EXHIBIT 13

                          ANNUAL REPORT TO STOCKHOLDERS



<PAGE>
                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

         The following tables set forth selected consolidated historical
financial and other data of Liberty Bancorp, Inc. (the "Company"), or prior to
June 30, 1998, Liberty Bank (the "Bank," and formerly "Axia Federal Savings
Bank") for the periods and at the dates indicated. The information is derived in
part from and should be read in conjunction with the Consolidated Financial
Statements and Notes thereto of the Company contained elsewhere herein.
<TABLE>
<CAPTION>
                                                                                      AT DECEMBER 31,
                                                                           ------------------------------------
                                                                              2000         1999         1998
                                                                           ----------   ----------   ----------
                                                                                      (IN THOUSANDS)
<S>                                                                        <C>          <C>          <C>
FINANCIAL CONDITION DATA:
Total assets.........................................................      $ 291,614    $ 283,269    $ 260,447
Loans receivable, net................................................        218,275      202,031      177,877
Securities available for sale........................................         38,533       48,707       62,735
Deposits.............................................................        223,609      220,533      223,270
Borrowings...........................................................         32,388       27,396           -0-
Equity capital.......................................................         32,526       31,948       34,433
</TABLE>

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31,
                                                                           ------------------------------------
                                                                              2000         1999         1998
                                                                           ----------   ----------   ----------
                                                                                        (IN THOUSANDS)
<S>                                                                        <C>          <C>          <C>
OPERATING DATA:
Interest income......................................................      $  19,925    $  18,205    $  16,014
Interest expense.....................................................         12,278       10,941        9,817
                                                                           ---------    ---------    ---------
Net interest income..................................................          7,647        7,264        6,197
Provision for loan losses............................................            104           60           45
                                                                           ---------     --------    ---------
Net interest income after provision for loan losses..................          7,543        7,204        6,152
                                                                           ---------     --------    ---------
Non-interest income..................................................            403          338          311
                                                                           ---------     --------    ---------
Non-interest expense.................................................          6,225        5,276        4,307
                                                                           ---------     --------    ---------
Income before income taxes...........................................          1,721        2,266        2,156
Income taxes.........................................................            627          826          766
                                                                           ---------    ---------    ---------
Net income...........................................................      $   1,094    $   1,440    $   1,390
                                                                           =========    =========    =========
</TABLE>
                       KEY OPERATING RATIOS AND OTHER DATA
<TABLE>
<CAPTION>
                                                                                    AT OR FOR THE YEAR
                                                                                    ENDED DECEMBER 31,
                                                                           ------------------------------------
                                                                              2000         1999         1998
                                                                           ----------   ----------   ----------
SELECTED RATIOS:

PERFORMANCE RATIOS:
<S>                                                                            <C>          <C>          <C>
   Return on assets (ratio of net income to average total assets)......          0.38%        0.52%        0.58%
   Return on equity (ratio of net income to average equity)............          3.32%        4.51%        5.44%
   Average interest rate spread during period..........................          2.19%        2.17%        2.05%
   Net interest margin (net interest income divided by average
     interest-earning assets)..........................................          2.74%        2.71%        2.63%
   Operating expenses to average total assets..........................          2.16%        1.92%        1.79%
   Average interest-earning assets to average interest-bearing liabilities     112.52%      113.37%      114.02%

ASSET QUALITY RATIOS:
   Non-performing assets to total assets...............................          0.07%        0.18%        0.27%
   Allowance for loan losses to non-performing loans...................        463.89%      187.60%      126.67%
   Allowance for loan losses to loans receivable, net..................          0.41%        0.39%        0.43%

CAPITAL RATIOS:
   Equity to total assets at end of period.............................         11.15%       11.31%       13.22%
   Average equity to average assets....................................         11.09%       11.60%       10.61%

OTHER DATA:
   Number of full service customer facilities at end of period.........          6            5            4
</TABLE>
-------------------
(1) Interest rate spread represents the difference between the weighted average
    yield on average interest-earning assets and the weighted average cost of
    average interest-bearing liabilities.

                                       2
<PAGE>
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

         In addition to historical information, this document contains
forward-looking statements. The forward looking statements contained in the
following sections are subject to certain risks and uncertainties that could
cause actual results to differ materially from those projected in the
forward-looking statements. Important factors that might cause such a difference
include, but are not limited to, those discussed. Readers should not place undue
reliance on these forward-looking statements, as they reflect management's
analysis as of the date of this report. The Company has no obligation to update
or revise these forward-looking statements to reflect events or circumstances
that occur after the date of this report. Readers should carefully review the
risk factors described in other documents the Company files from time to time
with the Securities and Exchange Commission (the "SEC"), including quarterly
reports on Form 10-QSB and current reports filed on Form 8-K.

GENERAL

         The Company's primary business activity is the ownership of 100% of the
outstanding common stock of the Bank. The Bank's results of operations depend
primarily on its net interest income, which is the difference between the income
earned on its loan and securities portfolios and the interest expense paid on
interest-bearing liabilities. Results of operations are also affected by the
Bank's provision for loan losses, fees and service charges on deposits and
loans, and gains on sales of securities. The Bank's non-interest expense
consists primarily of salaries and employee benefits, occupancy expense,
equipment expense, federal deposit insurance premiums, advertising and other
expenses. Results of operations are also significantly affected by general
economic and competitive conditions, particularly changes in market interest
rates, government policies and actions of regulatory authorities.

MANAGEMENT OF MARKET RISK

         GENERAL. As with other savings institutions, the Bank's most
significant form of market risk is interest rate risk. The Bank's assets,
consisting primarily of mortgage loans, have longer maturities than its
liabilities, consisting primarily of deposits. As a result, a principal part of
the Bank's business strategy is to manage interest rate risk and manage the
exposure of the Bank's net interest income to changes in market interest rates.
Accordingly, the Board of Directors has established an Asset/Liability
Management Committee which is responsible for evaluating the interest rate risk
inherent in the Bank's assets and liabilities, determining the level of risk
that is appropriate given the Bank's business strategy, operating environment,
capital, liquidity and performance objectives, and managing this risk consistent
with the guidelines approved by the Board of Directors. The Asset/Liability
Management Committee consists of senior management operating under a policy
adopted by the Board of Directors and meets at least quarterly to review the
Bank's asset/liability policies and interest rate risk position.

         The Bank has pursued the following strategies to manage interest rate
risk: (1) originating one- to-four family adjustable rate mortgage ("ARM")
loans, (2) increasing adjustable rate home equity lending and fixed-rate home
equity lending with maturities of five years or less, (3) purchasing adjustable
rate mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie
Mae, (4) originating commercial real estate loans with short terms or adjustable
rates, and (5) investing in shorter-term securities which generally have lower
yields compared to longer term investments, but which better position the Bank
to reinvest its assets if market interest rates increase.

                                       3
<PAGE>
         The Bank's current investment strategy is to maintain a securities
portfolio that provides a source of liquidity and that contributes to the Bank's
overall profitability and asset mix within given quality and maturity
considerations. The securities portfolio consists primarily of U.S. Treasury,
U.S. Government Agency and government sponsored corporation securities. All of
the Bank's investment securities and mortgage-backed securities, other than
Federal Home Loan Bank of New York ("FHLB") stock, are classified as available
for sale to provide management with the flexibility to make adjustments to the
portfolio in the event of changes in interest rates, to fulfill unanticipated
liquidity needs, or to take advantage of alternative investment opportunities.

         NET PORTFOLIO VALUE. The Bank measures the market value of its assets,
liabilities and off-balance sheet items to calculate the net portfolio value
("NPV"). The NPV is then tested through calculations in six interest rate
scenarios which assume an instantaneous and permanent change in market interest
rates up or down from 1% to 3% (100 to 300 basis points). The following table
presents the Bank's NPV at December 31, 2000, as calculated by the Office of
Thrift Supervision ("OTS"), which is based upon quarterly information that the
Bank provided voluntarily to the OTS.

<TABLE>
<CAPTION>
                                     PERCENTAGE CHANGE IN NET PORTFOLIO VALUE
                     -----------------------------------------------------------------------
                         CHANGES                      BOARD
                        IN MARKET      PROJECTED     POLICY         ESTIMATED      AMOUNT OF
                     INTEREST RATES    CHANGE (1)   GUIDELINES         NPV         CHANGE
                     --------------    ----------   ----------      ---------      ---------
                     (BASIS POINTS)                  (DOLLARS IN THOUSANDS)
                     <S>                 <C>              <C>         <C>            <C>
                          300            (57.0%)      -75.0%         12,509         (16,820)
                          200            (37.0%)      -50.0%         18,378         (10,951)
                          100            (18.0%)      -37.5%         24,045          (5,284)
                            0                            --          29,329
                         (100)            14.0%        15.0%         33,320           3,991
                         (200)            23.0%        25.0%         36,132           6,803
                         (300)            36.0%        50.0%         39,750          10,421
</TABLE>

----------------
(1) Calculated as the amount of change in the estimated NPV divided by the
    estimated NPV, assuming no change in interest rates.

         Certain shortcomings are inherent in the methodology used in the above
interest rate risk measurement. Modeling changes in NPV requires making certain
assumptions which may or may not reflect the manner in which actual yields and
costs respond to changes in market interest rates. In this regard, the NPV table
presented assumes that the composition of the Bank's interest sensitive assets
and liabilities existing at the beginning of a period remain constant over the
period being measured and assumes that a particular change in interest rates is
reflected uniformly across the yield curve regardless of the duration or
repricing of specific assets and liabilities. Accordingly, although the NPV
table provides an indication of the Bank's interest rate risk exposure at a
particular point in time, such measurements are not intended to and do not
provide a precise forecast of the effect of changes in market interest rates on
the Bank's net interest income, and will differ from actual results.
Additionally, the guidelines established by the Board of Directors are not
strict limitations. While a goal of the Asset/Liability Management Committee and
the Board of Directors is to limit projected NPV changes within the Board's
guidelines, the Bank will not necessarily limit projected changes in NPV if the
required action would present disproportionate risk to the Bank's continued
profitability.

COMPARISON OF FINANCIAL CONDITION

         ASSETS. Total assets for the year ended December 31, 2000 increased by
$8.3 million, or 2.9%, to $291.6 million from $283.3 million at December 31,
1999. The increase resulted primarily from an increase of $16.3 million, or
8.1%, in loans receivable to $218.3 million from $202.0 million. This was
partially offset by a decrease of $10.2 million, or 21.0%, in investment
securities available for sale to $38.5 million from $48.7 million. Premises and
equipment increased by $1.4 million, or 29.2%, to $6.2 million from $4.8 million
due to the opening of new branches.

                                       4

<PAGE>
         LIABILITIES. Total liabilities for the year ended December 31, 2000
increased by $7.7 million, or 3.1%, to $259.0 from $251.3 million at December
31, 1999. The increase was primarily due to a $5.8 million increase in advances
from the FHLB. In 1999 the Bank had no advances from the FHLB. This increase was
partially offset by an $800,000, or 3.2%, decrease in borrowings under
repurchase agreements with the FHLB. Deposits increased by $3.1 million, or
1.4%, to $223.6 million at December 31, 2000 from $220.5 million at December 31,
1999.

         TOTAL EQUITY. Total equity as of the year ended December 31, 2000
increased $600,000, or 1.88%, to $32.5 million from $31.9 million at December
31, 1999. The increase was the result of increases of $849,000 in retained
earnings and $431,000 in unrealized gain on securities available for sale,
offset by increases of $487,000 in treasury stock and $323,000 in the Company's
common stock purchased for its Recognition and Retention Plan.

ANALYSIS OF RESULTS OF OPERATIONS

         NET INTEREST INCOME. Net interest income represents the difference
between income on interest-earning assets and expense on interest-bearing
liabilities. Net interest income depends on the interest yield on
interest-earning assets and the interest paid on interest-bearing liabilities,
as well as the relative amounts of interest-earning assets and interest-bearing
liabilities.

                                       5
<PAGE>
         The following table sets forth certain information relating to the Bank
at December 31, 2000, and for the years ended December 31, 2000, 1999, and 1998.
For the periods indicated, the total dollar amount of interest income from
average interest-earning assets and the resultant yields, as well as the
interest expense on average interest-bearing liabilities and the resultant cost,
is expressed both in dollars and rates. No tax equivalent adjustments were made.
All average balances are monthly averages.

