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,
                                                                   --------------------------------------
                                                                     1999           1998           1997
                                                                   --------       --------       --------
                                                                               (In Thousands)
<S>                                                                <C>            <C>            <C>
Financial Condition Data:

Total assets ................................................      $283,269       $260,447       $217,437
Loans receivable, net .......................................       202,031        177,877        152,200
Securities available for sale ...............................        48,707         62,735         53,917
Deposits ....................................................       220,533        223,270        198,363
Equity capital ..............................................        31,948         34,433         16,541

<CAPTION>
                                                                           Year Ended December 31,
                                                                   --------------------------------------
                                                                     1999           1998           1997
                                                                   --------       --------       --------
                                                                               (In Thousands)
<S>                                                                <C>            <C>            <C>
Operating Data:

Interest income .............................................      $ 18,205       $ 16,014       $ 15,083
Interest expense ............................................        10,941          9,817          9,004
                                                                   --------       --------       --------
Net interest income .........................................         7,264          6,197          6,079
Provision for loan losses ...................................            60             45            200
                                                                   --------       --------       --------
Net interest income after provision for loan losses .........         7,204          6,152          5,879
                                                                   --------       --------       --------
Non-interest income .........................................           338            311            442
                                                                   --------       --------       --------
Non-interest expense ........................................         5,276          4,307          3,891
                                                                   --------       --------       --------
Income before income taxes ..................................         2,266          2,156          2,430
Income taxes ................................................           826            766            877
                                                                   --------       --------       --------
Net income ..................................................      $  1,440       $  1,390       $  1,553
                                                                   ========       ========       ========
</TABLE>

                       KEY OPERATING RATIOS AND OTHER DATA

<TABLE>
<CAPTION>
                                                                                                          At or For The Year
                                                                                                          Ended December 31,
                                                                                                    ------------------------------
                                                                                                     1999        1998        1997
                                                                                                    ------      ------      ------
<S>                                                                                                 <C>         <C>         <C>
Selected Ratios:

Performance Ratios:
   Return on assets (ratio of net income to average total assets) ..............................      0.52%       0.58%       0.73%
   Return on equity (ratio of net income to average equity) ....................................      4.51%       5.44%       9.95%
   Average interest rate spread during period (1) ..............................................      2.17%       2.05%       2.54%
   Net interest margin (net interest income divided by average interest-earning assets) ........      2.71%       2.63%       2.92%
   Operating expenses to average total assets ..................................................      1.92%       1.79%       1.84%
   Average interest-earning assets to average interest-bearing liabilities .....................    113.37%     114.02%     108.77%

Asset Quality Ratios:
   Non-performing assets to total assets .......................................................      0.18%       0.27%       0.49%
   Allowance for loan losses to non-performing loans ...........................................    187.62%     126.67%      77.41%
   Allowance for loan losses to total loans receivable .........................................      0.39%       0.43%       0.48%

Capital Ratios:
   Equity to total assets at end of period .....................................................     11.31%      13.22%       7.61%
   Average equity to average assets ............................................................     11.60%      10.61%       7.37%

Other Data:
   Number of full service customer facilities at end of period .................................        5           4           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 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 GNMA, and
(4) 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.


                                       7
<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,
Federal Government and government sponsored corporation securities. Of the
Bank's investment securities and mortgage-backed securities, other than Federal
Home Loan Bank ("FHLB") stock, 71% 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, 1999, as calculated by the Office of
Thrift Supervision (OTS), which is based upon quarterly information that the
Bank provided voluntarily to the OTS.

                            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)

                 300            (75.00)%      (75.00)%       $5,564   ($17,768)
                 200            (48.00)%      (50.00)%       12,178    (11,454)
                 100            (23.00)%      (37.50)%       18,256     (5,376)
                   0                -0-           --         23,632         -0-
                (100)            18.00%        15.00%        27,773      4,141
                (200)            31.00%        25.00%        30,905      7,273
                (300)            39.00%        50.00%        32,865      9,233

--------------

(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, 1999 increased by
$22.9 million, or 8.76%, to $283.3 million from $260.4 million at December 31,
1998. The increase resulted primarily from an increase of $24.1 million, or
13.6%, in loans receivable to $202.0 million from $177.9 million. Decreases of
$10.3 million, or 83.4%, in interest bearing deposits to $2.0 million at
December 31, 1999 from $12.3 million at December 31, 1998 and securities
available for sale of $14.0 million, or 22.4%, to $48.7 million at December 31,
1999 from $62.7 million at December 31, 1998 were largely offset by an increase
in securities held to maturity to $19.4 million at December 31, 1999. At
December 31, 1998 there were no


                                       8
<PAGE>

securities held to maturity.

