PROGRESSIVE BANK INC, PRE 14A, 1997-03-04

PROGRESSIVE BANK INC
PRE 14A, 1997-03-04
STATE COMMERCIAL BANKS

Previous: SOUTHWEST ROYALTIES INC INCOME FUND VI, 3, 1997-03-04

Next: STRONG GOVERNMENT SECURITIES FUND INC, 497J, 1997-03-04

<PAGE>
<PAGE>
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[X ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))

PROGRESSIVE BANK, INC.
- ----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

- ----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.

1. Title of each class of securities to which
transaction applies:
_________________________________________________________________

2. Aggregate number of securities to which transaction
applies:
_________________________________________________________________

3. Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (Set
forth the amount on which the filing fee is calculated and state
how it was determined):
_________________________________________________________________

4. Proposed maximum aggregate value of transaction:

_________________________________________________________________

5. Total fee paid:
_________________________________________________________________

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.

1. Amount Previously Paid:
____________________________________________

2. Form, Schedule or Registration Statement No.:
____________________________________________

3. Filing Party:
____________________________________________

4. Date Filed:
____________________________________________<PAGE>
<PAGE>

[Letterhead]

March 24, 1997

Dear Stockholder:

We invite you to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of Progressive Bank, Inc. (the "Company")
which will be held on Thursday, April 24, 1997, at the main
office of its subsidiary, Pawling Savings Bank (the "Bank"), on
Route 22, Pawling, New York at 6:00 p.m., local time.

The accompanying Notice and Proxy Statement describe the
formal business to be transacted at the meeting. During the
meeting, we will also report on the operations of the Bank.
Directors and officers of the Company and the Bank will be
present to respond to any questions the stockholders may have.

ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN,
DATE AND RETURN THE ACCOMPANYING FORM OF PROXY AS SOON AS
POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING.
Your vote is important, regardless of the number of shares you
own. This will not prevent you from voting in person but will
assure that your vote is counted if you are unable to attend the
meeting.

On behalf of the Board of Directors and all the employees of
the Company and the Bank, I wish to thank you for your continued
support.

Sincerely,

Peter Van Kleeck
President and Chief Executive Officer<PAGE>
<PAGE>
________________________________________________________________

PROGRESSIVE BANK, INC.
1301 ROUTE 52, P.O. BOX 7000
FISHKILL, NEW YORK 12524-7000

________________________________________________________________

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 24, 1997

________________________________________________________________

NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders (the "Annual Meeting") of Progressive Bank, Inc.
(the "Company") will be held at the main office of its
subsidiary, Pawling Savings Bank (the "Bank"), on Route 22,
Pawling, New York on Thursday, April 24, 1997, at 6:00 p.m.,
local time.

A Proxy Statement and Proxy Card for the Annual Meeting are
enclosed.

The Annual Meeting is for the purpose of considering and
acting upon the following matters:

1. The election of three directors of the Company;

2. The amendment of the Company's Certificate of
Incorporation to include provisions that set forth
procedures for director nominations and new
business proposals by stockholders;

3. The approval of the Progressive Bank, Inc. 1997
Employee Stock Option Plan;

4. The ratification of the appointment of KPMG Peat
Marwick LLP, independent certified public
accountants, as the Company's independent auditors
for the fiscal year ending December 31, 1997; and

5. Such other business as may properly come before
the Annual Meeting or any adjournment thereof.

The Board of Directors is not aware of any other business to
come before the Annual Meeting.

Any action may be taken on any one of the foregoing pro-
posals at the Annual Meeting on the date specified above or on
any date or dates to which, by original or later adjournment, the
Annual Meeting may be adjourned. Stockholders of record at the
close of business on March 14, 1997 are the stockholders entitled
to notice of and to vote at the Annual Meeting and any adjourn-
ment thereof.

You are requested to fill in and sign the enclosed Proxy
Card which is solicited by the Board of Directors and to mail it
promptly in the enclosed envelope. The proxy will not be used if
you attend and vote at the Annual Meeting in person.

BY ORDER OF THE BOARD OF DIRECTORS,

Beatrice D. Parent
Corporate Secretary
Fishkill, New York
March 24, 1997

IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE
COMPANY THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO
INSURE A QUORUM. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.<PAGE>
<PAGE>

________________________________________________________________

PROXY STATEMENT
OF
PROGRESSIVE BANK, INC.
1301 ROUTE 52, P.O. BOX 7000
FISHKILL, NEW YORK 12524-7000

________________________________________________________________
ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1997

________________________________________________________________
GENERAL
________________________________________________________________

This Proxy Statement is furnished to stockholders of
Progressive Bank, Inc. (the "Company") in connection with the
solicitation by the Board of Directors of the Company of proxies
to be used at the Annual Meeting of Stockholders (the "Annual
Meeting") which will be held at the main office of its
subsidiary, Pawling Savings Bank (the "Bank"), on Route 22,
Pawling, New York on Thursday, April 24, 1997, at 6:00 p.m.,
local time, and at any adjournment thereof. The accompanying
Notice of Annual Meeting and Proxy Card and this Proxy Statement
are being first mailed to stockholders on or about March 24,
1997.

________________________________________________________________
VOTING AND REVOCABILITY OF PROXIES
________________________________________________________________

Stockholders who execute proxies retain the right to revoke
them at any time. Unless so revoked, the shares represented by
properly executed proxies will be voted at the Annual Meeting and
all adjournments thereof. Proxies may be revoked by written
notice to Beatrice D. Parent, Corporate Secretary of the Company,
at the address shown above, by filing a later dated proxy prior
to a vote being taken on a particular proposal at the Annual
Meeting or by attending the Annual Meeting and voting in person.
The presence of a stockholder at the Annual Meeting will not in
itself revoke such stockholder's proxy.

Proxies solicited by the Board of Directors of the Company
will be voted in accordance with the directions given therein.
WHERE NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE VOTED FOR
THE NOMINEES FOR DIRECTORS SET FORTH BELOW AND IN FAVOR OF EACH
OF THE OTHER PROPOSALS SET FORTH IN THIS PROXY STATEMENT FOR CON-
SIDERATION AT THE ANNUAL MEETING. The proxy confers
discretionary authority on the persons named therein to vote with
respect to the election of any person as a director where the
nominee is unable to serve or for good cause will not serve, and
matters incident to the conduct of the Annual Meeting. If any
other business is presented at the Annual Meeting, proxies will
be voted by those named therein in accordance with the
determination of a majority of the Board of Directors. Proxies
marked as abstentions will not be counted as votes cast. In
addition, shares held in street name which have been designated
by brokers on proxies as not voted will not be counted as votes
cast. Proxies marked as abstentions or as broker non-votes,
however, will be treated as shares present for purposes of
determining whether a quorum is present.

________________________________________________________________
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
________________________________________________________________

The securities entitled to vote at the Annual Meeting
consist of the Company's common stock, par value $1.00 per share
(the "Common Stock"). Stockholders of record as of the close of
business on March 14, 1997 (the "Record Date") are entitled to
one vote for each share of Common Stock then held. As of the
Record Date, there were 3,824,646 shares of Common Stock issued
and outstanding. The presence, in person or by proxy, of at
least one-third of the total number of shares of Common Stock
outstanding and entitled to vote will be necessary to constitute
a quorum at the Annual Meeting.
<PAGE>
<PAGE>
Persons and groups beneficially owning more than 5% of the
Common Stock are required to file certain reports with respect to
such ownership pursuant to the Securities Exchange Act of 1934
(the "Exchange Act"). The following table sets forth information
regarding the shares of Common Stock beneficially owned as of
December 31, 1996 by persons known to the Company to beneficially
own more than 5% of the Common Stock.

AMOUNT AND PERCENT OF
NATURE OF SHARES OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP(1) OUTSTANDING
- ------------------- ------------ ------------
<S> <C> <C>

Builtland Partners 362,439 9.5%
1271 Avenue of the Americas
New York, New York 10020

Peter B. Cannell & Co., Inc. (2) 347,246 9.1
919 Third Avenue
New York, New York 10022

Dimensional Fund Advisors, Inc. (3) 289,700 7.6
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401

The Guardian Life Insurance
Company of America (4) 280,743 7.3
201 Park Avenue South
New York, New York 10003
<FN>

_________________
(1) In accordance with Rule 13d-3 under the Exchange Act, a
person is deemed to be the beneficial owner, for purposes
of this table, of any shares of Common Stock if he or she
has or shares voting or investment power with respect to
such Common Stock or has a right to acquire beneficial
ownership at any time within 60 days from the Record Date.
As used herein, "voting power" is the power to vote or
direct the voting of shares and "investment power" is the
power to dispose or direct the disposition of shares.
Except as otherwise noted, ownership is direct, and the
named beneficial owners exercise sole voting and investment
power over the shares of the Common Stock. Information is
based on reports filed by the beneficial owner pursuant to
the Exchange Act, except that information regarding
Builtland Partners and The Guardian Life Insurance Company
of America is based on information otherwise provided to
the Company by those beneficial owners.
(2) A registered investment advisor.
(3) Dimensional Fund Advisors, Inc. ("Dimensional"), a
registered investment advisor, is deemed to have beneficial
ownership of 289,700 shares of the Common Stock as of
December 31, 1996, all of which shares are held in
portfolios of DFA Investment Dimensions Group, Inc., a
registered open-end investment company, or in series of the
DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans,
of all of which Dimensional Fund Advisors, Inc. serves as
investment manager. Dimensional disclaims beneficial
ownership of all such shares.
(4) Includes affiliates Guardian Investors Services
Corporation, The Guardian Park Avenue Fund, Inc., The
Guardian Stock Fund, Inc. and The Guardian Employees'
Incentive Savings Plan.
</FN>
</TABLE>

2
<PAGE>
<PAGE>
________________________________________________________________
PROPOSAL I -- ELECTION OF DIRECTORS
________________________________________________________________

GENERAL

The Company's Board of Directors currently consists of 10
members. The Company's Certificate of Incorporation requires
that directors be divided into three classes, as nearly equal in
number as possible, with approximately one-third of the directors
elected each year. At the Annual Meeting, three directors will
be elected for a term expiring at the 2000 Annual Meeting and
until their respective successors are elected and shall qualify.
The Board of Directors has nominated Thomas C. Aposporos, John J.
Page and David A. Swinden to serve as directors for a three-year
period. All nominees are currently members of the Board. Under
New York law, directors are elected by a plurality of the votes
cast at the Annual Meeting, i.e., the nominees receiving the
highest number of votes will be elected regardless of whether
such votes constitute a majority of the shares represented at the
Annual Meeting.

It is intended that the persons named in the proxies
solicited by the Board of Directors will vote for the election of
the named nominees. If any nominee is unable to serve, the
shares represented by all valid proxies will be voted for the
election of such substitute as the Board of Directors may
recommend or the size of the Board may be reduced to eliminate
the vacancy. At this time, the Board knows of no reason why any
nominee might be unavailable to serve.

3<PAGE>
<PAGE>

The following table sets forth, for each nominee for
director and continuing director of the Company, his or her age,
the year he or she first became a director of the Company and the
expiration of his or her term as a director. There are no
arrangements or understandings between the Company and any
director pursuant to which such person has been elected a
director of the Company, and no director is related to any other
director or executive officer by blood, marriage or adoption.
Each director of the Company also is a member of the Board of
Directors of the Bank.
<TABLE>
<CAPTION>
PRINCIPAL YEAR FIRST
AGE AT OCCUPATION ELECTED AS CURRENT
DECEMBER 31, FOR PAST DIRECTOR OF TERM
NAME 1996 FIVE YEARS THE COMPANY TO EXPIRE
- ---- ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2000

Thomas C. Aposporos 44 Principal at Aposporos and Son, 1988 1997
licensed real estate brokers;
Chairman of the Board of the
Company

John J. Page 58 President of H.G. Page and Sons, 1986 1997
a building material supplier;
Owner of John Page Development Co.,
a property management development
company

David A. Swinden 64 Executive Vice President of 1994 1997
Imperial Schrade Corp., a
manufacturing company

DIRECTORS CONTINUING IN OFFICE

Richard T. Hazzard 53 President of Lyman A. Beecher, Inc., 1986 1998
d/b/a Beecher Funeral Home and
Dwyer Funeral Home

Richard Novik 56 Owner and President of Clear Channel 1986 1998
Communications, International;
Owner and President of WKIP Broad-
casting and Dutchess Communications
Corp. from 1987 to March 1997

Roger W. Smith 57 President of Pawling Corporation, a 1992 1998
manufacturer of rubber and plastic
products

Elizabeth P. Allen 54 Chairman of the Board of the Bank; 1986 1999
Director of Guideposts, Inc., a
not-for-profit church corporation

George M. Coulter 68 Private practice of dentistry 1986 1999

Archibald A. Smith, III 47 Headmaster at the Trinity Pawling 1995 1999
School, an independent boys college
preparatory school

Peter Van Kleeck 62 President and Chief Executive Officer 1990 1999
of the Company and the Bank
</TABLE>

4<PAGE>
<PAGE>

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors of the Company meets monthly and may
have additional special meetings. During the year ended December
31, 1996, the Board of Directors of the Company met 14 times. No
director attended fewer than 75% in the aggregate of the total
number of Company Board of Directors meetings held during the
year ended December 31, 1996 and the total number of meetings
held by committees on which he or she served during such fiscal
year. The Company's Board of Directors has standing Audit,
Compensation and Nominating Committees.