<TABLE>
<CAPTION>
                                                                               YEARS ENDED DECEMBER 31,
                              AT DECEMBER 31,    -----------------------------------------------------------------------------------
                                   2000                    2000                          1999                         1998
                             ----------------    -------------------------    -------------------------    -------------------------
                                       YIELD/    AVERAGE            YIELD/    AVERAGE            YIELD/    AVERAGE            YIELD/
                              BALANCE   COST     BALANCE  INTEREST   COST     BALANCE  INTEREST   COST     BALANCE  INTEREST   COST
                             --------- ------    -------  --------  ------    -------  --------  ------    -------  --------  ------
                                                                               (DOLLARS IN THOUSANDS)
<S>                          <C>        <C>     <C>        <C>       <C>     <C>        <C>       <C>     <C>        <C>       <C>
Interest-earning assets:
 Loans receivable (1)(2)...  $218,275   7.44%   $212,265   $15,500   7.30%   $189,917   $13,578   7.15%   $164,067   $12,239   7.46%
 Mortgage-backed securities    38,533   7.01      43,140     2,930   6.79      58,159     3,365   5.79      52,406     2,681   5.12
 Investment securities.....    19,484   6.12      19,480     1,201   6.17      14,506       919   6.34         915        59   6.45
 Other interest-earning
  assets...................     5,216   9.56       4,078       294   7.21       5,196       343   6.60      18,264     1,035   5.66
                             --------           --------                     --------                     --------   -------
Total interest-earning
 assets....................   281,508   7.32     278,963    19,925   7.14     267,778    18,205   6.80     235,652    16,014   6.80
                                                                                                                     -------
Non-interest earning assets    10,106              9,147                        7,396                        4,888
                                                --------                     --------                     --------
Total assets...............  $291,614            288,110                     $275,174                     $240,540
                             ========           ========                     ========                     ========
Interest-bearing liabilities:
 Interest bearing deposits
  Demand...................    14,027   1.76      12,582       223   1.77      12,465       218   1.75    $ 12,049       220   1.83
  Savings and club.......      49,982   3.00      50,381     1,438   2.85      50,986     1,389   2.72      47,914     1,464   3.06
  Certificates of deposit..   153,372   5.86     147,429     8,147   5.53     155,971     8,360   5.36     146,704     8,133   5.54
  Borrowed funds...........    32,387   7.20      37,542     2,470   6.58      16,780       974   5.80          --        --
                             --------           --------   -------           --------   -------           --------   -------
Total interest-bearing
 liabilities ..............   249,768   5.23     247,934    12,278   4.95     236,202    10,941   4.63     206,667     9,817   4.75
                                                           -------                      -------                      -------
Non-interest bearing
 liabilities. .............     9,320              8,232                        7,062                        8,348
Stockholders' equity.......    32,526             31,944                       31,910                       25,525
                             --------           --------                     --------                     --------
Total liabilities and
 retained earnings ........  $291,614            288,110                     $275,174                     $240,540
                             ========           ========                     ========                     ========

Net interest income........                                $ 7,647                      $ 7,264                      $ 6,197
                                                           =======                      =======                      =======

Net interest rate spread...                                          2.19%                        2.17%                        2.05%
                                                                     ====                         ====                         ====
Net yield on average
 interest-earning assets...                                          2.74%                        2.72%       `                2.63%
                                                                     ====                         ====                         ====

Ratio of average interest-
 earning assets to interest-
 bearing liabilities........                        1.13x                        1.13x                        1.14x
                                                    ====                         ====                         ====

<FN>
--------------
(1)  Calculated net of deferred loan fees and discounts and loans in process.
(2)  Includes non-accrual loans.
</FN>
</TABLE>
                                       6
<PAGE>

         The table below sets forth information regarding changes in the Bank's
interest income and interest expense for the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume
(changes in volume multiplied by old rate) and (ii) changes in rate (changes in
rate multiplied by old volume). Changes attributable to both rate and volume,
which cannot be segregated, have been allocated proportionately to the change
due to volume and the change due to rate.

<TABLE>
<CAPTION>
                                                       YEAR ENDED                             YEAR ENDED
                                        DECEMBER 31, 2000 VS DECEMBER 31, 1999   DECEMBER 31, 1999 VS DECEMBER 31, 1998
                                                   INCREASE (DECREASE)                    INCREASE (DECREASE)
                                                         DUE TO                                 DUE TO
                                          -----------------------------------     ----------------------------------
                                            VOLUME        RATE         TOTAL       VOLUME        RATE         TOTAL
                                          ---------    ---------     --------     --------     --------     --------
                                                                       (IN THOUSANDS)
<S>                                        <C>         <C>           <C>           <C>         <C>          <C>
Interest income:
     Loans receivable.................     $  1,631    $     291     $  1,922      $ 1,848     $   (509)    $  1,339
     Mortgage backed securities.......       (1,020)         585         (435)         333          351          684
     Investment Securities............          306          (24)         282          862           (2)         860
     Other interest-earning assets....          (81)          32          (49)        (862)         170         (692)
                                          ---------    ---------     --------     --------     --------     --------
         Total interest income........          836          884        1,720        2,181           10        2,191
                                          ---------    ---------     --------     --------     --------     --------
Interest expense:
     Interest-bearing demand..........            2            2            4            7           (9)          (2)
     Savings and club accounts........          (17)          65           48           88         (163)         (75)
     Certificates of deposit..........         (474)         263         (211)         496         (269)         227
     Borrowed funds...................        1,366          130        1,496          974          -0-          974
                                          ---------    ---------     --------     --------     --------     --------
     Total interest expense...........          877          460        1,337        1,565         (441)       1,124
                                          ---------    ---------     --------     --------     --------     --------

Change in interest income.............    $    (41)    $     424     $    383     $    616     $    451     $  1,067
                                          =========    =========     ========     ========     ========     ========
</TABLE>

COMPARISON OF OPERATING RESULTS

         GENERAL. The Bank's net income depends primarily on its level of net
interest income, which is the difference between interest earned on the Bank's
interest-earning assets, consisting primarily of one-to-four family mortgage
loans, mortgage-backed securities, home equity loans, commercial real estate
loans, multi-family real estate loans, and investment securities, and the
interest paid on interest-bearing liabilities, consisting of deposits and other
borrowings. Net interest income is affected primarily by (i) the Bank's interest
rate spread, which is the difference between the average yield earned on
interest-earning assets and the average rate paid on interest-bearing
liabilities, and by (ii) the average balance of interest-earning assets as
compared to interest-bearing liabilities. The Bank's net income is also affected
by its level of non-interest income consisting primarily of fees and service
charges on deposits and loans, and gains on sale of securities, loans and other
assets, as well as its level of non-interest expense, including salaries and
employee benefits, occupancy, equipment, advertising, deposit insurance,
professional services and other non-interest expenses.

         INTEREST INCOME. Interest income increased by $1.7 million, or 9.3%, to
$19.9 million for the year ended December 31, 2000 from $18.2 million for the
prior year. The increase was primarily the result of a $1.9 million, or 14.0%,
increase in income on loans and a $281,000, or 30.7%, increase in income on
investment securities held to maturity. These increases were partially offset by
a $434,000, or 12.9%, decrease in income on mortgage backed securities and a
$50,000, or 14.4% decrease in income on other interest earning assets. The
increase in income on loans was the result of a $22.3 million, or 11.8%,
increase in the average balance of loans combined with a 15 basis point increase
to 7.30% from 7.15% in the yield earned on loans. The increase in income on
investment securities held to maturity was the result of a $4.9 million, or
34.3% increase in the average balances of investment securities held to
maturity, partially offset by a 17 basis point decline from 6.34% to 6.17% in
the yield earned on such investments. The decline in the income earned on
mortgage backed securities is the result of a decline of $15.0 million, or

                                       7

<PAGE>

25.8%, in the average balances of mortgage backed securities, partially offset
by a 100 basis point increase in the yield on such securities. The decrease in
income on other earning assets was the result of a $1.1 million, or 21.5%
decline in the average balances of other earning assets, partially offset by an
increase of 61 basis points in the yield on other earning assets.

         INTEREST EXPENSE. Interest expense increased $1.4 million, or 12.8%, to
$12.3 million for the year ended December 31, 2000 from $10.9 million for the
prior year. The increase was the result of an increase of the average balance of
borrowed funds to $37.5 million for the year ended December 31, 2000 from $16.8
million for the prior year, combined with an increase in the average cost of
borrowed funds to 6.6% for the year ended December 31, 2000 from 5.8% for the
prior year and an increase of 12 basis points in the average cost of deposits to
4.66% for the year 2000 from 4.54% for the prior year. This was partially offset
by a decrease of 9.0 million, or 4.1%, in interest bearing deposits to $210.4
million at December 31, 2000 from $219.4 million for the year ended December 31,
1999.

         NET INTEREST INCOME. Net interest income increased by $383,000, or
5.27%, to $7.5 million for the year ended December 31, 2000 from $7.2 million
for the prior year. The increase was the result of higher average income earning
asset balances and higher yield on said balances, offset by higher average
borrowed fund balances and higher costs for the same.

         PROVISION FOR LOAN LOSSES. The Bank establishes provisions for loan
losses, which are charged to operations, in order to maintain the allowance for
loan losses at a level that is deemed appropriate to absorb future charge-offs
of loans deemed uncollectible. In determining the appropriate level of the
allowance for loan losses, management considers past and anticipated loss
experience, valuations of real estate collateral, current and anticipated
economic conditions, volume and type of lending and the levels of non-performing
and other classified loans. The amount of the allowance is based on estimates
and the ultimate losses may vary from such estimates. Management of the Bank
assesses the allowance for loan losses on a quarterly basis and makes provisions
for loan losses monthly in order to maintain the adequacy of the allowance.

         The Bank provided $104,000 and $60,000 in loan loss provisions during
the years ended December 31, 2000 and 1999, respectively. At December 31, 2000
and 1999 the Bank's allowance for loan losses was $886,000 and $788,000,
respectively, and the Bank's loans delinquent for ninety days or more were
$191,000 and $420,000, respectively. The Bank's allowance for loan losses as a
percentage of total non-performing loans at December 31, 2000 and 1999 was
463.89% and 187.60%, respectively. Management believes that, based on
information currently available, the Bank's allowance for loan losses is
sufficient to cover losses inherent in its loan portfolio at this time. However,
future loan loss provisions may be necessary based on changes in general
economic conditions. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the allowance for loan
losses and may require the Bank to recognize additional provisions based on
their judgment of information available to them at the time of their
examination.

         NON-INTEREST INCOME. Non-interest income consists primarily of fees and
service charges on deposit accounts and loans, and other income. Non-interest
income increased by $65,000, or 19.2%, to $403,000 for the year ended December
31, 2000 from $338,000 for the prior year.

         NON-INTEREST EXPENSE. Non-interest expense increased by $949,000, or
18.0%, to $6.2 million for the year ended December 31, 2000 from $5.2 million
for the prior year. Compensation, occupancy, equipment, advertising, loss on
real estate and miscellaneous expense increased during the year ended December
31, 2000 from the prior year by, $364,000, 228,000, $102,300, $111,400, $26,600
and $211,200, respectively. Most of the increases in non-interest expenses are

                                       8

<PAGE>

directly related to staffing, furnishing and promoting the Bank's new office
facilities opened during the year ended December 31, 2000. Director fees and
deposit insurance premiums decreased during the year ended December 31, 2000
from the prior year by $7,800 and $86,500, respectively

         PROVISION FOR INCOME TAXES. The Bank's provision for income taxes was
$627,000 and $826,000 for the years ended December 31, 2000 and 1999,
respectively. The Bank's provision for income taxes represented 36.4% of taxable
income for the years ended December 31, 2000 and 1999.

         NET INCOME. Net Income decreased by $345,000, or 23.98%, to $1.09
million for the year ended December 31, 2000 from $1.44 million for the prior
year. Such decrease was the result of an increase of $1.7 million in interest
income offset by a $1.3 million increase in interest expense and a $949,000
increase in operating expenses.

LIQUIDITY AND CAPITAL RESOURCES

         The objective of the Bank's liquidity management is to ensure the
availability of sufficient cash flows to meet all financial commitments and to
capitalize on opportunities for expansion. Liquidity management addresses the
Bank's ability to meet deposit withdrawals on demand or at contractual maturity,
to repay borrowings as they mature, and to fund new loans and investments as
opportunities arise.

         The Bank's primary sources of internally generated funds are principal
and interest payments on loans receivable, cash flows generated from operations,
and cash flows generated by investments. External sources of funds include
increases in deposits and advances from the FHLB. At December 31, 2000, the Bank
had outstanding $3.7 million in commitments to originate loans. If the Bank
requires funds beyond its internal funding capabilities, agreements with the
FHLB are available to borrow funds up to $53.0 million. At December 31, 2000,
approximately $118.8 million in certificates of deposit were scheduled to mature
within a year. The Bank's experience has been that a large portion of its
maturing certificates of deposit accounts remain on deposit with the Bank.

         The Bank is required under applicable federal regulations to maintain
specified levels of "liquid" investments in qualifying types of U.S. Government,
federal agency and other investments having maturities of five years or less.
Current OTS regulations require that a savings association maintain liquid
assets of not less than 4% of its average daily balance of net withdrawable
deposit accounts and borrowings payable in one year or less. Monetary penalties
may be imposed for failure to meet applicable liquidity requirements. At
December 31, 2000, the Bank's liquidity, as measured for regulatory purposes,
was in excess of the minimum OTS requirement.

         The Company's primary source of funds, other than income from its
investments and principal and interest payments received on its loan to the
Employee Stock Ownership Plan ("ESOP"), is dividends from the Bank. As a stock
savings association, the Bank may not declare or pay a cash dividend on or
repurchase any of its stock if the effect of such transaction would be to reduce
its net worth to an amount which is less than the minimum amount required by
applicable federal regulations. At December 31, 2000, the Bank was in compliance
with all applicable capital requirements.

IMPACT OF NEW ACCOUNTING STANDARDS

         In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 establishes

                                       9

<PAGE>

accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statements of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated forecasted
transaction. The accounting for changes in the fair value of a derivative (that
is, gains and losses) depends on the intended use of the derivative and the
resulting designation.

         At the date of initial application of SFAS No. 133, an entity may
transfer any held-to-maturity security into the available-for-sale category or
the trading category. An entity will then be able in the future to designate a
security transferred into the available-for-sale category as the hedged item, or
its variable interest payments as the cash flow hedged transactions, in a hedge
of the exposure to changes in market interest rates, changes in foreign currency
exchange rates, or changes in the overall fair value. (SFAS No. 133 precludes a
held-to-maturity security from being designated as the hedged item in a fair
value hedge of market interest rate risk or the risk of changes in its overall
fair value and precludes the variable cash flows of a held-to-maturity security
from being designated as the hedged transaction in a cash flow hedge of market
interest rate risk). SFAS No. 133 provides that such transfers from the
held-to-maturity category at the date of initial adoption shall not call into
question an entity's intent to hold other debt securities to maturity in the
future.