      Liabilities. Total liabilities for the year ended December 31, 1999
increased by $25.2 million, or 11.2%, to $251.2 million from $226.0 million at
December 31, 1998. The increase was primarily due to a $24.8 million increase in
borrowings under repurchase agreements with the Federal Home Loan Bank ("FHLB").
At December 31, 1998, the Company had no outstanding borrowings. This was
partially offset by a decrease in deposits of $2.7 million, or 1.2%, to $220.5
million at December 31, 1999 from $223.3 million at December 31, 1998.

      Total Equity. Total equity as of the year ended December 31, 1999
decreased by $2.4 million, or 7.21%, to $32 million from $34.4 million at
December 31, 1998. This decrease was the result of $2.8 million utilized to
repurchase shares of Company common stock under repurchase programs initiated in
1999.

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.


                                       9
<PAGE>

      The following table sets forth certain information relating to the Bank at
December 31, 1999, and for the years ended December 31, 1999, 1998, and 1997.
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>

                                                                       ------------------------------
                                               At December 31, 1999                  1999
                                               --------------------    ------------------------------
                                                            Yield/     Average                 Yield/
                                               Balance       Cost      Balance    Interest      Cost
                                               -------       ----      -------    --------      ----
<S>                                           <C>            <C>      <C>         <C>           <C>
Interest-earning assets:
Loans receivable (1)(2) ...............       $202,031       7.25%    $189,917    $ 13,578      7.15%
Mortgage-backed securities ............         48,707       6.61       58,159       3,365      5.79
Investment securities .................         19,468       6.07       14,506         919      6.34
Other interest-earning assets .........          4,404       6.50        5,196         343      6.60
                                              --------                --------    --------
Total interest-earning assets .........        274,610       7.04      267,778      18,205      6.80
                                                                                  --------
Non-interest earning assets ...........          8,659                   7,396
                                              --------                --------
Total assets ..........................       $283,269                $275,174
                                              ========                ========

Interest-bearing liabilities:
   Interest bearing deposits
       Demand .........................         12,238       1.78       12,465         218      1.75
       Savings and club ...............         51,419       3.00       50,986       1,389      2.72
       Certificates of deposit ........        151,985       5.23      155,971       8,360      5.36
   Borrowed funds .....................         27,396       5.72       16,780         974      5.80
                                              --------                --------    --------
Total interest-bearing liabilities ....        243,038       4.63      236,202      10,941      4.63
                                                                                  --------
Non-interest bearing liabilities ......          8,283                   7,062
Stockholders' equity ..................         31,948                  31,910
                                              --------                --------
Total liabilities and retained earnings       $283,269                $275,174
                                              ========                ========

Net interest income ...................                                           $  7,264
                                                                                  ========

Net interest rate spread ..............                                                         2.17%
                                                                                                ====

Net yield on average
  interest-earning assets .............                                                         2.72%
                                                                                                ====

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

<CAPTION>
                                                                    Years Ended December 31,
                                                 -----------------------------------------------------------------
                                                               1998                               1997
                                                 -------------------------------     -----------------------------
                                                 Average                  Yield/     Average                Yield/
                                                 Balance     Interest      Cost      Balance    Interest     Cost
                                                 -------     --------      ----      -------    --------     ----
                                                                       (Dollars in Thousands)
<S>                                             <C>          <C>           <C>      <C>         <C>          <C>
Interest-earning assets:
Loans receivable (1)(2) ...............         $164,067     $ 12,239      7.46%    $144,513    $ 10,944     7.57%
Mortgage-backed securities ............           52,406        2,681      5.12       53,333       3,536     6.63
Investment securities .................              915           59      6.45        3,126         197     6.30
Other interest-earning assets .........           18,264        1,035      5.66        7,086         406     5.73
                                                --------     --------               --------    --------
Total interest-earning assets .........          235,652       16,014      6.80      208,058      15,083     7.25
                                                             --------                           --------
Non-interest earning assets ...........            4,888                               3,572
                                                --------                            --------
Total assets ..........................         $240,540                            $211,630
                                                ========                            ========

Interest-bearing liabilities:
   Interest bearing deposits
       Demand .........................         $ 12,049          220      1.83     $ 12,358         244     1.97
       Savings and club ...............           47,914        1,464      3.06       44,803       1,346     3.00
       Certificates of deposit ........          146,704        8,133      5.54      132,467       7,318     5.52
   Borrowed funds .....................               --           --                  1,663          96     5.77
                                                --------     --------               --------    --------
Total interest-bearing liabilities ....          206,667        9,817      4.75      191,291       9,004     4.71
                                                             --------                           --------
Non-interest bearing liabilities ......            8,348                               4,734
Stockholders' equity ..................           25,525                              15,605
                                                --------                            --------
Total liabilities and retained earnings         $240,540                            $211,630
                                                ========                            ========

Net interest income ...................                      $  6,197                           $  6,079
                                                             ========                           ========

Net interest rate spread ..............                                    2.05%                             2.54%
                                                                           ====                              ====

Net yield on average
  interest-earning assets .............                                    2.63%                             2.92%
                                                                           ====                              ====

Ratio of average interest-earning
   assets to interest-bearing
   liabilities.........................             1.14x                               1.09x
                                                    ====                                ====
</TABLE>

------------------
(1)   Calculated net of deferred loan fees and discounts and loans in process.
(2)   Includes non-accrual loans.


