  and  $208,000,  
         respectively  on those impaired loans.

5.       Per Common Share Data
         ---------------------
         Per common  share data is  computed  based  upon the  weighted  average
number of shares.

6.       Reclassifications
         -----------------
         Certain  reclassifications  have been made to prior period  amounts for
consistency in reporting.

7.       Opinion of Management
         ---------------------
         The interim financial statements of the Company included in this Report
         reflect  all  adjustments  which are,  in the  opinion  of  management,
         necessary  to a  fair  statement  of  the  financial  condition  of the
         Company.  All adjustments made to the interim financial statements were
         of a normal recurring nature.


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

General
-------
The Company is a bank holding company  registered under the Bank Holding Company
Act of 1956.  The results of the Company are largely  dependent upon the results
of the Bank, its sole subsidiary.

                      Changes in Financial Condition from
                      -----------------------------------
                    December 31, 1994 to September 30, 1995
                    ---------------------------------------

Assets
------
Total  assets of the Company  were $206.9  million at  September  30,  1995,  an
increase of $8.0 million or 4.0% from  December 31, 1994.  Net loans  receivable
increased  $4.4 million,  investment  securities  were up $2.7 million and other
assets increased $1.2 million.

Loans
-----
Net loans receivable increased $4.4 million during the first nine months of 1995
to $168.3  million.  Total loan  originations  were $21.3  million  for the nine
months ended September 30, 1995, of which 59.2% were residential mortgages,  22%
were  commercial  loans  and  mortgages  and 18.8%  were  consumer  loans.  Loan
originations  dropped  34.1%  compared with the year ago period due primarily to
the sharply  rising rate  environment  in 1994,  which slowed housing starts and
home  sales  late in 1994 and into  1995.  Mortgage  refinancings  are also down
substantially,  following  record levels of refinancings in 1993 and early 1994.
As a result,  residential  loan  originations  in the first nine  months of 1995
totaled $12.6 million,  down 50% from the year earlier period.  Lending activity
recovered in the second and third  quarters of 1995 in response to a decrease in
interest rates during this period.  Mortgage and commercial loan applications in
process  totaled  $6.9 million at  September  30, 1995,  up from $3.1 million at
March 31, 1995.

The allowance for loan losses was  $3,004,000 at September 30, 1995,  which is a
$36,000  decrease from the balance at December 31, 1994.  The provision for loan
losses was  $30,000 and  $210,000  for the three  months and nine  months  ended
September  30, 1995,  respectively,  compared  with $90,000 and $270,000 for the
same  periods  in 1994.  The  Company  reduced  its  provision  for loan  losses
reflecting the continuing improvement in the quality of its loan portfolio.

<PAGE>
<TABLE>
The following table sets forth the activity in the allowance for loan losses for the periods indicated:

<S>                                      <C>          <C>               <C>               <C>               <C>  
                                            September 30,                               December 31,
                                      ----------------------         ---------------------------------------------
                                      1995              1994              1994              1993              1992
                                      ----------  ----------         -------------   ----------------   ----------
                                                                     (In Thousands)

Beginning Balance                        $3,040       $2,938            $2,938            $2,847            $4,019

Provision                                   210          270               360               600               455

Charge-offs
-----------
     Residential mortgages                    0          (18)              (18)                0                 0
     Commercial mortgages                  (217)           0                 0              (237)             (522)
     Business                              (127)        (263)             (331)             (428)           (1,145)
     Other consumer                          (9)         (17)              (17)              (64)              (30)
-------------------------------------------------------------------------------------------------------------------
                                           (353)        (298)             (366)             (729)           (1,697)
-------------------------------------------------------------------------------------------------------------------

Recoveries
----------
     Commercial mortgages                    11            0                 0                 4                 0
     Business                                92           39                96               203                60
     Other consumer                           4            9                12                13                10
------------------------------------------------------------------------------------------------------------------
                                            107           48               108               220                70
------------------------------------------------------------------------------------------------------------------
Net Charge-offs                            (246)        (250)             (258)             (509)           (1,627)
-------------------------------------------------------------------------------------------------------------------

Ending Balance                           $3,004       $2,958            $3,040            $2,938            $2,847
------------------------------------------------------------------------------------------------------------------

Ratio of net charge-offs
  to average loans outstanding            0.15%        0.16%             0.17%             0.41%             1.43%
------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