         SFAS No. 133 is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000, the quarter ended March 31, 2001 for the Company
and subsidiaries. Initial application shall be as of the beginning of an
entity's fiscal quarter. Earlier application of all of the provisions of SFAS
No. 133 is permitted only as of the beginning of a fiscal quarter. Earlier
application of selected provisions or retroactive application of provisions of
SFAS No. 133 is not permitted.

         The Company implemented SFAS No. 133 effective January 1, 2001. Such
implementation did not have a material impact on its consolidated financial
position or results of operations.

IMPACT OF INFLATION AND CHANGING PRICES

         The financial statements and related financial data presented herein
have been prepared in accordance with Generally Accepted Accounting Principles,
which requires the measurement of financial position and operating results in
terms of historical dollars, without considering changes in relative purchasing
power over time due to inflation.

         Unlike most industrial companies, virtually all of the Bank's assets
and liabilities are monetary in nature. As a result, interest rates generally
have a more significant impact on a financial institution's performance than
does the effect of inflation.

                                       10
<PAGE>



                  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

         A summary of selected financial data for the years ended December 31,
2000 and 1999 is as follows:

<TABLE>
<CAPTION>

                                          FIRST            SECOND             THIRD           FOURTH
                                         QUARTER           QUARTER           QUARTER          QUARTER
                                      -------------------------------------------------------------------
                                                      (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                         <C>               <C>              <C>               <C>
FISCAL YEAR ENDED
DECEMBER 31, 2000

Interest income.........................    $   4,810         $  4,914         $   5,040         $  5,161
Net interest income.....................        1,965            1,927             1,877            1,878
Provision for losses....................           30               30                30               14
Income before provision for
  income taxes..........................          537              451               470              263
Net income..............................          347              284               297              166

Net income per common share:
  Basic/Diluted.........................          .10              .08               .09              .05

FISCAL YEAR ENDED
DECEMBER 31, 1999

Interest income.........................    $   4,220         $  4,595         $   4,676         $  4,714
Net interest income.....................        1,697            1,792             1,873            1,902
Provision for losses....................           15               15                15               15
Income before provision for income taxes          491              497               565              713
Net income..............................          311              300               370              459

Net income per common share:
     Basic/Diluted......................          .08              .08               .11              .13
</TABLE>

                                       11

<PAGE>
                        COMMON STOCK AND RELATED MATTERS

         The Company's common stock is listed on the Nasdaq National Market
under the symbol "LIBB." As of December 31, 2000, the Company had seven
registered market makers, 536 stockholders of record (excluding the number of
persons or entities holding stock in street name through various brokerage
firms), and 3,548,399 shares outstanding. As of such date, Liberty Bancorp, MHC
(the "Mutual Holding Company"), the Company's mutual holding company, held
2,067,729 shares of common stock and stockholders other than the Mutual Holding
Company held1,480,670 shares. The following table sets forth market price and
dividend information for the Common Stock for the years ended December 31, 2000
and 1999.

<TABLE>
<CAPTION>
            FISCAL YEAR ENDED                                                         CASH DIVIDENDS
            DECEMBER 31, 2000                  HIGH                 LOW                  DECLARED
-------------------------------           -------------       -------------       ----------------------
<S>                                         <C>                <C>                     <C>
         Fourth quarter                     $      8.75        $      8.44             $     .03
         Third quarter                             9.00               6.50                   .025
         Second quarter                            6.94               6.25                   .025
         First quarter                             6.75               5.75                   .025

            FISCAL YEAR ENDED                                                         CASH DIVIDENDS
            DECEMBER 31, 1999                  HIGH                 LOW                  DECLARED
-------------------------------           -------------       -------------       ----------------------
         Fourth quarter                     $      6.69        $      5.88             $     .025
         Third quarter                             7.88               6.00                   .025
         Second quarter                            9.88               7.25                   .020
         First quarter                            10.44               8.75                   .020
</TABLE>

         Payment of dividends on the Company's common stock is subject to
determination and declaration by the Board of Directors and depends upon a
number of factors, including capital requirements, regulatory limitations on the
payment of dividends, the Company's results of operations and financial
condition, tax considerations and general economic conditions. No assurance can
be given that dividends will be declared or, if declared, what the amount of
dividends will be, or whether such dividends, once declared, will continue.

         OTS regulations impose limitations upon all "capital distributions" by
savings institutions, including cash dividends, payments by a savings
institution to repurchase or otherwise acquire its stock, payments to
stockholders of another savings institution in a cash-out merger, and other
distributions charged against capital. A savings institution may make a capital
distribution without notice to the OTS, unless it is a subsidiary of a holding
company, provided that it has a regulatory rating in the two top regulatory
categories, is not of supervisory concern, and would remain adequately
capitalized, as defined in the OTS prompt corrective action regulations,
following the proposed distribution. Savings institutions that would remain
adequately capitalized following the proposed distribution but do not meet the
other noted requirements must notify the OTS 30 days prior to declaring a
capital distribution. The OTS stated it will generally regard as permissible
that amount of capital distributions that do not exceed 50% of the institution's
excess regulatory capital plus net income to date during the calendar year. A
savings institution may not make a capital distribution without prior approval
of the OTS and the FDIC if it is undercapitalized before, or as a result of,
such a distribution. The OTS may object to a capital distribution if it would
constitute an unsafe or unsound practice.

                                       12

<PAGE>
         In addition to the foregoing, earnings of the Bank appropriated to bad
debt reserves and deducted for federal income tax purposes are not available for
payment of cash dividends or other distributions to stockholders without payment
of taxes at the then-current tax rate by the Bank on the amount of earnings
removed from the reserves for such distributions. The Bank intends to make full
use of this favorable tax treatment and does not contemplate any distribution by
the Bank in a manner that would limit the Bank's bad debt deduction or create
federal tax liability.

         OTS regulations require the Mutual Holding Company to notify the OTS of
any proposed waiver of the right to receive dividends. It is the OTS' recent
practice to review dividend waiver notices on a case-by case-basis, and, in
general, not object to any such waiver if: (i) the mutual holding company's
board of directors determines that such a waiver is consistent with such
directors' fiduciary duties to the mutual holding company's members; (ii) for as
long as the savings association subsidiary is controlled by the mutual holding
company, the dollar amount of dividends waived by the mutual holding company are
considered as a restriction on the retained earnings of the savings association
as a note to the financial statements; (iii) the amount of any dividend waived
by the mutual holding company is available for declaration as a dividend solely
to the mutual holding company, and, in accordance with SFAS 5, where the savings
association determines that the payment of such dividend to the mutual holding
company is probable, an appropriate dollar amount is recorded as a liability;
and (iv) the amount of any waived dividend is considered as having been paid by
the savings association (and the savings association's capital ratios adjusted
accordingly) in evaluating any proposed dividend under OTS capital distribution
regulations.

                                       13
<PAGE>
                              LIBERTY BANCORP, INC.
                                AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                   (With Independent Auditors' Report Thereon)

                                December 31, 2000
             -------------------------------------------------------

                                      INDEX
                                                                     Page
                                                                   --------
Independent Auditors' Report                                          2

Consolidated Statements of Financial Condition
  as of December 31, 2000 and 1999                                    3

Consolidated Statements of Income
  for the Years Ended December 31, 2000 and 1999                      4

Consolidated Statements of Comprehensive Income
  for the Years Ended December 31, 2000 and 1999                      5

Consolidated Statements of Stockholders' Equity
  for the Years Ended December 31, 2000 and 1999                      6

Consolidated Statements of Cash Flows
  for the Years Ended December 31, 2000 and 1999                    7 - 8

Notes to Consolidated Financial Statements                          9 - 37

All schedules are omitted as the required information is either not applicable
or is presented in the consolidated financial statements.

<PAGE>
                          INDEPENDENT AUDITORS' REPORT

To The Board of Directors
Liberty Bancorp, Inc.

We have audited the accompanying consolidated statements of financial condition
of Liberty Bancorp, Inc. (the "Company") and Subsidiaries as of December 31,
2000 and 1999, and the related consolidated statements of income, comprehensive
income, stockholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to in the second
preceding paragraph present fairly, in all material respects, the consolidated
financial position of Liberty Bancorp, Inc. and Subsidiaries as of December 31,
2000 and 1999, and the results of their operations and their cash flows for the
years then ended, in conformity with generally accepted accounting principles.

/s/ Radics & Co., LLC
Pine Brook, New Jersey
January 19, 2001

                                        2

<PAGE>
                              LIBERTY BANCORP, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
                                                                                                    December 31,
                                                                                       ---------------------------------------
                                                                        Notes                2000                 1999
                                                                    --------------     ------------------   ------------------
Assets
<S>                                                                 <C>                   <C>                  <C>
Cash and amounts due from depository institutions                                         $  1,695,546         $  1,563,041
Interest-bearing deposits in other banks                                                     2,861,403            2,049,256
                                                                                          ------------         ------------
             Total cash and cash equivalents                         1 and 14                4,556,949            3,612,297

Investment securities available for sale                            1,3, 8 and 14           38,533,429           48,707,248
Investment securities held to maturity                              1,3, 8 and 14           19,484,583           19,468,185
Loans receivable                                                     1,4 and 14            218,275,067          202,031,204
Premises and equipment                                              1,5,9 and 13             6,187,524            4,867,039
Foreclosed real estate                                                    1                     -                    80,222
Federal Home Loan Bank of New York stock                                  8                  2,355,100            2,355,100
Interest receivable                                                  1,6 and 14              1,721,026            1,539,332
Other assets                                                             12                    500,661              608,061
                                                                                          ------------         ------------
              Total assets                                                                $291,614,339         $283,268,688
                                                                                          ------------         ------------
Liabilities and retained earnings

Liabilities

Deposits                                                              7 and 14            $223,609,329         $220,532,547
Advances from Federal Home Loan Bank of New York                      8 and 14               5,800,000               -
Securities sold under agreements to repurchase                        8 and 14              24,000,000           24,800,000
Capitalized lease obligations                                          1 and 9               2,587,766            2,596,031
Advance payments by borrowers for taxes and insurance                                        2,444,990            2,262,379
Other liabilities                                                     11 and 12                646,011            1,129,787
                                                                                          ------------         ------------
              Total liabilities                                                            259,088,096          251,320,744
                                                                                          ------------         ------------
Commitments and contingencies                                        9,13 and 14                -                    -

Stockholders' equity                                            2, 10, 11 and 12

Preferred stock; $1.00 par value, 10,000,000 shares
  authorized, none issued and outstanding                                                       -                    -
Common stock; $1.00 par value; 20,000,000 shares
  authorized; 3,901,375 shares issued; 3,548,399 and
  3,621,329 shares outstanding at December 31, 2000
  and 1999, respectively.                                                                    3,901,375            3,901,375
Additional paid-in capital                                                                  13,757,810           13,796,320
Retained earnings - substantially restricted                                                19,543,895           18,695,283
Unearned employees' stock ownership plan
  ("ESOP") shares                                                                           (1,100,183)          (1,246,874)
Common stock acquired by Recognition and Retention
  Plan ("RRP")                                                                                (323,245)              -
Treasury stock, at cost; 352,976 and 280,046 shares at
  December 31, 2000 and 1999, respectively                                                  (3,335,942)          (2,849,415)
Accumulated other comprehensive income - unrealized
  gain (loss) on securities available for sale, net                                             82,533             (348,745)
                                                                                          ------------         ------------
              Total stockholders' equity                                                    32,526,243           31,947,944
                                                                                          ------------         ------------
              Total liabilities and stockholders' equity                                  $291,614,339         $283,268,688
                                                                                          ------------         ------------
</TABLE>

See notes to consolidated financial statements.

                                       3
<PAGE>
                              LIBERTY BANCORP, INC.
                                AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                                                    Year Ended December 31,
                                                                              -------------------------------------
                                                                 Notes              2000                1999
                                                              -------------   -----------------   -----------------
<S>                                                             <C>               <C>                 <C>
Interest income:
     Loans                                                      1 and 4           $ 15,500,178        $ 13,578,153
     Mortgage-backed securities                                    1                 2,930,352           3,364,053
     Investment securities                                         1                 1,200,678             919,245
     Other interest-earning assets                                                     294,277             343,980
                                                                                  ------------        ------------
          Total interest income                                                     19,925,485          18,205,431
                                                                                  ------------        ------------
Interest expense:
     Deposits                                                   1 and 7              9,807,950           9,967,444
     Borrowings                                                    8                 2,201,974             750,224
     Capitalized lease                                                                 268,488             223,733
                                                                                  ------------        ------------
          Total interest expense                                                    12,278,412          10,941,401
                                                                                  ------------        ------------
Net interest income                                                                  7,647,073           7,264,030
Provision for loan losses                                       1 and 4                103,661              60,000
                                                                                  ------------        ------------
Net interest income after provision for loan losses                                  7,543,412           7,204,030
                                                                                  ------------        ------------
Non-interest income:
     Fees and service charges                                                          244,657             214,282
     Miscellaneous                                                                     158,011             123,596
                                                                                  ------------        ------------
          Total non-interest income                                                    402,668             337,878
                                                                                  ------------        ------------
Non-interest expenses:
     Salaries and employee benefits                                11                2,814,802           2,451,107
     Net occupancy expense of premises                          1 and 9                859,996             631,919
     Equipment                                                     1                   677,992             575,672
     Advertising                                                                       398,910             287,500
     Director fees                                                                     175,000             182,775
     Federal insurance premium                                                          44,452             130,941
     Loss (gain) from foreclosed real estate                       1                    23,392              (3,265)
     Miscellaneous                                                                   1,230,470           1,019,288
                                                                                  ------------        ------------
          Total non-interest expenses                                                6,225,014           5,275,937
                                                                                  ------------        ------------
Income before income taxes                                                           1,721,066           2,265,971
Income taxes                                                    1 and 12               626,662             826,173
                                                                                  ------------        ------------
Net income                                                                        $  1,094,404        $  1,439,798
                                                                                  ------------        ------------
Net income per common share:                                       1
     Basic                                                                           $ 0.32              $ 0.41
     Diluted                                                                         $ 0.32              $ 0.41

Weighted average number common shares
  outstanding:                                                     1
     Basic                                                                           3,452,252           3,540,149
     Diluted                                                                         3,453,277           3,553,275
</TABLE>

See notes to consolidated financial statements.