                                       10
<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, 1999 vs December 31, 1998  December 31, 1998 vs December 31, 1997
                                                              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 ..........................      $ 1,848       $  (509)      $ 1,339       $ 1,458       $  (163)      $ 1,295
     Mortgage Backed Securities ................          333           351           684           (50)         (805)         (855)
     Investment Securities .....................          862            (2)          860          (143)            5          (138)
     Other interest-earning assets .............         (862)          170          (692)          633            (4)          629
                                                      -------       -------       -------       -------       -------       -------
         Total interest income .................        2,181            10         2,191         1,898          (967)          931
                                                      -------       -------       -------       -------       -------       -------
Interest expense:
     Interest-bearing demand ...................            7            (9)           (2)           (6)          (18)          (24)
     Savings and club accounts .................           88          (163)          (75)           95            23           118
     Certificates of deposit ...................          496          (269)          227           789            26           815
     Borrowed funds ............................          974           -0-           974           (96)          -0-           (96)
                                                      -------       -------       -------       -------       -------       -------
     Total interest expense ....................        1,565          (441)        1,124           782            31           813
                                                      -------       -------       -------       -------       -------       -------

Change in interest income ......................      $   616       $   451       $ 1,067       $ 1,116       $  (998)      $   118
                                                      =======       =======       =======       =======       =======       =======
</TABLE>

Comparison of Operating Results

      General. Net income depends primarily on its level of net interest income,
which is the difference between interest earned on 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 primarily of deposits. Net interest
income is affected primarily by (i) the 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.
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 $2.2 million, or 13.7%, to
$18.2 million for the year ended December 31, 1999 from $16.0 million for the
prior year. The increase was the result of a $1.5 million increase in income on
securities and a $1.3 million increase in interest on loans, which were
partially offset by a $692,000 decrease in interest on other earning assets. The
increase in income from securities was partly due to a $19.3 million, or 36.3%,
increase in the average balances on securities combined with a 76 basis point
increase, to 5.90% from 5.14%, in the average yield on the portfolio. The
increase in income on loans was partly due to the $25.8 million, or 15.7%
increase in the average balance of loans to $189.9 million from $164.1 million.
This was partially offset by a reduction of 31 basis points, to 7.15% from
7.46%, in the average yield in the portfolio.


                                       11
<PAGE>

      Interest on other earning assets decreased by $692,000, or 66.9%, to
$343,000 from $1.0 million. The decrease was largely the result of a decline of
$13.1 million, or 71.6%, in average balances to $5.2 million from $18.3 million.

      Interest income increased by $931,000, or 6.2%, to $16.0 million for the
year ended December 31, 1998 from $15.1 million for the prior year. The increase
was the result of a $1.3 increase in income on loans and a $629,000 increase in
income on other earning assets, which were partially offset by a $993,000
decrease in income from mortgage backed and other securities. The increase in
income from loans was due to a $19.6 million, or 13.6% increase in the average
balance of loans to $164.1 million from $144.5 million, which was partially
offset by an 11 basis point decrease in average yield on loans to 7.46% in 1998
from 7.57% in 1997. The lower interest rate environment led to refinances in the
loan portfolio and is responsible for the decline in average yield in the
portfolio.

      Interest on other earning assets increased by $629,000, or 154.9%, to $1.0
million for the year ended December 31, 1998, from $406,000 for the prior year.
The increase in income on other earning assets is largely the result of higher
average balances in 1998 compared with 1997. The average balance of other
earning assets increased by $11.2 million, or 157.7%, to $18.3 million for the
year ended December 31, 1998 from $7.1 million for the year ended December 31,
1997.

      Interest Expense. Interest expense increased $1.1 million, or 11.45%, to
$10.9 million for the year ended December 31, 1999 from $9.8 million for the
prior year. The increase was the result of an increase in the average balance of
borrowed funds to $16.8 million for the year ended December 31, 1999 from zero
in the prior year. Additionally, the average balance on interest bearing
deposits increased by $12.7 million, or 6.17%, to $219.4 million for the year
ended December 31, 1999 from $206.7 million for the prior year. This increase
was partially offset by a reduction in the average cost of interest bearing
deposits of 21 basis points to 4.54% for the year ended December 31, 1999 from
4.75% for the prior year.