The Audit Committee reviews examinations of the Company and
the Bank that are conducted by regulatory agencies and oversees
and reviews audits of the Company and the Bank by internal audit
staff and independent auditors. The Audit Committee also
recommends to the Board of Directors, on an annual basis, a firm
to serve as the Company's independent auditors and an individual
to serve as the chief internal auditor of the Company and Bank.
The Audit Committee met seven times during the year ended
December 31, 1996. To qualify for service on the Audit
Committee, directors must meet certain specified criteria
designed to establish independence from management. The present
members of the Audit Committee are David A. Swinden (Chairman),
John J. Page, Archibald A. Smith, III and Roger W. Smith.

The Compensation Committee determines the personnel, salary,
employee benefits policies and related matters for the officers
and employees of the Company and the Bank. The Compensation
Committee met three times during the year ended December 31,
1996. The present members of the Committee are Roger W. Smith
(Chairman), Elizabeth P. Allen, Thomas C. Aposporos, Richard T.
Hazzard and David A. Swinden.

The Nominating Committee meets for the purpose of
considering potential nominees to the Board of Directors. During
the year ended December 31, 1996, the Nominating Committee met
five times. Effective May 1, 1997, the members of the Nominating
Committee will be Archibald A. Smith, III (Chairman), George M.
Coulter, Richard Novik and John J. Page.

Any stockholder wishing to suggest nominees to the Board of
Directors may forward their suggestions along with nominating
information to: Beatrice D. Parent, Corporate Secretary,
Progressive Bank, Inc., 1301 Route 52, P.O. Box 7000, Fishkill,
New York 12524-7000. If the proposed amendment to the
Certificate of Incorporation is approved at the Annual Meeting,
stockholders wishing to suggest nominees must follow the
procedures and submit the information as set forth in the
proposed amendments to the Certificate of Incorporation and
Bylaws attached hereto as Exhibit A. See "Proposal II --
Amendment of the Certificate of Incorporation of Progressive
Bank, Inc." and Exhibit A. If the proposed amendment to the
Certificate of Incorporation is not approved at the Annual
Meeting, stockholders wishing to suggest nominees must follow the
procedures and submit the information currently required for this
purpose. Under procedures currently followed by the Board of
Directors, to be eligible for election to the Board of Directors
the following information concerning a proposed nominee must be
submitted in writing to the Corporate Secretary on a date not
earlier than one hundred eighty days prior to and not later than
the date set forth below: (i) name; (ii) business address; (iii)
residence address; (iv) present occupation or employment and the
name, principal business and address of any corporation or other
organization in which said employment is carried on; (v)
information as to all occupations, positions, offices or
employments during the last ten years, giving starting and ending
dates of each and the name, principal business and address of any
business corporation or other business organization in which each
said occupation, position, office or employment was carried on;
(vi) a statement as to whether such person has been a participant
in any proxy contest involving the Company or any other
corporation within the past ten years and the principals, subject
matter, the relationship of such person to the principals and
outcome of such contest; (vii) a statement as to whether or not
during the past ten years such person has been convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors) and if so the dates, nature of conviction, name and
location of court, and penalty imposed or other disposition of
the case; and (viii) the amount of Common Stock held by such
person beneficially, directly or indirectly, or of record but not
beneficially.
5<PAGE>
<PAGE>

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Overview and Philosophy

The Company's executive compensation policies are
established by the Compensation Committee of the Board of
Directors (the "Committee") composed of five outside directors.
The Committee is responsible for developing the Company's
executive compensation policies. The Company's Chief Executive
Officer, under the direction of the Committee, implements the
Company's executive compensation policies. The Committee
retained an outside consultant to provide assistance in designing
the Company's executive compensation policies. The Committee's
objectives in designing and administering the specific elements
of the Company's executive compensation program are as follows:

. To link executive compensation rewards to increases in
shareholder value, as measured by favorable long-term
operating results and continued strengthening of the
Company's financial condition.

. To provide incentives for executive officers to work
towards achieving successful annual results as a step
in achieving the Company's long-term operating results
and strategic objectives.

. To correlate, as closely as possible, executive
officers' receipt of compensation with the attainment
of specified performance objectives.

. To maintain a competitive mix of total executive
compensation, with particular emphasis on awards
related to increases in long-term shareholder value.

. To attract and retain top performing executive officers
for the long-term success of the Company.

. To facilitate stock ownership through the granting of
stock options.

In furtherance of these objectives, the Committee has
determined that there should be three specific components of
executive compensation: base salary, a cash bonus plan and a
stock option plan designed to provide long-term incentives
through the facilitation of stock ownership in the Company.

Base Salary. The Committee makes recommendations to the
Board concerning executive compensation on the basis of surveys
of salaries paid to executive officers of other savings bank
holding companies, non-diversified banks and other financial
institutions similar in size, market capitalization and other
characteristics. The Committee's objective is to provide for
base salaries that are competitive with the average salary paid
by the Company's peers.

Executive Incentive Compensation Plan. The Company
maintains a formula-based bonus plan (the "Executive Incentive
Compensation Plan"), which provides for annual cash incentive
compensation based on achievement of a combination of individual
and Company performance objectives. Under the Executive
Incentive Compensation Plan, at the beginning of the year, the
Committee established a minimum "Threshold" target return on
equity ("ROE") and a maximum "Best Expected" target ROE. The
range of possible bonuses that could be paid to each employee is
determined following the end of the year based on where the
actual ROE for 1996 was within the range of Threshold to Best
Expected ROE. No bonuses are paid unless actual ROE exceeds
Threshold ROE. Within the range of possible bonuses for each
employee, the actual bonus awarded is determined based on a
rating given to each employee reflecting the employee's success
in achieving specific individual performance goals established at
the beginning of the year.
6<PAGE>
<PAGE>

Stock Options. The Committee believes that stock options
are an important element of compensation because they provide
executives with incentives linked to the performance of the
Common Stock. The Company awards stock options as a means of
providing employees the opportunity to acquire a proprietary
interest in the Company and to link their interests with those of
the Company's stockholders. Options are granted at the market
value of the Common Stock on the date of grant, and thus acquire
value only if the Company's stock price increases.

Compensation of the Chief Executive Officer

Mr. Van Kleeck's base salary is established in accordance
with the terms of the employment agreement entered into between
the Company and Mr. Van Kleeck. See "Executive Compensation --
Employment Agreement." The Committee determines the Chief
Executive Officer's compensation on the basis of several factors.
In determining Mr. Van Kleeck's base salary, the Committee
conducted surveys of compensation paid to chief executive
officers of similarly situated savings banks and non-diversified
banks and other financial institutions of similar size. The
Committee believes that Mr. Van Kleeck's base salary is generally
competitive with the average salary paid to executives of similar
rank and expertise at banking institutions which the Committee
considered to be comparable.

Mr. Van Kleeck received bonus compensation under the
Executive Incentive Compensation Plan in fiscal year 1996 based
on the Company's ROE and Mr. Van Kleeck's achievement of
individual performance goals based on the formula set forth
above.

The Committee believes that the Company's executive
compensation program serves the Company and its shareholders by
providing a direct link between the interests of executive
officers and those of shareholders generally and by helping to
attract and retain qualified executive officers who are dedicated
to the long-term success of the Company.

Members of the Compensation Committee

Roger W. Smith (Chairman)
Elizabeth P. Allen
Thomas C. Aposporos
Richard T. Hazzard
David A. Swinden

7<PAGE>
<PAGE>
COMPARATIVE STOCK PERFORMANCE GRAPH

The graph and table which follow show the cumulative total
return on the Common Stock during the five fiscal years ended
December 31, 1996 with (1) the total cumulative return of all
companies whose equity securities are traded on the Nasdaq market
and (2) the total cumulative return of banking companies traded
on the Nasdaq market. The comparison assumes $100 was invested
on January 1, 1991 in the Company's Common Stock and in each of
the foregoing indices and assumes reinvestment of dividends. The
stockholder returns shown on the performance graph are not
necessarily indicative of the future performance of the Common
Stock or of any particular index.

[Line graph appears here depicting the cumulative total
shareholder return of $100 invested in the Common Stock as
compared to $100 invested in all companies whose equity
securities are traded on the Nasdaq market and banking companies
traded on the Nasdaq market. Line graph begins at December 31,
1991 and plots the cumulative total return at December 31, 1992,
1993, 1994, 1995 and 1996. Plot points are provided below.]
<TABLE>
<CAPTION>

12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
COMPANY $100 $293.33 $444.00 $630.00 $804.00 $931.20
NASDAQ 100 116.38 133.59 130.59 184.67 227.16
NASDAQ BANKS 100 145.55 165.99 165.38 246.32 325.60

</TABLE>

8<PAGE>
<PAGE>
EXECUTIVE COMPENSATION

Summary Compensation Table. The following table sets forth
cash and noncash compensation for each of the last three fiscal
years awarded to or earned by the Chief Executive Officer and
each other executive officer whose salary and bonus earned in
fiscal 1996 exceeded $100,000 for services rendered in all
capacities to the Company and its subsidiaries.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
NAME AND --------------------------------- SECURITIES
PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS COMPENSATION(2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>

Peter Van Kleeck 1996 $262,073 $86,677 $ -- 15,000 $2,558
President and Chief 1995 241,687 45,000 -- 46,500 2,440
Executive Officer of 1994 220,353 6,750 -- 7,098 3,987
the Company and the Bank

Robert A. Gabrielsen 1996 134,934 35,987 -- 6,000 1,891
Executive Vice President,1995 120,934 20,000 -- 20,000 1,912
Chief Financial Officer 1994 105,626 27,000 -- 5,433 2,067
of the Bank, Treasurer
of the Company

J. Donald Weand, Jr. (5) 1996 35,880 40,485 -- 6,000 72,872
Former Senior Vice 1995 136,957 20,000 -- 20,000 2,183
President, Chief Lending 1994 117,419 27,000 -- 5,634 2,283
Officer of the Bank
<FN>

_______________
(1) Bonuses are paid in January of each year based on Company and individual
performance during the prior year.
(2) Executive officers of the Company receive indirect compensation in the
form of certain perquisites and other personal benefits. The amount of
such benefits received by the named executive officers in fiscal 1996 did
not exceed 10% of the executive officer's salary and bonus.
(3) Adjusted to give effect to a three-for-two stock split completed in
December 1996.
(4) For fiscal 1996, consists of life insurance premium payments of $702, $66
and $120 and contributions pursuant to the Company's Retirement Plan of
$1,856, $1,825 and $752 made by the Company in fiscal 1996 for the benefit
of Messrs. Van Kleeck, Gabrielsen and Weand, respectively. In the case of
Mr. Weand, also includes $72,000 paid in connection with the end of his
service with the Company.
(5) Mr. Weand's employment with the Bank ended on March 29, 1996.
</FN>
</TABLE>
9<PAGE>
<PAGE>

Option Grants in Last Fiscal Year. The following table
contains information concerning grants of stock options to the
Company's Chief Executive Officer and the other named executive
officers during fiscal year 1996.
<TABLE>
<CAPTION>

INDIVIDUAL GRANTS
----------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION PRESENT
NAME GRANTED (1)(2) FISCAL YEAR PRICE (1) DATE VALUE (3)
- ---- -------------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Peter Van Kleeck 15,000 20% $ 17.75 02/13/06 $70,350
Robert A. Gabrielsen 6,000 8 17.75 02/13/06 28,140
J. Donald Weand, Jr. 6,000 8 17.75 02/13/06 28,140
<FN>
____________
(1) Adjusted to give effect to a three-for-two stock split
completed in December 1996.
(2) All options granted became exercisable immediately upon
grant.
(3) Represents the present value of the grant at the date of
grant, as determined using the Black-Scholes option pricing
model. In calculating the present value of the option
grant, the following assumptions were utilized: (i) the
current market price of the underlying stock at the date of
grant was $17.75; (ii) the continuously compounded risk-free
rate of return expressed on an annual basis was 5.67%;
(iii) the annual dividend on the Common Stock was 3.0%; (iv)
the expected volatility rate of the underlying Common Stock,
measured by the standard deviation of the continuously
compounded annual rate of return of the Common Stock, was
25.30%; and (v) the options were assumed to be exercised 6.2
years after the grant date. The foregoing assumptions are
used for illustrative purposes only. No assurance can be
given that actual experience will correspond to the
assumptions utilized.
</FN>
</TABLE>

Option Exercises in Last Fiscal Year and Fiscal Year End
Option Values. The following table sets forth information
concerning the exercise of options by the Chief Executive Officer
and the other named executive officers during fiscal year 1996
and the value of options held by such individuals at December 31,
1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1996 AT DECEMBER 31, 1996
SHARES ACQUIRED VALUE (EXERCISABLE/ (EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE)(1) UNEXERCISABLE)(1)(2)
- ---- --------------- ------- ----------------- --------------------
<S> <C> <C> <C> <C>
Peter Van Kleeck 3,348 $20,646 48,000/13,500 $271,920/$75,330
Robert A. Gabrielsen -- -- 19,433/ 6,000 142,538/ 33,480
J. Donald Weand, Jr. 24,134 132,942 --/ -- --/ --
<FN>
_______________
(1) Adjusted to give effect to a three-for-two stock split
completed in December 1996.
(2) Calculated based on the product of: (a) the number of shares
subject to options and (b) the difference between the fair
market value of the underlying Common Stock at December 31,
1996, based on the closing sale price of the Common Stock on
December 31, 1996 as reported on the Nasdaq National Market
($22.75 per share), and the weighted average exercise price
of the options.
</FN>
</TABLE>
Employment Agreement. The Company has entered into an
employment agreement (the "Employment Agreement") with Peter Van
Kleeck, the President and Chief Executive Officer of the Company
and the Bank. The Employment Agreement, which expires on
December 31, 1999, provides that Mr. Van Kleeck will receive a
base salary, subject to increases and bonuses as may be granted
by the Board of Directors from year to year. Mr. Van Kleeck's
base salary for 1997 is $272,160. Under the Employment
Agreement, Mr. Van Kleeck may defer a portion
10<PAGE>
<PAGE>
of his salary. In the event of termination without cause, Mr.
Van Kleeck would receive his current salary for the remainder of
the term of the Employment Agreement plus an amount equal to his
bonus for the prior calendar year for each year, including the
year of termination, through the end of the term of the
Employment Agreement. In the event of a change in control, he
would, upon termination, as defined, receive his salary for the
remainder of the term plus if such termination occurs during the
last three years of the term, an amount equal to thirty-six
months salary less the salary for the number of months to the end
of the term, plus any excise tax imposed pursuant to Section
280G(b)(2) of the Internal Revenue Code (the "Code"). The
aggregate payments that would be made to Mr. Van Kleeck assuming
termination of his employment under the foregoing circumstances
at December 31, 1996 would be approximately $816,000.

