FIRST ALBANY COMPANIES INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the fiscal year ended September 29, 1995 Commission file number 014140

F I R S T A L B A N Y C O M P A N I E S I N C .
(Exact name of registrant as specified in its charter)
New York 22-2655804
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

41 State Street, Albany, New York 12207
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (518) 447-8500

Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
none none

Securities registered pursuant to Section 12(g) of the Act:

Common stock par value $.01 per share
(Title of class)

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

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

As of December 14, 1995, 4,530,378 shares, par value $.01 per share, were
outstanding. The aggregate market value of the shares of common stock of the
Registrant held by non-affiliates (based upon the closing price of
Registrant's shares as reported on the NASDAQ system on December 14, 1995,
which was $10.25) was approximately $28,434,848.

DOCUMENTS INCORPORATED BY REFERENCE

The Exhibit index is included on pages 37 through 39.
Portions of the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission are incorporated by reference into Part
III. Total number of pages in this document - 41.

Part I

Item 1. Business

First Albany Companies Inc. (the Company), through its wholly owned subsidiary
First Albany Corporation (First Albany), conducts an investment banking
business with brokerage activity centered in New York and New England. The
primary business includes securities brokerage for individual and
institutional
customers, and market-making and trading of corporate, government, and
municipal securities. In addition, First Albany underwrites and distributes
municipal and corporate securities, provides securities clearance activities
for other brokerage firms, and offers financial advisory services to its
customers. Another of the Company's subsidiaries is First Albany Asset
Management Corporation ("Asset Management"). Under management agreements,
Asset Management serves as investment manager to individual and institutional
customers. Asset Management also serves as a sub-advisor under contract to
the Victory Fund for Income, a mutual fund registered under the Investment
Company Act of 1940. Asset Management directs the investment of the customer
and mutual fund assets by making investment decisions, placing purchase and
sales orders, and providing research, statistical analysis, and continuous
supervision of the portfolios.

Brokerage services to retail and institutional customers are provided through
First Albany's salesforce of Investment Executives and Institutional
Salespeople. First Albany believes that Investment Executives and
Institutional Salespeople are a key factor to the success of its business.
Over the last five years, the number of full-time Investment Executives and
Institutional Salespeople has grown from approximately 221 to 291, many of
whom joined First Albany after previous associations with national brokerage
firms.

First Albany has organized its business to focus on and serve the needs and
financial/capital requirements of institutions, individuals, corporations, and
municipalities. As investment bankers, First Albany is positioned to advise,
manage, and conduct a variety of activities as requested including
underwritings, initial and secondary offerings, advisory services, mergers and
acquisitions, and private placements. As a brokerage firm, First Albany
offers customers a full array of investment opportunities.

First Albany operates a total of 29 Retail, Institutional, and Investment
Banking offices in 9 states. First Albany's executive office and largest
sales office are both located in Albany, New York.

First Albany is a member of the New York Stock Exchange, Inc. ("NYSE"), the
American Stock Exchange, Inc. ("ASE"), and the Boston Stock Exchange, Inc.
("BSE") and is registered as a broker-dealer with the Securities and Exchange
Commission ("SEC"). First Albany is also a member of the National Association
of Securities Dealers, Inc. ("NASD") and the Securities Investor Protection
Corporation ("SIPC"), which insures customer funds and securities deposited
with a broker-dealer up to $500,000 per customer, with a limitation of
$100,000 on claims for cash balances. First Albany has obtained additional
coverage of $24,500,000 per account from National Union, a wholly owned
subsidiary of American International Group (AIG), America's largest commercial
insurer. Both companies are rated A+15 (highest rating) by A.M. Best.

Sources of Revenues

A breakdown of the amount and percentage of revenues from each principal
source for the periods indicated follows:

Years Ended
- --------------------------------------------------------------------------------
September 29, 1995 September 30, 1994 September 24, 1993
- --------------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
- --------------------------------------------------------------------------------
(In thousands of dollars)

Securities commissions:
Listed $ 17,852 14.5% $ 14,201 13.2% $ 14,219 13.9%
Over-the-counter 4,395 3.6 3,588 3.3 3,290 3.2
Options 1,240 1.0 911 0.8 851 0.8
Mutual funds 8,228 6.7 10,586 9.8 10,334 10.1
Other 174 0.1 267 0.3 190 0.2
- --------------------------------------------------------------------------------
Sub-total 31,889 25.9 29,553 27.4 28,884 28.2

Principal transactions 43,198 35.1 36,167 33.6 34,857 34.0
Investment banking 14,625 11.9 19,164 17.8 23,265 22.7
Clearing revenues 1,059 0.8 1,151 1.1 1,102 1.1
Fees and other 6,155 5.0 5,427 5.0 4,799 4.7
- --------------------------------------------------------------------------------
Total operating
revenues 96,926 78.7 91,462 84.9 92,907 90.7
- --------------------------------------------------------------------------------
Interest income 26,173 21.3 16,222 15.1 9,483 9.3
- --------------------------------------------------------------------------------
Total revenues $123,099 100.0% $107,684 100.0% 102,390 100.0%
================================================================================

Securities Commissions

In executing customers' orders to buy or sell listed securities and securities
in which it does not make a market, First Albany generally acts as an agent
and charges a commission.

Principal Transactions

First Albany buys and maintains inventories of municipal debt, corporate debt,
and equity securities as a "market maker" for sale of those securities to
other dealers and to customers. A staff of 46 traders, underwriters, and
assistants manages First Albany's inventory of securities. First Albany
Investment Executives work directly with these traders. As of September 29,
1995, First Albany made a market in 291 common stocks quoted on National
Association of Securities Dealers Automated Quotation ("NASDAQ") and other
less actively traded securities. First Albany also trades municipal bonds and
taxable debt obligations, including U.S. Treasury bills, notes, and bonds,
U.S. Government agency notes and bonds, bank certificates of deposit, mortgage-
backed securities, and corporate obligations. Principal transactions have
been a significant source of revenue and should continue to be so in the
future. Continuation of these activities depends on the availability of
sufficient capital and the services of highly skilled traders, Investment
Executives, and Institutional Salespeople.

The majority of revenues derived from principal transactions are on a
"riskless" basis. In fiscal 1995, First Albany added an institutional
municipal risk trading operation in which inventory positions are hedged by
highly liquid future contracts. Most of the inventory positions are carried
for the purpose of generating sales by the retail and institutional
salesforce.

First Albany's trading activities require the commitment of capital and may
place First Albany's capital at risk. Profits and losses are dependent upon
the skill of traders, price movement, trading activity, and the size of
inventories.

In executing customers' orders to buy or sell in the over-the-counter market
in a security in which it makes a market, First Albany may sell to or purchase
from its customers at a price which is substantially equal to the current
interdealer market price, plus or minus a markup or markdown. Alternatively,
First Albany may act as an agent, executing a customer's purchase or sale
order with another broker-dealer, who acts as a market maker, at the best
inter-dealer market price available and charging a commission.

The following table sets forth the highest, lowest, and average month-end
inventories (including the net of securities owned and securities sold, but
not yet purchased) for fiscal 1995 by securities category where First Albany
acted as principal.

Highest Lowest Average
Inventory Inventory Inventory
- --------------------------------------------------------------------------------
(In thousands of dollars)
State and municipal bonds $ 44,314 $ 7,945 $ 26,349
Corporate obligations 12,873 1,677 4,490
Corporate stocks 3,511 (2,421) 1,903
U.S. Government and federal
agencies obligations 6,119 693 3,384

Underwriting and Investment Banking

First Albany manages, co-manages, and participates in tax-exempt and corporate
securities distributions. For the periods indicated, the table below
highlights the number and dollar amount of corporate and tax-exempt securities
offerings managed or co-managed by First Albany and the number and amount of
First Albany's underwriting participations in syndicates, including those
managed or co-managed by First Albany:

Corporate Stock and Bond Offerings
----------------------------------

Managed or Co-Managed Syndicate Participations
--------------------- ------------------------
Fiscal Number of Amount of Number of Amount of
Year Issues Offering Participations Participation
------ --------- --------- -------------- -------------
(In thousands of dollars)
1995 13 $ 514,583 203 $ 227,170
1994 13 483,814 334 349,723
1993 3 158,300 344 366,314
1992 4 212,451 322 130,938
1991 1 7,650 159 51,677

Tax-Exempt Bond Offerings
-------------------------

Managed or Co-Managed Syndicate Participations
Fiscal Number of Dollar Number of Dollar
Year Issues Amount Participations Amount
------ --------- ------ -------------- ------
(In thousands of dollars)
1995 113 $ 12,235,469 222 $ 1,362,845
1994 123 14,744,502 332 1,598,182
1993 171 18,379,821 349 1,741,206
1992 179 14,482,448 328 1,137,423
1991 89 14,933,761 332 886,069

Participation in an underwriting syndicate or selling group involves both
economic and regulatory risks. An underwriter or selling group member may
incur losses if it is forced to resell the securities it is committed to
purchase at less than the agreed-upon purchase price. In addition, under the
federal securities laws, other statutes, and court decisions with respect to
underwriters' liabilities and limitations on indemnification of underwriters
by issuers, an underwriter is subject to substantial potential liability for
material misstatements or omissions in prospectuses and other communications
with respect to underwritten offerings. Further, underwriting or selling
commitments constitute a charge against net capital and First Albany's
underwriting or selling commitments may be limited by the requirements that it
must at all times be in compliance with the net capital rule. See "Net
Capital Requirements."

Interest

First Albany derives interest income primarily from the financing of customer
margin loans, securities lending activities, and securities owned.

Customers' securities transactions are effected on either a cash or margin
basis. In margin transactions, First Albany extends credit, which is
collateralized by securities and cash in the customer's account, to the
customer. In accordance with Federal Reserve Bank regulations, NYSE
regulations, and internal policy, First Albany earns interest income as a
result of charging customers at a rate of up to 2% over the brokers' call
rate.