      Interest expense increased by $813,000, or 9.0%, to $9.8 million for the
year ended December 31, 1998 from $9.0 million for the prior year. This increase
was the result of an increase in average interest bearing deposits by $15.4
million, or 8.0%, to $206.7 million for the year ended December 31, 1998 from
$191.3 million for the year ended December 31, 1997. Additionally, the average
cost of funds increased by 4 basis points to 4.75% at December 31, 1998 from
4.71% at December 31, 1997.

      Net Interest Income. Net interest income increased by $1.1 million, or
17.2%, to $7.3 million for the year ended December 31, 1999 from $6.2 million
for the prior year. The increase is the combined result of a higher yielding
investment portfolio and a reduction of the cost of deposits.

      Net interest income increased by $118,000, or 1.9%, to $6.2 million for
the year ended December 31, 1998 from $6.1 million for the prior year. The
increase in net interest income resulted from the increase in average interest
earning assets relative to the increase in average interest bearing liabilities.
The asset growth was partially funded by the proceeds of the Company's offering
of common stock which was completed on June 30, 1998.


                                       12
<PAGE>

      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 which 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 nonperforming
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 $60,000 and $45,000 in loan loss provisions during the
years ended December 31, 1999 and 1998, respectively. At December 31, 1999 and
1998, the Bank's allowance for loan losses was $788,000 and $760,000,
respectively, and the Bank's loans delinquent for ninety days or more were
$420,000 and $600,000, respectively. The Bank's allowance for loan losses as a
percentage of total nonperforming loans at December 31, 1999 and 1998 was
187.62% and 126.67%, 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, gains on sale of assets, and
other income. Non-interest income increased $27,500, or 8.8%, to $338,000 for
the year ended December 31, 1999 from $311,000 for the prior year. The increase
is the result of an increase in miscellaneous income of $24,800, which includes
a $15,600 gain on the trade-in of two automobiles.

      Non-interest income decreased by $131,000, or 29.8%, to $311,000 for the
year ended December 31, 1998 from $442,000 for the prior year, as a result of a
decrease in gain on sale of securities and student loans of $133,000 from
December 31, 1997.

      Non-interest Expense. Non-interest expense increased $969,000, or 22.5%,
to $5.3 million for the year ended December 31, 1999 from $4.3 million for the
prior year. Compensation and occupancy expenses increased by $450,000, or 22.5%
and $199,000, or 46.1%, respectively, related to the establishment of one new
branch office, the relocation of one office and the construction of two other
offices. Additionally, the Bank initiated a comprehensive marketing program
during the year ended December 31, 1999, resulting in an increase of $50,000 in
advertising expense. Such a program involves the hiring of a marketing director
and associate and an increase in various advertising media expenses.

      Non-interest expense increased by $416,000, or 10.7%, to $4.3 million for
the year ended December 31, 1998 from $3.9 million for the prior year. The
increase was due to $100,000 of non-recurring expenses related to the Bank's
name change, $74,000 in Employee Stock Ownership Plan ("ESOP") expense and
increases in the Bank's audit and legal expenses related to the mutual holding
company reorganization and stock offering by the Company.

      Provision for Income Taxes. The provision for income taxes was $826,000
and $766,000 for the years ended December 31, 1999 and 1998, respectively,
resulting in an effective income tax rate of 36.5% and 35.5%, respectively.


                                       13
<PAGE>

      Net Income. Net income increased by $50,000, or 3.6%, to $1.44 million for
the year ended December 31, 1999 from $1.39 million for the prior year. Such
increase was primarily the result of an increase of $2.2 million in net interest
income offset by a $1.1 million increase in interest expense, a $969,000
increase in the non-interest expenses and a $50,000 increase in income taxes.

      Net income decreased by $163,000, or 10.5%, to $1.39 million for the year
ended December 31, 1998 from $1.55 million for the prior year. The decrease was
primarily due to an increase of $416,000, or 10.7%, in operations expenses,
partially offset by a $118,000 increase in net interest income and a $111,000
decrease in income taxes.

Liquidity and Capital Resources

      The objective of 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 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 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 of New York. At December 31, 1999, the
Bank had $4.9 million outstanding commitments to originate loans. If the Bank
requires funds beyond its internal funding capabilities, agreements with the
FHLB of New York are available to borrow funds up to $70.8 million. At December
31, 1999, approximately $107.6 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, 1999, 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 the ESOP loan, is
capital 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 capital 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, 1999, the Bank was in compliance with all
applicable capital requirements.


                                       14
<PAGE>

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, which is 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 are not permitted.