Severance Agreements. The Bank has entered into a severance
agreement with Mr. Gabrielsen. The severance agreement provides
that in the event of a change in control of the Company or the
Bank and Mr. Gabrielsen's termination within two years
thereafter, either by the Company for reasons other than cause or
by Mr. Gabrielsen following the occurrence of certain specified
events generally amounting to a reduction of salary, bonus,
benefits or responsibilities: (i) he would be entitled to a
severance payment equal to 2.99 times his average annual
compensation for his employment period but not averaged over more
than five years; and (ii) all his options would become
immediately exercisable. The aggregate payments that would be
made to Mr. Gabrielsen assuming termination of employment under
the foregoing circumstances at December 31, 1996 would be
approximately $324,000. The Bank had entered into a similar
severance agreement with Mr. Weand. That severance agreement was
terminated during 1996.

Pension Plan. The Company maintains a non-contributory
defined benefit pension plan (the "Plan") through the RSI
Retirement Trust. The Plan covers full-time employees who have
attained the age of 21 years and completed at least one year of
service with the Company or the Bank.

The following table indicates annual benefits payable upon
retirement for various levels of compensation and periods of
service under the Plan. The benefit amounts listed in the table
are not subject to any deduction for Social Security or other
offsets.
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ----------------------------------------------
ANNUAL SALARY 10 15 20 25 30
- ------------- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
$ 75,000 $11,250 $16,875 $22,500 $28,125 $33,750
95,000 14,250 21,375 28,500 35,625 42,750
115,000 17,250 25,875 34,500 43,125 51,750
135,000 20,250 30,375 40,500 50,625 60,750
150,000 22,500 33,750 45,000 56,250 67,500

</TABLE>

The formula for determining retirement benefit payments is:
(i) for service prior to October 1, 1990, 2% times years of
credited service times average annual earnings; plus (ii) for
service on or subsequent to October 1, 1990 and prior to July 1,
1993, 1.667% times years of credited service times average annual
earnings; plus (iii) for service on or subsequent to July 1,
1993, 1.5% times years of credited service times average annual
earnings. The compensation used to calculate the employee's
average annual earnings consists of base compensation (which is
equivalent to the amounts shown in the "Salary" column in the
Summary Compensation Table above) for the highest 60 consecutive
months during the final 120 consecutive months of service. The
maximum benefit payable to any employee under the Plan is 60% of
average annual earnings. For 1996, the maximum average annual
salary permitted under the Code to be used to determine benefits
was $150,000, and the maximum benefit payable to any employee
under the Plan was $120,000.

11<PAGE>
<PAGE>

Under the Plan, the Company makes an annual contribution for
the benefit of eligible employees, computed on an actuarial
basis. During the year ended December 31, 1996, the Company
contributed $9,716, $5,069 and $5,140 to the Plan for the benefit
of Messrs. Van Kleeck, Gabrielsen and Weand, respectively.
Vesting in the Plan occurs upon completion of 10 years of service
subsequent to the employee's 18th birthday. At December 31,
1996, Messrs. Van Kleeck and Gabrielsen had approximately 9 and 6
years of service, respectively, credited in the Plan. When he
left the Company, Mr. Weand had not met the Plan's vesting
requirements and will not receive benefits under the Plan.

DIRECTOR COMPENSATION

Directors of the Company and the Bank receive annual
retainer fees of $5,000 from each of the Company and the Bank.
Further, in 1996, Mr. Aposporos, the Chairman of the Board of the
Company, and Ms. Allen, the Chairman of the Board of the Bank,
were paid monthly stipends by the Company and the Bank of $2,500
and $1,500, respectively. In 1996, each director also received
fees of $400 for attendance at meetings of the Board of Directors
of each of the Company and the Bank. Directors are not paid for
attendance at committee meetings. Mr. Van Kleeck does not
receive any fees for service as a director of the Company or the
Bank. Board members who are not employees also may receive non-
qualified stock options. In 1996, in connection with his
becoming a director of the Company, Mr. Archibald A. Smith, III
was awarded options to acquire 10,800 shares of Common Stock at
an exercise price of $17.17 (the number of shares and exercise
price have been adjusted to give effect to a three-for-two stock
split completed in December 1996). No other options were awarded
to directors during 1996. Directors of the Company, but not the
Bank, who have been a director at least five years, are entitled
to retirement or severance benefits upon leaving the Board in an
amount equal to the amount of the annual retainer fee multiplied
by the number of years of service as a Director, but not more
than fifteen years.

TRANSACTIONS WITH MANAGEMENT

As a savings bank, the Bank is authorized under the New York
Banking Law and regulations to make loans to its executive
officers and directors and to the executive officers and
directors of the Company and the Bank. All such loans must be
approved by the Board of Directors of the Bank or an authorized
committee. If such loan is secured by a first lien on a
residence of such executive officer or director, or if the
principal amount of the loan, when aggregated with the unpaid
principal amount of all other loans by the Bank to the executive
officer or director, exceeds $25,000 or 5% of its capital stock,
surplus funds and undivided profits, whichever is higher, the
approval of the Bank's Board of Directors is required. Also,
loans to an executive officer or director in excess of $500,000
in the aggregate may be made only if the approval of the Board of
Directors of the Company has been obtained.

At December 31, 1996, all of the Bank's loans to officers
and directors and employees were in the ordinary course of
business, on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other persons. These loans do not
involve more than the normal risk of collectibility or present
other unfavorable features.

12<PAGE>
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth, as of the Record Date, the
beneficial ownership of the Company's Common Stock by each of the
Company's directors and nominees, the executive officers named in
the Summary Compensation Table and by all directors and executive
officers as a group.
<TABLE>
<CAPTION>

PERCENT OF
SHARES OF
AMOUNT AND NATURE OF COMMON STOCK
NAME BENEFICIAL OWNERSHIP (1) OUTSTANDING
- ---- ----------------------- ------------
SHARES OPTIONS (2)
------ -----------
<S> <C> <C> <C>
Elizabeth P. Allen 7,434 10,800 *
Thomas C. Aposporos 3,900 10,800 *
George M. Coulter 31,985 10,800 1.1
Richard T. Hazzard 8,112 10,800 *
Richard Novik 6,207 10,800 *
John J. Page 20,025 (3) 10,800 *
Archibald A. Smith, III 750 10,800 *
Roger W. Smith 1,500 10,800 *
David A. Swinden 1,182 10,050 *
Peter Van Kleeck 31,061 48,000 2.0
Robert A. Gabrielsen 6,000 19,433 *

All directors and executive 118,656 187,478 7.6
officers of the Company
as a group (15 persons)
<FN>
______________
(1) For the definition of beneficial ownership, see footnote
1 to the table in "Voting Securities and Principal Holders
Thereof." Unless otherwise indicated, ownership is direct
and the named individual exercises sole voting and
investment power over the shares listed as beneficially
owned by such person. Amounts are adjusted to give effect
to a three-for-two stock split completed in December 1996.
(2) Consists of shares which may be acquired pursuant to options
exercisable within 60 days after the Record Date.
(3) Includes 13,177 shares held by spouse and by minor children
living at home.
* Less than 1%.

________________________________________________________________
PROPOSAL II -- AMENDMENT OF THE CERTIFICATE OF
INCORPORATION OF PROGRESSIVE BANK, INC.
________________________________________________________________

The Company's Board of Directors has unanimously adopted,
subject to stockholder approval, an amendment to the Company's
Certificate of Incorporation to include provisions which would
require stockholders to give advance notice and to follow certain
procedures in nominating directors or proposing new business for
consideration by stockholders at a meeting. If the proposed
amendment to the Company's Certificate of Incorporation is
adopted at the Annual Meeting, a new Paragraph 8 will be inserted
into the Certificate of Incorporation and subsequent sections
will be renumbered. In addition, the Board of Directors has
voted to amend the Company's Bylaws, subject to stockholder
approval of the proposed amendment to the Certificate of
Incorporation, to provide that (i) a new Section 9 will be
inserted into Article I of the Bylaws, and (ii) a new Section 14
will be inserted into Article III of the Bylaws. If the proposed
amendment of the Certificate of Incorporation is not approved by
stockholders at the Annual Meeting, then the Bylaw amendments
will not go into effect. Copies of proposed Paragraph 8 of the
Certificate of Incorporation and Article I Section 9 and Article
III Section 14 of the Bylaws are attached hereto as Exhibit A.
13<PAGE>
<PAGE>
The proposed amendment to the Certificate of Incorporation
provides that nominations for the election of directors and
proposals for any new business to be taken up at any annual or
special meeting of stockholders may be made by the Board of
Directors of the Company or by any stockholder of the Company
entitled to vote generally in the election of directors. In
order for a stockholder of the Company to make any such
nominations and/or proposals, he or she must give written notice
thereof to the Corporate Secretary of the Company not less than
thirty days nor more than sixty days prior to the date of any
such meeting; provided, however, that if less than forty days'
notice of the meeting is given to stockholders, such written
notice shall be delivered or mailed, as prescribed, to the
Corporate Secretary of the Company not later than the close of
business on the tenth day following the day on which notice of
the meeting was mailed to stockholders. Each such notice given
by a stockholder with respect to nominations for the election of
directors must set forth (i) the name, age, business address and,
if known, residence address of each nominee proposed in such
notice; (ii) the principal occupation or employment of each such
nominee; and (iii) the number of shares of stock of the Company
which are beneficially owned by each such nominee. In addition,
the stockholder making such nomination must promptly provide any
other information reasonably requested by the Company. Each such
notice given by a stockholder to the Corporate Secretary with
respect to business proposals to be brought before a meeting must
set forth in writing as to each matter: (i) a brief description
of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting; (ii) the
name and address, as they appear on the Company's books, of the
stockholder proposing such business; (iii) the class and number
of shares of the Company which are beneficially owned by the
stockholder; and (iv) any material interest of the stockholder in
such business. Stockholder nominations or business proposals not
made in accordance with the foregoing procedures may be
disregarded and laid over for action at the next succeeding
annual or special meeting of stockholders taking place 30 days or
more thereafter.

If the proposed amendment to the Certificate of
Incorporation is approved by stockholders at the Annual Meeting,
then the following amendments to the Bylaws will become
effective. First, a new Section 14 will be added to Article III
of the Bylaws to provide that the Board of Directors or a
committee appointed by the Board of Directors shall act as a
nominating committee for selecting the management nominees for
election as directors. Except in the case of a nominee
substituted as a result of the death or other incapacity of a
management nominee, the nominating committee shall deliver
written nominations to the Corporate Secretary at least twenty
days prior to the date of the annual meeting. Provided such
committee makes such nominations, no nominations for directors
except those made by the nominating committee shall be voted upon
at the annual meeting unless other nominations by stockholders
are made in writing and delivered to the Corporate Secretary of
the Company in accordance with the provisions of the Company's
Certificate of Incorporation, as amended in the manner described
above. Second, a new Section 9 will be inserted into Article I
of the Bylaws, which will contain the same provisions as proposed
Paragraph 8 of the Certificate of Incorporation. The new Section
9 is designed to ensure that the Bylaws are consistent with the
Certificate of Incorporation.

The proposed amendments to the Certificate of Incorporation
and Bylaws are designed to ensure that management is given
sufficient time to disclose to stockholders information
concerning a dissident slate of nominees for director. The
advance notice requirement may also give management time to
solicit its own proxies in an attempt to defeat any dissident
slate of nominees if management determines that doing so is in
the best interests of stockholders, generally. Similarly,
advance notice of stockholder proposals will give management time
to study stockholder proposals and to determine whether to
recommend to stockholders that such proposals be adopted.