                                       4
<PAGE>
                              LIBERTY BANCORP, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                          -----------------------------------
                                                                               2000                1999
                                                                          ----------------    ---------------
<S>                                                                           <C>                <C>
Net income                                                                    $1,094,404         $1,439,798

Other comprehensive income, net of income taxes:
          Unrealized holding gains (losses) on securities
            available for sale, net of income taxes (benefit)
            of $253,289, and $(548,489), respectively                            431,278           (933,914)
                                                                              ----------         ----------
Comprehensive income                                                          $1,525,682         $  505,884
                                                                              ==========         ==========
</TABLE>

See notes to consolidated financial statements.

                                        5

<PAGE>
                              LIBERTY BANCORP, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                              Retained
                                                                 Additional   earnings -   Unearned    Recognition
                                                      Common      Paid-In   Substantially    ESOP     and Retention  Treasury
                                                      Stock       Capital    Restricted     Shares        Plan         Stock
                                                    ----------  -----------  -----------  -----------  ---------    -----------
<S>                                                 <C>         <C>          <C>          <C>          <C>          <C>
Balance - December 31, 1998                         $3,901,375  $13,827,420  $17,512,659  $(1,393,565) $    -       $      -

Net income for the year ended
  December 31, 1999                                      -            -        1,439,798        -           -              -

Dividends declared                                       -            -         (257,174)       -           -              -

ESOP shares committed to be released                     -          (31,100)       -          146,691       -              -

Purchase of 280,046 shares of common stock               -            -            -            -           -        (2,849,415)

Unrealized loss on securities available
  for sale, net of income tax effect                     -            -            -            -           -              -
                                                    ----------  -----------  -----------  -----------  ---------    -----------
Balance - December 31, 1999                          3,901,375   13,796,320   18,695,283   (1,246,874)      -        (2,849,415)

Unamortized balance of common stock acquired by
  RRP at January 1, 2000                                 -            -            -            -       (419,524)          -

Net income for the year ended December 31, 2000          -            -        1,094,404        -           -              -

Dividends declared                                       -            -         (245,792)       -           -              -

ESOP shares committed to be released                     -          (38,510)       -          146,691       -              -

Amortization of common stock acquired by RRP             -            -            -            -         96,279           -


Purchase of 72,930 shares of treasury stock              -            -            -            -           -          (486,527)

Unrealized gain on securities available
  for sale, net of income tax (benefit)                  -            -            -            -           -              -
                                                    ----------  -----------  -----------  -----------  ---------    -----------
Balance - December 31, 2000                         $3,901,375  $13,757,810  $19,543,895  $(1,100,183) $(323,245)   $(3,335,942)
                                                    ==========  ===========  ===========  ===========  =========    ===========
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                  Accumulated
                                                                     Other              Total
                                                                 Comprehensive      Stockholders'
                                                                    Income             Equity
                                                                   ---------         -----------
<S>                                                                <C>               <C>
Balance - December 31, 1998                                        $ 585,169         $34,433,058

Net income for the year ended
  December 31, 1999                                                     -              1,439,798

Dividends declared                                                      -               (257,174)

ESOP shares committed to be released                                    -                115,591

Purchase of 280,046 shares of common stock                              -             (2,849,415)

Unrealized loss on securities available
  for sale, net of income tax effect                                (933,914)           (933,914)
                                                                   ---------         -----------
Balance - December 31, 1999                                         (348,745)         31,947,944

Unamortized balance of common stock acquired by
  RRP at January 1, 2000                                                -               (419,524)

Net income for the year ended December 31, 2000                         -              1,094,404

Dividends declared                                                      -               (245,792)

ESOP shares committed to be released                                    -                108,181

Amortization of common stock acquired by RRP                            -                 96,279


Purchase of 72,930 shares of treasury stock                             -               (486,527)

Unrealized gain on securities available
  for sale, net of income tax (benefit)                              431,278             431,278
                                                                   ---------         -----------
Balance - December 31, 2000                                        $  82,533         $32,526,243
                                                                   =========         ===========
</TABLE>

See notes to consolidated financial statements.

                                        6
<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                                ------------------------------------
                                                                                     2000                1999
                                                                                ----------------   -----------------
<S>                                                                                <C>                 <C>
Cash flows from operating activities:
      Net income                                                                   $  1,094,404        $  1,439,798
      Adjustments to reconcile net income to net cash
        provided by operating activities:
           Deferred income taxes                                                       (115,455)           (105,739)
           Depreciation and amortization of premises and equipment                      471,346             393,588
           Amortization of premiums, net of accretion of discounts
             and deferred loan fees                                                      76,404             353,564
           Provision for loan losses                                                    103,661              60,000
           Loss (gain) on sale of foreclosed real estate                                 15,222              (8,265)
           Gain on trade-in of automobile                                                -                  (15,625)
           (Increase) in accrued interest receivable                                   (181,694)           (223,335)
           (Increase) decrease in other assets                                          (30,434)            201,264
           (Decrease) increase in other liabilities                                    (313,505)            421,928
           ESOP shares committed to be released                                         108,181             115,591
           RRP expense                                                                   96,279              77,223
                                                                                   ------------        ------------
                     Net cash provided by operating activities                        1,324,409           2,709,992
                                                                                   ------------        ------------
Cash flows from investing activities:
      Purchases of securities available for sale                                         -              (18,984,642)
      Principal repayments on securities available for sale                          10,735,788          31,178,455
      Purchase of securities held to maturity                                            -              (19,421,500)
      Net increase in loans receivable                                              (16,317,728)        (24,343,935)
      Net additions to premises and equipment                                        (1,791,831)           (512,892)
      Proceeds from foreclosed real estate                                               65,000             113,885
      Purchase of Federal Home Loan Bank of New York stock                               -                 (347,600)
                                                                                   ------------        ------------
                     Net cash (used in) investing activities                         (7,308,771)        (32,318,229)
                                                                                   ------------        ------------
Cash flows from financing activities
      Increase (decrease) in deposits                                                 3,076,782          (2,737,737)
      Increase in advances from Federal Home Loan Bank
        of New York                                                                   5,800,000               -
      (Decrease) increase in securities sold under agreements
        to repurchase                                                                  (800,000)         24,800,000
      Repayment of capitalized lease obligation                                          (8,265)             (3,969)
      Increase in advance payments by
        borrowers for taxes and insurance                                               182,611             351,631
      Dividends paid                                                                   (338,840)           (164,126)
      Treasury stock purchased                                                         (486,527)         (2,849,415)
      Common stock acquired by RRP                                                     (496,747)              -
                                                                                   ------------        ------------
                     Net cash provided by financing activities                        6,929,014          19,396,384
                                                                                   ------------        ------------
Net increase (decrease) in cash and cash equivalents                                    944,652         (10,211,853)
Cash and cash equivalents - beginning                                                 3,612,297          13,824,150
                                                                                   ------------        ------------
Cash and cash equivalents - ending                                                 $  4,556,949        $  3,612,297
                                                                                   ------------        ------------
</TABLE>

See notes to consolidated financial statements.

                                       7
<PAGE>
                              LIBERTY BANCORP, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                                ------------------------------------
                                                                                     2000                1999
                                                                                ----------------   -----------------
<S>                                                                                <C>                 <C>
Supplemental disclosure of cash flow information:
      Cash paid during the year for:
           Interest                                                                $ 12,312,736        $ 10,821,622
                                                                                   ============        ============
           Income taxes, net of refunds                                            $    767,383        $    868,305
                                                                                   ============        ============
Supplemental disclosure of noncash activities:
      Loans receivable transferred to foreclosed real estate                             -             $     80,222
                                                                                   ============        ============
      Property acquired under capital leases                                             -             $  2,600,000
                                                                                   ============        ============
      Dividends declared, but not paid                                                   -             $     93,048
                                                                                   ============        ============
</TABLE>

See notes to consolidated financial statements.

                                        8

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Basis of financial statement presentation

         The consolidated financial statements include the accounts of the
         Company and its wholly own subsidiaries, Liberty Bank ("Bank"),
         formerly Axia Federal Savings Bank, and Axia Financial Corporation
         ("Subsidiary"), and have been prepared in conformity with generally
         accepted accounting principles. All significant intercompany accounts
         and transactions have been eliminated in consolidation.

         In preparing the consolidated financial statements, management is
         required to make estimates and assumptions that affect the reported
         amounts of assets and liabilities as of the date of the consolidated
         statement of financial condition and revenues and expenses for the
         period then ended. Actual results could differ significantly from those
         estimates. Material estimates that are particularly susceptible to
         significant changes relate to the determination of the allowance for
         loan losses and the assessment of prepayment risks associated with
         mortgage-backed securities. Management believes that the allowance for
         loan losses is adequate and that the risks associated with
         mortgage-backed securities prepayments have been properly recognized.
         While management uses available information to recognize losses on
         loans, future additions to the allowance for loan losses may be
         necessary based on changes in economic conditions in the market area.
         Additionally, assessments of prepayment risks related to
         mortgage-backed securities are based upon current market conditions,
         which are subject to frequent change.

         In addition, various regulatory agencies, as an integral part of their
         examination process, periodically review the allowances for loan
         losses. Such agencies may require additions to the allowance for loan
         losses based on their judgments about information available to them at
         the time of their examination.

         Cash and cash equivalents

         Cash and cash equivalents include cash and amounts due from depository
         institutions and interest-bearing deposits in other banks with initial
         maturities of three months or less.

         Securities

         Investments in debt securities that the Company has the positive intent
         and ability to hold to maturity are classified as held-to-maturity
         securities and reported at amortized cost. Debt and equity securities
         that are bought and held principally for the purpose of selling them in
         the near term are classified as trading securities and reported at fair
         value, with unrealized holding gains and losses included in earnings.
         Debt and equity securities not classified as trading securities nor as
         held-to-maturity securities are classified as available for sale
         securities and reported at fair value, with unrealized holding gains or
         losses, net of applicable deferred income taxes, reported in the
         accumulated other comprehensive income component of stockholders'
         equity.

                                        9

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)

         Securities (Cont'd.)

         Premiums and discounts on all securities are amortized/accreted using
         the interest method. Interest and dividend income on securities, which
         includes amortization of premiums and accretion of discounts, is
         recognized in the consolidated financial statements when earned. The
         adjusted cost basis of an identified security sold or called is used
         for determining security gains and losses recognized in the
         consolidated statements of income.

         Loans receivable

         Loans receivable are stated at unpaid principal balances, less the
         allowance for loan losses and net deferred loan origination fees and
         discounts.

         The Bank defers loan origination fees and certain direct loan
         origination costs and accretes such amounts, using a method which
         approximates the level-yield method, as an adjustment of yield over the
         contractual lives of the related loans. Discounts on loans are
         recognized as income by use of a method which approximates the
         level-yield method over the terms of the respective loans.

         Allowance for loan losses

         An allowance for loan losses is maintained at a level considered
         adequate to absorb future loan losses. Management of the Bank, in
         determining the allowance for loan losses, considers the risks inherent
         in its loan portfolio and changes in the nature and volume of its loan
         activities, along with general economic and real estate market
         conditions. The Bank utilizes a two tier approach: (1) identification
         of impaired loans and the establishment of specific loss allowances on
         such loans; and (2) establishment of general valuation allowances on
         the remainder of its loan portfolio. The Bank maintains a loan review
         system which allows for a periodic review of its loan portfolio and the
         early identification of potential impaired loans. Such system takes
         into consideration, among other things, delinquency status, size of
         loans, types of collateral and financial condition of the borrowers.
         Specific loan loss allowances are established for identified losses
         based on a review of such information and/or appraisals of the
         underlying collateral. General loan loss allowances are based upon a
         combination of factors including, but not limited to, actual loan loss
         experience, composition of the loan portfolio, current economic
         conditions and management's judgment. Although management believes that
         adequate specific and general loan loss allowances are established,
         actual losses are dependent upon future events and, as such, further
         additions to the level of the loan loss allowance may be necessary.

         Impaired loans are measured based on the present value of expected
         future cash flows discounted at the loan's effective interest rate or,
         as a practical expedient, at the loan's observable market price or the
         fair value of the collateral if the loan is collateral dependent. A
         loan evaluated for impairment is deemed to be impaired when, based on
         current information and events, it is probable that the Bank will be
         unable to collect all amounts due according to the contractual terms of
         the loan agreement. All loans identified as impaired are evaluated
         independently. The Bank does not aggregate such loans for evaluation
         purposes. Payments received on impaired loans are applied first to
         accrued interest receivable and then to principal. At December 31, 2000
         and 1999, and during the years then ended, the Bank did not have any
         loans deemed to be impaired.

                                       10

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)

         Concentration of risk

         The Bank's lending activity is concentrated in loans secured by real
         estate located in the State of New Jersey.

         Premises and equipment

         Premises and equipment are comprised of land, at cost, and buildings,
         building improvements, furnishings and equipment and leasehold
         improvements, at cost, less accumulated depreciation and amortization.
         Depreciation and amortization are provided utilizing the straight-line
         method over the estimated useful lives of the assets or lease terms,
         whichever is shorter. Property under capital leases is amortized over
         the lease terms.