      Management of the Company has not yet determined when SFAS No. 133 will be
implemented, but does not believe the ultimate implementation of SFAS No. 133
will have a material impact on its consolidated financial position or results of
operations.

Impact of Inflation and Changing Prices

      The consolidated financial statements and related financial data presented
herein have been prepared in accordance with GAAP, 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 Company'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.


                                       15
<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, 1999, the Company had seven registered
market makers, 572 stockholders of record (excluding the number of persons or
entities holding stock in street name through various brokerage firms), and
3,621,329 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 held
1,553,600 shares.

      The following table sets forth market price and dividend information for
the Common Stock since the completion of the Bank's reorganization and stock
offering on June 30, 1998.

        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


        Fiscal Year Ended                                        Cash Dividends
        December 31, 1998              High           Low           Declared
        -----------------            -------        -------      --------------

         Third quarter               $ 11.69        $  9.38        $   --
         Fourth quarter                 9.75           7.25            --

      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 by the Bank to the Company, 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.


                                       16

<PAGE>

<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,
1999 and 1998 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,
1999 and 1998, 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

January 21, 2000


                                                                              2.
<PAGE>

                              LIBERTY BANCORP, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                                                                         December 31,
                                                                                              ---------------------------------
                                                                          Notes                    1999               1998
                                                                     --------------           -------------       -------------
<S>                                                                  <C>                      <C>                 <C>
Assets
Cash and amounts due from depository institutions                                             $   1,563,041       $   1,474,529
Interest-bearing deposits in other banks                                                          2,049,256          12,349,621

              Total cash and cash equivalents                           1 and 14                  3,612,297          13,824,150

Investment securities available for sale                              1,3, 8 and 14              48,707,248          62,734,597
Investment securities held to maturity                                1,3, 8 and 14              19,468,185                  --
Loans receivable                                                       1,4 and 14               202,031,204         177,876,607
Premises and equipment                                                1,5,9 and 13                4,867,039           2,132,110
Foreclosed real estate                                                      1                        80,222             105,620
Federal Home Loan Bank of New York stock                                    8                     2,355,100           2,007,500
Interest receivable                                                    1,6 and 14                 1,539,332           1,315,997
Other assets                                                               12                       608,061             450,231

              Total assets                                                                    $ 283,268,688       $ 260,446,812

Liabilities and retained earnings

Liabilities

Deposits                                                                 7 and 14             $ 220,532,547       $ 223,270,284
Securities sold under agreements to repurchase                           8 and 14                24,800,000                  --
Capitalized lease obligations                                            1 and 9                  2,596,031                  --
Advance payments by borrowers for taxes and insurance                                             2,262,379           1,910,748
Other liabilities                                                       11 and 12                 1,129,787             832,722

              Total liabilities                                                                 251,320,744         226,013,754

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; 3,621,329 and
  3,901,375 shares outstanding at December 31, 1999
  and 1998, respectively                                                                          3,901,375           3,901,375
Additional paid-in capital                                                                       13,796,320          13,827,420
Retained earnings - substantially restricted                                                     18,695,283          17,512,659
Unearned employees' stock ownership plan
  ("ESOP") shares                                                                                (1,246,874)         (1,393,565)
Treasury stock, at cost; 280,046 at December 31, 1999                                            (2,849,415)                 --
Accumulated other comprehensive income - Unrealized
  (loss) gain on securities available for sale, net                                                (348,745)            585,169

              Total stockholders' equity                                                         31,947,944          34,433,058

              Total liabilities and stockholders' equity                                      $ 283,268,688       $ 260,446,812
</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          1999               1998
                                                       ----------    ------------       ------------
<S>                                                      <C>         <C>                <C>
Interest income:
     Loans                                               1 and 4     $ 13,578,153       $ 12,238,409
     Mortgage-backed securities                             1           3,364,053          2,680,973
     Investment securities                                  1             919,245             59,004
     Other interest-earning assets                                        343,980          1,035,176

          Total interest income                                        18,205,431         16,013,562

Interest expense:
     Deposits                                            1 and 7        9,967,444          9,816,890
     Borrowings                                             8             750,224                 --
     Capitalized lease                                                    223,733                 --

          Total interest expense                                       10,941,401          9,816,890

Net interest income                                                     7,264,030          6,196,672
Provision for loan losses                                1 and 4           60,000             44,556

Net interest income after provision for loan losses                     7,204,030          6,152,116

Non-interest income:
     Fees and service charges                                             214,282            211,087
     Gain on sale of loans                                                     --                511
     Miscellaneous                                                        123,596             98,828

          Total non-interest income                                       337,878            310,426