During the past several years, cash balances in customers' accounts have been
a source of funds to finance customers' margin account debit balances. SEC
regulations restrict the use of customers' funds by broker-dealers by
providing generally that free credit balances and funds derived from pledging
and lending customers' securities are to be used only to finance customers'
margin account debit balances, and, to the extent not so used, the funds must
be deposited in a special reserve bank account for the exclusive benefit of
customers. The regulations also require broker-dealers, within designated
periods of time, to obtain physical possession or control of and to segregate
customers' fully paid and excess margin securities.

In connection with both its trading and brokerage activities, First Albany
borrows securities to cover short sales and to complete transactions in which
customers or other brokers have failed to deliver securities by the required
settlement date. First Albany also lends securities to other brokers and
dealers for similar purposes. This is a common occurrence for broker-dealers.

When borrowing securities, First Albany is required to deposit cash or other
collateral, or to post a letter of credit with the lender and receive a rebate
(based on the amount of cash deposited) calculated to yield a negotiated rate
of return. When lending securities, First Albany receives cash and generally
pays a rebate (based on the amount of cash received) to the other party to the
transaction. Securities borrow and loan transactions are executed pursuant to
written agreements with counter-parties which provide that the securities
borrowed or loaned be marked to market on a daily basis and that excess
collateral be refunded or that additional collateral be furnished in the event
of changes in the market value of the securities. Collateral adjustments are
usually made on a daily basis through the facilities of various
clearinghouses.

Operations, Clearing, and Systems

First Albany's operations include: execution of orders; processing of
transactions; receipt, identification, and delivery of funds and securities;
custody of customers' securities; internal financial control; and compliance
with regulatory and legal requirements.

The volume of transactions handled by the operations staff fluctuates
substantially. The monthly number of purchase and sale transactions processed
for the periods indicated were as follows:

Number of Monthly
Transactions
-----------------
Fiscal Year High Low Average
- ----------- ---- --- -------
1995 71,407 44,409 54,254
1994 58,245 40,537 47,257
1993 51,745 37,276 43,409
1992 43,068 30,907 36,346
1991 38,744 20,800 31,434

First Albany has established internal controls and safeguards against
securities theft, including use of depositories and periodic securities
counts. As required by the NYSE and certain other authorities, First Albany
carries fidelity bonds covering loss or theft of securities as well as
embezzlement and forgery.

First Albany clears its own securities transactions and posts its books and
records daily. Periodic reviews of controls are conducted, and
administrative and operations personnel meet frequently with management to
review operating conditions. Operations personnel monitor compliance with
applicable laws, rules, and regulations.

In addition to processing its own customer transactions, First Albany
processes, for a fee, the transactions of other brokerage firms whose customer
accounts are carried on a fully disclosed basis with all security positions,
margin accounts receivable, and credit balances reflected on the books and
records of First Albany.

Financial Services

Customized financial services are available to customers at First Albany.

The Financial Planning Department advises customers on a variety of
interrelated financial matters, including investment portfolio review, tax
management, insurance analysis, education and retirement planning, and estate
analysis. For a fee, financial planners will prepare a detailed analysis with
specific recommendations aimed at accumulating wealth and attaining financial
goals.

First Albany also offers a range of retirement plans, including IRAs, SEP
Plans, profit sharing, 401K, and pension programs. Fixed and variable
annuities are available as well as life, disability, and nursing home
insurance programs, limited partnership interests in real estate, oil and gas
drilling, and similar ventures.

Research

First Albany maintains a professional staff of equity analysts. Research is
focused on six industry sectors: technology, health care, financial services,
energy, utilities, and basic industry. First Albany employs 16 analysts
and 12 research assistants who support First Albany's institutional and retail
brokerage and corporate finance activities.

In fiscal 1995, First Albany enlarged the scope ofits research in the technology
sector by entering into a strategic alliance with the META Group, Inc. (META).
META, an independent market assessment company, provides research and analysis
of developments and trends in information technology (IT) including computer
hardware, software, communications and related information technology industries
to both IT users and IT vendors. The alliance with META enables First Albany to
provide its investors with insights drawn from META's analysis of technology
trends, user experience, and vendor pricing and negotiating tactics.

Research services include review and analysis of the economy; general market
conditions; technology trends, industries and specific companies via both
fundamental and technical analyses; recommendations of specific action with
regard to industries and specific companies; review of customer portfolios;
preparation of research reports which are provided to retail and institutional
customers; and responses to inquiries from customers and Investment Executives.
In addition, First Albany purchases outside research services including economic
reports, charts, data bases, company analyses, and technical analyses.

Retail Business

Revenues from First Albany's retail brokerage activities are a substantial
portion of First Albany's business and are generated through customer
purchases and sales of stocks, bonds, mutual funds, and other investment
products. For the fiscal years 1995, 1994, and 1993, these revenues accounted
for approximately 53%, 54%, and 49% of net revenues, respectively.

Institutional Business

Revenues generated from securities transactions with major institutions in
fiscal 1995, 1994, and 1993 accounted for approximately 31%, 29%, and 30% of
net revenues, respectively. Institutional revenues are derived from sales of
taxexempt securities, taxable debt obligations, and equities, and are serviced
by 83 Institutional Salespeople. First Albany Retail Investment Executives
cover most of the regional institutions.

Municipal Bond Business

First Albany considers its expertise in municipal bonds to be one of its major
strengths. The tax-exempt department consists of 49 professionals and offers
a broad range of services, including primary market underwriting, secondary
market trading, institutional sales, sales liaison with branches, portfolio
analysis, credit analysis, investment banking services, and financial advisory
services.

Sales revenues from all secondary market tax-exempt products were $12.9
million in fiscal 1995, $8.95 million in fiscal 1994, and $7.5 million in fiscal
1993.

Employees

At September 29, 1995, the Company had 669 full-time employees, of which 193
were Retail Investment Executives, 98 were Institutional Salespeople and
Institutional Traders, 129 were in branch sales support, 27 were in home
office sales support, 60 were in other revenue producing positions, 60 were
in operations, and 102 were in other support and administrative functions.

New Investment Executives are required to take examinations given by the NASD
and approved by the NYSE and all principal exchanges as well as state
securities authorities in order to be registered. There is intense
competition among securities firms for Investment Executives with proven sales
production records.

The Company considers its employee relations to be good and believes that its
compensation and employee benefits are competitive with those offered by other
securities firms. None of the Company's employees are covered by a collective
bargaining agreement.

Competition

First Albany is engaged in a highly competitive business. Its competition
includes, with respect to one or more aspects of its business, all of the
member organizations of the NYSE and other registered securities exchanges,
all members of the NASD, members of the various commodity exchanges, and
commercial banks and thrift institutions. Many of these organizations are
national firms and have substantially greater financial and human resources
than First Albany. Discount brokerage firms seeking to expand their share of
the retail market, including firms affiliated with commercial banks and thrift
institutions, are devoting substantial funds to advertising and direct
solicitation of customers. In many instances, First Albany is competing
directly with such organizations. In addition, there is competition for
investment funds from the real estate, insurance, banking, and savings and loan
industries. The Company believes that the principal factors affecting
competition for the securities industry are the quality and ability of
professional personnel and relative prices of services and products offered.

Regulation

The securities industry in the United States is subject to extensive regulation
under federal and state laws. The SEC is the federal agency charged with
administration of the federal securities laws. Much of the regulation of
brokerdealers, however, has been delegated to self-regulatory organizations,
principally the NASD and the national securities exchanges. These self
regulatory organizations adopt rules (subject to approval by the SEC) which
govern the industry and conduct periodic examinations of member broker-dealers.
Securities firms are also subject to regulation by state securities commissions
in the states in which they are registered. First Albany is currently
registered as a broker-dealer in 49 states and the District of Columbia.

The regulations to which broker-dealers are subject cover all aspects of the
securities business, including sales methods, trade practices among broker
dealers, capital structure of securities firms, recordkeeping, and conduct of
directors, officers, and employees. Additional legislation, changes in rules
promulgated by the SEC and by self-regulatory organizations, or changes in the
interpretation or enforcement of existing laws and rules often directly affect
the method of operation and profitability of broker-dealers. The SEC, self
regulatory organizations, and state security regulators may conduct
administrative proceedings which can result in censure, fine, suspension, or
expulsion of a broker-dealer, its officers, or employees. The principal
purpose of regulation and discipline of broker-dealers is the protection of
customers and the securities markets rather than protection of creditors and
stockholders of broker-dealers.

Net Capital Requirements

As a broker-dealer and member of the NYSE, First Albany is subject to the
Uniform Net Capital Rule promulgated by the SEC. The rule is designed to
measure the general financial condition and liquidity of a broker-dealer;
therefore, it imposes a minimum net capital requirement deemed necessary to
meet the broker-dealer's continuing commitments to its customers.

A broker-dealer may be required to reduce its business and to restrict
withdrawal of subordinated capital if its net capital is less than 4% of
aggregate debit balances; it may be prohibited from expanding its business and
declaring cash dividends if its net capital is less than 5% of aggregate debit
balances; and it will be subject to closer supervision by the NYSE if its net
capital is less than 6% of aggregate debit balances. Compliance with the Net
Capital Rule may limit those operations of a firm such as First Albany which
require the use of its capital for purposes such as maintaining the inventory
required for a firm trading in securities, underwriting securities, and
financing customer margin account balances. Net capital and aggregate debit
balances change from day to day and, at September 29, 1995, First Albany's net
capital was $17,178,000 which was 18% of its aggregate debit balances (2%
minimum requirement) and $15,303,000 in excess of required minimum net
capital.