         The annual provisions for depreciation and amortization have been
         computed in accordance with the following ranges of useful lives:

          Buildings                                 30 to 50 years
          Property under capital leases             Term of lease
          Furniture and fixtures                    3 to 10 years
          Leasehold and capital lease improvements  Shorter of estimated useful
                                                    life or term of lease.
          Motor vehicles                            3 years

         Significant renewals and betterments are charged to the premises and
         equipment account. Maintenance and repairs are charged to operations in
         the year incurred.

         Foreclosed real estate

         Real estate properties acquired through, or in lieu of, foreclosure are
         initially recorded at the lower of cost or estimated fair value at the
         date of acquisition. Subsequent valuations are periodically performed
         and an allowance for losses established by a charge to operations if
         the carrying value of a property exceeds its fair value less estimated
         selling costs. Costs relating to development or improvement of
         properties are capitalized. Income and expenses of holding and
         operating properties are recorded in operations as incurred or earned.
         Gains and losses from sales of these properties are recognized as
         incurred.

         Allowance for uncollected interest

         The Bank provides an allowance for the loss of uncollected interest on
         loans based upon management's evaluation of the collectibility of such
         interest. Such interest ultimately collected is credited to income in
         the period of recovery.

         Income taxes

         The Company and its subsidiaries file a consolidated federal income tax
         return. Income taxes are allocated based on the contribution of income
         to the consolidated income tax return. Separate state income tax
         returns are filed.

                                       11

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)

         Income taxes  (Cont'd.)

         Federal and state income taxes have been provided on the basis of
         reported income. The amounts reflected on the Company's tax returns
         differ from these provisions due principally to temporary differences
         in the reporting of certain items for financial reporting and income
         tax reporting purposes. Deferred income tax expense or benefit is
         determined by recognizing deferred tax assets and liabilities for the
         estimated future tax consequences attributable to differences between
         the financial statement carrying amounts of existing assets and
         liabilities and their respective tax bases. Deferred tax assets and
         liabilities are measured using enacted tax rates expected to apply to
         taxable income in the years in which those temporary differences are
         expected to be recovered or settled. The effect on deferred tax assets
         and liabilities of a change in tax rates is recognized in earnings in
         the period that includes the enactment date. The realization of
         deferred tax assets is assessed and a valuation allowance provided,
         when necessary, for that portion of the asset which is not likely to be
         realized. Management believes, based upon current facts, that it is
         more likely than not that there will be sufficient taxable income in
         future years to realize all deferred tax assets.

         Interest rate risk

         The Bank is principally engaged in the business of attracting deposits
         from the general public and using these deposits, together with other
         funds, to purchase securities and to make loans secured by real estate.
         The potential for interest-rate risk exists as a result of the
         generally shorter duration of the Bank's interest-sensitive liabilities
         compared to the generally longer duration of interest-sensitive assets.
         In a rising rate environment, liabilities will reprice faster than
         assets, thereby reducing net interest income. For this reason,
         management regularly monitors the maturity structure of the Bank's
         interest-earning assets and interest-bearing liabilities in order to
         measure its level of interest-rate risk and to plan for future
         volatility.

         Net income per share

         Basic and diluted net income per share were computed by dividing net
         income by the weighted average number of shares of common stock
         outstanding, adjusted for unearned shares of the ESOP. Diluted net
         income per share for 1999 includes dilutive effects of 12,618 shares
         related to securities to be issued in regard to the recognition
         retention plan and 508 shares in regard to stock options outstanding.
         Diluted net income per share for 2000 includes the dilutive effects of
         1,025 shares in regard to stock options outstanding (see note 11).

         Reclassification

         Certain amounts for the year ended December 31, 1999 have been
         reclassified to conform to the current year's presentation.

                                       12

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   STOCKHOLDERS' EQUITY

At the time of the reorganization of the Bank (June 30, 1998), the Company
issued 2,067,729 shares of common stock to Liberty Bancorp MHC ("MHC"), a mutual
holding company. At December 31, 2000, MHC owns 58.3% of the outstanding common
stock of the Company. During the years ended December 31, 2000 and 1999, the MHC
waived its right to receive its share of common stock dividends declared by the
Company in the amount of $113,725 and $41,355, respectively. The Office of
Thrift Supervision (the "OTS") requires that retained earnings be restricted by
the amount of such waived dividends. Such restricted amounts at December 31,
2000 and 1999, aggregated $155,080 and $41,355, respectively.

During the years ended December 31, 2000 and 1999, the Company repurchased, in
the open market, 72,930 and 280,046 shares of its common stock at an aggregated
cost of $486,527 and $2,849,415, respectively. These repurchases are reflected
as treasury stock in the consolidated statements of financial condition. As of
December 31, 2000, the Company plans to repurchase an additional 148,067 shares
of its common stock in the open market.

In addition to the 20,000,000 authorized shares of Common Stock, the company
authorized 10,000,000 shares of preferred stock with a par value of $1.00 per
share (the "Preferred Stock"). The Board of Directors is authorized, subject to
any limitations by law, to provide for the issuance of the shares of Preferred
Stock in series, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences,
and rights of the shares of each such series and any qualifications, limitations
or restriction thereof. As of December 31, 2000 and 1999, there were no shares
of Preferred Stock issued.

3.   INVESTMENT SECURITIES
<TABLE>
<CAPTION>
                                                                                December 31, 2000
                                                    --------------------------------------------------------------------------
                                                                                 Gross Unrealized
                                                        Amortized      ------------------------------------        Fair
                                                          Cost               Gains             Losses              Value
                                                    -----------------  -----------------  -----------------  -----------------
<S>                                                    <C>                <C>               <C>                <C>
Available for sale
Mortgage-backed securities:
      Due in one year or less                          $ 1,080,027        $   -             $    694           $ 1,079,333
      Due after five years                              37,322,398         282,561           150,863            37,454,096
                                                       -----------        --------          --------           -----------
                                                       $38,402,425        $282,561          $151,557           $38,533,429
                                                       ===========        ========          ========           ===========
Held to maturity
U.S. Government Agencies obligations:
      Due after one year through five years            $10,688,902        $  3,639          $ 24,550           $10,667,991
      Due after five years through ten years             8,795,681            -               72,536             8,723,145
                                                       -----------        --------          --------           -----------
                                                       $19,484,583        $  3,639          $ 97,086           $19,391,136
                                                       ===========        ========          ========           ===========
</TABLE>
                                       13

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.   INVESTMENT SECURITIES  (Cont'd.)

<TABLE>
<CAPTION>
                                                                                December 31, 1999
                                                    --------------------------------------------------------------------------
                                                                                 Gross Unrealized
                                                        Amortized      ------------------------------------        Fair
                                                          Cost               Gains             Losses              Value
                                                    -----------------  -----------------  -----------------  -----------------
<S>                                                    <C>              <C>                 <C>              <C>
Available for sale
Mortgage-backed securities:
      Due after one year through five years            $ 1,897,299      $     -             $  14,794        $ 1,882,505
      Due after five years                              47,363,512         169,477            708,246         46,824,743
                                                       -----------      ----------          ---------        -----------
                                                       $49,260,811      $  169,477          $ 723,040        $48,707,248
                                                       ===========      ==========          =========        ===========
Held to maturity
U.S. Government Agencies obligations:
      Due after one year through five years            $10,680,229      $     -             $  94,544        $10,585,685
      Due after five years through ten years             8,787,956            -                22,081          8,765,875
                                                       -----------      ----------          ---------        -----------
                                                       $19,468,185      $     -             $ 116,625        $19,351,560
                                                       ===========      ==========          =========        ===========
</TABLE>

The amortized cost and carrying value of securities at December 31, 2000 and
1999, are shown above by contractual final maturity. Actual maturities will
differ from contractual final maturities due to scheduled monthly payments
related to mortgage-backed securities and due to the borrowers having the right
to call or prepay obligations with or without call or prepayment penalties.

There were no sales of securities available for sale or held to maturity during
the years ended December 31, 2000 and 1999.

Securities available for sale with a carrying value of approximately $80,000 and
$92,000 at December 31, 2000 and 1999, respectively, were pledged to secure
public funds.

                                       14

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.  LOANS RECEIVABLE
<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                        ----------------------------------------
                                                                              2000                  1999
                                                                        ------------------    ------------------
<S>                                                                        <C>                   <C>
Real estate mortgage:
       One-to-four family                                                  $171,734,208          $182,100,635
       Multi-family                                                           5,559,630             2,142,912
       Commercial                                                            22,807,951             7,552,838
                                                                           ------------          ------------
                                                                            200,101,789           191,796,385
                                                                           ------------          ------------
Consumer:
       Home equity loans                                                     18,605,355            10,615,900
       Other                                                                    203,842               234,832
                                                                           ------------          ------------
                                                                             18,809,197            10,850,732
                                                                           ------------          ------------
              Total loans                                                   218,910,986           202,647,117
                                                                           ------------          ------------
Less:
       Allowance for loan losses                                                886,030               787,961
       Deferred loan fees (costs) and discounts                                (250,111)             (172,048)
                                                                           ------------          ------------
                                                                                635,919               615,913
                                                                           ------------          ------------
                                                                           $218,275,067          $202,031,204
                                                                           ============          ============
</TABLE>

The Bank has granted loans to its officers and directors and to their
associates. Related party loans are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated persons and do not involve more than
normal risk of collectibility. Activity in such loans is as follows:
<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                        ----------------------------------------
                                                                              2000                  1999
                                                                        ------------------    ------------------
<S>                                                                          <C>                   <C>
              Balance - beginning                                            $ 414,000             $ 421,000
              Loans no longer associated                                      (176,000)                 -
              Repayments                                                        (4,000)               (7,000)
                                                                             ---------             ---------
              Balance - ending                                               $ 234,000             $ 414,000
                                                                             =========             =========
</TABLE>

                                       15

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.  LOANS RECEIVABLE  (Cont'd.)

Nonaccrual loans totalled approximately $191,000 and $315,000 at December 31,
2000 and 1999, respectively. Interest income on these loans, which is recorded
only when collected, amounted to approximately $12,000 and $ - 0 - for the years
ended December 31, 2000 and 1999, respectively. Had these loans been performing
in accordance with their original terms, interest income for the years ended
December 31, 2000 and 1999, would have been approximately $19,000 and $31,000,
respectively. The Bank is not committed to lend additional funds to the
borrowers whose loans have been placed on nonaccrual status.

The activity in allowance for loan losses follows:
<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                        ----------------------------------------
                                                                              2000                  1999
                                                                        ------------------    ------------------
<S>                                                                            <C>                   <C>
       Balance - beginning                                                      $ 787,961            $ 760,496
       Provisions charged to operations                                           103,661               60,000
       Loans charged off, net of recoveries                                        (5,592)             (32,535)
                                                                                ---------            ---------
       Balance - ending                                                         $ 886,030            $ 787,961
                                                                                =========            =========
</TABLE>

5.   PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                        ----------------------------------------
                                                                              2000                  1999
                                                                        ------------------    ------------------
<S>                                                                          <C>                   <C>
Land                                                                         $   181,386           $   181,386
Buildings and improvements                                                       628,179               628,179
Capital leases                                                                 2,600,000             2,600,000
Leasehold improvements                                                         2,375,248             1,610,897
Furniture and equipment                                                        2,167,088             1,904,618
Improvements and equipment for future office                                     711,279                  -
                                                                             -----------           -----------
                                                                               8,663,180             6,925,080
Less accumulated deprecation and amortization                                 (2,475,656)           (2,058,041)
                                                                             -----------           -----------
                                                                             $ 6,187,524           $ 4,867,039
                                                                             ===========           ===========
</TABLE>
                                       16

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.   PREMISES AND EQUIPMENT  (Cont'd.)

Assets recorded under capital leases include the following:

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                        ----------------------------------------
                                                                              2000                  1999
                                                                        ------------------    ------------------
<S>                                                                          <C>                   <C>
               Land and building                                             $2,600,000            $2,600,000
               Less accumulated amortization                                   (264,946)             (120,430)
</TABLE>

6.   INTEREST RECEIVABLE
<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                        ----------------------------------------
                                                                              2000                  1999
                                                                        ------------------    ------------------
<S>                                                                          <C>                   <C>
Loans, net of allowance for uncollected
 interest of $13,833  (2000) and $12,544 (1999)                              $ 1,100,331           $   880,630
Investment securities                                                            620,695               658,702
                                                                             -----------           -----------
                                                                             $ 1,721,026           $ 1,539,332
                                                                             ===========           ===========
</TABLE>

7.  DEPOSITS
<TABLE>
<CAPTION>
                                                                           December 31,
                                               ---------------------------------------------------------------------
                                                  2000                               1999
                                               --------------------------------   ----------------------------------
                                                Weighted                           Weighted
                                                 Average                            Average
                                                  Rate            Amount             Rate              Amount
                                               ------------  ------------------   ------------    ------------------
<S>                                                  <C>         <C>                    <C>          <C>
Demand accounts:
    Non-interest bearing                              -          $   6,227,618           -           $   4,600,293
    Money Market                                     2.83%           1,945,817          2.79%            2,213,206
    NOW                                              1.59%          12,081,411          1.56%           10,313,583
Savings and clubs                                    3.00%          49,982,189          3.00%           51,420,608
Certificates of deposit                              5.86%         153,372,294          5.23%          151,984,857
                                                                 -------------                       -------------
                                                     4.80%       $ 223,609,329          4.40%        $ 220,532,547
                                                                 =============                       =============
</TABLE>

                                       17
<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.  DEPOSITS  (Cont'd.)