Non-interest expenses:
     Salaries and employee benefits                         11          2,451,107          2,001,495
     Net occupancy expense of premises                   1 and 9          631,919            432,525
     Equipment                                              1             575,672            445,123
     Advertising                                                          287,500            237,375
     Director fees                                                        182,775            168,043
     Federal insurance premium                                            130,941            124,842
     (Gain) loss from foreclosed real estate                1              (3,265)            27,444
     Miscellaneous                                                      1,019,288            870,219
          Total non-interest expenses                                   5,275,937          4,307,066

Income before income taxes                                              2,265,971          2,155,476
Income taxes                                             1 and 12         826,173            765,750

Net income                                                           $  1,439,798       $  1,389,726

Net income per common share:                                1
     Basic                                                           $       0.41       $       0.37
     Diluted                                                         $       0.41       $       0.37

Weighted average number common shares
  outstanding:                                              1
     Basic                                                              3,540,149          3,758,362
     Diluted                                                            3,553,275          3,758,362
</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,
                                                         -----------------------------
                                                             1999              1998
                                                         -----------       -----------
<S>                                                      <C>               <C>
Net income                                               $ 1,439,798       $ 1,389,726

Other comprehensive income, net of income taxes:
    Unrealized holding (losses) gains on securities
     available for sale, net of income taxes
     of $548,489, and $(108,597), respectively              (933,914)          167,259
                                                         -----------       -----------

Comprehensive income                                     $   505,884       $ 1,556,985
                                                         ===========       ===========
</TABLE>


                                                                              5.
<PAGE>

                              LIBERTY BANCORP, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                               Retained
                                                                              Additional      earnings -       Unearned
                                                                 Common        Paid-In      Substantially        ESOP
                                                                  Stock        Capital        Restricted        Shares
                                                              ------------   ------------   -------------    ------------
<S>                                                           <C>            <C>             <C>             <C>
Balance - December 31, 1997                                   $         --   $         --    $ 16,122,933    $         --

Net income for the year ended December 31, 1998                         --             --       1,389,726              --

Net proceeds from initial public stock offering                  3,901,375     13,830,168              --              --

Common stock acquired by ESOP                                           --             --              --      (1,466,910)

ESOP shares committed to be released                                    --         (2,748)             --          73,345

Unrealized gain on securities available for sale, net
  of income tax effect                                                  --             --              --              --

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 treasury stock                            --             --              --              --

Unrealized (loss) on securities available for sale, net
  of income losses (benefit)                                            --             --              --              --
                                                              ------------   ------------    ------------    ------------

Balance - December 31, 1999                                   $  3,901,375   $ 13,796,320    $ 18,695,283    $ (1,246,874)
                                                              ============   ============    ============    ============

<CAPTION>
                                                                                Accumulated
                                                                                   Other           Total
                                                                  Treasury     Comprehensive    Stockholders'
                                                                    Stock          Income          Equity
                                                                ------------   -------------    -------------
<S>                                                             <C>             <C>             <C>
Balance - December 31, 1997                                     $         --    $    417,910    $ 16,540,843

Net income for the year ended December 31, 1998                           --              --       1,389,726

Net proceeds from initial public stock offering                           --              --      17,731,543

Common stock acquired by ESOP                                             --              --      (1,466,910)

ESOP shares committed to be released                                      --              --          70,597

Unrealized gain on securities available for sale, net
  of income tax effect                                                    --         167,259         167,259

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 treasury stock                      (2,849,415)             --      (2,849,415)

Unrealized (loss) on securities available for sale, net
  of income losses (benefit)                                              --        (933,914)       (933,914)
                                                                ------------    ------------    ------------

Balance - December 31, 1999                                     $ (2,849,415)   $   (348,745)   $ 31,947,944
                                                                ============    ============    ============
</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,
                                                                      -----------------------------
                                                                          1999             1998
                                                                      ------------     ------------
<S>                                                                   <C>              <C>
Cash flows from operating activities:
      Net income                                                      $  1,439,798     $  1,389,726
      Adjustments to reconcile net income to net cash
        provided by operating activities:
           Deferred income taxes                                          (105,739)         (19,069)
           Depreciation and amortization of premises and equipment         393,588          209,586
           Amortization of premiums, net of accretion of discounts
             and deferred loan fees                                        353,564          393,352
           Provision for loss on real estate owned                              --           15,444
           Provision for loan losses                                        60,000           44,556
           Gain on sale of foreclosed real estate                           (8,265)              --
           Gain on sale of loans                                                --             (511)
           Gain on trade-in of automobile                                  (15,625)              --
           (Increase) decrease in accrued interest receivable             (223,335)         (96,019)
           Decrease (increase) in other assets                             201,264         (320,836)
           Increase (decrease) in other liabilities                        499,151         (130,240)
           ESOP shares committed to be released                            115,591           70,597
                                                                      ------------     ------------

                     Net cash provided by operating activities           2,709,992        1,556,586
                                                                      ------------     ------------