The following table sets forth  information  with respect to loans delinquent 90
days or more, non-accrual loans, restructured loans, and real estate owned as of
the dates indicated.
<TABLE>
<S>                                                  <C>          <C>        <C>           <C>        <C>          <C>     
                                                 September 30,                          December 31,
                                                 -------------    -------------------------------------------------------
                                                     1995         1994         1993         1992        1991         1990
                                                 ------------------------------------------------------------------------
                                                                               (In Thousands)
Nonaccruing loans
     Residential real estate mortgages                $298        $317         $291         $582        $686         $352
     Commercial (1)                                  1,574       2,894        2,716        2,135       4,271        3,334
     Consumer                                           53          40           10           63          22          216
-------------------------------------------------------------------------------------------------------------------------
Total                                               $1,925      $3,251       $3,017       $2,780      $4,979       $3,902
-------------------------------------------------------------------------------------------------------------------------
Other loans past due 90 days or more
and still accruing:
     Consumer (2)                                       $9          $0          $12          $16         $25          $40
     Commercial (1)                                    322         447            0            0           0            0
     Lease loans                                         0           0            0            0          52            0
-------------------------------------------------------------------------------------------------------------------------
Total                                                 $331        $447          $12          $16         $77          $40
-------------------------------------------------------------------------------------------------------------------------

Restructured loans, not included above               1,125         932        1,006          901         114          392
-------------------------------------------------------------------------------------------------------------------------

Real estate owned                                      975         984        1,572        1,343       1,671        1,617
-------------------------------------------------------------------------------------------------------------------------

Total assets containing specific risk elements      $4,356      $5,614       $5,607       $5,040      $6,841       $5,951
-------------------------------------------------------------------------------------------------------------------------
Ratio of total loans past due
90 days or more to gross loans                       1.32%       2.05%        1.95%        2.27%       4.36%        2.66%
-------------------------------------------------------------------------------------------------------------------------
Ratio of assets containing specific
risk elements to total assets                        2.11%       2.82%        3.21%        2.98%       3.74%        2.76%
-------------------------------------------------------------------------------------------------------------------------
(1) Includes commercial real estate loans.
(2) Consists primarily of Guaranteed Student
Loans.
</TABLE>

Nonperforming  loans were  $1,925,000  or 1.12% of total loans at September  30,
1995,  compared  with  $3,251,000  or 1.95% at December 31, 1994.  Nonperforming
commercial loans, which accounted for 81.8% of nonperforming  loans at September
30, 1995, decreased by $1.0 million or 39.8%, primarily due to the restructuring
of one commercial  loan in February 1995.  The  restructured  terms of this loan
call for interest only payments  monthly at 2% over the Bank's prime rate,  with
the full  principal  balance due in  December  1995.  The  Company is  currently
negotiating  a  repayment  plan and  expects  this loan will be renewed  and its
maturity date extended.  This loan is considered to be impaired at September 30,
1995 and an allowance  for this loan has been  established  pursuant to SFAS No.
114.  The  allowance  for loan losses  covered  156% of  nonperforming  loans at
September 30, 1995, compared with coverage of 94% at December 31 1994.

Potential problem loans at September 30, 1995 amounted to $3,057,000. "Potential
problem  loans" are  defined as loans which are not  included  with past due and
non-accrual  loans discussed above, but about which  management,  through normal
internal  credit  review  procedures,  has  information  about  possible  credit
problems which may result in the borrowers  inability to comply with the present
loan  repayment  terms.  Of the  $3,057,000 in potential  problem  loans,  loans
totaling  $2,789,000 are considered impaired under SFAS No. 114. There have been
no loans classified for regulatory  purposes as loss,  doubtful,  or substandard
that are not included above or which caused management to have serious doubts as
to the ability of the  borrower to comply with  repayment  terms.  In  addition,
there were no material  commitments to lend additional  funds to borrowers whose
loans were classified as non-performing.

<PAGE>

Real Estate Owned
-----------------
Real estate  owned,  net (REO)  totaled  $975,000 at  September  30, 1995 and is
comprised  primarily of  non-residential  real estate.  Two properties  totaling
$544,000  are under  contract to sell and are  expected to close by November 30,
1995.