The scheduled maturities of certificates of deposit are as follows:
<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                  ------------------------------------
                                                                                       2000                1999
                                                                                  ----------------    ----------------
                                                                                            (In Thousands)
<S>                                                                                     <C>                 <C>
                One year or less                                                        $ 118,806           $ 107,577
                After one through three years                                              34,288              43,474
                After three years                                                             278                 934
                                                                                        ---------           ---------
                                                                                        $ 153,372           $ 151,985
</TABLE>

At December 31, 2000 and 1999, certificates of deposit of $100,000 or more
totalled approximately $14,651,000 and $10,626,000, respectively.

Interest expense on deposits consists of the following:
<TABLE>
<CAPTION>
                                                                                        Year Ended December 31,
                                                                                  ------------------------------------
                                                                                       2000                1999
                                                                                  ----------------    ----------------
<S>                                                                                  <C>                 <C>
                Money Market                                                         $    60,069         $    69,991
                NOW                                                                      163,974             148,130
                Savings and club                                                       1,438,900           1,390,649
                Certificates of deposit                                                8,191,044           8,393,680
                                                                                     -----------         -----------
                                                                                       9,853,987          10,002,450
                Less penalties for
                 early withdrawal of certificates of deposits                             46,037              35,006
                                                                                     -----------         -----------
                                                                                     $ 9,807,950         $ 9,967,444
                                                                                     ===========         ===========
</TABLE>
                                       18
<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.   BORROWINGS

Information concerning securities sold under agreements to repurchase is
summarized as follows:
<TABLE>
<CAPTION>
                                                                                Interest                  December 31,
                                                                                              -----------------------------------
                         Lender                              Maturity             Rate               2000               1999
     -----------------------------------------------   ---------------------   ------------   ----------------   ----------------
<S>                                                    <C>                           <C>       <C>                  <C>
     Federal Home Loan Bank of New York                April 3, 2000                 5.24%     $      -            $ 4,800,000
     Federal Home Loan Bank of New York                February 15, 2000             5.83%            -             20,000,000
     Federal Home Loan Bank of New York                January 22, 2001              6.49%      24,000,000                -
                                                                                               -----------         -----------
                                                                                               $24,000,000         $24,800,000
                                                                                               ===========         ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                         -----------------------------------------
                                                                                2000                  1999
                                                                         -------------------    ------------------
<S>                                                                            <C>                   <C>
         Average balance during the year                                       $ 28,150,000          $ 13,258,000
         Average interest rate during the year                                        6.40%                 5.15%
         Maximum month end balance                                             $ 31,800,000          $ 24,800,000

         Investment securities underlying the
           agreement at year end
                Carrying value                                                 $ 25,629,000          $ 35,179,000
                Fair value                                                     $ 25,546,000          $ 35,074,000
</TABLE>

The Bank also has an available line of credit with the Federal Home Loan Bank of
New York ("FHLB") subject to terms and conditions of the lender's overnight
advance program, in the amount of $23,176,600 and $27,869,000 at December 31,
2000 and 1999, respectively. Advances under this line of credit, which expires
on December 31, 2001, are made for one day periods only. The advances are
secured by stock of the FHLB in the amount of $2,355,100 and a blanket
assignment of mortgages at both December 31, 2000 and 1999. Amounts outstanding
at December 31, 2000 and 1999, totalled $5,800,000, at an interest rate of
6.66%, and $ -0-, respectively.

9.   LEASE COMMITMENTS

The Bank leases certain branches and the land on which the main office is
constructed. The leases generally provide for the leasee to pay taxes,
maintenance, insurance and certain other operating costs of the leased property.
The leases on most of the properties contain renewal provisions.

The following is a summary of future minimum payments under capitalized leases
and under operating leases that have initial or remaining noncancelable terms in
excess of one year at December 31, 2000.

                                       19

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.   LEASE COMMITMENTS  (Cont'd.)
<TABLE>
<CAPTION>
                                                                                            Capitalized           Operating
                                                                                              Leases               Leases
                                                                                          ----------------     ----------------
                                                                                                     (In Thousands)
<S>                                                                                            <C>                  <C>
                    Year Ending December 31,
                          2001                                                                 $   280              $  373
                          2002                                                                     288                 290
                          2003                                                                     297                 263
                          2004                                                                     306                 263
                          2005                                                                     315                 277
                          Years subsequent                                                       4,281               5,548
                                                                                               -------              ------
                          Total minimum net lease payments                                       5,767              $7,014
                                                                                                                    ------
                          Imputed interest                                                      (3,167)

                          Accrued interest included in other liabilities                           (12)
                                                                                               -------
                          Present value of minimum capitalized lease payments                  $ 2,588
                                                                                               -------
</TABLE>

Rentals, including related expenses, under long-term operating leases for
certain branch offices amounted to approximately $330,000 and $242,000 for the
years ended December 31, 2000 and 1999, respectively.

10.  REGULATORY CAPITAL

The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possible additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the Bank.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier 1
capital (as defined in the regulations) to risk-weighted assets (as defined),
and of Tier 1 capital to adjusted total assets (as defined). The following
tables present a reconciliation of capital per generally accepted accounting
principles ("GAAP") and regulatory capital and information as to the Bank's
capital levels at the dates presented:

<TABLE>
<CAPTION>
                                                                           December 31,
                                                                   -----------------------------
                                                                      2000             1999
                                                                   ------------     ------------
                                                                          (In Thousands)
<S>                                                                   <C>              <C>
GAAP capital                                                          $ 27,267         $ 26,042
Less: unrealized (gain) loss on securities
           available for sale                                              (83)             349
                                                                      --------         --------
Core and tangible capital                                               27,184           26,391
Add: loan valuation allowance                                              886              788
                                                                      --------         --------
          Total regulatory capital                                    $ 28,070         $ 27,179
                                                                      --------         --------
</TABLE>

                                       20

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.   REGULATORY CAPITAL  (Cont'.d)
<TABLE>
<CAPTION>
                                                                             December 31, 2000
                                           --------------------------------------------------------------------------------------
                                                                                                              To Be Well
                                                                                                             Capitalized
                                                                                                             Under Prompt
                                                                              Minimum Capital                 Corrective
                                                     Actual                    Requirements               Actions Provisions
                                           ---------------------------  ----------------------------  ---------------------------
                                             Amount          Ratio         Amount         Ratio         Amount          Ratio
                                           ------------   ------------  -------------  -------------  ------------   ------------
                                                                          (Dollars in Thousands)
<S>                                           <C>              <C>          <C>               <C>        <C>              <C>
Total Capital
  (to risk-weighted assets)                   $ 28,070         19.76%       $ 11,364          8.00%      $ 14,205         10.00%

Tier 1 Capital
  (to risk-weighted assets)                     27,184         19.14%           -               -           8,523          6.00%

Core (Tier 1) Capital
  (to adjusted total assets)                    27,184          9.43%         11,531          4.00%        14,414          5.00%

Tangible Capital
  (to adjusted total assets)                    27,184          9.43%          4,324          1.50%          -              -
</TABLE>

<TABLE>
<CAPTION>
                                                                             December 31, 1999
                                           --------------------------------------------------------------------------------------
                                                                                                              To Be Well
                                                                                                             Capitalized
                                                                                                             Under Prompt
                                                                              Minimum Capital                 Corrective
                                                     Actual                    Requirements               Actions Provisions
                                           ---------------------------  ----------------------------  ---------------------------
                                             Amount          Ratio         Amount         Ratio         Amount          Ratio
                                           ------------   ------------  -------------  -------------  ------------   ------------
                                                                          (Dollars in Thousands)
<S>                                           <C>              <C>          <C>               <C>        <C>              <C>
Total Capital
  (to risk-weighted assets)                   $ 27,179         21.71%       $ 10,015          8.00%      $ 12,519         10.00%

Tier 1 Capital
  (to risk-weighted assets)                     26,391         21.08%           -              -            7,512          6.00%

Core (Tier 1) Capital
  (to adjusted total assets)                    26,391          9.41%         11,213          4.00%        14,016          5.00%

Tangible Capital
  (to adjusted total assets)                    26,391          9.41%          4,205          1.50%          -              -
</TABLE>

As of February 14, 2000, the most recent notification from the OTS, the Bank was
categorized as well capitalized under the regulatory framework for prompt
corrective action. There are no conditions existing or events which have
occurred since notification that management believes have changed the
institution's category.

Dividend payments to the Company by the Bank are subject to the profitability of
the Bank and applicable regulations. The Bank did not pay any dividends to the
Company during the years ended December 31, 2000 and 1999.

                                       21

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.  BENEFIT PLANS

Retirement plan

The Bank had a non-contributory pension plan covering all eligible employees.
The plan was a defined benefit plan which provided benefits based on a
participant's years of service and compensation. The Bank's funding policy was
to contribute annually the maximum amount that can be deducted for federal
income tax purposes. Effective October 1, 1999, the plan ceased all benefit
accruals. The plan was terminated during 2000 and vested benefits were
distributed to participants.

Plan assets were comprised primarily of stocks, bonds, mutual funds and bank
deposits. The following tables set forth the plan's funded status and components
of net periodic pension cost:

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                               ----------------------------------
                                                                                    2000               1999
                                                                               ---------------    ---------------
<S>                                                                             <C>                 <C>
        Actuarial present value of benefit obligations,
              including vested benefits of $-0- and
              $1,221,745, respectively                                          $      -            $ 1,221,745
                                                                                ===========         ===========
         Projected benefit obligation - beginning                               $ 1,221,745         $ 1,474,206
               Service cost                                                            -                 52,621
               Interest cost                                                         82,242              89,222
               Actuarial loss (gain)                                                133,270            (222,658)
               Settlements                                                       (1,437,257)            (51,515)
               Curtailment                                                             -               (120,131)
                                                                                -----------         -----------
         Projected benefit obligation - ending                                         -              1,221,745
                                                                                -----------         -----------
         Plan assets at fair value - beginning                                    1,239,752           1,088,924
               Actual return on plan assets                                          66,471             145,703
               Employer contribution                                                131,034              56,640
               Settlements                                                       (1,437,257)            (51,515)
                                                                                -----------         -----------
         Plan assets at fair value - ending                                            -              1,239,752
                                                                                -----------         -----------
         Projected benefit obligation (less than) plan assets                          -                (18,007)
         Unrecognized gain                                                             -                 78,502
                                                                                -----------         -----------
         Accrued pension cost included in other liabilities                     $      -            $    60,495
                                                                                ===========         ===========
</TABLE>
                                       22

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.  BENEFIT PLANS  (Cont'd.)

Retirement plan  (Cont'd.)

Net periodic pension cost for the plan included the following components:
<TABLE>
<CAPTION>
                                                                                    Year Ended December 31,
                                                                               ----------------------------------
                                                                                    2000               1999
                                                                               ---------------    ---------------
<S>                                                                             <C>                     <C>
        Service cost                                                            $   -               $ 52,621
        Interest cost                                                             82,242              89,222
        Expected return on plan assets                                           (76,565)            (88,259)
        Amortization of net transition obligation                                   -                  8,867
        Amortization of unrecognized loss                                           -                  8,391
        Amortization of unrecognized past service liability                         -                  1,326
        Settlement charge                                                         64,862                -
        Curtailment gain                                                            -                (12,194)
                                                                                --------            --------
        Net periodic pension cost
         included in salaries and employee benefits                             $ 70,539            $ 59,974
                                                                                ========            ========
</TABLE>

Assumptions used in accounting for the plan were as follows:

                                                   Year Ended December 31,
                                             -----------------------------------
                                                   2000                1999
                                             ----------------    ---------------
Discount rate                                       6.00%              6.00%
Long-term rate of return on plan assets              N/A               6.00%

                                       23
<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.  BENEFIT PLANS  (Cont'd.)

Postretirement benefits

Postretirement benefits offered by the Bank include health care and life
insurance coverage and are provided to all employees retiring after the
attainment of age 60 and fifteen years of service. The plan is unfunded. The
following tables set forth the plan's funded status and components of
postretirement benefit costs:

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                  ------------------------------------
                                                                                       2000                1999
                                                                                  ----------------    ----------------
<S>                                                                                     <C>                 <C>
                Accumulated postretirement benefit
                      obligation - beginning                                            $ 383,087           $ 480,423
                          Service cost                                                     10,431              18,971
                          Interest cost                                                    22,610              30,744
                          Actuarial loss (gain)                                            12,804            (135,112)
                          Premiums/claims paid                                            (10,655)            (11,939)
                                                                                        ---------           ---------
                Accumulated postretirement benefit
                      obligation - ending (includes benefit obligation for
                         retirees and dependents of $193,541 and
                           $176,846, respectively                                         418,277             383,087
                           Employer contribution                                           10,655             (11,939)
                           Premium paid                                                   (10,655)             11,939
                                                                                        ---------           ---------
                Accumulated and unfunded postretirement
                   benefit obligation                                                     418,277             383,087
                      Unrecognized transition obligation                                 (353,494)           (372,099)
                      Unrecognized gain                                                   263,950             288,741
                                                                                        ---------           ---------
                Accrued expense included in other liabilities                           $ 328,733           $ 299,729
                                                                                        =========           =========
</TABLE>

The following table sets forth the components of net periodic postretirement
benefits costs:
<TABLE>
<CAPTION>
                                                                                        Year Ended December 31,
                                                                                  ------------------------------------
                                                                                       2000                1999
                                                                                  ----------------    ----------------
<S>                                                                                     <C>                 <C>
                   Service cost                                                         $ 10,431            $ 18,971
                   Interest cost on
                    accumulated postretirement benefit obligation                         22,610              30,744
                   Amortization of transition obligation                                  18,605              24,806
                   Amortization of unrecognized gain                                     (11,987)             (6,795)
                                                                                        --------            --------
                   Net postretirement benefit cost included in
                     compensation and employee benefits                                 $ 39,659            $ 67,726
                                                                                        ========            ========
</TABLE>

                                       24

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.  BENEFIT PLANS  (Cont'd.)