Cash flows from investing activities:
      Purchases of securities available for sale                       (18,984,642)     (46,890,204)
      Principal repayments on securities available for sale             31,178,455       35,962,187
      Proceeds from calls of securities available for sale                      --        2,000,000
      Purchase of securities held to maturity                          (19,421,500)              --
      Net increase in loans receivable                                 (24,343,935)     (25,795,395)
      Proceeds from sales of loans receivable                                   --           68,055
      Net additions to premises and equipment                             (512,892)        (227,792)
      Proceeds from foreclosed real estate                                 113,885               --
      Purchase of Federal Home Loan Bank of New York stock                (347,600)        (203,400)
                                                                      ------------     ------------

                     Net cash (used in) investing activities           (32,318,229)     (35,086,549)
                                                                      ------------     ------------

Cash flows from financing activities
      (Decrease) increase in deposits                                   (2,737,737)      28,189,280
      Increase in advance payments by
        borrowers for taxes and insurance                                  351,631          251,133
      Repayment of capitalized lease obligation                             (3,969)              --
      Proceeds from securities sold under agreements to repurchase      30,400,000               --
      Repurchase of securities sold under agreements to repurchase      (5,600,000)              --
      Dividends paid                                                      (164,126)              --
      Treasury stock purchased                                          (2,849,415)              --
      Net proceeds from issuance of common stock                                --       14,449,719
      Common stock acquired by ESOP                                             --       (1,466,910)
                                                                      ------------     ------------

                     Net cash provided by financing activities          19,396,384       41,423,222
                                                                      ------------     ------------

Net (decrease) increase in cash and cash equivalents                   (10,211,853)       7,893,259
Cash and cash equivalents - beginning                                   13,824,150        5,930,891
                                                                      ------------     ------------

Cash and cash equivalents - ending                                    $  3,612,297     $ 13,824,150
                                                                      ============     ============

</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,
                                                                -----------------------------
                                                                    1999             1998
                                                                ------------     ------------
<S>                                                             <C>              <C>
Supplemental disclosure of cash flow information:
      Cash paid during the year for:
           Interest                                             $ 10,821,622     $  9,816,890
                                                                ============     ============

           Income taxes, net of refunds                         $    868,305     $    991,941
                                                                ============     ============

Supplemental disclosure of noncash activities:
      Loans receivable transferred to foreclosed real estate    $     80,222     $         --
                                                                ============     ============

      Unrealized (depreciation) appreciation on securities
        available for sale                                      $ (1,482,403)    $    275,856
      Deferred income taxes                                          548,489         (108,597)
                                                                ------------     ------------

                                                                $   (933,914)    $    167,259
                                                                ============     ============

      Property acquired under capital leases                    $  2,600,000     $         --
                                                                ============     ============

      Issuance of common stock in exchange for deposits         $         --     $  3,281,824
                                                                ============     ============

      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.

      On June 30, 1998, Axia Federal Savings Bank changed its name to Liberty
      Bank. Such change did not materially impact financial condition or
      operations.

      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. The Bank does 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. For the year ended
      December 31, 1998, such amounts were calculated based upon income for the
      entire year, although the Bank converted to stock form on June 30, 1998,
      and the weighted average number of shares outstanding since June 30, 1998,
      as if such shares were outstanding during all of 1998. 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 (see note 11). There
      were no potentially dilutive securities or contracts at or during the year
      ended December 31, 1998.

      Reclassification

      Certain amounts for the year ended December 31, 1998 have been
      reclassified to conform to the current year's presentation.


                                                                             12.
<PAGE>

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

2. REORGANIZATION AND STOCKHOLDERS' EQUITY

The Company is a business corporation formed at the direction of the Bank under
the laws of the United States on June 30, 1998. On June 30, 1998: (i) the Bank
reorganized from a federally chartered mutual savings bank to a federally
chartered stock savings bank in the mutual holding company form of organization;
(ii) the Bank issued all of its outstanding capital stock to the Company; and
(iii) the Company consummated its initial public offering of common stock, par
value $1.00 per share (the "Common Stock"), by selling, at a price of $10.00 per
share, 1,686,955 and 146,691 shares of common stock to certain eligible account
holders of the Bank who had subscribed for such shares and the ESOP,
respectively, and by issuing 2,067,729 shares of common stock to Liberty Bancorp
MHC ("MHC"), a mutual holding company formed at the direction of the Bank
(collectively, the "Reorganization and Offering"). The Reorganization and
Offering resulted in net proceeds of $16.3 million, after expenses of $605,000.

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, 1999, there were no shares of
Preferred Stock issued.