The Board of Directors has determined that amendment of the
Certificate of Incorporation and Bylaws to provide advance
notification of and to establish procedures for stockholder
nominations and proposals for new business is in the best
interests of the Company and its stockholders. Approval of the
proposed amendment to the Certificate of Incorporation requires
the affirmative vote of the holders of a majority of the total
votes eligible to be cast at the Annual Meeting. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL TO
AMEND THE CERTIFICATE OF INCORPORATION TO INCLUDE PROVISIONS THAT
SET FORTH PROCEDURES FOR DIRECTOR NOMINATIONS AND NEW BUSINESS
PROPOSALS BY STOCKHOLDERS.
14<PAGE>
<PAGE>

________________________________________________________________
PROPOSAL III - THE APPROVAL OF PROGRESSIVE BANK, INC.
1997 EMPLOYEE STOCK OPTION PLAN
________________________________________________________________

GENERAL

The Board of Directors of the Company has adopted the
Progressive Bank, Inc. 1997 Employee Stock Option Plan (the
"Option Plan"), subject to its approval by the Company's
stockholders. The Option Plan is attached hereto as Exhibit B
and should be consulted for additional information. All
statements made herein regarding the Option Plan, which are only
intended to summarize its terms, are qualified in their entirety
by reference to the Option Plan.

PURPOSE OF THE OPTION PLAN

The purpose of the Option Plan is to advance the interests
of the Company by providing selected key employees of the Company
and its affiliates, including the Bank, with the opportunity to
acquire shares of Common Stock. By encouraging such stock
ownership, the Company seeks to attract, retain, and motivate the
best available personnel for positions of substantial
responsibility and to provide additional incentives to key
employees of the Company and its affiliates to promote the
success of the business of the Company.

DESCRIPTION OF THE OPTION PLAN

Effective Date. The Option Plan became effective February
11, 1997 (the "Effective Date"), subject to its approval by the
Company's stockholders.

Administration. The Option Plan is administered by a
committee (the "Committee"), appointed by the Board of Directors,
consisting of at least two directors of the Company who are "non-
employee directors" within the meaning of the federal securities
laws. It is expected that the Committee will initially consist
of the non-employee directors serving on the Company's
Compensation Committee. The Option Plan authorizes the Company's
Board of Directors to act in lieu of the Committee in the absence
of a duly appointed Committee.

The Committee has discretionary authority to select
participants and grant awards, to determine the form and content
of any awards made under the Option Plan, to interpret the Option
Plan, and to make other decisions necessary or advisable in
connection with administering the Option Plan. All decisions,
determinations, and interpretations of the Committee are final
and conclusive on all persons affected thereby. Members of the
Committee will be indemnified to the full extent permissible
under the Company's governing instruments in connection with any
claims or other actions relating to any action taken under the
Option Plan.

Eligible Persons; Types of Awards. The Option Plan
authorizes the Committee to make the following awards
(collectively, "Awards") to employees: stock options ("Options"),
stock appreciation rights ("SARs"), restricted stock and phantom
stock. As of the Record Date, all of the Company's and its
subsidiaries' approximately 276 employees were eligible to
participate in the Option Plan, although there is no requirement
that any particular employee receive Awards under the Option
Plan.

Shares Available for Grants. The Option Plan authorizes the
issuance of up to 375,000 shares of Common Stock upon the
exercise of Options or SARs, the grant of restricted stock or the
settlement of phantom stock. Such shares may be (i) authorized
but unissued shares, (ii) shares held in treasury, or (iii)
shares held in a grantor trust created by the Company.
Generally, the number of shares as to which SARs are granted are
charged against the aggregate number of shares available for
grant under the Option Plan, provided that, in the case of an SAR
granted in conjunction with an Option, under circumstances in
which the exercise of the SAR results in termination of the
Option and vice versa, only the number of shares of Common Stock
subject to the Option shall be charged against
15<PAGE>
<PAGE>
the aggregate number of shares of Common Stock remaining
available under the Option Plan. To the extent Awards expire,
become unexercisable, are forfeited, or are cancelled for any
reason without having resulted in an issuance of Common Stock,
the shares of Common Stock subject to such Awards shall be
available for the grant of additional Awards.

Change in Control. The terms of any Award which provide for
its exercise or vesting in installments will immediately and
permanently lapse on the date of a "change in control" (meaning
that all Options, SARs, restricted stock and phantom stock awards
will become immediately exercisable and fully vested). In
addition, at the time of a change in control, with respect to
Options and SARs, each participant will, at the discretion of the
Committee, be entitled to receive cash in an amount equal to the
excess of the fair market value of any shares of Common Stock
subject to an Option or SAR over the exercise price of such
shares, in exchange for the cancellation of such Options or SARs.
For purposes of the Option Plan, a "change in control" is
generally defined as (i) an acquisition of voting control over
more than 25% of the voting stock of the Bank or the Company,
(ii) an acquisition of the ability to control the election of a
majority of the Bank's or the Company's directors, (iii) an
acquisition of a controlling influence over the management or
policies of the Bank or of the Company by any person or by
persons acting as a group, or (iv) during any period of two
consecutive years, individuals (the "Continuing Directors") who
at the beginning of such period constitute the Board of Directors
of the Bank or of the Company (the "Existing Board") cease for
any reason to constitute at least two-thirds thereof, provided
that any individual whose election or nomination for election as
a member of the Existing Board was approved by a vote of at least
two-thirds of the Continuing Directors then in office shall be
considered a Continuing Director.

Although these provisions are included in the Option Plan
primarily for the protection of a participant in the event of a
change in control of the Company, they may also be regarded as
having a takeover defensive effect, which may reduce the
Company's vulnerability to hostile takeover attempts and certain
other transactions which have not been negotiated with and
approved by the Board of Directors.

Options. The Committee may grant Options that are either
incentive stock options ("ISOs"), as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or
options that are not ISOs ("Non-ISOs"). The exercise price as to
any Option may not be less than 50% of the fair market value of
the optioned shares on the date of grant. In the case of a
participant who owns more than 10% of the outstanding Common
Stock on the date of grant, the exercise price for an ISO may not
be less than 110% of fair market value of the shares. As
required by federal tax laws, to the extent that the aggregate
fair market value (determined when an ISO is granted) of the
Common Stock with respect to which ISOs are exercisable by a
participant for the first time during any calendar year (under
all plans of the Company and of any subsidiary) exceeds $100,000,
the Options granted in excess of $100,000 will be treated as Non-
ISOs and not as ISOs. The Committee has the discretion to permit
one or more select employees to elect to receive Non-ISOs in lieu
of cash compensation otherwise payable by the Company or an
affiliate. The aggregate exercise price for such Non-ISOs would
be below-market by an amount equal to the cash compensation
deferred during the calendar year, although no more than 10,000
shares may be issued in any calendar year to all employees
pursuant to deferred compensation elections.

Reload of Options. The Option Plan authorizes the Committee
to establish the terms under which a key employee would receive a
new Option for shares of Common Stock that are purchased upon
exercise of an Option (subject to the availability of shares for
the grant). The exercise price for the "reload" option would be
the fair market value of the underlying shares on the grant date
of the reload Option. The exercise of a reload Option would not
trigger another Option grant.

SARs. An SAR may be granted in tandem with all or part of
any Option granted under the Option Plan, or without any
relationship to any Option. An SAR granted in tandem with an ISO
must expire no later than the ISO, must have the same exercise
price as the ISO and may be exercised only when the ISO is
exercisable and when the fair market value of the shares subject
to the ISO exceeds the exercise price of the ISO. For SARs
granted in tandem with Options, the participant's exercise of the
SAR cancels his or her right to exercise the Option, and vice
16<PAGE>
<PAGE>
versa. Regardless of whether an SAR is granted in tandem with an
Option, exercise of the SAR will entitle the participant to
receive, as the Committee prescribes in the grant, all or a
percentage of the difference between (i) the fair market value of
the shares of Common Stock subject to the SAR at the time of its
exercise, and (ii) the fair market value of such shares at the
time the SAR was granted (or, in the case of SARs granted in
tandem with Options, the exercise price). The exercise price as
to any particular SAR may not be less than the fair market value
of the underlying shares of Common Stock on the date of grant.

Exercise of Options and SARs. The exercise of Options and
SARs will be subject to terms and conditions established by the
Committee in a written agreement with the participant. Any
vesting requirement will, however, automatically accelerate to
100% both upon a participant's termination of service as an
employee due to death, disability (as defined in the Option
Plan), retirement, and upon a change in control. In the absence
of Committee action to the contrary, an otherwise unexpired
Option will cease to be exercisable upon (i) a participant's
termination of employment for "just cause" (as defined in the
Option Plan), (ii) the date one year after a participant
terminates service for a reason other than just cause or death,
or (iii) the date two years after a participant terminates
service due to death.

A participant may exercise Options, subject to provisions
relative to their termination and limitations on their exercise,
only by payment to the Company in cash, in Common Stock, or a
combination of cash and Common Stock, of the amount of the
exercise price for the number of shares with respect to which the
Option is then being exercised. In addition, a participant may
elect to pay all or part of the exercise price of the optioned
shares by having the Company withhold delivery of a number of
optioned shares having a fair market value equal to the exercise
price being paid through such withholding.

Restricted Stock and Phantom Stock Awards. The Committee
has broad discretion to make awards of restricted stock (in the
form of forfeitable shares subject to transfer restrictions), as
well as phantom stock (in the form of credits of shares, and
future share earnings, to bookkeeping accounts maintained by the
Company). With respect to both types of awards, the Committee
may impose conditions that must be satisfied in order for the
underlying shares granted to become vested (i.e.,
nonforfeitable). The period and conditions for vesting may be
different for each participant, but will automatically accelerate
to 100% in the event of a change in control or the participant's
death, disability, or retirement. In addition, the Committee may
shorten the restriction period or waive any restrictions if the
Committee concludes that it is in the best interests of the
Company to do so.

Restricted stock is nontransferable and forfeitable until a
participant's interest vests. Nevertheless, the participant is
entitled to vote the restricted stock and to receive dividends
and other distributions made with respect to the restricted
stock. As a participant becomes vested in his or her restricted
stock, the Company will deliver unrestricted shares of Common
Stock to the participant. At the end of the restriction period,
the participant will forfeit to the Company any shares of
restricted stock as to which he or she did not earn a vested
interest during the restriction period. With respect to phantom
stock, a participant's vested account will become payable in a
lump sum upon his or her termination of employment, unless the
participant elects to receive all or part of his vested account
(i) in substantially equal annual installments over a period of
up to five years, and/or (ii) in unrestricted whole shares of
Common Stock.

Conditions on Issuance of Shares. The Committee will have
the discretionary authority to impose such restrictions on shares
of Common Stock issued pursuant to the Option Plan as it may deem
appropriate or desirable, including but not limited to the
authority to impose a right of first refusal or to establish
repurchase rights or both of these restrictions. In addition,
the Committee may not issue shares unless the issuance complies
with applicable securities laws, and to that end may require that
a participant make certain representations or warranties.

Limitations on Transferability. Participants may transfer
their Awards (but not ISOs) to certain family members or trusts
under specified circumstances. Awards may not otherwise be sold,
pledged, assigned, hypothecated, transferred or disposed of in
any manner other than by will or by the laws of descent and
distribution.
17<PAGE>
<PAGE>
Effect of Merger, Dissolution, and Related Transactions. In
the event of any merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up,
combination of shares, or similar event in which the number or
kind of shares is changed without receipt or payment of
consideration by the Company, the Committee will adjust the
number and kind of shares reserved for issuance under the Option
Plan, the number and kind of shares subject to outstanding
Awards, and the exercise prices of such Awards.

In the event of (i) the liquidation or dissolution of the
Company, (ii) a merger or consolidation in which the Company is
not the surviving entity, or (iii) the sale or disposition of all
or substantially all of the Company's assets (any of the
foregoing to be referred to as a "Transaction"), all outstanding
Awards, together with the exercise prices thereof, shall be
equitably adjusted for any change or exchange of shares for a
different number or kind of shares or other securities which
results from the Transaction.

Duration of the Option Plan and Grants. The Option Plan has
a term of 10 years from the Effective Date, after which date no
Awards may be granted. The maximum term for an Award is 10 years
from the date of grant, except that the maximum term of an ISO
(and an SAR granted in tandem with an ISO) may not exceed five
years if the participant owns more than 10% of the Common Stock
on the date of grant. The expiration of the Option Plan, or its
termination by the Committee, will not affect any Award then
outstanding.

Amendment and Termination of the Option Plan. The Board of
Directors of the Company may from time to time amend the terms of
the Option Plan and, with respect to any shares at the time not
subject to Awards, suspend or terminate the Option Plan. No
amendment, suspension, or termination of the Option Plan will,
without the consent of any affected participant, alter or impair
any rights or obligations under any Award previously granted.

Financial Effects of Awards. The Company will receive no
monetary consideration for the granting of Awards under the
Option Plan. It will receive no monetary consideration other
than the exercise price for shares of Common Stock issued to
participants upon the exercise of their Options, and will receive
no monetary consideration upon the exercise of SARs. Under the
accounting standards followed by the Company, recognition of
compensation expense is not required unless Options are granted
at an exercise price less than the fair market value of the
Common Stock on the date the Option is granted. For any such
Options, compensation expense is recognized in an amount equal to
the difference between the exercise price and the fair market
value on the grant date.