Assumptions used in accounting for the plan are as follows:

                                                    Year Ended December 31,
                                                    -----------------------
                                                       2000          1999
                                                    ----------    ---------
                Discount rate                          8.00%         6.50%
                Rate of increase in compensation       5.50%         4.50%

For the years ended December 31, 2000 and 1999, a medical cost trend rate of
6.50%, decreasing 0.5% per year thereafter until an ultimate rate of 5.0% is
reached, was used in the plan's valuation. Increasing the assumed medical cost
trend by one percent in each year would increase the accumulated postretirement
benefit obligation as of December 31, 2000 and 1999, by $54,000 and $52,000,
respectively, and the aggregate of the service and interest components of net
periodic postretirement benefit cost for the years ended December 31, 2000 and
1999, by $5,000 and $10,000, respectively. Decreasing the assumed medical cost
trend by one percent in each year would decrease the accumulated postretirement
benefit obligation as of December 31, 2000 and 1999, by $44,000 and $43,000,
respectively, and the aggregate of the service and interest components of net
periodic postretirement benefit cost for the years ended December 31, 2000 and
1999, by $4,000 and $8,000, respectively.

ESOP

Effective upon conversion, an ESOP was established for all eligible employees.
The ESOP used $1,466,910 of proceeds from a term loan from the Company to
purchase 146,691 shares of Company common stock in the initial offering. The
term loan from the Company to the ESOP is payable over 10 years. Interest on the
term loan is payable monthly, commencing on July 31, 1998, at the prime rate.
The Bank has and intends to make discretionary contributions to the ESOP which
will be equal to principal and interest payments required from the ESOP on the
term loan. Shares purchased with the loan proceeds were initially pledged as
collateral for the term loan and are held in a suspense account for future
allocation among participants. Contributions to the ESOP and shares released
from the suspense account will be allocated among the participants on the basis
of compensation, as described by the ESOP, in the year of allocation. During the
years ended December 31, 2000 and 1999, the Bank made cash contributions of
$257,000 and $254,000, respectively, to the ESOP, of which $147,000 and
$147,000, respectively, was applied to loan principal. The loan had an
outstanding balance of $1,100,000 and $1,247,000 at December 31, 2000 and 1999,
respectively.

The ESOP is accounted for in accordance with Statement of Position 93-6
"Accounting for Employee Stock Ownership Plans", which was issued by the
American Institute of Certified Public Accountants in November 1994.
Accordingly, the ESOP shares pledged as collateral are reported as unearned ESOP
shares in the consolidated statements of financial condition. As shares are
committed to be released from collateral, the Company reports compensation
expense equal to the current market price of the shares, and the shares become
outstanding for net income per common share computations. Dividends on allocated
ESOP shares are recorded as a reduction of retained earnings. Contributions
equivalent to dividends on unallocated ESOP shares are recorded as a reduction
of debt. ESOP compensation expense was $108,000 and $116,000 for the years ended
December 31, 2000 and 1999, respectively.

                                       25

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.  BENEFIT PLANS  (Cont'd.)

ESOP  (Cont'd.)

The ESOP shares are summarized as follows:

                                                      December 31,
                                                 ----------------------
                                                    2000         1999
                                                 ---------    ---------
                Allocated shares                   36,673       22,004
                Unreleased shares                 110,018      124,687
                                                 --------     --------
                                                  146,691      146,691
                                                 ========     ========
                Fair value of unreleased shares  $962,658     $748,122
                                                 ========     ========

      Recognition and Retention Plan

      During 1999, the Bank established the 1999 Recognition and Retention Plan
      ("RRP") to provide key employees and non-employee directors of the Bank
      and their affiliates with proprietary interest in the company in a manner
      designed to encourage such person to remain with the Bank and its
      affiliates. During 2000, the Bank contributed $496,747 from available
      liquid assets to the RRP to enable the trust to acquire 73,345 shares of
      common stock of the Company in the open market. Under the RRP, awards are
      granted in the form of common stock held by the RRP trust. The awards vest
      over a period of time at a rate not to exceed 20% per year beginning one
      year from the date of grant. During the years 2000 and 1999, the Bank
      awarded 3,000 and 70,203 shares, respectively, of Company stock under the
      RRP. During 2000, 7,312 shares of common stock awarded to officers and
      outside directors were forfeited.

      The Bank recorded compensation expense for the RRP in the amount of
      $96,000 and $77,000 for the years 2000 and 1999, respectively.

      Stock Option Plan

      During 1999, Company adopted the 1999 Stock Option Plan ("Stock Option
      Plan") authorizing the granting of stock options and limited rights to
      officers, employees and non-employee directors of the Company and the Bank
      to purchase 183,364 shares of Company common stock. Options granted under
      this plan may be either options that qualify as incentive stock options as
      defined in Section 422 of the Internal Revenue Code of 1986 as amended, or
      non-statutory options. Options will be exercisable on a cumulative basis
      in equal installments at the rate of 20% per year commencing one year from
      the date of grant.

      All options granted will be exercisable in the event the optionee
      terminates employment due to death or disability. The options expire ten
      years from the date of grant. The Company granted "limited rights" with
      respect to shares covered by options granted to officers and employees,
      which enables the optionee, upon a change of control of the Company or the
      Bank, to elect to receive cash for each option granted, equal to the
      difference between the exercise price of the option and the fair market
      value of the common stock on the date of exercise of the limited rights.
      In 1999, the Company granted options for 55,000 shares to non-employee
      directors and 118,000 shares to officers and employees at an option price
      of $10.06. In 2000, the Company granted options for 7,500 shares to
      employees at an option price of $6.13. During the years ended December 31,
      2000 and 1999, options for 17,486 and 7,852 shares were forfeited. At
      December 31, 2000 and 1999, options for 155,162 and 165,148 shares,
      respectively, were outstanding, of which 33,030 and none, respectively,
      were vested.

                                       26

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.  BENEFIT PLANS  (Cont'd.)

         The Company, as permitted by Statement No. 123, recognized compensation
         cost for stock options granted based on the intrinsic value method
         instead of the fair value based method. The weighted average fair
         values of options granted during 2000 and 1999, all of which have
         exercise prices equal to the market price of the Company's common stock
         as of the grant date, was estimated using the Black-Sholes
         option-pricing model. Such fair value and the assumptions used for
         estimating fair values are as follows:

<TABLE>
<CAPTION>
                                                                                                Grant Date
                                                                                          ---------------------
                                                                                           2000           1999
                                                                                          ------         ------
<S>                                                                                       <C>            <C>
                  Weighted average grant - date fair value per share                      $ 2.21         $ 4.02
                  Expected common stock dividend yield                                      1.63%          0.84%
                  Expected volatility                                                      35.22%         38.38%
                  Expected option life                                                    5 years        5 years
                  Risk-free interest rate                                                   6.50%          5.88%
</TABLE>

         Had the Company used the fair value based method, net income for the
         year ended December 31, 2000 and 1999, would have decreased to
         approximately $1,025,000 and $1,363,000 and net income per share, both
         basic and diluted, would have been reduced to $ 0.30 and $ 0.38,
         respectively.

         Savings incentive plan

         The Bank has a savings incentive plan effective October 1, 1999,
         pursuant to Section 401(k) of the Internal Revenue Code, for all
         eligible employees of the Bank. Employees may elect to save from 1% to
         10% of their eligible compensation, of which the Bank will match up to
         4% of eligible compensation. Total savings incentive plan expense for
         the years ended December 31, 2000 and 1999, were approximately $54,000
         and $10,000, respectively.

12.  INCOME TAXES

The Bank qualifies as a thrift institution under the provisions of the Internal
Revenue Code and, therefore, must calculate its bad debt deduction using either
the experience or the specific charge off method. Retained earnings at December
31, 2000, includes approximately $3,009,000 of bad debt deductions for which
income taxes have not been provided. If such amount is used for purposes other
than for bad debts losses, including distributions in liquidation, it will be
subject to income tax at the then current rate.

                                       27

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.  INCOME TAXES  (Cont'd.)

The components of income taxes are summarized as follows:

                                              Year Ended December 31,
                                          ---------------------------------
                                               2000              1999
                                          ---------------   ---------------
     Current tax expense:
         Federal income                       $ 671,797         $ 856,416
         State income                            70,320            75,496
                                              ---------         ---------
                                                742,117           931,912
                                              ---------         ---------
      Deferred tax (benefit):
         Federal income                        (106,014)          (96,830)
         State income                            (9,441)           (8,909)
                                              ---------         ---------
                                               (115,455)         (105,739)
                                              ---------         ---------
                                              $ 626,662         $ 826,173
                                              =========         =========

The following table presents a reconciliation between the reported income taxes
and the income taxes which would be computed by applying the normal federal
income tax rate of 34% to income before income taxes:

                                                  Year Ended December 31,
                                              ---------------------------------
                                                   2000              1999
                                              ---------------   ---------------

      Federal income tax expense                  $ 585,162         $ 770,430
      Increases in income taxes resulting from:
         New Jersey savings institution tax,
          net of federal income tax effect           40,180            43,947
         Other items, net                             1,320            11,796
                                                  ---------         ---------
      Effective income tax                        $ 626,662         $ 826,173
                                                  =========         =========

                                       28

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.  INCOME TAXES  (Cont'd.)

The tax effects of existing temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
                                                                              December 31,
                                                                    ---------------------------------
      Deferred tax assets                                                2000              1999
                                                                    ---------------   ---------------
<S>                                                                      <C>               <C>
      Benefit plans                                                      $ 124,058         $ 116,255
      Deferred loan fees                                                    32,703            45,033
      Uncollected interest                                                   5,020            11,694
      Allowance for loss on loans                                          321,452           283,508
      Capitalized lease                                                     95,770            44,374
      Unrealized loss on securities available for sale                        -              204,818
                                                                         ---------         ---------
      Deferred tax liabilities                                             579,003           705,682
                                                                         ---------         ---------
      Unrealized gain on securities available for sale                      48,471              -
      Depreciation                                                         134,782           135,621
      Bad debt deduction in excess of base year                            159,552           210,967
      Other                                                                 14,938              -
                                                                         ---------         ---------
                                                                           357,743           346,588
                                                                         ---------         ---------
      Net deferred tax assets included in other assets                   $ 221,260         $ 359,094
                                                                         =========         =========
</TABLE>

Income taxes payable of $24,124 and $49,390 at December 31, 2000 and 1999,
respectively, are included in other liabilities.

13.  COMMITMENTS AND CONTINGENCIES

The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers and
reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and purchase securities. The
commitments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the consolidated statement of
financial condition. The Bank's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments to
extend credit is represented by the contractual notional amount of those
instruments. The Bank uses the same credit policies in making commitments as it
does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend a customer as long as there
is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since commitments may expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Bank upon extension of credit, is based on management's credit evaluation of
the counterparty. Collateral held varies but primarily includes residential real
estate.

                                       29

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.  COMMITMENTS AND CONTINGENCIES  (Cont'd.)

Commitments to purchase securities are contracts for delayed delivery of
securities in which the seller agrees to make delivery at a specified future
date of a specified instrument, at a specified price or yield. Risks arise from
the possible inability of counterparties to meet the terms of their contracts
and from movements in securities values and interest rates.

The Bank has the following outstanding commitments to originate loans, expiring
in three months or less:

                                                   December 31,
                                          -------------------------------
                                              2000              1999
                                          ---------------   -------------
         Mortgage                           $ 2,840,000       $ 4,643,000
         Fixed rate home equity loans           724,000           621,000
         Home equity credit lines               130,000           120,000
                                            -----------       -----------
                                            $ 3,694,000       $ 5,384,000
                                            ===========       ===========

At December 31, 2000, of the $3,694,000 in commitments to originate loans,
$3,455,000 are for loans at fixed interest rates ranging from 7.125% to 9.50%,
$109,000 is for a loan at an adjustable interest rate with an initial rate of
6.375% and $130,000 are for home equity loans at the prime rate plus 1%.

At December 31, 1999, of the $5,384,000 in commitments to originate loans,
$2,659,000 are for loans at fixed interest rates ranging from 8.25% to 8.50%,
$2,605,000 are for loans at adjustable interest rates with initial rates ranging
from 5.50% to 8.50% and $120,000 are for home equity lines at the prime rate
plus 1%.

At December 31, 2000 and 1999, outstanding commitments related to unused home
equity lines of credit totalled approximately $4,968,000 and $3,993,000,
respectively. Commitments under home equity credit line programs represent
undisbursed funds from approved lines of credit. Unless specifically cancelled
by notice from the Bank, these are firm commitments to the respective borrowers
on demand. The lines of credit are secured by one-to-four family residential
property owned by the borrowers. The interest rate charged for any month on
funds disbursed under the Homeowners' Equity Credit Line Program is within a
range from 1% below prime rate and 2.00% above the prime rate as most recently
published in The Wall Street Journal prior to the last business day of the month
immediately preceding the month in which the billing cycle begins. The interest
rate charged under the Preferred Home Equity Credit Line is fixed at 6.49% for
one year, and thereafter is adjusted monthly to a rate of 1.00% above the prime
rate as discussed above.

The Bank also has, in the normal course of business, commitments for services
and supplies. Management does not anticipate losses on any of these
transactions.

The Company and its subsidiaries are also parties to litigation which arises
primarily in the ordinary course of business. In the opinion of management, the
ultimate disposition of such litigation should not have a material effect on
consolidated financial position or operations.

                                       30

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial instrument is defined as the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than a forced or liquidation sale. Significant estimations were used for
the purposes of this disclosure. Estimated fair values have been determined
using the best available data and estimation methodology suitable for each
category of financial instruments. The estimation methodologies used and
assumptions made in estimating fair values of financial instruments are set
forth below.