Item 2. Properties

The Company has a total of 29 Retail, Institutional, and Investment Banking
offices in 9 states, all of which are leased or rented. The Company's
executive offices are currently located at 41 State Street, Albany, New York.
The order entry, trading, investment banking, research, data processing,
operations, and accounting activities are centralized in the Albany office.
During 1996, these offices will be relocated to 30 South Pearl Street, Albany,
New York. The offices at 30 South Pearl Street will be operated under a lease
which currently expires in the year 2002. All other offices are subject to
lease or rental agreements which, in the opinion of management, are sufficient
to meet the needs of the Company.

Item 3. Legal Proceedings

In the normal course of business, the Company has been named a defendant, or
otherwise has possible exposure, in several claims. Certain of these are
class actions which seek unspecified damages that could be substantial.
Although there can be no assurance as to the eventual outcome of litigation in
which the Company has been named as a defendant or otherwise has possible
exposure, the Company has provided for those actions most likely to result in
adverse dispositions. Although further losses are possible, the opinion of
management, based upon the advice of its attorneys and general counsel, is
that such litigation will not, in the aggregate, have a material adverse
effect on the Company's liquidity or financial position, although it could
have a material effect on quarterly or annual operating results in the period
in which it is resolved.

Item 4. Submission of Matters to a Vote of Security Holders.
None.

PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters

The Company's common stock has traded on the Nasdaq Stock Market under the
symbol "FACT." As of December 14, 1995, there were approximately 875 holders
of record of the Company's common stock. The following table sets forth the
high and low bid quotations for the common stock as adjusted for subsequent
stock dividends, along with cash dividends during each quarter for the fiscal
years ended:

September 29, 1995 Quarters Ended
- ------------------ --------------
Stock Price Range Dec. 31 Mar. 31 June 30 Sept. 29
- ----------------- ------- ------- ------- --------
High $7 1/4 $7 5/8 $8 $8 3/4
Low $6 1/4 $6 1/2 $7 1/8 $7 1/8

Cash Dividend
per Share $ .05 $ .05 $ .05 $ .05

September 30, 1994 Quarters Ended
- ------------------ --------------
Stock Price Range Dec. 31 Mar. 25 June 24 Sept. 30
- ----------------- ------- ------- ------- --------
High $7 1/2 $7 1/2 $7 1/2 $6 7/8
Low $6 1/4 $6 3/4 $6 3/8 $5 3/4

Cash Dividend
per Share $ .05 $ .05 $ .05 $ .05

The Board of Directors has from time to time authorized the Company to
repurchase shares of its common stock either in the open market or otherwise.
After the 5% common stock dividend declared on October 26, 1995, the total
number of treasury shares was 365,739. When appropriate, the Company will
consider making additional purchases.

During fiscal 1995, the Company declared and paid four quarterly cash
dividends totaling $.20 per share of common stock, along with declaring and
issuing two 5% common stock dividends. During fiscal 1994, the Company also
declared and paid four quarterly cash dividends totaling $.20 per share of
common stock, along with declaring and issuing two 5% common stock dividends.

On October 26, 1995, subsequent to the period reflected in this report, the
Board of Directors declared the regular quarterly cash dividend of $0.05 per
share along with a 5% common stock dividend, both payable on November 8,
1995, to shareholders of record on November 22, 1995.

Item 6. Selected Financial Data

The following selected financial data have been derived from the Consolidated
Financial Statements of the Company.

First Albany Companies Inc.
FIVE YEAR FINANCIAL SUMMARY
---------------------------
(In thousands of dollars except per share amounts)

Sept. 29, Sept. 30, Sept. 24, Sept. 25, Sept. 27,
For the years ended 1995 1994 1993 1992 1991
- ------------------- -------- -------- -------- -------- --------
Operating Results
Revenues:
Commissions $ 31,889 $ 29,553 $ 28,884 $ 24,569 $ 19,445
Principal transactions 43,198 36,167 34,857 31,405 28,443
Investment banking 14,625 19,164 23,265 16,065 8,051
Fees and other 7,214 6,578 5,901 4,782 4,593
- --------------------------------------------------------------------------------
Operating revenues 96,926 91,462 92,907 76,821 60,532
Interest income 26,173 16,222 9,483 8,999 12,047
- --------------------------------------------------------------------------------
Total revenues 123,099 107,684 102,390 85,820 72,579
Interest expense 19,904 10,467 5,257 5,078 8,697
- --------------------------------------------------------------------------------
Net revenues 103,195 97,217 97,133 80,742 63,882
- --------------------------------------------------------------------------------

Expenses Excluding Interest:
Compensation
and benefits 71,064 65,513 64,388 51,558 40,881
Clearing, settlement
and brokerage costs 2,258 1,894 1,981 1,978 2,120
Communications and data
processing 7,794 7,198 6,209 5,213 4,770
Occupancy and
depreciation 6,660 5,710 5,395 5,130 5,130
Selling 4,817 4,779 4,152 3,410 2,565
Other 5,382 4,755 6,242 4,534 4,831
- --------------------------------------------------------------------------------
Total expenses excluding
interest 97,975 89,849 88,367 71,823 60,297
- --------------------------------------------------------------------------------
Income before
income taxes 5,220 7,368 8,766 8,919 3,585
Income tax expense 1,870 2,876 3,375 3,352 1,302
- --------------------------------------------------------------------------------
Net income $ 3,350 $ 4,492 $ 5,391 $ 5,567 $ 2,283
================================================================================
Per Common Share: *
Earnings-primary $ 0.71 $ .96 $ 1.14 $ 1.22 $ .52
Cash dividend 0.20 0.20 0.20 0.20
Book value 8.00 7.48 6.69 5.65 4.56
- --------------------------------------------------------------------------------

Financial Condition:
Total assets $543,255 $482,749 $514,794 $203,877 $164,679
Long-term note payable 1,791 94 456 1,334 1,900
Subordinated debt 2,250 2,750 3,250
Stockholders' equity 36,192 33,230 30,088 25,272 19,989
- --------------------------------------------------------------------------------
* All per share figures have been restated for common stock dividends declared
through October 26, 1995.

First Albany Companies Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS COMPARISON 1995
VS. 1994 AND 1994 VS. 1993
(In thousands of dollars)

1995 1994
Fiscal Years Ended vs. 1994 vs. 1993
Sept. 29, Sept. 30, Sept. 24, Increase Increase
1995 1994 1993 (Decrease) (Decrease)
--------- --------- --------- ---------- ----------

Operating Results
Revenues:
Commissions $ 31,889 $ 29,553 $ 28,884 $ 2,336 8% $ 669 2%
Principal
transactions 43,198 36,167 34,857 7,031 19% 1,310 4%
Investment banking 14,625 19,164 23,265 (4,539) (24%) (4,101) (18%)
Fees and other 7,214 6,578 5,901 636 10% 677 11%
Operating revenues 96,926 91,462 92,907 5,464 6% (1,445) (2%)
Interest income 26,173 16,222 9,483 9,951 61% 6,739 71%
Total revenues 123,099 107,684 102,390 15,415 14% 5,294 5%
Interest expense 19,904 10,467 5,257 9,437 90% 5,210 99%
Net revenues 103,195 97,217 97,133 5,978 6% 84 0%

Expenses Excluding Interest:
Compensation
and benefits 71,064 65,513 64,388 5,551 8% 1,125 2%
Clearing, settlement
and brokerage costs 2,258 1,894 1,981 364 19% (87) (4%)
Communications and
data processing 7,794 7,198 6,209 596 8% 989 16%
Occupancy and
depreciation 6,660 5,710 5,395 950 17% 315 6%
Selling 4,817 4,779 4,152 38 1% 627 15%
Other 5,382 4,755 6,242 627 13% (1,487) (24%)
Total expenses
excluding interest 97,975 89,849 88,367 8,126 9% 1,482 2%
Income before
income taxes 5,220 7,368 8,766 (2,148) (29%) (1,398) (16%)
Income tax expense 1,870 2,876 3,375 (1,006) (35%) (499) (15%)
Net income $ 3,350 $ 4,492 $ 5,391 $(1,142) (25%) $ (899) (17%)

Net interest income:
Interest income $ 26,173 $ 16,222 $ 9,483 $ 9,951 61% $ 6,739 71%
Interest expense 19,904 10,467 5,257 9,437 90% 5,210 99%
Net interest income $ 6,269 $ 5,755 $ 4,226 $ 514 9% $ 1,529 36%

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

BUSINESS ENVIRONMENT

First Albany Corporation (First Albany), a wholly owned subsidiary of First
Albany Companies Inc. (the Company), is a full service investment banking and
brokerage firm. Its primary business includes the underwriting, distribution,
and trading of fixed income and equity securities. The investment banking and
brokerage business earns revenues in direct correlation with the general level
of trading activity in the stock and bond markets. This level of activity
cannot be controlled by the Company; however, many of the Company's costs are
fixed. Therefore, the Company's earnings, like those of others in the industry,
reflect the activity in the markets and can fluctuate accordingly.

This is a highly competitive business. The competition includes not only
full service national firms and discount houses, but also mutual funds that sell
directly to the customer as well as banks that offer a variety of investment
products.

1995 was an unusually good year for the financial markets in general and many
securities firms in particular. Long term interest rates declined sharply and
the economy and profits expanded. As a result, both bond prices and stock
prices rose registering returns of 17.5% and 34.8% from December 31, 1994,
through November 30, 1995 for the Lehman Brothers Government/Corporate Index
and the S&P 500 Index respectively. These returns are unusual in the
financial markets. The compound annual returns with all dividends and interest
reinvested between 1926 and 1994 for corporate bonds was 5.5%, for government
bonds 4.9%, and the return for equities 10.2%. Although First Albany remains
optimistic about the outlook for equity prices in 1996, a pullback in prices
could occur. If such a pullback was to occur, it would have a damaging effect
on the secondary markets. Revenues from security trading, commission revenues,
and underwriting fees and profits of First Albany Corporation would most
likely suffer. In such an environment, it would be difficult for all
securities firms to maintain growth and earnings comparable to the levels
achieved in 1995.