The granting of SARs will require charges to the income of
the Company based on the amount of the appreciation, if any, in
the market price of the Common Stock to which the SARs relate
over the exercise price of those shares. If the market price of
the Common Stock declines subsequent to recognition of such a
charge against earnings, the amount of the decline will result in
a credit to earnings (but not to exceed the aggregate of prior
charges against earnings).

Neither the Company nor the Bank will receive any monetary
consideration with respect to awards of restricted stock or
phantom stock. The Company must recognize compensation expense
based on the fair market value of the underlying Common Stock on
the date the awards are granted, with such amount being amortized
over the expected vesting period for the award.

FEDERAL INCOME TAX CONSEQUENCES

There are no tax consequences to participants or the Company
on the mere granting of an Option, SAR, restricted stock, or
phantom stock award. Subsequent taxation depends on the type of
award, as highlighted below.

ISOs. If the participant holds the shares purchased upon
exercise of an ISO for at least two years from the date the ISO
is granted, and for at least one year from the date the ISO is
exercised, any gain realized on the sale of the shares received
upon exercise of the ISO is taxed as long-term capital gain.
However, the difference between
18<PAGE>
<PAGE>
the fair market value of the Common Stock on the date of exercise
and the exercise price of the ISO will be treated by the
participant as an item of tax preference in the year of exercise
for purposes of the alternative minimum tax. If a participant
disposes of the shares before the expiration of either of the two
special holding periods noted above, the disposition is a
"disqualifying disposition." In this event, the participant will
be required, at the time of the disposition of the Common Stock,
to treat the lesser of the gain realized or the difference
between the exercise price and the fair market value of the
Common Stock at the date of exercise as ordinary income and the
excess, if any, as capital gain. The Company will not be
entitled to any deduction for federal income tax purposes as the
result of the grant or exercise of an ISO, regardless of whether
the exercise of the ISO results in liability to the participant
for alternative minimum tax. However, if a participant has
ordinary income taxable as compensation as a result of a
disqualifying disposition, the Company will be entitled to deduct
an equivalent amount.

Non-ISOs. A participant will recognize ordinary income upon
the exercise of the Non-ISO in an amount equal to the difference
between the fair market value of the shares on the date of
exercise and the option price (or, if the participant is subject
to certain restrictions imposed by the federal securities laws,
upon the lapse of those restrictions unless the participant makes
a special tax election within 30 days after the date of exercise
to have the general rule apply). Upon a subsequent disposition
of such shares, any amount received by the participant in excess
of the fair market value of the shares as of the exercise will be
taxed as capital gain. The Company will be entitled to a
deduction for federal income tax purposes at the same time and in
the same amount as the ordinary income recognized by the
participant in connection with the exercise of a Non-ISO.
Although no assurances can be given due to an absence of
controlling tax precedent, Non-ISOs having an exercise price
below the fair market value of the underlying shares are expected
to be treated in the same manner as Non-ISOs for federal income
tax purposes.

SARs. Upon exercise of an SAR, any cash or Common Stock
received by the participant in connection with the surrender of
his or her SAR will be treated as compensation income to the
participant, and the Company will be entitled to a corresponding
business expense deduction for the amounts treated as
compensation income.

Restricted Stock. Participants will recognize compensation
income when their interest vests, or at an earlier date pursuant
to a participant's election to accelerate recognition pursuant to
Section 83(b) of the Internal Revenue Code.

Phantom Stock Awards. When cash or shares are transferred to
the participant pursuant to the settlement of a phantom stock
award, the participant will recognize ordinary income equal to
the cash received and the fair market value of the shares
delivered to him under the phantom stock award. A participant may
elect to accelerate recognition pursuant to Section 83(b) of the
Code.

PROPOSED STOCK OPTION GRANTS

For information relating to awards made under the Option
Plan at the Effective Date, see "New Plan Benefits" below. All
Options will be subject to the terms and conditions described
above and are contingent on, and not exercisable until, the
Option Plan receives stockholder approval, and will automatically
expire ten years after the date of their grant. All Options will
be exercisable immediately following approval of the Option Plan
by stockholders at the Annual Meeting. If stockholder approval
is not obtained, the Option Plan and Option grants made on
February 11, 1997 will not become effective. The exercise price
for these Options is $23.25, which was the fair market value of
the Common Stock on February 11, 1997, the date of grant. The
closing sale price of the Common Stock on March 14, 1997, as
reported on the Nasdaq National Market System, was $_____ per
share.

RECOMMENDATION AND VOTE REQUIRED

The Board of Directors has determined that the Option Plan
is desirable, cost effective, and produces incentives which will
benefit the Company and its stockholders. The Board of Directors
is seeking stockholder
19<PAGE>
<PAGE>
approval of the Option Plan in order to satisfy the requirements
of the Code for favorable tax treatment of ISOs, and to satisfy
the requirements for continued listing of the Common Stock on the
Nasdaq National Market System.

Stockholder approval of the Option Plan requires the
affirmative vote of the holders of a majority of the votes cast
in person or by proxy at the Annual Meeting. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE OPTION PLAN.

NEW PLAN BENEFITS

The following table sets forth certain information regarding
the Options granted on February 11, 1997 under the Option Plan,
subject to stockholder approval of the Option Plan. No SARs,
phantom stock or restricted stock were awarded on February 11,
1997.

</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
DOLLAR OF COMMON STOCK
VALUE (1) UNDERLYING OPTIONS
--------- ------------------
<S> <C> <C>
Peter Van Kleeck 15,000
President and Chief Executive
Officer of the Company and the Bank

Robert A. Gabrielsen 7,500
Executive Vice President, Chief
Financial Officer of the Bank,
Treasurer of the Company

All executive officers as a group
(6 persons) 27,750

All directors who are not executive
officers as a group (9 persons) --

All employees, including officers who
are not executive officers, 9,125
as a group (6 persons)
<FN>

________________
(1) Based on the fair market value of the Common Stock on the
Record Date (the closing price of the underlying Common
Stock of $_____ per share as quoted on the NASDAQ National
Market System on March 14, 1997) less the exercise price.
All Options were granted at an exercise price equal to the
fair market value of the underlying shares of Common Stock
on the date of the grant, which was February 11, 1997.
</FN>
</TABLE>

________________________________________________________________
PROPOSAL IV -- RATIFICATION OF APPOINTMENT OF AUDITORS
________________________________________________________________

The Board of Directors has appointed the firm of KPMG Peat
Marwick LLP, independent certified public accountants, to be the
Company's auditors for the 1997 fiscal year, subject to
ratification by the Company's stockholders. A representative of
KPMG Peat Marwick LLP will be present at the Annual Meeting to
respond to stockholders' questions and will have the opportunity
to make a statement if he or she so desires.

THE APPOINTMENT OF THE AUDITORS MUST BE APPROVED BY A
MAJORITY OF THE VOTES CAST BY THE STOCKHOLDERS OF THE COMPANY AT
THE ANNUAL MEETING. THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE APPOINTMENT OF
AUDITORS.

________________________________________________________________
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
________________________________________________________________

Pursuant to regulations promulgated under the Exchange Act,
the Company's officers and directors and all persons who own more
than 10% of the Common Stock ("Reporting Persons") are required
to file reports detailing
20<PAGE>
<PAGE>
their ownership and changes of ownership in the Common Stock and
to furnish the Company with copies of all such ownership reports
that are filed. Based solely on the Company's review of copies
of such ownership reports which it has received in the past
fiscal year or with respect to the past fiscal year, or written
representations from the Reporting Persons that no annual report
of changes in beneficial ownership were required, the Company
believes that during fiscal year 1996 all Reporting Persons have
complied with these reporting requirements.

________________________________________________________________
OTHER MATTERS
________________________________________________________________

The Board of Directors is not aware of any business to come
before the Annual Meeting other than those matters described
above in this Proxy Statement and matters incident to the conduct
of the Annual Meeting. However, if any other matters should pro-
perly come before the Annual Meeting, it is intended that proxies
in the accompanying form will be voted in respect thereof in
accordance with the determination of a majority of the Board of
Directors.

________________________________________________________________
MISCELLANEOUS
________________________________________________________________

The cost of soliciting proxies will be borne by the Company.
The Company will reimburse brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred by them
in sending proxy materials to the beneficial owners of Common
Stock. In addition to solicitations by mail, directors, officers
and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional
compensation therefor. The Company has retained Corporate
Investor Communications, Inc., a proxy soliciting firm, to assist
in the solicitation of proxies, for which Corporate Investor
Communications, Inc. will receive a fee of $4,000 plus
reimbursement of certain out-of-pocket expenses.

The Company's 1996 Annual Report to Stockholders, including
financial statements, is being mailed on March 24, 1997 to all
stockholders of record as of the close of business on the Record
Date. Any stockholder who has not received a copy of such Annual
Report may obtain a copy by writing to the Corporate Secretary of
the Company. Such Annual Report is not to be treated as a part
of the proxy solicitation material or as having been incorporated
herein by reference.
21<PAGE>
<PAGE>
________________________________________________________________
STOCKHOLDER PROPOSALS
________________________________________________________________

In order to be eligible for inclusion in the proxy materials
of the Company for the Annual Meeting of Stockholders for the
year ending December 31, 1997, any stockholder proposal to take
action at such meeting must be received at the Company's
executive offices at 1301 Route 52, P.O. Box 7000, Fishkill, New
York 12524 by no later than December 1, 1997. Any such proposals
shall be subject to the requirements of the proxy rules adopted
under the Securities Exchange Act of 1934, as amended.

BY ORDER OF THE BOARD OF DIRECTORS,

Beatrice D. Parent
Corporate Secretary
March 24, 1997
Fishkill, New York
________________________________________________________________
ANNUAL REPORT ON FORM 10-K
________________________________________________________________

A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1996 AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT CHARGE TO EACH
STOCKHOLDER AS OF THE RECORD DATE UPON WRITTEN REQUEST TO
BEATRICE D. PARENT, CORPORATE SECRETARY, PROGRESSIVE BANK, INC.,
1301 ROUTE 52, P.O. BOX 7000, FISHKILL, NEW YORK 12524-7000.
________________________________________________________________

22<PAGE>
<PAGE>

Exhibit A

PROPOSED AMENDMENTS TO
CERTIFICATE OF INCORPORATION AND BYLAWS

PROPOSED PARAGRAPH 8 TO BE ADDED TO CERTIFICATE OF INCORPORATION:

8. Notice for Nominations and Proposals
------------------------------------

(a) Nominations for the election of directors and
proposals for any new business to be taken up at any annual or
special meeting of stockholders may be made by the board of
directors of the Corporation or by any stockholder of the
Corporation entitled to vote generally in the election of
directors. In order for a stockholder of the Corporation to make
any such nominations and/or proposals, he or she shall give
notice thereof in writing, delivered or mailed by first class
United States mail, postage prepaid, to the Corporate Secretary
of the Corporation not less than thirty days nor more than sixty
days prior to the date of any such meeting; provided, however,
that if less than forty days' notice of the meeting is given to
stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Corporate Secretary of the Corporation not
later than the close of business on the tenth day following the
day on which notice of the meeting was mailed to stockholders.
Each such notice given by a stockholder with respect to
nominations for the election of directors shall set forth (i) the
name, age, business address and, if known, residence address of
each nominee proposed in such notice, (ii) the principal
occupation or employment of each such nominee, and (iii) the
number of shares of stock of the Corporation which are
beneficially owned by each such nominee. In addition, the
stockholder making such nomination shall promptly provide any
other information reasonably requested by the Corporation.

(b) Each such notice given by a stockholder to the
Corporate Secretary with respect to business proposals to be
brought before a meeting shall set forth in writing as to each
matter: (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such
business at the meeting; (ii) the name and address, as they
appear on the Corporation's books, of the stockholder proposing
such business; (iii) the class and number of shares of the
Corporation which are beneficially owned by the stockholder; and
(iv) any material interest of the stockholder in such business.
Notwithstanding anything in this Certificate to the contrary, no
new business shall be conducted at the meeting except in
accordance with the procedures set forth in this Article.

(c) The Chairman of the annual or special meeting of
stockholders may, if the facts warrant, determine and declare to
such meeting that a nomination or proposal was not made in
accordance with the foregoing procedure, and, if he should so
determine, he shall so declare to the meeting and the defective
nomination or proposal shall be disregarded and laid over for
action at the next succeeding special or annual meeting of the
stockholders taking place thirty days or more thereafter. This
provision shall not require the holding of any adjourned or
special meeting of stockholders for the purpose of considering
such defective nomination or proposal.