The Company  maintains an allowance for possible  losses on REO,  which was
$49,000  at  September   30,  1995.   Provisions   of  $150,000  and   $240,000,
respectively,  were recorded in the three months and nine months ended September
30,  1995,  compared  with  $45,000 and  $140,000  for the same periods in 1994.
Writedowns  of $229,000  were  recorded  in the third  quarter of 1995 to better
position the Company to liquidate the  properties in a weak real estate  market.
All the Company's  properties have been written down during the third quarter to
their  currently  estimated  net  realizable  value.  Future  writedowns  may be
necessary if the value of these  properties  decline due to factors  outside the
control of the Company,  such as adverse  market  conditions  or a lack of buyer
interest.

The  activity  in the  allowance  for losses on real  estate  owned for the nine
months ended September 30 is summarized as follows:
<TABLE>
<S>                                                              <C>              <C>
---------------------------------------------------------------------------------------------
                                                                 1995             1994
---------------------------------------------------------------------------------------------
                                                                       (In Thousands)
Balance at January 1                                              $38             $253
Provision charged to operations                                   240              140
Writedowns                                                       (229)            (365)
---------------------------------------------------------------------------------------------
Balance at September 30                                           $49              $28
---------------------------------------------------------------------------------------------
</TABLE>

Other Assets
------------
Other assets  totaled $2.0  million at September  30, 1995,  an increase of $1.2
million or 162% from December 31, 1994. The Company reclassified $1.7 million of
cash  balances due from  Nationar to other  assets at June 30,  1995.  Nationar,
which provided item  processing  and check  clearing  services for the Bank, was
seized by the New York State Banking  Department (the Department) on February 6,
1995 due to liquidity problems.  The Department froze all assets of Nationar and
a liquidation of Nationar is in process. In July 1995 the Department released to
the Bank $618,000 of its funds on deposit with Nationar. Under the provisions of
the Banking Law of the State of New York, there may be certain  preferences that
might affect the percentage recovery of any particular  institution.  Management
is taking all steps  necessary to recover the amounts owed the Bank by Nationar.
In July, 1995 the Bank filed a claim on the estate of Nationar for the remaining
balance  owed the Bank of $1.1  million.  The seizure of Nationar  has not had a
significant impact on the Bank's liquidity or its day-to-day operations.

Deposits
--------
Total deposits  (including  advance payments by borrowers for property taxes and
insurance)  increased  $6.8  million  or 4.0% in the first 9 months of 1995,  to
reach $177.5 million at September 30, 1995.  During the third quarter,  deposits
decreased  $3.0 million,  reversing  increases in the first two quarters of 1995
totaling $9.8 million.  Disbursements of escrowed funds for payments of property
taxes and insurance  accounted  for $1 million of the decrease  during the third
quarter.  Interest  bearing  accounts  decreased  $3.4 million  during the third
quarter due primarily to an overall  decrease in market interest  rates.  During
the first two quarters of 1995 while  market  interest  rates were  rising,  the
Company experienced a $9.1 million increase in interest bearing deposits.

The  Company's  mix of  deposits  was  56.2%  in  time  accounts  and  43.2%  in
transaction  accounts (savings,  demand, money market accounts) at September 30,
1995.  This is a change in  deposit  mix from the end of 1994 when 48.3% were in
time  accounts  and 50.3% were in  transaction  accounts.  Transaction  accounts
decreased  $6.0  million in the first nine  months of 1995,  mostly in the first
half of the year,  due in large part to the movement of rate  sensitive  savings
and money market accounts to higher yielding time accounts and other alternative
investments.  This movement of funds has slowed in the third quarter due in part
to lower interest rates.

The Company is currently developing a marketing program,  which will include new
product  offerings,  that will be  designed  to attract  and retain  transaction
accounts,  especially consumer demand accounts.  Increased  transaction accounts
will  provide the  Company  with a low cost,  stable  source of funds for future
asset  growth.  Transaction  accounts  are  historically  more  stable  and less
sensitive  to changes in  interest  rates than time  deposits  and  provide  the
Company a greater opportunity to cross-sell other products and services, such as
direct deposit,  ATM cards, and consumer loans. The Company expects to implement
this program late in the first quarter of 1996.

Stockholders' Equity
--------------------
Stockholders'  equity at  September  30, 1995 was $14.5  million,  or $15.63 per
share,  compared with $13.8 million or $14.90 per share at December 31, 1994. At
September  30, 1995,  the  Company's  leverage  capital  ratio was 7.04% and its
risk-based capital ratio was 12.41%. Both capital measurements were in excess of
regulatory requirements.