         Cash and cash equivalents and interest receivable

         The carrying amounts for cash and cash equivalents and interest
         receivable approximate fair value because they mature in three months
         or less.

         Securities

         The fair values for securities available for sale and held to maturity
         are based on quoted market or dealer prices, if available. If quoted
         market or dealer prices are not available, fair value is estimated
         using quoted market prices for similar securities.

         Loans receivable

         Fair value is estimated by discounting future cash flows, using the
         current rates at which similar loans would be made to borrowers with
         similar credit ratings and for the same remaining maturities, of such
         loans.

         Deposits

         The fair value of demand deposits, savings accounts and club accounts
         is equal to the amount payable on demand at the reporting date. The
         fair value of certificates of deposit is estimated by discounting
         future cash flows, using rates currently offered for deposits of
         similar remaining maturities. The fair value estimates do not include
         the benefit that results from the low-cost funding provided by deposit
         liabilities compared to the cost of borrowing funds in the market.

         Borrowings

         Fair value is estimated using rates currently offered for liabilities
         of similar remaining maturities, or when available, quoted market
         prices.

         Commitments

         The fair value of loan commitments is estimated using fees currently
         charged to enter into similar agreements taking into account the
         remaining terms of the agreements and the present creditworthiness of
         the counterparties. For fixed rate loan commitments, fair value also
         considers the difference between current levels of interest and the
         committed rates.

                                       31

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  FAIR VALUE OF FINANCIAL INSTRUMENTS  (Cont'd.)

The carrying amounts and fair values of financial instruments are as follows:
<TABLE>
<CAPTION>
                                                               December 31,
                                        ------------------------------------------------------------
                                                    2000                           1999
                                        ----------------------------    ----------------------------
                                        Carrying        Estimated       Carrying       Estimated
      Financial assets                  Amount          Fair Value      Amount         Fair Value
                                        -------------   ------------    ------------   -------------
                                                              (In Thousands)
<S>                                        <C>             <C>            <C>             <C>
      Cash and cash equivalents            $   4,557       $  4,557       $   3,612       $   3,612
      Investment securities                   58,018         57,925          68,175          68,059
      Loans receivable                       218,275        218,123         202,031         202,818
      Interest receivable                      1,721          1,721           1,539           1,539

      Financial liabilities

      Deposits                               223,609        224,901         220,533         221,219
      Borrowings                              29,800         29,800          24,800          24,792

      Commitments

      To originate loans                       3,694          3,694           5,384           5,384
      Unused lines of credit                   4,968          4,968           3,993           3,993
</TABLE>

The fair value estimates are made at a discrete point in time based on relevant
market information and information about the financial instruments. Because no
market exists for a significant portion of the financial instruments, fair value
estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and, therefore, cannot
be determined with precision. Changes in assumptions could significantly affect
the estimates.

In addition, the fair value estimates were based on existing on-and-off balance
sheet financial instruments without attempting to value anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Other significant assets and liabilities that are not
considered financial assets and liabilities include premises and equipment and
advances from borrowers for taxes and insurance. In addition, the tax
ramifications related to the realization of the unrealized gains and losses can
have a significant effect on fair value estimates and have not been considered
in any of the estimates.

Finally, reasonable comparability between financial institutions may not be
likely due to the wide range of permitted valuation techniques and numerous
estimates which must be made given the absence of active secondary markets for
many of the financial instruments. This lack of uniform valuation methodologies
introduces a greater degree of subjectivity to these estimated fair values.

                                       32

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.   PARENT ONLY FINANCIAL INFORMATION

The Company's primary business is the operation of its wholly owned subsidiary,
the Bank. The earnings of the Bank are recognized by the Company under the
equity method of accounting. The following are the condensed financial
statements for the Company (Parent Company only) as of and for the years ended
December 31, 2000 and 1999.

      Condensed statements of financial condition
<TABLE>
<CAPTION>
                                                                          December 31,
                                                             --------------------------------------
                                                                   2000                 1999
                                                             ----------------    ------------------
              Assets
<S>                                                            <C>                  <C>
              Cash and cash equivalents                        $   708,430          $   271,735
              Investments held to maturity                       3,493,802            3,489,427
              Investment in Liberty Bank                        27,266,831           26,041,585
              ESOP loan receivable                               1,100,183            1,246,874
              Receivable from Liberty Bank                            -                 947,804
              Accrued interest receivable                           43,567               43,567
                                                               -----------          -----------
                   Total assets                                $32,612,813          $32,040,992
                                                               ===========          ===========
              Liabilities and stockholder's equity

              Dividends payable                                $      -             $    93,048
              Income taxes payable                                  83,829                 -
              Other liabilities                                      2,741                 -
              Stockholders' equity                              32,526,243           31,947,944
                                                               -----------          -----------
                  Total liabilities and stockholders' equity   $32,612,813          $32,040,992
                                                               ===========          ===========
</TABLE>

                                       33
<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.   PARENT ONLY FINANCIAL INFORMATION  (Cont'd.)

      Condensed statements of income

<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                                             --------------------------------------
                                                                   2000                 1999
                                                             ----------------    ------------------
<S>                                                            <C>                  <C>
              Interest                                         $  321,220           $  251,763
              Equity in earnings of Liberty Bank                1,009,032            1,322,928
                                                               ----------           ----------
                                                                1,330,252            1,574,691

              Expenses                                            108,740              132,751
                                                               ----------           ----------
              Income before income taxes                        1,221,512            1,441,940
              Income taxes                                        127,108                2,142
                                                               ----------           ----------
              Net income                                       $1,094,404           $1,439,798
                                                               ==========           ==========
</TABLE>
                                       34

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.   PARENT ONLY FINANCIAL INFORMATION  (Cont'd.)

      Condensed statements of cash flows
<TABLE>
<CAPTION>
                                                                                        Year Ended December 31,
                                                                                 --------------------------------------
                                                                                       2000                 1999
                                                                                 -----------------    -----------------
<S>                                                                                   <C>                  <C>
              Cash flow from operating activities

              Net income                                                              $ 1,094,404          $ 1,439,798
              Equity in earnings of Liberty Bank                                       (1,009,032)          (1,322,927)
              Increase (decrease) in other liabilities                                     86,570              (16,668)
              (Increase) in accrued interest receivable                                      -                 (43,567)
              Accretion of discounts                                                       (4,375)              (2,552)
                                                                                      -----------          -----------
                 Net cash provided by operating activities                                167,567               54,084
                                                                                      -----------          -----------
              Investing activities

              Purchase of investment securities                                              -              (3,486,875)
              Decrease in loan receivable from Liberty Bank                               947,804            6,451,057
              Repayment of loan receivable from ESOP                                      146,691              146,691
                                                                                      -----------          -----------
                 Net cash provided by investing activities                              1,094,495            3,110,873
                                                                                      -----------          -----------
              Financing activities

              Purchase of treasury stock                                                 (486,527)          (2,849,415)
              Dividends paid                                                             (338,840)            (164,126)
                                                                                      -----------          -----------
                 Net cash (used in) financing activities                                 (825,367)          (3,013,541)
                                                                                      -----------          -----------
              Net increase in cash and cash equivalents                                   436,695              151,416
              Cash and cash equivalents at beginning of period                            271,735              120,319
                                                                                      -----------          -----------
              Cash and cash equivalents at end of period                              $   708,430          $   271,735
                                                                                      ===========          ===========
</TABLE>
                                       35

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16.   QUARTERLY FINANCIAL DATA (UNAUDITED)

Year Ended December 31, 2000
<TABLE>
<CAPTION>
                                            First              Second             Third              Fourth
                                           Quarter            Quarter            Quarter            Quarter
                                        ---------------    ---------------    ---------------    ---------------
                                                         (In Thousands Except Per Share Data)
<S>                                       <C>                  <C>               <C>                 <C>
      Interest income                     $ 4,810            $ 4,914            $ 5,040            $ 5,161
      Interest expense                      2,845              2,987              3,163              3,283
                                          -------            -------            -------            -------
         Net interest income                1,965              1,927              1,877              1,878

      Provision for loan losses                30                 30                 30                 14
      Non-interest income                      93                 99                110                101
      Non-interest expense                  1,491              1,545              1,487              1,702
      Income taxes                            190                167                173                 97
                                          -------            -------            -------            -------
      Net income                          $   347            $   284            $   297            $   166
                                          -------            -------            -------            -------
      Net income per common
       share: Basic/diluted               $  0.10            $  0.08            $  0.09            $  0.05
                                          =======            =======            =======            =======
</TABLE>

Year Ended December 31, 1999
<TABLE>
<CAPTION>
                                            First              Second             Third              Fourth
                                           Quarter            Quarter            Quarter            Quarter
                                        ---------------    ---------------    ---------------    ---------------
                                                         (In Thousands Except Per Share Data)
<S>                                       <C>                  <C>               <C>                 <C>
      Interest income                     $ 4,220            $ 4,595            $ 4,676            $ 4,714
      Interest expense                      2,523              2,803              2,803              2,812
                                          -------            -------            -------            -------
         Net interest income                1,697              1,792              1,873              1,902

      Provision for loan losses                15                 15                 15                 15
      Non-interest income                      77                 92                 78                 91
      Non-interest expense                  1,268              1,372              1,371              1,265
      Income taxes                            180                197                195                254
                                          -------            -------            -------            -------
      Net income                          $   311            $   300            $   370            $   459
                                          -------            -------            -------            -------
      Net income per common
       share:  Basic/diluted              $ 0.085            $ 0.085            $ 0.106            $ 0.131
                                          =======            =======            =======            =======
</TABLE>
                                       36

<PAGE>
                     LIBERTY BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.   IMPACT OF NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statements of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated forecasted
transaction. The accounting for changes in the fair value of a derivative (that
is, gains and losses) depends on the intended use of the derivative and the
resulting designation.

At the date of initial application of SFAS No. 133, an entity may transfer any
held-to-maturity security into the available-for-sale category or the trading
category. An entity will then be able in the future to designate a security
transferred into the available-for-sale category as the hedged item, or its
variable interest payments as the cash flow hedged transactions, in a hedge of
the exposure to changes in market interest rates, changes in foreign currency
exchange rates, or changes in the overall fair value. (SFAS No. 133 precludes a
held-to-maturity security from being designated as the hedged item in a fair
value hedge of market interest rate risk or the risk of changes in its overall
fair value and precludes the variable cash flows of a held-to-maturity security
from being designated as the hedged transaction in a cash flow hedge of market
interest rate risk). SFAS No. 133 provides that such transfers from the
held-to-maturity category at the date of initial adoption shall not call into
question an entity's intent to hold other debt securities to maturity in the
future.

SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000, the quarter ended March 31, 2001 for the Company and
subsidiaries. Initial application shall be as of the beginning of an entity's
fiscal quarter. Earlier application of all of the provisions of SFAS No. 133 is
permitted only as of the beginning of a fiscal quarter. Earlier application of
selected provisions or retroactive application of provisions of SFAS No. 133 is
not permitted.

The Company implemented SFAS No. 133 effective January 1, 2001. Such
implementation did not have a material impact on its consolidated financial
position or results of operations.

                                       37
<PAGE>
                             DIRECTORS AND OFFICERS

<TABLE>
<S>                                                         <C>
       LIBERTY BANCORP, INC.                                LIBERTY BANK
       (732) 499-7200                                       (732) 499-7200

       DIRECTORS                                            OFFICERS
       John R. Bowen                                        John R. Bowen
       Chairman, President and                              Chairman, President and
         Chief Executive Officer                              Chief Executive Officer

       Michael J. Widmer                                    Michael J. Widmer
       Chief Operating Officer, Executive                   Chief Operating Officer, Executive
         Vice President and Chief                             Vice President and Chief
         Financial Officer                                    Financial Officer

       Neil R. Bryson, DDS                                  Daniel Bennett
       Doctor of Dental Surgery                             Vice President of Lending

       Anthony V. Caruso, Esquire                           Lucille Capece
       Attorney at Law                                      Vice President of Operations, Compliance
                                                              Officer and Security Officer
       Annette Catino
       President and Chief Executive Officer                Paula L. Palermo
       QualCare, Inc.                                       Vice President of Sales and Service

       John C. Marsh                                        Joseph Coccaro
       President and Chief Executive Officer                Treasurer
       Consumers International
                                                            Leslie C. Whelan
       Paul J. McGovern                                     Secretary
       Retired Pharmaceuticals Executive
                                                            Dana Mihailovic
       Nelson L. Taylor, Jr.                                  Assistant Vice President of Operations
       President
       West End Garage, Inc.                                Sandra Sievewright
                                                            Assistant Vice President of Lending,
                                                              Compliance Officer and CRA Officer
</TABLE>

<PAGE>
                             STOCKHOLDER INFORMATION

ANNUAL MEETING

The Annual Meeting of Stockholders will be held at 10:30 a.m. on May 23, 2001 at
the Woodbridge Sheraton, 515 Route 1 South Woodbridge, New Jersey.

STOCK LISTING

The Company's Common Stock trades over-the-counter on the Nasdaq National Market
under the symbol "LIBB."

SPECIAL COUNSEL

Luse Lehman Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W., Suite 400
Washington, D.C.  20015

INDEPENDENT AUDITORs

Radics & Co., LLC
55 U.S. Highway #46
Pine Brook, NJ 07058

TRANSFER AGENT

ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road, Overpeck Centre
Ridgefield Park, NJ 07660

ANNUAL REPORT ON FORM 10-KSB

A copy of the Company's Form 10-KSB for the fiscal year ended December 31, 2000,
will be furnished without charge to stockholders as of April 9, 2001, upon
written request to the Secretary, Liberty Bancorp, Inc., 1410 St. Georges
Avenue, Avenel, New Jersey 07001.