PROPOSED NEW SECTIONS 9 AND 14 TO BE ADDED TO ARTICLE I AND
ARTICLE III, RESPECTIVELY, OF THE BYLAWS SUBJECT TO AND EFFECTIVE
UPON THE APPROVAL OF THE COMPANY'S STOCKHOLDERS OF THE PROPOSED
AMENDMENT TO ADD A NEW PARAGRAPH 8 TO THE COMPANY'S CERTIFICATE
OF INCORPORATION:

ARTICLE I

SECTION 9. Notice for Nominations and Proposals
------------------------------------

(a) Nominations for the election of directors and
proposals for any new business to be taken up at any annual or
special meeting of stockholders may be made by the board of
directors of the Corporation or by any stockholder of the
Corporation entitled to vote generally in the election of
directors. In order for a stockholder of the Corporation to make
any such nominations and/or proposals, he or she shall give
notice thereof in writing, delivered or mailed by first class
United States mail, postage prepaid, to the Corporate Secretary
of the
A-1<PAGE>
<PAGE>
Corporation not less than thirty days nor more than sixty days
prior to the date of any such meeting; provided, however, that if
less than forty days' notice of the meeting is given to
stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Corporate Secretary of the Corporation not
later than the close of business on the tenth day following the
day on which notice of the meeting was mailed to stockholders.
Each such notice given by a stockholder with respect to
nominations for the election of directors shall set forth (i) the
name, age, business address and, if known, residence address of
each nominee proposed in such notice, (ii) the principal
occupation or employment of each such nominee, and (iii) the
number of shares of stock of the Corporation which are
beneficially owned by each such nominee. In addition, the
stockholder making such nomination shall promptly provide any
other information reasonably requested by the Corporation.

ARTICLE III

SECTION 14. Nominating Committee.
--------------------

The board of directors or a committee appointed by the board
of directors shall act as a nominating committee for selecting
the management nominees for election as directors. Except in the
case of a nominee substituted as a result of the death or other
incapacity of a management nominee, the nominating committee
shall deliver written nominations to the secretary at least
twenty days prior to the date of the annual meeting. Provided
such committee makes such nominations, no nominations for
directors except those made by the nominating committee shall be
voted upon at the annual meeting unless other nominations by
stockholders are made in writing and delivered to the secretary
of the Corporation in accordance with the provisions of the
Corporation's Certificate of Incorporation.

A-2<PAGE>
PROGRESSIVE BANK, INC. Exhibit B
1997 EMPLOYEE STOCK OPTION PLAN

1. PURPOSE OF THE PLAN.

The purpose of this Plan is to advance the interests of the
Company through providing select Employees of the Bank, the
Company, and their Affiliates with the opportunity to acquire
Shares. By encouraging such stock ownership, the Company seeks
to attract, retain and motivate the best available personnel for
positions of substantial responsibility and to provide additional
incentives to Employees of the Company or any Affiliate to
promote the success of the Company.

2. Definitions.

As used herein, the following definitions shall apply.

(a) "Account" shall mean a bookkeeping account
maintained by the Company in the name of a Participant who has
received an Award of Phantom Stock.

(b) "Affiliate" shall mean any "parent corporation"
or "subsidiary corporation" of the Company, as such terms are
defined in Section 424(e) and (f), respectively, of the Code.

(d) "Awards" shall mean, collectively, Options,
SARs, Phantom Stock, and Restricted Stock unless the context
clearly indicates a different meaning.

(e) "Bank" shall mean Pawling Savings Bank.

(f) "Board" shall mean the Board of Directors of
the Company.

(g) "Change in Control" shall mean any one of the
following events: (i) the acquisition of ownership, holding or
power to vote more than 25% of the voting stock of the Bank or
the Company, (ii) the acquisition of the ability to control the
election of a majority of the Bank's or the Company's directors,
(iii) the acquisition of a controlling influence over the
management or policies of the Bank or of the Company by any
person or by persons acting as a "group" (within the meaning of
Section 13(d) of the Securities Exchange Act of 1934), or (iv)
during any period of two consecutive years, individuals (the
"Continuing Directors") who at the beginning of such period
constitute the Board of Directors of the Bank or of the Company
(the "Existing Board") cease for any reason to constitute at
least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of the Existing
Board was approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be considered a
Continuing Director. Notwithstanding the foregoing, the
Company's ownership of the Bank shall not of itself constitute a
Change in Control for purposes of the Agreement. For purposes of
this paragraph only, the term "person" refers to an individual or
a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization
or any other form of entity not specifically listed herein.

(h) "Code" shall mean the Internal Revenue Code of
1986, as amended.

(i) "Committee" shall mean either the Stock Option
Committee appointed by the Board in accordance with Paragraph
5(a) hereof, or the Board itself (which may act, at any time and
from time to time, in lieu of the Stock Option Committee).

B-1<PAGE>
<PAGE>
(j) "Common Stock" shall mean the common stock of
the Company.

(k) "Company" shall mean Progressive Bank, Inc.

(l) "Continuous Service" shall mean the absence of
any interruption or termination of service as an Employee of the
Company or an Affiliate. Continuous Service shall not be
considered interrupted in the case of sick leave, military leave
or any other leave of absence approved by the Company, in the
case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor.

(m) "Director" shall mean any member of the Board
and any member of the board of directors of any Affiliate.

(n) "Disability" shall mean a physical or mental
condition, which in the sole and absolute discretion of the
Committee, is reasonably expected to be of indefinite duration
and to substantially prevent a Participant from fulfilling his or
her duties or responsibilities to the Company or an Affiliate.

(o) "Effective Date" shall mean the date specified
in Paragraph 16 hereof.

(p) "Employee" shall mean any person employed by
the Company, the Bank, or an Affiliate.

(q) "Exercise Price" shall mean the price per
Optioned Share at which an Option or SAR may be exercised.

(r) "ISO" shall mean an option to purchase Common
Stock which meets the requirements set forth in the Plan, and
which is intended to be and is identified as an "incentive stock
option" within the meaning of Section 422 of the Code.

(s) "Market Value" shall mean the fair market value
of the Common Stock, as determined under Paragraph 7(b) hereof.

(t) "Non-Employee Director" shall have the meaning
provided in Rule 16b-3.

(u) "Non-ISO" means an option to purchase Common
Stock which meets the requirements set forth in the Plan but
which is not intended to be and is not identified as an ISO.

(v) "Option" means an ISO and/or a Non-ISO.

(w) "Optioned Shares" shall mean Shares subject to
an Award granted pursuant to this Plan.

(x) "Participant" shall mean any person who
receives an Award pursuant to the Plan.

(y) "Phantom Stock" shall mean an award pursuant to
Paragraph 10 hereof.

(z) "Plan" shall mean the Progressive Bank, Inc.
1997 Employee Stock Option Plan.

(aa) "Restricted Stock" means Common Stock which is
subject to restrictions against transfer and forfeiture and such
other terms and conditions determined by the Committee, as
provided in Paragraph 11.

(bb) "Rule 16b-3" shall mean Rule 16b-3 of the
General Rules and Regulations under the Securities Exchange Act
of 1934, as amended.

(cc) "Share" shall mean one share of Common Stock.
B-2<PAGE>
<PAGE>

(dd) "SAR" (or "Stock Appreciation Right") means a
right to receive the appreciation in value, or a portion of the
appreciation in value, of a specified number of shares of Common
Stock.

(ee) "Year of Service" shall mean a full twelve-
month period, measured from the date of an Award and each annual
anniversary of that date, during which a Participant has not
terminated Continuous Service for any reason.

3. TERM OF THE PLAN AND AWARDS.

(a) Term of the Plan. The Plan shall continue in
effect for a term of ten (10) years from the Effective Date,
unless sooner terminated pursuant to Paragraph 18 hereof. No
Award shall be granted under the Plan after ten (10) years from
the Effective Date.

(b) Term of Awards. The term of each Award granted
under the Plan shall be established by the Committee, but shall
not exceed ten years; provided, however, that in the case of an
Employee who owns Shares representing more than 10% of the
outstanding Common Stock at the time an ISO is granted, the term
of such ISO shall not exceed five years.

4. SHARES SUBJECT TO THE PLAN.

(a) General Rule. Except as otherwise required
under Paragraph 13, the aggregate number of Shares deliverable
pursuant to Awards shall not exceed 375,000 Shares. Such Shares
may either be authorized but unissued Shares, Shares held in
treasury, or Shares held in a grantor trust created by the
Company. If an Award should expire, become unexercisable, be
forfeited, or be cancelled for any reason without having resulted
in the issuance of Shares, the Shares subject to the Award shall,
unless the Plan has been terminated, become available for the
grant of additional Awards under the Plan.

(b) Special Rule for SARs. The number of Shares
with respect to which an SAR is granted, but not the number of
Shares which the Company delivers or could deliver to an Employee
or individual upon exercise of an SAR, shall be charged against
the aggregate number of Shares remaining available under the
Plan; provided, however, that in the case of an SAR granted in
conjunction with an Option, under circumstances in which the
exercise of the SAR results in termination of the Option and vice
versa, only the number of Shares subject to the Option shall be
charged against the aggregate number of Shares remaining
available under the Plan. The Shares involved in an Option as to
which option rights have terminated by reason of the exercise of
a related SAR, as provided in Paragraph 9 hereof, shall not be
available for the grant of further Options under the Plan.

5. ADMINISTRATION OF THE PLAN.

(a) Composition of the Committee. The Plan shall
be administered by the Committee, which shall consist of not less
than two (2) members of the Board who are Non-Employee Directors.
Members of the Committee shall serve at the pleasure of the
Board. In the absence at any time of a duly appointed Committee,
the Plan shall be administered by the Board.

(b) Powers of the Committee. Except as limited by
the express provisions of the Plan or by resolutions adopted by
the Board, the Committee shall have sole and complete authority
and discretion (i) to select Participants and grant Awards, (ii)
to determine the form and content of Awards to be issued in the
form of Agreements under the Plan, (iii) to interpret the Plan,
(iv) to prescribe, amend and rescind rules and regulations
relating to the Plan, and (v) to make other determinations
necessary or advisable for the administration of the Plan. The
Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to
time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing
by a majority of the Committee without a meeting, shall be deemed
the action of the Committee.
B-3<PAGE>
<PAGE>
(c) Agreement. Each Award shall be evidenced by a
written agreement containing such provisions as may be approved
by the Committee. Each such Agreement shall constitute a binding
contract between the Company and the Participant, and every
Participant, upon acceptance of such Agreement, shall be bound by
the terms and restrictions of the Plan and of such Agreement.
The terms of each such Agreement shall be in accordance with the
Plan, but each Agreement may include such additional provisions
and restrictions determined by the Committee, in its discretion,
provided that such additional provisions and restrictions are not
inconsistent with the terms of the Plan. In particular, the
Committee shall set forth in each Agreement (i) the Exercise
Price of an Option or SAR, (ii) the number of Shares subject to
the Award, and its expiration date, (iii) the manner, time, and
rate (cumulative or otherwise) of exercise or vesting of such
Award, and (iv) the restrictions, if any, to be placed upon such
Award, or upon Shares which may be issued upon exercise of such
Award. The Chairman of the Committee and such other Directors
and officers as shall be designated by the Committee are hereby
authorized to execute Agreements on behalf of the Company and to
cause them to be delivered to the recipients of Awards.

(d) Effect of the Committee's Decisions. All deci-
sions, determinations and interpretations of the Committee shall
be final and conclusive on all persons affected thereby.

(e) Indemnification. In addition to such other
rights of indemnification as they may have, the members of the
Committee shall be indemnified by the Company in connection with
any claim, action, suit or proceeding relating to any action
taken or failure to act under or in connection with the Plan or
any Award, granted hereunder to the full extent provided for
under the Company's governing instruments with respect to the
indemnification of Directors.

6. GRANTING OF AWARDS.

(a) General Rule. Key Employees of the Company, the
Bank, or an Affiliate shall be eligible to receive discretionary
Awards. In selecting those key Employees to whom Awards will be
granted and the number of shares covered by such Awards, the
Committee shall consider the position, duties and
responsibilities of the eligible key Employees, the value of
their services to the Company and its Affiliates, and any other
factors the Committee may deem relevant. Notwithstanding the
foregoing, the Committee shall automatically make the Awards
specified in Paragraphs 6(b), 6(d), and 6(e).

(b) Automatic Grants to Employees. On the Effective
Date, each of the Employees listed in Exhibit "A" hereof shall
receive an Option (in the form of an ISO, to the extent
permissible under the Code) to purchase the number of Shares
listed in Exhibit "A" at an Exercise Price per Share equal to the
Market Value of a Share on the Effective Date; provided that such
grant shall not be made to an Employee whose Continuous Service
terminates on or before the Effective Date. Each of the Options
granted hereunder (i) shall vest in accordance with the general
rule set forth in Paragraph 8(a) of the Plan, (ii) shall have a
term of ten (10) years from the Effective Date, and (iii) shall
be subject to the general rule set forth in Paragraph 8(c) with
respect to the effect of a Participant's termination of
Continuous Service on the Participant's right to exercise his
Options.

(c) Special Rules for ISOs. The aggregate Market
Value, as of the date the Option is granted, of the Shares with
respect to which ISOs are exercisable for the first time by an
Employee during any calendar year (under all incentive stock
option plans, as defined in Section 422 of the Code, of the
Company or any present or future Affiliate of the Company) shall
not exceed $100,000. Notwithstanding the foregoing, the
Committee may grant Options in excess of the foregoing
limitations, in which case Options granted in excess of such
limitation shall be Non-ISOs.