RESULTS OF OPERATIONS

Fiscal Year 1995 Compared with Fiscal Year 1994

Net Income
Net income for the 1995 fiscal year was $3.4 million or $0.71 per share
compared to $4.5 million or $.96 per share earned in fiscal 1994. During
fiscal 1995, both the Company's municipal and equity institutional businesses
showed substantial growth, along with an ongoing solid contribution by the
retail division. The Company continued to make investments in people and
technology. These investments are critical for the firm's long-term success,
but have negatively impacted short-term operating results. These investments
will strengthen the Company's revenues and profitability in the future.

Commissions

Commission revenues increased $2.3 million or 8% in fiscal 1995, reflecting
active trading in institutional equities. Revenues from listed and over-the
counter stock commissions increased $4.6 or 25%, while mutual fund commission
revenues decreased $2.3 million or 22%.

Principal Transactions

Principal transactions increased $7.0 million or 19% in fiscal 1995. This
increase was comprised of an increase in equities of $2.1 million, an increase
in municipal bonds of $7.8 million (primarily due to the addition in fiscal
1995 of an institutional municipal risk trading operation), a decrease in
taxable fixed income securities of $2.1 million, and a decrease in investment
income of $0.8 million. A primary reason for the decrease in investment
income was the result of an unrealized gain of $1.4 million recorded in fiscal
1994 due to the Company's investment in a firm which completed an initial
public offering in February 1994.

Investment Banking

Investment banking revenues decreased $4.5 million or 24% in fiscal 1995.
Revenues from selling concessions decreased $3.4 million (equities decreased
$2.4 million, while municipal bonds decreased $1.2 million and taxable fixed
income increased $0.2 million), underwriting fees decreased $0.2 million, and
investment banking fees decreased $0.9 million (corporate finance fees
decreased $0.1 million, while municipal finance fees decreased $0.8 million).
The result in investment banking revenues was largely dependent upon an
industry-wide decline in underwriting activity.

Compensation and Benefits

Compensation and benefits increased $5.6 million or 8% in fiscal 1995.
Salesrelated compensation was $0.9 million higher and salaries increased $3.8
million which impacted benefits (up $0.9 million).

Occupancy and Depreciation

Occupancy and depreciation expense increased $1 million or 17% in fiscal
1995 primarily as a result of our increased investment in new automated
systems.

Income Taxes

Income taxes decreased $1.0 million or 35% in fiscal 1995 due to a decrease
in pre-tax earnings. The Company's effective tax rate decreased to 36% from
39% as a result of an increased proportion of tax-exempt interest income to
income before taxes.

Fiscal Year 1994 Compared with Fiscal Year 1993

Net Income

Net income for the 1994 fiscal year was $4.5 million or $.96 per share
compared to $5.4 million or $1.14 per share earned in fiscal 1993. Revenues
increased due to a solid contribution made by our retail brokerage business
along with significant contributions by our institutional equity and corporate
finance areas. However, net income decreased due to the effect of falling
bond prices on fixed income sales, trading and underwritings, and because
municipal bond refinancings declined significantly from last year.

Principal Transactions

Principal transactions increased $1.3 million or 4% in fiscal 1994. This
increase was comprised of an increase in equities of $3.2 million, a decrease
in taxable fixed income securities of $4.1 million, an increase in municipal
bonds of $0.8 million and an unrealized gain of $1.4 million due to the
Company's investment in a firm which completed an initial public offering in
February 1994.

Investment Banking

Investment banking revenues decreased $4.1 million or 18% in fiscal 1994.
Revenues from selling concessions decreased $0.2 million (equities increased
$1.7 million, while municipal bonds decreased $1.8 million and taxable fixed
income decreased $0.1 million), underwriting fees decreased $1.1 million
(primarily municipal bonds), and investment banking fees decreased $2.8
million (corporate finance fees increased $1.6 million, while municipal
finance fees decreased $4.4 million). The result in investment banking
revenues was largely dependent upon declining municipal bond activity due to
increasing interest rates and a significant decrease in municipal bond
refinancings; however, these were partially offset by increasing revenues in
equity corporate finance activities.

Net Interest Income

Net interest income increased $1.5 million or 36% in fiscal 1994 due
primarily to increased revenues from customer margin balances, and increased
stock borrowed and stock loaned activities.

Compensation and Benefits

Compensation and benefits increased $1.1 million or 2% in fiscal 1994.
Salesrelated compensation decreased $1.3 million, salaries increased $1.8
million which impacted benefits (up $0.6 million).

Communications and Data Processing

Communications and data processing expense increased $1 million or 16% in
fiscal 1994. Communication expense increased $0.8 million mainly
as a result of the expansion of the institutional and research divisions. Data
processing expense increased $0.2 million due primarily to an increased number
of transactions.

Other Expenses

Other expenses decreased $1.5 million or 24% in fiscal 1994 due primarily to
a decrease in litigation and to consulting costs.

LIQUIDITY AND CAPITAL RESOURCES

A substantial portion of the Company's assets, similar to other brokerage and
investment banking firms, is liquid, consisting of cash and assets readily
convertible into cash. These assets are financed primarily by the Company's
interest-bearing and non-interest-bearing payables to customers, payables to
brokers and dealers collateralized by loaned securities and bank lines-of
credit. Securities borrowed and securities loaned will fluctuate due
primarily to the current level of business activity in this area. Receivables
from others decreased due primarily to a decrease in the adjustment to record
securities owned on a trade date basis. Securities owned increased primarily
due to the addition in fiscal 1995 of an institutional municipal risk trading
operation. Net receivables from customers increased due to a decrease in
customer free credits. Short-term bank loans increased due primarily to an
increase in securities owned and an increase in net receivables from customers.

At fiscal year-end 1995, both First Albany Corporation and Northeast
Brokerage Services Corporation, subsidiaries of First Albany Companies Inc.,
were in compliance with the net capital requirements of the Securities and
Exchange Commission and had capital in excess of the minimum required.

Management believes that funds provided by operations and a variety of
committed and uncommitted bank lines-of-credit_totaling $120,000,000 of which
approximately $66,712,000 were unused as of September 29, 1995_will provide
sufficient resources to meet present and reasonably foreseeable short-term
financial needs.

During fiscal 1995, the Company declared and paid four quarterly cash
dividends totaling $ 0.20 per share of common stock, along with declaring and
issuing two 5% common stock dividends.

On October 26, 1995, subsequent to the period reflected in this report, the
Board of Directors declared the regular quarterly cash dividend of $ 0.05 per
share along with a 5% common stock dividend, both payable on November 8, 1995,
to stockholders of record on November 22, 1995.

The Company believes that funds provided by operations will be sufficient to
fund the acquisition of office equipment and leasehold improvements, and other
long-term requirements.

Item 8. Financial Statements and Supplementary Data.

Index to Financial Statements and Supplementary Data

Page
REPORT OF INDEPENDENT ACCOUNTANTS 18

FINANCIAL STATEMENTS:

Consolidated Statements of Income, For the Years
Ended September 29, 1995, September 30, 1994,
and September 24, 1993 19

Consolidated Statements of Financial Condition,
as of September 29, 1995, and September 30, 1994 20

Consolidated Statements of Changes in
Stockholders' Equity, For the Years Ended September 29,
1995, September 30, 1994, and September 24, 1993 21

Consolidated Statements of Cash Flows,
For the Years Ended September 29, 1995,
September 30, 1994, and September 24, 1993 22

Notes to Consolidated Financial Statements 23-34

SUPPLEMENTARY DATA:

Selected Quarterly Financial Data (Unaudited) 35

Report of Independent Accountants

Board of Directors and Stockholders
First Albany Companies Inc.

We have audited the consolidated financial statements and the
financial statement schedule of First Albany Companies Inc. listed in Item
14(a) of this Form 10-K. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of First
Albany Companies Inc. as of September 29, 1995, and September 30, 1994,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended September 29, 1995, in
conformity with generally accepted accounting principles. In addition, in
our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.

COOPERS & LYBRAND L.L.P.
Albany, New York
November 10, 1995

First Albany Companies Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars)
---------------------------------

September 29, September 30, September 24,
For the years ended 1995 1994 1993
- ------------------- ------------- ------------- -------------
Revenues
Commissions $ 31,889 $ 29,553 $ 28,884
Principal transactions 43,198 36,167 34,857
Investment banking 14,625 19,164 23,265
Interest 26,173 16,222 9,483
Fees and other 7,214 6,578 5,901
Total revenues 123,099 107,684 102,390
Interest expense 19,904 10,467 5,257
Net revenues 103,195 97,217 97,133

Expenses excluding interest
Compensation and benefits 71,064 65,513 64,388
Clearing, settlement and
brokerage costs 2,258 1,894 1,981
Communications and data
processing 7,794 7,198 6,209
Occupancy and depreciation 6,660 5,710 5,395
Selling 4,817 4,779 4,152
Other 5,382 4,755 6,242
Total expenses excluding interest 97,975 89,849 88,367

Income before income taxes 5,220 7,368 8,766
Income tax expense 1,870 2,876 3,375
Net income $ 3,350 $ 4,492 $ 5,391

Net income per common and
common equivalent share

Primary $ 0.71 $ .96 $ 1.14
Fully diluted $ 0.71 $ .96 $ 1.14

The accompanying notes are an integral
part of the consolidated financial statements.