The Company declared a dividend of $.05 per share during the third quarter,
payable on November 14, 1995 to shareholders of record on October 31.


                    Comparison of the Results of Operations
                    ---------------------------------------

General
-------
Net  income  was  $218,000  or $.23 per  share for the  third  quarter  of 1995,
compared with $264,000 or $.29 per share for the same period in 1994. Net income
was  $715,000  or $.77 per  share  and  $769,000  or $.83 per share for the nine
months  ended  September  30,  1995 and 1994,  respectively.  The third  quarter
results for 1995 include  charges for losses on foreclosed  real estate totaling
$150,000 and a one-time charge of $83,000 to write off the Bank's  investment in
Nationar,  a  correspondent  bank that was seized by the New York State  Banking
Department earlier this year.  Partially offsetting these charges was a $109,000
one-time refund from the Federal Deposit Insurance  Corporation (FDIC) resulting
from the re-capitalization of the Bank Insurance Fund. The Bank's FDIC insurance
assessment was reduced to $.04 per $100 of insured deposits,  from $.23 per $100
retroactive to June 1, 1995. Based on the Bank's total deposits at September 30,
1995,  annual savings from this lower assessment will be approximately  $332,000
before taxes.


Net Interest Income
-------------------
Net interest  income is affected by the  difference  between the yield earned on
interest  earning  assets  and  rates  paid on  interest  bearing  deposits  and
borrowings.  The relative amounts of interest  earning assets,  interest bearing
deposits, and borrowings also impact net interest income levels.

<PAGE>

The  following  table  sets  forth,  for the nine  months  ended  September  30,
information  regarding  (i) the total  dollar  amount of  interest  income  from
interest-earning  assets and the resulting average yields; (ii) the total dollar
amount of interest  expense on  interest-bearing  liabilities  and the resultant
average cost;  (iii) net interest  income;  (iv)  interest rate spread;  (v) net
interest-earning  assets; (vi) net yield on  interest-earning  assets; and (vii)
ratio  of  interest-earning  assets  to  interest-bearing  liabilities.  No  tax
equivalent adjustments were made.

<TABLE>
<S>                                 <C>        <C>            <C>          <C>          <C>            <C>
                                                 1995                                   1994
                                    ---------------------------------      ---------------------------------
                                    Average                   Yield/       Average                   Yield/
                                    Balance    Interest        Rate        Balance      Interest        Rate
                                    ---------------------------------      ---------------------------------
                                                            (Dollars In Thousands)
Interest-earning assets:
  Mortgage loans                   $141,215      $8,364        7.89%       $122,057      $6,513        7.12%
  Other loans                        27,564       2,120       10.28          28,513       1,792        8.40
-------------------------------------------------------------------------------------------------------------
Total loans                         168,779      10,484        6.21         150,570       8,305        5.52
-------------------------------------------------------------------------------------------------------------
  Securities                         24,474       1,234        6.74          23,013       1,105        6.42
  Federal funds sold                  3,094         141        6.09               0           0
-------------------------------------------------------------------------------------------------------------
Total interest-earning assets       196,348      11,859        8.08         173,583       9,410        7.25
-------------------------------------------------------------------------------------------------------------
Non-interest earning assets          10,095           0                       6,239           0
-------------------------------------------------------------------------------------------------------------
Total assets                       $206,443     $11,859                    $179,822      $9,410
-------------------------------------------------------------------------------------------------------------