(d) Discounted Non-ISOs. Notwithstanding any
provision of this Plan to the contrary, the Committee may, at the
election of an Employee selected by the Committee, grant Non-ISOs
to such Employee in lieu of cash compensation otherwise payable
by the Company or an Affiliate. An Employee's election pursuant
to this Paragraph 6(d) shall be made prior to the calendar year
for which such election will be deemed effective, and in
accordance with regulations prescribed by the Committee.
Elections shall be approved or disapproved in the
B-4<PAGE>
<PAGE>
discretion of the Committee and in accordance with the terms of
the Plan. Changes to a Participant's election pursuant to this
Paragraph 6(d) shall be prospective only. Pursuant to an
election accepted and approved by the Committee, a Participant
may elect to forgo the receipt of cash compensation otherwise
expected from the Company or the Bank and instead receive, as of
the last day of the calendar year, Non-ISOs with an aggregate
difference between the Market Value of the underlying Shares and
the Exercise Price (determined as of the first day of the
calendar year) equal to the amount of cash compensation foregone
by the Participant pursuant to an election covering the calendar
year. Such Non-ISOs will be at all times fully exercisable
following their date of grant, and shall otherwise be subject to
the terms of the underlying Agreement and this Plan. In no event
however, may a Non-ISO be granted pursuant to this Paragraph 6(d)
either (i) with an Exercise Price which is less than 50% of the
Market Value of the underlying Shares on the date of grant, or
(ii) with respect to more than 10,000 Shares per calendar year
for all Employees, who shall receive cash reimbursement of their
deferrals (done on a pro rata basis) to the extent this
limitation caps the Options awarded hereunder.

A Participant's interest in receiving Non-ISOs pursuant to
this Paragraph 6(d) shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge; and the Company shall not be obligated to
make any Awards to persons other than as specifically provided in
the Plan. A Participant shall not have a secured claim against
the assets of the Company, and such Participant shall rely solely
on the unsecured promise of the Company for the payment of any
compensation deferred through an election to receive a Non-ISO
pursuant to the Plan. Nothing herein shall be construed to give
any person any right, title, interest, or claim in or to any
specific asset, fund, reserve, account, or property of any kind
whatsoever owned by them or in which it may have any right, title
or interest now or in the future; but such persons shall have the
right to enforce his or her claim against the Company in the same
manner as any unsecured creditor.

(e) Reload of Options. The Committee may provide
in the grant of an Option that the Participant will receive a new
Option for Shares that are purchased upon the exercise of an
Option, upon the terms determined by the Committee in its
discretion, provided that grants of reload Options shall be made
only to the extent there are still Shares remaining from total
number of Shares authorized under paragraph 4(a) (on the day in
which the Shares authorized under the Plan in paragraph 4(a) are
fully depleted, any Participants exercising Options and
determined to be entitled to a grant of reload Options will have
their reload Options reduced pro rata among those Participants
exercising on that day), provided that the Participant is
employed when the initial Option is exercised. The Exercise
Price for the "reload" Option would be the Market Value of the
underlying Shares on the grant date of the reload Option. The
exercise of a reload Option would not trigger another Option
grant.

(f) Special Rule for Phantom Stock. A Phantom
Stock Award shall be invalid ab initio if the recipient is an
Employee who is not one of a "select group of management or
highly compensated employees" within the meaning of the Employee
Retirement Income Security Act, as amended.

7. EXERCISE PRICE FOR OPTIONS.

(a) Limits on Committee Discretion. The Exercise
Price as to any particular Option shall not be less than 50% of
the Market Value of the Optioned Shares on the date of grant. In
the case of an Employee who owns Shares representing more than
10% of the Company's outstanding Shares of Common Stock at the
time an ISO is granted, the Exercise Price shall not be less than
110% of the Market Value of the Optioned Shares at the time the
ISO is granted.

(b) Standards for Determining Exercise Price. If
the Common Stock is listed on a national securities exchange
(including the NASDAQ National Market System) on the date in
question, then the Market Value per Share shall be the closing
sale price on such exchange on such date, or if there were no
sales on such date, then the Exercise Price shall be the mean
between the closing bid and asked price on such date. If the
Common Stock is traded otherwise than on a national securities
exchange on the date in question, then the Market Value per Share
shall be the mean between the bid and asked price on such date,
or, if there is no bid and asked price on such date, then on the
next prior business day on which there was a closing bid and
asked price. If no such
B-5<PAGE>
<PAGE>

bid and asked price is available, then the Market Value per Share
shall be its fair market value as determined by the Committee, in
its sole and absolute discretion.

8. EXERCISE OF OPTIONS.

(a) Generally. The Committee shall specify in each
Agreement the period of years over which the underlying Option
shall become exercisable. Notwithstanding the foregoing, an
Option shall become fully (100%) exercisable immediately upon
termination of the Participant's Continuous Service due to
Disability, death, or retirement, or upon a Change in Control.

(b) Procedure for Exercise. A Participant may
exercise Options, subject to provisions relative to its
termination and limitations on its exercise, only by (1) written
notice of intent to exercise the Option with respect to a
specified number of Shares, and (2) payment to the Company
(contemporaneously with delivery of such notice) in cash, in
Common Stock, or a combination of cash and Common Stock, of the
amount of the Exercise Price for the number of Shares with
respect to which the Option is then being exercised. Each such
notice (and payment where required) shall be delivered, or mailed
by prepaid registered or certified mail, addressed to the
Corporate Secretary of the Company at its executive offices. If
a Participant elects to pay for Optioned Shares by delivering
Shares of Common Stock already owned, such Shares shall be valued
at their Market Value on the business day immediately prior to
exercise of the Option. In addition, a Participant may also elect
to pay all or part of the Exercise Price of the Optioned Shares
by having the Company withhold from the Optioned Shares a number
of Shares having a Market Value, as of the day immediately prior
to the date of exercise, equal to the Exercise Price being paid
through such withholding. An Option may not be exercised for a
fractional Share.

(c) Period of Exercisability. Except to the extent
otherwise provided in the terms of an Agreement, an Option may be
exercised by a Participant only while he has maintained
Continuous Service from the date of the grant of the Option, or
within one year after termination of such Continuous Service (but
not later than the date on which the Option would otherwise
expire), except if the Participant's Continuous Service
terminates by reason of --

(1) "Just Cause" which for purposes hereof
shall have the meaning set forth in any unexpired employment or
severance agreement between the Participant and the Bank and/or
the Company (and, in the absence of any such agreement, shall
mean termination because of the Participant's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary
duty involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule or regulation
(other than traffic violations or similar offenses) or final
cease-and-desist order), then the Participant's rights to
exercise such Option shall expire on the date of such
termination; or

(2) death, then to the extent that the
Participant would have been entitled to exercise the Option
immediately prior to his death, such Option of the deceased
Participant may be exercised within two years from the date of
his death (but not later than the date on which the Option would
otherwise expire) by the personal representatives of his estate
or person or persons to whom his rights under such Option shall
have passed by will or by laws of descent and distribution.

(d) Effect of the Committee's Decisions. The
Committee's determination whether a Participant's Continuous
Service has ceased, and the effective date thereof, shall be
final and conclusive on all persons affected thereby.

(e) Mandatory Six-Month Holding Period.
Notwithstanding any other provision of this Plan to the contrary,
common stock of the Company that is purchased upon exercise of an
Option or SAR may not be sold within the six-month period
following the grant of that Option or SAR.
B-6<PAGE>
<PAGE>

9. SARS (STOCK APPRECIATION RIGHTS)

(a) Granting of SARs. In its sole discretion, the
Committee may from time to time grant SARs either in conjunction
with, or independently of, any Options granted under the Plan.
An SAR granted in conjunction with an Option may be an
alternative right wherein the exercise of the Option terminates
the SAR to the extent of the number of Shares purchased upon
exercise of the Option and, correspondingly, the exercise of the
SAR terminates the Option to the extent of the number of Shares
with respect to which the SAR is exercised. Alternatively, an
SAR granted in conjunction with an Option may be an additional
right wherein both the SAR and the Option may be exercised. An
SAR may not be granted in conjunction with an ISO under
circumstances in which the exercise of the SAR affects the right
to exercise the ISO or vice versa, unless the SAR, by its terms,
meets all of the following requirements:

(1) The SAR will expire no later than the ISO;

(2) The SAR may be for no more than the
difference between the Exercise Price of the ISO and the Market
Value of the Shares subject to the ISO at the time the SAR is
exercised;

(3) The SAR is transferable only when the ISO
is transferable, and under the same conditions;

(4) The SAR may be exercised only when the ISO
may be exercised; and

(5) The SAR may be exercised only when the
Market Value of the Shares subject to the ISO exceeds the
Exercise Price of the ISO.

(b) Exercise Price. The Exercise Price as to any
particular SAR shall not be less than the Market Value of the
Optioned Shares on the date of grant.

(c) Exercise of SARs. The provisions of Paragraph
8(c) regarding the period of exercisability of Options are
incorporated by reference herein, and shall determine the period
of exercisability of SARs. An SAR granted hereunder shall be
exercisable at such times and under such conditions as shall be
permissible under the terms of the Plan and of the Agreement
granted to a Participant, provided that an SAR may not be
exercised for a fractional Share. Upon exercise of an SAR, the
Participant shall be entitled to receive, without payment to the
Company except for applicable withholding taxes, an amount equal
to the excess of (or, in the discretion of the Committee if
provided in the Agreement, a portion of) the then aggregate
Market Value of the number of Optioned Shares with respect to
which the Participant exercises the SAR, over the aggregate
Exercise Price of such number of Optioned Shares. This amount
shall be payable by the Company, in the discretion of the
Committee, in cash or in Shares valued at the then Market Value
thereof, or any combination thereof.

(d) Timing of Exercise. Any election by a
Participant to exercise SARs shall be made during the period
beginning on the 3rd business day following the release for
publication of quarterly or annual financial information and
ending on the 12th business day following such date. This
condition shall be deemed to be satisfied when the specified
financial data is first made publicly available. In no event,
however, may an SAR be exercised within the six-month period
following the date of its grant.

(e) Procedure for Exercising SARs. To the extent
not inconsistent herewith, the provisions of Paragraph 8(b) as to
the procedure for exercising Options are incorporated by
reference, and shall determine the procedure for exercising SARs.

B-7<PAGE>
<PAGE>

10. PHANTOM STOCK AWARDS.

Any Phantom Stock Awards that the Committee may grant shall
be subject to the following terms and conditions, and to such
other terms and conditions as are either applicable generally to
Awards, or are prescribed by the Committee in an Agreement with
the Participant.

(a) Awards Generally. With respect to each
Phantom Stock Award, the Company shall establish an Account in
the Participant's name, and shall credit that Account with the
number of Shares specified in the Agreement effecting the Award.

(b) Vesting Restrictions. At any time, the
Committee may at its discretion impose a restriction period for
the Phantom Stock (the "Restriction Period"). The Restriction
Period may differ among Participants and may have different
expiration dates with respect to Shares covered by the Award.
The Committee shall determine the restrictions applicable to the
award of Phantom Stock, including, but not limited to,
requirements of Continuous Service for a specified term, or the
attainment of specific corporate, divisional or individual
performance standards or goals, which restrictions may differ
with respect to each Participant. The Agreement shall provide
for forfeiture of Shares covered thereby if the specified
restrictions are not met during the Restriction Period, and may
provide for early termination of any Restriction Period in the
event of satisfaction of the specified restrictions prior to
expiration of the Restricted Period.

(c) Acceleration of Vesting. Phantom Stock shall
vest automatically in the Participant in the event of his death,
Disability, or retirement prior to the expiration of the
Restriction Period or the satisfaction of the restrictions
applicable to an award of Phantom Stock. Notwithstanding the
Restriction Period and the restrictions imposed on the Phantom
Stock, as set forth in any Agreement, the Committee may shorten
the Restriction Period or waive any restrictions, if the
Committee concludes that it is in the best interests of the
Company to do so.

(d) Payment of Awards. As soon as practicable
after termination of a Participant's Continuous Service, the
Participant shall receive the vested portion of his Account. The
Company shall make such payment in cash, and in a lump sum unless
the Participant has elected, more than six months before first
becoming vested in any portion of the Phantom Stock Award, to
receive all or part of his vested Account -- (i) in unrestricted
whole Shares, with cash paid in lieu of fractional shares, and/or
(ii) in substantially equal annual installments over a period of
up to five years, beginning with the year in which the
Participant's Continuous Service ends.

(e) Forfeiture of Stock. Each Agreement shall
provide for forfeiture of any Phantom Stock which is not vested
in the Participant or for which the restrictions have not been
satisfied during the Restriction Period.

11. RESTRICTED STOCK AWARDS.

Any Share of Restricted Stock which the Committee may grant
shall be subject to the following terms and conditions, and to
such other terms and conditions as are either applicable
generally to Awards, or prescribed by the Committee in an
Agreement with the Participant.