First Albany Companies Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands of dollars)

September 29, September 30,
1995 1994
------------- -------------

Assets
Cash and cash equivalents $ 3,253 $ 3,165
Securities borrowed 376,919 331,209
Receivables from
Brokers, dealers and clearing agencies 1,889 1,511
Customers 88,610 96,830
Others 4,965 18,358
Securities owned 56,025 20,988
Office equipment and leasehold
improvements, net 6,062 5,151
Other assets 5,532 5,537
Total Assets $543,255 $482,749

Liabilities and Stockholders' Equity

Liabilities
Short-term bank loans $ 53,288 $ 38,921
Securities loaned 388,523 329,478
Payables to
Brokers, dealers and clearing agencies 3,104 5,077
Customers 38,335 56,949
Others 4,135 1,663
Securities sold but not yet purchased 3,892 3,724
Accounts payable 1,696 1,411
Accrued compensation 8,108 9,149
Accrued expenses 4,191 3,053
Notes payable 1,791 94
Total Liabilities 507,063 449,519

Commitments and Contingencies

Stockholders' Equity
Preferred stock; $1.00 par value; authorized
500,000 shares; none issued
Common stock; $.01 par value; authorized
10,000,000 shares; issued 4,889,747
shares 1995 and 4,435,454 shares 1994 49 44
Additional paid-in capital 20,257 16,489
Retained earnings 17,822 19,099
Less treasury stock at cost (1,936) (2,402)
Total Stockholders' Equity 36,192 33,230
Total Liabilities and Stockholders' Equity $543,255 $482,749

The accompanying notes are an integral
part of the consolidated financial statements.

First Albany Companies Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended September 29, 1995, September 30, 1994,
and September 24, 1993
(In thousands of dollars except for number of shares)

Common Stock Additional
Issued Paid-In Retained Treasury Stock
Shares Amount Capital Earnings Shares Amount
------ ------ ---------- -------- ------ ------

Balance,
September 25, 1992 3,475,915 $35 $ 8,554 $18,610 (294,545) $(1,927)
Issuance of
restricted stock 14 (13) 2,050 13
Stock dividends
declared 547,506 5 4,574 (4,580) (44,448)
Cash dividends
paid (671)
Options exercised (18) 16,157 101
Net income 5,391
Balance
September 24, 1993 4,023,421 40 13,142 18,719 (320,786) (1,813)
Issuance of re-
stricted stock 132 (104) 16,028 104
Stock dividends
declared 412,033 4 3,215 (3,219) (37,973)
Cash dividends
paid (742)
Options exercised (47) 64,281 379
Treasury stock purchase (130,000) (1,072)
Net income 4,492
Balance
September 30, 1994 4,435,454 44 16,489 19,099 (408,450) (2,402)
Issuance of re-
stricted stock 186 (155) 19,635 130
Stock dividends
declared 454,293 5 3,582 (3,587) (35,175)
Cash dividends
paid (815)
Options exercised (70) 58,251 336
Net income 3,350
Balance
September 29, 1995 4,889,747 $49 $20,257 $17,822 (365,739) $(1,936)

The accompanying notes are an integral
part of the consolidated financial statements.

First Albany Companies Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)

September 29, September 30, September 24,
For the years ended 1995 1994 1993
- ------------------- ------------- ------------- -------------

Cash flows from operating activities:
Net income $ 3,350 $ 4,492 $ 5,391
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,302 1,511 1,326
Deferred income taxes (1,278) 658 (246)
(Increase) decrease in operating assets:
Cash and securities segregated under
federal regulations 250 36
Securities purchased under
agreement to resell 2,806 (2,806)
Securities borrowed, net (1,641) 883
Net receivable from customers (10,394) (12,364) (13,086)
Net receivable from others 15,865 (16,584) 3,013
Securities owned, net (33,031) 2,355 (569)
Other assets 1,283 (294) (991)
Increase (decrease) in operating liabilities:
Securities sold under agreement to
repurchase (2,825) 2,825
Securities loaned, net 13,335
Net payable to brokers and dealers (2,351) (1,997) 7,457
Accounts payable and accrued expenses 382 (2,158) 3,401
Net cash (used in) provided by operating
activities (10,537) (25,791) 6,634
Cash flows from investing activities:
Purchase of furniture, equipment, and
leaseholds (3,213) (3,043) (1,460)
Purchase of long-term investments (1,838)
Net cash used in investing activities (5,051) (3,043) (1,460)
Cash flows from financing activities:
Proceeds of short-term bank
loans, net 14,367 28,990 1,100
Payments of subordinated debt (2,250) (500)
Proceeds (payments) of notes payable, net 1,697 (362) (878)
Payments for purchases of common stock
for treasury (1,072)
Proceeds from issuance of common stock
from treasury 266 332 83
Proceeds from issuance of restricted stock 161 132 13
Dividends paid (815) (742) (671)
Net cash provided by (used in) financing
activities 15,676 25,028 (853)
Increase (decrease) in cash 88 (3,806) 4,321
Cash at beginning of the year 3,165 6,971 2,650
Cash at the end of the period $ 3,253 $ 3,165 $ 6,971
Supplemental cash flow disclosures:
Income tax payments $ 1,753 $ 2,660 $ 3,322
Interest payments $18,989 $ 10,108 $ 4,999

The accompanying notes are an integral
part of the consolidated financial statements.

First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.
Significant Accounting Policies

Organization and Nature of Business

The consolidated financial statements include the accounts of First Albany
Companies Inc. and its wholly owned subsidiaries (the Company). First Albany
Corporation (the Corporation) is the Company's principal subsidiary and a
registered broker-dealer. All significant intercompany balances and
transactions have been eliminated. The Company's year-end is the last Friday
in September and, therefore, the Company's fiscal year will contain 52 or 53
week periods. The years ended September 29, 1995, September 30, 1994, and
September 24, 1993, contained 52 weeks, 53 weeks, and 52 weeks, respectively.

Securities Transactions

Proprietary securities transactions are recorded on trade date, as if they
had settled. Profit and loss arising from all securities transactions entered
for the account and risk of the Company are recorded on trade date.
Customers' securities transactions are reported on a settlement date basis
(normally the third business day following the transaction) with related
commission income and expenses reported on a trade date basis.

As a broker-dealer, the Corporation values marketable securities at market
value and securities not readily marketable at fair value as determined by
management. The resulting unrealized gains and losses are included as revenues
from principal transactions. First Albany Companies Inc. also purchases
securities not readily marketable for investments purposes and, as a
non-broker-dealer values them at cost.

Resale and Repurchase Agreements

Transactions involving purchases of securities under agreements to resell
or sales of securities under agreements to repurchase are treated as
collateralized financing transactions and are recorded at their contracted
resale or repurchase amounts plus accrued interest. It is the policy of the
Company to obtain possession of collateral with a market value equal to or in
excess of the principal amount loaned under resale agreements. Collateral is
valued daily and the Company may require counterparties to deposit additional
collateral or return collateral pledged when appropriate. At September 29,
1995, and September 30, 1994, the Company had not entered into any resale or
repurchase agreements with counterparties.

Securities-Lending Activities

Securities borrowed and securities loaned are recorded at the amount of
cash collateral advanced or received. Securities borrowed transactions
require the Company to deposit cash or other collateral with the lender. With
respect to securities loaned, the Company receives collateral in the form of
cash or other collateral in an amount generally in excess of the market value
of securities loaned. The Company monitors the market value of securities
borrowed and loaned on a daily basis, with additional collateral obtained or
refunded as necessary.

Investment Banking

Investment banking revenues include gains, losses, and fees, net of
syndicate expenses, arising from securities offerings in which the Company
acts as an underwriter or agent. Investment banking revenues also include
fees earned from providing merger-and-acquisition and financial restructuring
advisory services. Investment banking management fees are recorded on
offering date, sales concessions on trade

First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

date, and underwriting fees at the time the underwriting is completed and the
income is reasonably determinable.

Income Taxes

The amount of current taxes payable is recognized as of the date of the
financial statements, utilizing currently enacted tax laws and rates.
Deferred income taxes are recognized for the future tax consequences
attributable to differences between financial statement and tax basis of
existing assets and liabilities.

Office Equipment and Leasehold Improvements

Office equipment and leasehold improvements are stated at cost less
accumulated depreciation of $9,834,000 in 1995, and $7,570,000 in 1994,
respectively. Depreciation is provided on a straight-line basis over the
estimated useful life of the asset or the remaining life of the lease.

Statement of Cash Flows

For purposes of the statement of cash flows, the Company considers
amounts in demand deposit accounts at various financial institutions, other
than those segregated under federal regulations, to be cash equivalents.

Earnings per Common Share

Net income per common and common equivalent share have been computed based
upon the weighted average number of common shares and dilutive common
equivalent shares (stock options) outstanding. The weighted average number of
common shares and dilutive common equivalent shares were:

Fiscal Year 1995 Fiscal Year 1994 Fiscal Year 1993
---------------- ---------------- ----------------
Primary 4,705,306 4,677,757 4,726,030
Fully diluted 4,737,101 4,677,757 4,741,455

All per share figures, as well as the weighted average number of common and
dilutive common equivalent shares, have been restated for stock dividends
declared through October 26, 1995.

Reclassifications

Certain Amounts in the 1994 and 1993 financial statements have been
reclassified to conform with the 1995 presentation.

First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2.
Receivables From and Payables To Brokers, Dealers, and Clearing Agencies

Amounts receivable from and payable to brokers, dealers and clearing
agencies other than correspondents, as of:

(In thousands of dollars) September 29, September 30,
1995 1994
------------- -------------
Securities failed to deliver $ 1,882 $ 1,511
Receivable from clearing agencies 7
Total receivables $ 1,889 $ 1,511

Securities failed to receive $ 3,060 $ 2,453
Payable to clearing agencies 44 2,624
Total payables $ 3,104 $ 5,077

NOTE 3.
Receivables From and Payables To Customers

Receivables from and payables to customers include amounts due on cash and
margin transactions. Securities owned by customers are held as collateral for
receivables. Such collateral is not reflected in the financial statements.
Total unsecured and partly secured customer receivables are $125,000 and
$204,000 for the fiscal years ended 1995 and 1994, respectively. An allowance
for doubtful accounts, based upon an aging of accounts receivable and specific
identification, has been recorded for $125,000 and $106,000 for the fiscal
years ended 1995 and 1994, respectively.