Interest-bearing liabilities:
  Deposits:
     Savings and club accounts      $33,656        $706        2.81%        $37,756        $725        2.57%
     Time certificates               96,896       4,112        5.67          68,662       2,445        4.76
     Money market accounts           23,535         585        3.32          28,272         585        2.77
     Now and escrow accounts         14,525         247        2.27          12,312         201        2.18
-------------------------------------------------------------------------------------------------------------
  Total interest-bearing deposits   168,613       5,650        3.35         147,001       3,956        2.69
-------------------------------------------------------------------------------------------------------------
  Borrowings                         14,711         735        6.68          12,807         590        6.16
Total interest-bearing              183,324       6,385        4.66         159,808       4,546        3.80
liabilities
Non-interest-bearing deposits         8,116           0                       5,884           0
Non-interest-bearing liabilities        590           0                         728           0
-------------------------------------------------------------------------------------------------------------
Total liabilities                   192,030       6,385                     166,420       4,546
Stockholders' equity                 14,413           0                      13,402           0
-------------------------------------------------------------------------------------------------------------
Total liabilities and
  stockholders' equity             $206,443      $6,385                    $179,822      $4,546
-------------------------------------------------------------------------------------------------------------
Net interest income/
  interest rate spread                           $5,474        3.42%                     $4,864        3.44%
-------------------------------------------------------------------------------------------------------------
Net interest-earning assets/
  net yield on interest-earning
  assets                            $13,024                    3.72%        $13,775                    3.74%
-------------------------------------------------------------------------------------------------------------
Ratio of interest-earning assets
  to interest-bearing liabilities                              1.07%                                   1.09%
-------------------------------------------------------------------------------------------------------------
</TABLE>

Net interest  income was $1,807,000 and $5,474,000 for the three months and nine
months ended  September 30, 1995,  respectively,  compared with  $1,676,000  and
$4,864,000  for the same periods in 1994. The increase  resulted  primarily from
loan  growth,  partially  offset  by lower  net  interest  margin.  Total  loans
outstanding  at the end of the third quarter were $171.2  million,  up 8.7% from
$157.5 million as of September 30, 1994.  The Company's net interest  margin was
3.62% in the  third  quarter,  down  from  3.82% in the  year ago  quarter.  Net
interest  margin was 3.72% for the nine months ended  September  30, 1995,  down
slightly  from  3.74% in the year ago  period.  Much of the  contraction  in the
Company's net interest  margin over the past twelve months  occurred  during the
second quarter of 1995, with the margin  shrinking by 22 basis points.  A higher
costs of funds due to rising rates in the first quarter of 1995 was  exacerbated
by a drop in the prime rate in the second  quarter,  which is the index used for
many adjustable commercial and consumer loans.  Relatively stable interest rates
during the third  quarter  helped to limit the  reduction  in margin  during the
quarter to only 4 basis points.

<PAGE>

Other Operating Income
----------------------
Total other operating  income was $105,000 and $397,000 for the three months and
nine months ended September 30, 1995,  respectively,  compared with $144,000 and
$385,000 for the same periods in 1994.  Writeoffs  of the Bank's  investment  in
Nationar reduced other operating income by $83,000 and $99,000,  respectively in
the three  months and nine months ended  September  30,  1995.  Excluding  these
writeoffs,  other  operating  income  increased  30.6% and 28.8%,  respectively,
resulting primarily from fee income generated by the Bank's new branches.

Other Operating Expenses
------------------------
Total other operating  expenses were $1.6 million and $4.7 million for the three
months and nine months ended  September  30, 1995,  respectively,  compared with
$1.4 million and $4.0 million for the same periods in 1994. Most of the increase
is due to the cost of staffing and operating  the Bank's four new branches,  and
to higher depreciation expense on new computer equipment purchased in 1994. Also
contributing to the increase in third quarter  expenses is a $49,000 increase in
real estate owned expense.

Income Taxes
------------
Tax expense of $71,000 and  $242,000  was recorded for the three months and nine
months ended  September 30, 1995 compared with $49,000 and $165,000 for the same
periods in 1994.

PART II.  OTHER INFORMATION
---------------------------

         Item 1.  Legal Proceedings
         -------  Not applicable

         Item 2.  Changes in Securities
         -------  Not applicable

         Item 3.  Defaults Upon Senior Securities
         -------  Not applicable

         Item 4.  Submission of Matters to a Vote of Security Holders
         -------  Not applicable

         Item 5.  Other Information
         -------  Not applicable

         Item 6.  Exhibits and Reports on Form 8-K
         -------  a.  Not applicable
                  b.  Not applicable

<PAGE>

                                   SIGNATURES

 Pursuant  to the  requirements  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.

                           CENTER BANKS INCORPORATED
                           -------------------------
                                  (Registrant)





By:  /s/John P. Driscoll                               Date: November 10, 1995
     ----------------                                        -----------------
     John P. Driscoll
     Chairman, President and Chief
     Executive Officer


By:  /s/J. Daniel Mohr                                 Date: November 10, 1995
     --------------                                          -----------------
     J. Daniel Mohr
     Chief Financial Officer
     and Treasurer