(a) Vesting Restrictions. At any time, the Committee
may at its discretion impose a Restriction Period for the
Restricted Stock. The Restriction Period may differ among
Participants and may have different expiration dates with respect
to portions of shares of Restricted Stock covered by the same
award. The Committee shall determine the restrictions applicable
to the award of Restricted Stock, including, but not limited to,
requirements of Continuous Service for a specified term, or the
attainment of specific corporate, divisional or individual
performance standards or goals, which restrictions may differ
with respect to each Participant. The Agreement shall provide
for forfeiture of Shares covered thereby if the specified
restrictions are not met during the Restriction Period, and may
provide for early termination of any Restriction Period in the
event of satisfaction of the specified restrictions prior to
expiration of the Restricted Period.
B-8<PAGE>
<PAGE>

(b) Accelerated Vesting. The Committee shall set forth
in the Agreement the percentage of the award of Restricted Stock
which shall vest in the Participant in the event of death,
Disability, or retirement prior to the expiration of the
Restriction Period or the satisfaction of the restrictions
applicable to an award of Restricted Stock. Notwithstanding the
Restriction Period and the restrictions imposed on the Restricted
Stock, as set forth in any Agreement, the Committee may shorten
the Restriction Period or waive any restrictions, if the
Committee concludes that it is in the best interests of the
Company to do so.

(c) Ownership; Voting. Stock certificates shall be
issued in respect of Restricted Stock awarded hereunder and shall
be registered in the name of the Participant, whereupon the
Participant shall become a stockholder of the Company with
respect to such Restricted Stock and shall, to the extent not
inconsistent with express provisions of the Plan, have all the
rights of a stockholder, including but not limited to the right
to receive all dividends paid on such Shares and the right to
vote such Shares. Said stock certificates shall be deposited
with the Company or its designee, together with a stock power
endorsed in blank, and the following legend shall be placed upon
such certificates reflecting that the shares represented thereby
are subject to restrictions against transfer and forfeiture:

"The transferability of this certificate and the shares
of stock represented thereby are subject to the terms and
conditions (including forfeiture) contained in the 1997 Stock
Option Plan of Progressive Bank, Inc., and an agreement entered
into between the registered owner and Progressive Bank, Inc.
Copies of such Plan and Agreement are on file in the offices of
the Secretary of Progressive Bank, Inc., 1301 Route 52, P.O. Box
7000, Fishkill, New York 12524-7000"

(d) Lapse of Restrictions. At the expiration of the
Restricted Period applicable to the Restricted Stock, the Company
shall deliver to the Participant, or the legal representative of
the Participant's estate, or if the personal representative of
the Participant's estate shall have assigned the estate's
interest in the Restricted Stock, to the person or persons to
whom his rights under such Stock shall have passed by assignment
pursuant to his will or to the laws of descent and distribution,
the stock certificates deposited with it or its designee and as
to which the Restricted Period has expired and the requirements
of the restrictions have been met. If a legend has been placed
on such certificates, the Company shall cause such certificates
to be reissued without the legend.

(e) Forfeiture of Restricted Stock. The Agreement shall
provide for forfeiture of any Restricted Stock which is not
vested in the Participant or for which the restrictions have not
been satisfied during the Restriction Period.

12. CHANGE OF CONTROL.

The terms of any Award which provide for its exercise or
vesting in installments shall immediately and permanently lapse
on the date of a Change in Control. Consequently, all Options,
SARs, Phantom Stock Awards, and Restricted Stock Awards shall
become immediately exercisable and fully vested on the date of
the Change in Control. With respect to Options and SARs, at the
time of a Change in Control, the Participant shall, at the
discretion of the Committee, be entitled to receive cash in an
amount equal to the excess of the Market Value of the Common
Stock subject to such Option over the Exercise Price of such
Shares, in exchange for the cancellation of such Options or SARs
by the Participant.

13. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.

(a) Recapitalizations; Stock Splits, Etc. The
number and kind of Shares reserved for issuance under the Plan,
and the number and kind of shares subject to outstanding Awards,
and the Exercise Price thereof, shall be proportionately adjusted
for any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapitaliza-
tion,
B-9<PAGE>
<PAGE>
reorganization, reclassification, stock dividend, split-up,
combination of shares, or similar event in which the number or
kind of shares is changed without the receipt or payment of
consideration by the Company.

(b) Transactions in which the Company is Not the
Surviving Entity. In the event of (i) the liquidation or
dissolution of the Company, (ii) a merger or consolidation in
which the Company is not the surviving entity, or (iii) the sale
or disposition of all or substantially all of the Company's
assets (any of the foregoing to be referred to herein as a
"Transaction"), all outstanding Awards, together with the
Exercise Prices thereof, shall be equitably adjusted for any
change or exchange of Shares for a different number or kind of
shares or other securities which results from the Transaction.

(c) Special Rule for ISOs. Any adjustment made
pursuant to subparagraphs (a) or (b)(1) hereof shall be made in
such a manner as not to constitute a modification, within the
meaning of Section 424(h) of the Code, of outstanding ISOs.

(d) Conditions and Restrictions on New, Additional,
or Different Shares or Securities. If, by reason of any
adjustment made pursuant to this Paragraph, a Participant becomes
entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or
securities shall thereupon be subject to all of the conditions
and restrictions which were applicable to the Shares pursuant to
the Award before the adjustment was made.

(e) Other Issuances. Except as expressly provided
in this Paragraph, the issuance by the Company or an Affiliate of
Shares of stock of any class, or of securities convertible into
Shares or stock of another class, for cash or property or for
labor or services either upon direct sale or upon the exercise of
rights or warrants to subscribe therefor, shall not affect, and
no adjustment shall be made with respect to, the number, class,
or Exercise Price of Shares then subject to Awards or reserved
for issuance under the Plan.

(f) Certain Special Dividends. The Exercise Price
of Shares subject to outstanding Awards shall be proportionately
adjusted upon the payment of a special large and nonrecurring
dividend that has the effect of a return of capital to the
stockholders, except that this subparagraph (f) shall not apply
to any dividend which is paid to the Participant pursuant to
Paragraph 8(b) or 9(b) hereof.

14. NON-TRANSFERABILITY OF AWARDS.

Awards may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by
the laws of descent and distribution. Notwithstanding the
foregoing, or any other provision of this Plan, a Participant who
holds Awards may transfer such Awards (but not ISOs) to his or
her spouse, lineal ascendants, lineal descendants, or to a duly
established trust for the benefit of one or more of these
individuals. Awards so transferred may thereafter be transferred
only to the Participant who originally received the grant or to
an individual or trust to whom the Participant could have
initially transferred the Awards pursuant to this Paragraph 14.
Awards which are transferred pursuant to this Paragraph 14 shall
be exercisable by the transferee according to the same terms and
conditions as applied to the Participant.

15. TIME OF GRANTING AWARDS.

The date of grant of an Award shall, for all purposes, be
the later of the date on which the Committee makes the determina-
tion of granting such Award, and the Effective Date. Notice of
the determination shall be given to each Participant to whom an
Award is so granted within a reasonable time after the date of
such grant.

16. EFFECTIVE DATE.

The Plan became effective on February 11, 1997, subject to
approval of the Plan by a favorable vote of stockholders owning
at least a majority of the total votes cast at a duly called
meeting of the Company's stockholders
B-10<PAGE>
<PAGE>
held in accordance with applicable laws. Any Awards made prior to
approval of the Plan by the stockholders of the Company shall be
contingent on such approval.

17. MODIFICATION OF AWARDS.

At any time, and from time to time, the Board may authorize
the Committee to direct execution of an instrument providing for
the modification of any outstanding Award, provided no such
modification shall confer on the holder of said Award any right
or benefit which could not be conferred on him by the grant of a
new Award at such time, or impair the Award without the consent
of the holder of the Award.

18. AMENDMENT AND TERMINATION OF THE PLAN.

The Board may from time to time amend the terms of the Plan
and, with respect to any Shares at the time not subject to
Awards, suspend or terminate the Plan. No amendment, suspension
or termination of the Plan shall, without the consent of any
affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.

19. CONDITIONS UPON ISSUANCE OF SHARES.

(a) Compliance with Securities Laws. Shares of
Common Stock shall not be issued with respect to any Award unless
the issuance and delivery of such Shares shall comply with all
relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and
the requirements of any stock exchange upon which the Shares may
then be listed.

(b) Special Circumstances. The inability of the
Company to obtain approval from any regulatory body or authority
deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder shall relieve the
Company of any liability in respect of the non-issuance or sale
of such Shares. As a condition to the exercise of an Option or
SAR, the Company may require the person exercising the Option or
SAR to make such representations and warranties as may be
necessary to assure the availability of an exemption from the
registration requirements of federal or state securities law.

(c) Committee Discretion. The Committee shall have
the discretionary authority to impose in Agreements such
restrictions on Shares as it may deem appropriate or desirable,
including but not limited to the authority to impose a right of
first refusal or to establish repurchase rights or both of these
restrictions.

20. RESERVATION OF SHARES.

The Company, during the term of the Plan, will reserve and
keep available a number of Shares sufficient to satisfy the
requirements of the Plan.

21. WITHHOLDING TAX.

The Company's obligation to deliver cash or Shares upon
vesting of Phantom Stock, Shares upon vesting of Restricted
Stock, or upon exercise of Options and/or SARs shall be subject
to the Participant's satisfaction of all applicable federal,
state and local income and employment tax withholding
obligations. Each Participant may satisfy the obligation, in
whole or in part, by irrevocably electing to have the Company
withhold Shares, or to deliver to the Company Shares that he
already owns, having a value equal to the amount required to be
withheld. The value of the Shares to be withheld, or delivered
to the Company, shall be based on the Market Value of the Shares
on the date the amount of tax to be withheld is to be determined.
As an alternative, the Company may retain, or sell without
notice, a number of such Shares sufficient to cover the amount
required to be withheld.
B-11<PAGE>
<PAGE>

22. NO EMPLOYMENT OR OTHER RIGHTS.

In no event shall an Employee's eligibility to participate
or participation in the Plan create or be deemed to create any
legal or equitable right of the Employee or any other party to
continue service with the Company, the Bank, or any Affiliate of
such corporations. Except to the extent provided in Paragraph
6(b), no Employee shall have a right to be granted an Award or,
having received an Award, the right to again be granted an Award.
However, an Employee who has been granted an Award may, if
otherwise eligible, be granted an additional Award or Awards.

23. NONEXCLUSIVITY OF THE PLAN

Neither the adoption of the Plan by the Board nor the
submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the
power of the Board to adopt such other incentive arrangements as
it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and
such arrangements may be either applicable generally or only in
specific cases.

24. GOVERNING LAW

The Plan shall be governed by and construed in accordance
with the laws of the State of New York, except to the extent that
federal law shall be deemed to apply.

B-12<PAGE>
<PAGE>
REVOCABLE PROXY
________________________________________________________________
PROGRESSIVE BANK, INC.
Fishkill, New York
________________________________________________________________

ANNUAL MEETING OF STOCKHOLDERS
April 24, 1997

The undersigned hereby appoints Beatrice D. Parent and
Robert Apple, with full powers of substitution, to act as
attorneys and proxies for the undersigned, to vote all shares of
the common stock of Progressive Bank, Inc. which the undersigned
is entitled to vote at the Annual Meeting of Stockholders, to be
held at the main office of its subsidiary, Pawling Savings Bank,
on Route 22, Pawling, New York, on Thursday, April 24, 1997, at
6:00 p.m. (the "Annual Meeting"), and at any and all adjournments
thereof, as follows:

VOTE
FOR WITHHELD
--- --------

1. The election as directors of all
nominees listed below (except as
marked to the contrary below). [ ] [ ]

Thomas C. Aposporos
John J. Page
David A. Swinden

INSTRUCTION: To withhold your vote for any individual
nominee, insert that nominee's name on the line provided
below.
_____________________________
[CAPTION]
<TABLE>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
2. The amendment of the Company's Certificate
of Incorporation to include provisions
that set forth procedures for director
nominations and new business proposals
by stockholders. [ ] [ ] [ ]

3. The approval of the Progressive Bank, Inc.
1997 Employee Stock Option Plan [ ] [ ] [ ]

4. Ratification of the appointment of
KPMG Peat Marwick LLP as independent
auditors for the 1997 fiscal year. [ ] [ ] [ ]
</TABLE>

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED
PROPOSITIONS.

________________________________________________________________
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NAMED
NOMINEES AND FOR THE OTHER PROPOSITIONS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT THE ANNUAL MEETING, INCLUDING MATTERS
RELATING TO THE CONDUCT OF THE ANNUAL MEETING, THIS PROXY WILL BE
VOTED BY THOSE NAMED IN THIS PROXY IN ACCORDANCE WITH THE
DETERMINATION OF A MAJORITY OF THE BOARD OF DIRECTORS. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS
TO BE PRESENTED AT THE ANNUAL MEETING.
________________________________________________________________
<PAGE>
<PAGE>

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

Should the undersigned be present and elect to vote at the
Annual Meeting or at any adjournment thereof, then the power of
said attorneys and prior proxies shall be deemed terminated and
of no further force and effect. The undersigned may also revoke
this proxy by filing a subsequent proxy or notifying the
Corporate Secretary of his or her decision to terminate this
proxy.

The undersigned acknowledges receipt from the Company prior
to the execution of this proxy of a Notice of Annual Meeting and
a Proxy Statement dated March 24, 1997.

Dated: _______________________, 1997

__________________________ __________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER

__________________________ __________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER

Please sign exactly as your name appears on the enclosed
card. When signing as attorney, executor, administrator, trustee
or guardian, please give your full title. Corporation proxies
should be signed in corporate name by an authorized officer. If
shares are held jointly, each holder should sign.

PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.