NOTE 4.
Receivables From Others

Amounts receivable from others as of:

(In thousands of dollars) September 29, September 30,
1995 1994
------------- -------------
Adjustment to record securities
on a trade date basis, net $ $15,040
Others 4,965 3,318
Total $ 4,965 $18,358

For proprietary securities transactions, amounts receivable and payable for
securities transactions that have not reached their contractual settlement date
are recorded net on the statement of financial condition.

First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 5.
Securities Owned And Sold, But Not Yet Purchased

Securities owned and sold, but not yet purchased consisted of the
following as of:

(In thousands of dollars) September 29, September 30,
1995 1994
------------- -------------
Sold, but Sold, but
not yet not yet
Owned Purchased Owned Purchased
----- --------- ----- ---------
Marketable
U.S. government and federal
agencies obligations $ 5,164 $ 1,045 $ 2,943 $ 1,220
State and municipal bonds 39,936 244 10,943 436
Corporate obligations 3,558 1,246 2,698 348
Corporate stocks 4,869 1,357 3,768 1,720
Options 100
Not readily marketable
securities, fair value 560 636
Not readily marketable
securities, cost 1,838
------- ------- ------- -------
$56,025 $ 3,892 $20,988 $ 3,724

Securities not readily marketable include investment securities (a) for
which there is no market on a securities exchange or no independent publicly
quoted market, (b) that cannot be publicly offered or sold unless
registration has been effected under the Securities Act of 1933, or (c) that
cannot be offered or sold because of other arrangements, restrictions, or
conditions applicable to the securities or to the Company.

NOTE 6.
Bank Loans

Short-term bank loans are made under a variety of committed and
uncommitted bank lines of credit which are limited to financing securities
eligible for collateralization under these arrangements. This includes
Company owned securities and certain customer owned securities purchased on
margin, subject to certain regulatory formulae. These loans bear interest at
fluctuating rates based primarily on the Federal Funds interest rate. The
weighted average interest rate on these loans were 7.54% and 5.82% at
September 29, 1995, and September 30, 1994, respectively.

Short-term bank loans and unused lines of credit were collateralized by
Company owned securities of $40,391,000 and customers' margin account
securities of $44,719,000 at September 29, 1995.

A note for $1,759,912, which is collateralized by fixed assets, is payable
in monthly payments of principal and interest of $65,005. Interest is at the
prime rate (8.75% at September 29, 1995) plus 1.5%. The note matures April 1,
1998.

Future annual principal loan repayment requirements are as follows:

(In thousands of dollars)
1996 $ 626
1997 693
1998 441
Total $1,760

First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

An unsecured note for $31,250 is payable in quarterly installments of $15,625
plus interest at the prime rate (8.75% at September 29, 1995) plus 0.5%. The
note matures March 25, 1996.

NOTE 7.
Stockholders' Equity

During fiscal 1995, the Company declared and paid four quarterly cash
dividends totaling $0.20 per share of common stock, along with declaring and
issuing two 5% common stock dividends.

On October 26, 1995, subsequent to the period reflected in this report,
the Board of Directors declared the regular quarterly cash dividend of $0.05
per share along with a 5% common stock dividend, both payable on November 8,
1995, to shareholders of record on November 22, 1995. Stockholders' Equity
and all per share figures have been adjusted to reflect the common stock
dividend.

NOTE 8.
Income Taxes

Under the asset and liability method, deferred income taxes are recognized
for the tax consequences of "temporary differences" by applying enacted
statutory tax rates applicable for future years to differences between financial
statement and tax basis of existing assets and liabilities. The effect of tax
rate changes on deferred taxes is recognized in the income tax provision in the
period that includes the enactment date.

The components of income taxes are:

(In thousands of dollars) September 29, September 30, September 24,
1995 1994 1993
------------- ------------- -------------
Federal
Current $ 2,051 $ 1,463 $ 2,475
Deferred (904) 466 (165)
State and local
Current 1,097 755 1,146
Deferred (374) 192 (81)
Total income taxes $ 1,870 $ 2,876 $ 3,375

The reasons for the difference between the expected income tax expense
using the federal statutory rate and the income tax expense are as follows:

(In thousands of dollars) September 29, September 30, September 24,
1995 1994 1993
------------- ------------- -------------
Income taxes
at federal statutory rate $ 1,775 $ 2,505 $ 2,984
State income taxes, net of
federal income taxes 477 625 703
Tax-exempt interest income (514) (348) (357)
Non-deductible expenses 132 94 45
Total income taxes $ 1,870 $ 2,876 $ 3,375

First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The temporary differences that give rise to significant portions of
deferred tax assets are as follows:

(In thousands of dollars) September 29, September 30,
1995 1994
------------- -------------
Receivables $ 80 $ 45
Securities held for investment (345) (606)
Fixed assets 267 340
Deferred compensation 2,057 824
Other 145 323
Total deferred tax asset $2,204 $ 926

The Company has not recorded a valuation allowance for deferred tax assets
as income in the carryback period is sufficient to realize the benefit of
future deductions.

NOTE 9.
Employee Benefit Plans

The Company maintains a deferred profit sharing plan (Internal Revenue
Code Section 401(k) Plan) which permits eligible employees to defer a
percentage of their compensation. Company contributions to eligible
participants may be made at the discretion of the Board of Directors. The
Company contributed $140,000 in 1995, $56,000 in 1994, and $46,000 in 1993.

The Company also participates in an Employee Stock Bonus Plan (Internal
Revenue Code Section 401(a)) which permits eligible employees to contribute up
to 8% of their compensation on an after-tax basis. The Company makes matching
contributions equal to a percentage of each employee's contributions. Company
contributions vest in accordance with the Plan and are tax-deferred until
withdrawal. Employee and Company contributions are invested solely in the
common stock of First Albany Companies Inc. The Company contributed $408,000
in 1995, $334,000 in 1994, and $244,000 in 1993.

NOTE 10.
Incentive Plans

In 1982, the Company established a Stock Incentive Plan (the "1982 Plan")
which, as amended by stockholders in 1987, authorized issuance of options to
officers and key employees to purchase up to 800,000 shares of common stock.
On February 27, 1989, stockholders approved adoption of the First Albany
Companies Inc. 1989 Stock Incentive Plan (the "1989 Plan"). Coincident with
the adoption of the 1989 Plan, the 1982 Plan was terminated. Options previously
granted under the 1982 Plan remain valid in accordance with the terms of the
grant of such options; however, the grant of new options under the 1982 Plan was
ended. Both the 1982 Plan and 1989 Plan provide for incentive stock options
(ISOs) which meet the requirements of Section 422A of the Internal Revenue Code
of 1954, as amended, and nonqualified stock options (NSOs) which may be granted.
ISOs are granted at prices not less than fair value at the date of the grant;
NSOs may be issued at prices less than fair market value.

In addition, under the 1989 Plan, stock appreciation rights (SARs) may be
granted in tandem with ISOs or NSOs. SARs may be exercised only if the
related options (or portions thereof) are surrendered and at such time as the
fair market value of the shares underlying the option exceeds the option price
for such shares. Upon exercise of SAR and surrender of the related option, an
employee will be entitled to receive an amount equal to the excess of the fair
market value of one share at the time of such surrender over the option price
per share specified in such option times the number of such shares called for
by the option,

First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

or portion thereof, which is so surrendered. Payment may be made in cash,
shares of common stock, or a combination thereof. SARs may not be exercised
before six months from date of grant. Both ISOs and NSOs may not have a term
of more than ten years. Under certain conditions, the Company is required to
purchase shares issued under this Plan at prices ranging from the original
exercise or award a price to the greater of the then book or market value. If
NSOs are exercised, the difference between the option price and the selling
price will be recognized as an expense in the income statement.

Option transactions for the 3-year period ended September 29, 1995 under
the 1982 Plan were as follows: (all are ISOs unless otherwise noted)

Exercised Issued
Or And Options Total
Terminated Exercisable Issuable Authorized
---------- ----------- -------- ----------
September 25, 1992 797,000 3,000 0 800,000

Additional options authorized 3,950 3,950
Options expired adjustment (38,000) 38,000
Options exercised at $4.76 5,000 (5,000)
September 24, 1993 764,000 39,950 0 803,950

Additional options authorized 3,280 3,280
Options exercised at $4.31
to $5.96 7,220 (7,220)
Options forfeited (4,410) 4,410
Options terminated 4,410 (4,410)
September 30, 1994 775,630 31,600 0 807,230

Additional options authorized 2,908 2,908
Options exercised at $4.70
to $5.00 11,605 (11,605)
September 29, 1995 787,235 22,903 0 810,138

Issued and exercisable options are outstanding at $3.91 - $5.41 per share.

During fiscal year 1995, the Company declared two 5% common stock dividends.
These dividends resulted in an additional 2,908 options authorized.

First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Option transactions during the 3-year period ended September 29, 1995
under the 1989 Plan were as follows:

Issued Issued
And But Not Options Options Total
Exercisable Exercisable Issuable Exercised Authorized
----------- ----------- -------- --------- ----------

September 25, 1992 332,375 138,375 195,000 34,250 700,000

Additional options authorized 51,891 11,257 4,519 67,667
Options issued and
exercisable: $6.12 - $7.50 340,000 (340,000)
Options exercisable:
$5.125 to $6.25 45,249 (45,249)
Options issued but
not exercisable: $6.12 15,000 (15,000)
Options exercised:
$4.93 - $5.22 (11,157) 11,157
Options terminated (376,733) (41,663) 418,396
September 24, 1993 381,625 77,720 262,915 45,407 767,667

Additional options authorized 43,914 6,057 283,687 333,658
Options issued and
exercisable: $4.48 - $9.43 126,891 (126,891)
Options exercisable:
$4.48 to $6.59 37,026 (37,026)
Options exercised:
$5.65 - $6.48 (57,061) 57,061
Options terminated (8,770) (2,893) 11,663
September 30, 1994 523,625 43,858 431,374 102,468 1,101,325

Additional options authorized 53,309 8,395 38,353 100,057
Options issued but
not exercisable:
$7.62 to $8.23 137,750 (137,750)
Options exercisable:
$4.23 to $5.98 27,633 (27,633)
Options exercised:
$4.06 to $5.98 (46,646) 46,646
Options terminated (479) 479
September 29, 1995 557,442 162,370 332,456 149,114 1,201,382

Issued and exercisable options are outstanding at $4.23 - $8.23 per share

During fiscal year 1995, the Company declared two 5% common stock
dividends. These dividends resulted in an additional 100,057 options
authorized.

First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In 1992, the Company established the First Albany Companies Inc. Restricted
Stock Plan which authorized the issuance of up to 331,509 shares of common
stock (adjusted for all stock dividends) to certain key employees of the
Company. Awards under this plan expire over a four-year period after the award
date and are subject to certain restrictions including continued employment.
As of September 29, 1995, 36,880 shares have been awarded under this plan.
The fair market value of the awards will be amortized over the period in which
the restrictions are outstanding.

The Company has various other incentive programs which are offered to
eligible employees. These programs consist of cash incentives and deferred
bonuses. Amounts awarded vest over periods ranging from three to five years.
Costs are amortized over the vesting period and aggregated $1,343,000 in 1995,
$1,828,000 in 1994, and $369,000 in 1993.

NOTE 11.
Commitments and Contingencies

The Company's main and sales offices, and certain office and communication
equipment are leased under noncancellable operating leases, which expire at
various times through 2003. Future minimum annual rentals payable are as
follows:

(In thousands of dollars)

1996 $ 2,963
1997 2,379
1998 2,110
1999 1,720
2000 1,014
Thereafter 1,331
Total $11,517

Annual rental expense including utilities for 1995, 1994, and 1993
approximated $3,630,000, $3,955,000, and $3,932,000, respectively.

In the normal course of business, the Company has been named a defendant, or
otherwise has possible exposure, in several claims. Certain of these are
class actions which seek unspecified damages which could be substantial.
Although there can be no assurance as to the eventual outcome of litigation in
which the Company has been named as a defendant or otherwise has possible
exposure, the Company has provided for those actions most likely to result in
adverse dispositions. Although further losses are possible, the opinion of
management, based upon the advice of its attorneys and general counsel, is
that such litigation will not, in the aggregate, have a material adverse
effect on the Company's liquidity or financial position, although it could
have a material effect on quarterly or annual operating results in the period
in which it is resolved.

The Company is contingently liable under bank stand-by letter of credit
agreements, executed in connection with security clearing activities, totaling
$3,710,000 at September 29, 1995.

NOTE 12.
Net Capital Requirements

The Corporation is subject to the SEC's Uniform Net Capital Rule (Rule
15c3-1), which requires the maintenance of minimum net capital. The
Corporation has elected to use the alternative method, permitted

First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

by the Rule, which requires that the Corporation maintain a minimum net
capital equal to 2 percent of aggregate debit balances arising from customer
transactions, as defined. At September 29, 1995, the Corporation had net
capital of $17,178,000 which was 18% of aggregate debit balances and
$15,303,000 in excess of required minimum net capital.

NOTE 13.
Financial Instruments with Off-Balance-Sheet Risk

In the normal course of business, the Company's customer and correspondent
clearance activities involve the execution, settlement, and financing of
various customer securities transactions. These activities may expose the
Company to off-balance-sheet risk in the event the customer or other broker is
unable to fulfill its contracted obligations and the Company has to purchase
or sell the financial instrument underlying the contract at a loss.

The Company's customer securities activities are transacted on either a
cash or margin basis. In margin transactions, the Company extends credit to
its customers, subject to various regulatory and internal margin requirements,
collateralized by cash and securities in the customers' accounts. In
connection with these activities, the Company executes and clears customer
transactions involving the sale of securities not yet purchased, substantially
all of which are transacted on a margin basis subject to individual exchange
regulations. Such transactions may expose the Company to significant off-
balance-sheet risk in the event margin requirements are not sufficient to
fully cover losses that customers may incur. In the event the customer fails
to satisfy its obligations, the Company may be required to purchase or sell
financial instruments at prevailing market prices to fulfill the customer's
obligations.

The Company seeks to control the risks associated with its customer
activities by requiring customers to maintain margin collateral in compliance
with various regulatory and internal guidelines. The Company monitors
required margin levels daily and, pursuant to such guidelines, requires the
customer to deposit additional collateral, or to reduce positions, when
necessary.

The Company's customer financing and securities settlement activities
require the Company to pledge customer securities as collateral in support of
various secured financing sources such as bank loans and securities loaned.
In the event the counterparty is unable to meet its contractual obligation to
return customer securities pledged as collateral, the Company may be exposed
to the risk of acquiring the securities at prevailing market prices in order
to satisfy its customer obligations.

The Company controls this risk by monitoring the market value of securities
pledged on a daily basis and by requiring adjustments of collateral levels in
the event of excess market exposure. In addition, the Company establishes
credit limits for such activities and monitors compliance on a daily basis.

In addition, the Company has sold securities that it does not currently own
and therefore will be obligated to purchase such securities at a future date.
The Company has recorded these obligations in the financial statement at the
September 29, 1995 market values of the related securities and will incur a
loss if the market value of the securities increases subsequent to September
29, 1995.

The Company acts as a manager and co-manager in underwriting security
transactions. In this capacity, there is risk if the potential customer does
not fulfill the obligation to purchase the securities. The Company controls
this risk by dealing primarily with institutional investors. In most cases,
no one institutional customer subscribes to the majority of the securities
being sold, thereby spreading the risk for this type of loss among many
established customers. The Company also maintains credit limits for these
activities and monitors compliance with applicable limits and industry
regulations on a daily basis.

First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 14.
Concentrations of Credit Risk

The Company is engaged in various trading and brokerage activities whose
counterparties primarily include broker-dealers, banks, and other financial
institutions. In the event counterparties do not fulfill their obligations,
the Company may be exposed to risk. The risk of default depends on the credit
worthiness of the counterparty or issuer of the instrument. The Company seeks
to control credit risk by following an established credit approval process,
monitoring credit limits, and by requiring collateral where appropriate.

The Company purchases debt securities and may have significant positions in
its inventory subject to market and credit risk. In order to control these
risks, security positions are monitored on at least a daily basis. Should the
Company find it necessary to sell such a security, it may not be able to
realize the full carrying value of the security due to the significance of the
position sold. The Company reduces its exposure to changes in securities
valuation with the use of municipal bond index futures contracts. (See Note 16.)
If a single security position held in inventory represents a significant portion
of net capital, referred to as "undue concentration" as defined by SEC Rule
15c3-1, the Company may not be able to realize the full carrying value of the
security if the entire position was required to be sold. The total value of
securities held in inventory at September 29, 1995, which met this criterion was
$8,659,000. At September 30, 1994, the Company had no securities in inventory
which met this criterion.

NOTE 15.
Market Value of Financial Instruments

The financial instruments of the Company are reported on the Statement of
Financial Condition at market or fair value or at carrying amounts that
approximate fair value with the exception of First Albany Companies Inc.'s
securities not readily marketable, which are recorded at cost.
In December 1995, the value of such securities, as a result of an initial public
offering was $5,400,000. The fair value of other financial assets and
liabilities (consisting primarily of receivable from and payable to brokers
dealers, clearing agencies, customers, securities borrowed and loaned, and bank
loans payable) are considered to approximate the carrying value due to the
short-term nature of the financial instruments.

The Company also enters into transactions in financial instruments that are
not recognized in the Statement of Financial Condition. The notional amounts
of the open transactions at September 29, 1995, are disclosed in Note 16.

NOTE 16.
Derivative Financial Instruments

The Company does not engage in the proprietary trading of derivative
securities with the exception of highly liquid index future contracts and
options. These index future contracts and options are used to hedge securities
positions in the Company's inventory. Gains and losses on these financial
instruments are included as revenues from principal transactions. Trading
profits and losses relating to these financial instruments were as follows:

(In thousands of dollars)

Trading Profits-State and Municipal Bonds $ 5,068
Index Futures Hedging Losses (1,350)
Trading Profits-Corporate Stocks 1,159
Options (206)
Net Trading Revenues $ 4,671

First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of September 29, 1995, the contractual or notional amounts related to
these financial instruments were as follows:

(In thousands of dollars) Average Notional or Year End Notional or
Contract Market Value Contract Market Value
--------------------- ---------------------
Index Futures Contracts $(5,819) $(20,773)
Options 121 100

The contractual or notional amounts related to these financial
instruments reflect the volume and activity and do not reflect the amounts at
risk. The amounts at risk are generally limited to the unrealized market
valuation gains on the instruments and will vary based on changes in market
value. Futures contracts are executed on an exchange and cash settlement is
made on a daily basis for market movements. The settlement of the
aforementioned transactions is not expected to have a material adverse effect
on the financial condition of the Company.

The market or fair value of the options are recorded in securities owned
while the open equity in the future contracts are recorded as receivables
from clearing organizations.

FIRST ALBANY COMPANIES INC.
SUPPLEMENTARY DATA
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited)
(In thousands of dollars, except per share data)

Quarters Ended
1995 Dec. 31 Mar. 31 June 30 Sept. 29
- ---- ------- ------- ------- --------

Total revenues $ 28,825 $ 27,884 $ 32,760 $ 33,630
Interest expense (4,551) (4,173) (5,681) (5,499)
Net revenues 24,274 23,711 27,079 28,131
Total expenses excluding interest (22,995) (22,994) (25,494) (26,492)
Income before income taxes 1,279 717 1,585 1,639
Income tax expense (436) (205) (592) (637)
Net income $ 843 $ 512 $ 993 $ 1,002
Net income per common
and common equivalent share:
Primary $ .18 $ .11 $ .21 $ .21
Fully diluted $ .18 $ .11 $ .21 $ .21

Quarters Ended
1994 Dec. 31 Mar. 25 June 24 Sept. 30
- ---- ------- ------- ------- --------

Total revenues $ 29,749 $ 27,154 $ 24,590 $ 26,191
Interest expense (2,428) (2,133) (2,842) (3,064)
Net revenues 27,321 25,021 21,748 23,127
Total expenses excluding interest (24,343) (22,993) (20,912) (21,601)
Income before income taxes 2,978 2,028 836 1,526
Income tax expense (1,216) (820) (298) (542)
Net income $ 1,762 $ 1,208 $ 538 $ 984
Net income per common
and common equivalent share:
Primary $ .37 $ .26 $ .12 $ .21
Fully diluted $ .37 $ .26 $ .12 $ .21

All per share figures have been restated for common stock dividends declared
through October 1995. The sum of the quarters' earnings per share amount does
not always equal the full fiscal year's amount due to the effect of averaging
the number of shares of common stock and common stock equivalents throughout
the year.

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

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

PART III

Item 10. Directors and Executive Officers of the Registrant.

Except as set forth below, the information required by this item will be
contained under the caption "Election of Directors" in the Company's
definitive proxy statement for the Annual Meeting of Stockholders to be held
on or about April 2, 1996. Such information is incorporated herein by
reference to the proxy statement.

Information (not included in the Company's definitive proxy statement for the
1995 Annual Meeting of Stockholders) regarding certain executive officers of
the Company is as follows:

Edwin T. Brondo, age 48, Senior Vice President and Chief Administrative
Officer, joined First Albany Corporation in 1993 and was elected Vice
President of First Albany Companies Inc. in 1994. He previously held senior
management positions at Bankers Trust, Goldman Sachs, and Morgan Stanley.

David J. Cunningham, age 49, Senior Vice President and Chief Financial
Officer, joined First Albany Corporation in 1975 and has served as Chief
Financial Officer of First Albany Corporation since 1980 and First Albany
Companies Inc. since fiscal 1986.

Michael R. Lindburg, age 46, Senior Vice President, Secretary, and General
Counsel, joined First Albany Corporation in 1986 and has served as Vice
President, Secretary, and General Counsel of First Albany Companies Inc.
since 1986. He previously served as Vice President and General Counsel of the
Boston Stock Exchange.

Item 11. Executive Compensation.

The information required by this item will be contained under the caption
"Compensation of Executive Officers and Directors" in the Company's definitive
proxy statement for the Annual Meeting of Stockholders to be held on or about
April 2, l996. Such information is incorporated herein by reference to the
proxy statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The information required by this item will be contained under the caption
"Stock Ownership of Principal Owners and Management" in the Company's
definitive proxy statement for the Annual Meeting of Stockholders to be held
on or about April 2, 1996. Such information is incorporated herein by
reference to the proxy statement.

Item 13. Certain Relationships and Related Transactions.

The information required by this item will be contained under the caption
"Certain Transactions" in the Company's definitive proxy statement for the
Annual Meeting of Stockholders to be held on or about April 2, 1996. Such
information is incorporated herein by reference to the proxy statement.

Part IV

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

(a) (1) The following financial statements are included in Part II, Item 8:

Report of Independent Accountants

Financial Statements:

Consolidated Statements of Income, For the Years
Ended September 29, 1995, September 30, 1994,
and September 24, 1993.

Consolidated Statements of Financial Condition,
as of September 29, 1995, and September 30,
1994.

Consolidated Statements of Changes in
Stockholders' Equity, For the Years Ended
September 29, 1995, September 30, 1994, and
September 24, 1993.

Consolidated Statements of Cash Flows,
For the Years Ended September 29, 1995,
September 30, 1994, and September 24, 1993.

Notes to Consolidated Financial Statements

(2) The following financial statement schedule for the years 1995, 1994, and
1993 are submitted herewith:

Schedule VII-Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.

(3) Exhibits included herein:

Exhibit
Number Description
3.1 Certificate of Incorporation of First Albany Companies Inc. (filed as
Exhibit No. 3.1 to Registration Statement No. 33-1353).

3.2 By-laws of First Albany Companies Inc. (filed as Exhibit No. 3.2 to
Registration Statement No.33-1353).

3.2a By-laws of First Albany Companies Inc., as amended (as filed as
Exhibit No. 3.2a to Form 10-K for the fiscal year ended
September 24, 1993).

4 Specimen Certificate of Common Stock, par value $.01 per share (filed as
Exhibit No. 4 to Registration Statement No. 33-1353).

10.2 Lease dated February 9, 1978, between MacFarland Construction Company
Inc. and First Albany Corporation for office facilities at 41 State
Street, Albany, New York (filed as Exhibit No. 10.2 to Registration
Statement No. 33-1353).

10.6 Deferred Profit Sharing Plan of First Albany Corporation effective
October 1, 1982, as amended by shareholder vote, dated January 19, 1987
(filed as Exhibit 10.6 to Form 10-K for the fiscal year ended
September 30, 1986).

10.7 Incentive Stock Option Plan of First Albany Corporation effective
October 1, 1982, as amended by shareholder vote, dated January 19, 1987
(filed as Exhibit 10.7 to Form 10-K for the fiscal year ended
September 30, 1987).

10.10 First Albany Companies Inc. Stock Bonus Plan effective July 8, 1987
(filed as Registration Statement No. 33-15220 (Form B) dated
July 8, 1987).

10.10a First Albany Companies Inc. Stock Bonus Plan, as amended, effective
June 25, 1990 (filed as Registration Statement No. 33-35166 (Form S-8)
dated June 25, 1990).

10.10b First Albany Companies Inc. Stock Bonus Plan, as amended, effective
February 4, 1994 (filed as Registration Statement 33-52153 (Form S-8)
dated February 4, 1994).

10.10c First Albany Companies Inc. Stock Bonus Plan, as amended, effective
June 2, 1995 (filed as Registration Statement 33-59855 (Form S-8) dated
June 2, 1995).

10.12 First Albany Companies Inc. 1989 Stock Incentive Plan effective
February 27, 1989, as approved by shareholder vote, dated February 27,
1989 (filed as Exhibit 10.12 to Form 10-K for the fiscal year ended
September 30, 1989).

10.15 Lease dated June 12, 1992, between First Albany Companies Inc. and
Olympia and York Limited Partnership for office space at 53 State
Street, Boston, Massachusetts (filed as Exhibit 10.15 to Form 10-K for
the fiscal year ended September 25, 1992).

10.16 The First Albany Companies Inc. Restricted Stock Plan as adopted by
the Company on April 27, 1992 (filed as Exhibit 10.16 to Form 10-K for
the fiscal year ended September 25, 1992).

10.17 Term Loan Agreement dated March 29, 1995 between First Albany
Companies Inc. and The Hudson City Savings Institution.

(3) Exhibits included herein: (continued)

Exhibit
Number Description

10.18 Sublease dated October 13, 1995 between First Albany Companies Inc.
and Keycorp for office facilities at 30 South Pearl Street, Albany,
New York.

11 Computation of per share earnings

22 List of Subsidiaries of First Albany Companies Inc.

24 Consent of experts

(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the Registrant during the
last quarter of the period covered by this report.

27 Financial Data Schedule BD

FIRST ALBANY COMPANIES INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 29, 1995,
SEPTEMBER 30, 1994, AND SEPTEMBER 24, 1993

COL. A COL. B COL. C COL. D COL. E

Additions
Balance at Charged to Balance
Beginning Costs and at End of
Description of Period Expenses Deductions Period

Allowance for doubtful
accounts -- deducted
from receivables from
customers:

1995 $ 106,000 $ 120,000 $ 101,000 $ 125,000

1994 $ 125,000 $ 120,000 $ 139,000 $ 106,000

1993 $ 189,000 $ 120,000 $ 184,000 $ 125,000

SIGNATURES

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

FIRST ALBANY COMPANIES INC.

By: /s/ George C. McNamee
-----------------------
George C. McNamee,
Chairman of the Board

Date: December 19, 1995.

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

Signature Title Date

/s/ George C. McNamee Chairman of the Board December 19, 1995
- -------------------------
George C. McNamee

/s/ Alan P. Goldberg President and Director December 19, 1995
- -------------------------
Alan P. Goldberg

/s/ J. Anthony Boeckh Director December 19, 1995
- -------------------------
J. Anthony Boeckh

/s/ Hon. Hugh L. Carey Director December 19, 1995
- -------------------------
Hon. Hugh L. Carey

/s/ Edwin T. Brondo Vice President December 19, 1995
- -------------------------
Edwin T. Brondo

/s/ David J. Cunningham Vice President and December 19, 1995
- ------------------------- Chief Financial Officer
David J. Cunningham (Principal Accounting Officer)

/s/ Hugh A. Johnson, Jr. Senior Vice President December 19, 1995
- ------------------------- and Director
Hugh A. Johnson Jr.

/s/ Michael R. Lindburg Vice President December 19, 1995
- ------------------------- General Counsel
Michael R. Lindburg

/s/ Daniel V. McNamee Director December 19, 1995
- -------------------------
Daniel V. McNamee

/s/ Charles L. Schwager Director December 19, 1995
- -------------------------
Charles L. Schwager

Director December 19, 1995
- -------------------------
Benaree P. Wiley