During the year ended December 31, 1999, the Company repurchased, in the open
market, 280,046 shares of its common stock at an aggregate cost of $2,849,415.
These repurchases are reflected as treasury stock in the consolidated statements
of financial condition. As of December 31, 1999, the Company has obtained
regulatory approval and currently plans to repurchase an additional 72,930
shares of its common stock.

The MHC waived its right to receive its share of common stock dividends declared
by the Company during the quarter ended June 30, 1999. The Office of Thrift
Supervision (the "OTS") requires that retained earnings be restricted by the
amount of such waived dividends. Such restricted amounts aggregated $41,355 at
and for the year ended December 31, 1999.


                                                                             13.
<PAGE>

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

3. INVESTMENT SECURITIES

<TABLE>
<CAPTION>
                                                                December 31, 1999
                                            --------------------------------------------------------
                                                                Gross Unrealized             Fair
                                             Amortized     --------------------------    -----------
                                               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 through ten 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
                                            -----------    -----------    -----------    -----------

<CAPTION>
                                                                December 31, 1998
                                            --------------------------------------------------------
                                                                Gross Unrealized             Fair
                                             Amortized     --------------------------    -----------
                                               Cost           Gains         Losses           Value
                                            -----------    -----------    -----------    -----------
<S>                                         <C>            <C>            <C>            <C>
Available for sale
Mortgage-backed securities:
Due in one year or less                     $   627,215    $     4,145    $        --    $   631,360
Due after one year through five years         3,045,823         26,023             --      3,071,846
Due after five years                         58,132,719        921,180         22,508     59,031,391
                                            -----------    -----------    -----------    -----------

                                            $61,805,757    $   951,348    $    22,508    $62,734,597
                                            -----------    -----------    -----------    -----------
</TABLE>

The amortized cost and carrying value of securities at December 31, 1999 and
1998 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 during the year ended
December 31, 1999 and 1998. There were no sales of securities held to maturity
during the year ended December 31, 1999.

Securities available for sale with a carrying value of approximately $92,000 and
$184,000 at December 31, 1999 and 1998, 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,
                                                   -------------------------------
                                                        1999              1998
                                                   -------------     -------------
<S>                                                <C>               <C>
Real estate mortgage:
       One-to-four family                          $ 182,100,635     $ 166,573,554
       Multi-family                                    2,142,912         1,199,558
       Commercial                                      7,552,838         3,366,711
                                                   -------------     -------------

                                                     191,796,385       171,139,823
                                                   -------------     -------------

Consumer:
       Home equity loans                              10,615,900         7,133,410
       Other                                             234,832           388,225
                                                   -------------     -------------

                                                      10,850,732         7,521,635
                                                   -------------     -------------

              Total loans                            202,647,117       178,661,458
                                                   -------------     -------------

Less:
       Allowance for loan losses                         787,961           760,496
       Deferred loan fees (costs) and discounts         (172,048)           24,355
                                                   -------------     -------------

                                                         615,913           784,851
                                                   -------------     -------------

                                                   $ 202,031,204     $ 177,876,607
                                                   =============     =============
</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,
                                                   -------------------------------
                                                        1999              1998
                                                   -------------     -------------

<S>                                                <C>               <C>
              Balance - beginning                  $     421,000     $     570,000
              New loans                                       --           143,000
              Repayments                                  (7,000)         (292,000)
                                                   -------------     -------------

              Balance - ending                     $     414,000     $     421,000
                                                   =============     =============
</TABLE>


                                                                             15.
<PAGE>

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

4. LOANS RECEIVABLE (Cont'd.)

Nonaccrual loans totalled approximately $315,000 and $593,000 at December 31,
1999 and 1998, respectively. Interest income on these loans, which is recorded
only when collected, amounted to approximately $ - 0 - and $6,000 for the years
ended December 31, 1999 and 1998, respectively. Had these loans been performing
in accordance with their original terms, interest income for the years ended
December 31, 1999 and 1998, would have been approximately $31,000 and $51,000,
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:

                                                  Year Ended December 31,
                                                  -----------------------
                                                     1999          1998
                                                  ---------     ---------

      Balance - beginning                         $ 760,496     $ 723,319
      Provisions charged to operations               60,000        44,556
      Loans charged off, net of recoveries          (32,535)       (7,379)
                                                  ---------     ---------

      Balance - ending                            $ 787,961     $ 760,496
                                                  =========     =========

At December 31, 1999 and 1998, loans serviced for the benefit of others totalled
approximately $49,000 and $104,000, respectively.

5. PREMISES AND EQUIPMENT

<TABLE>
<CAPTION>
                                                             December 31,
                                                   -------------------------------
                                                       1999               1998
                                                   -------------     -------------

<S>                                                <C>               <C>
Land                                               $     181,386     $     181,386
Buildings and improvements                               628,179           628,179
Capital leases                                         2,600,000                --
Leasehold improvements                                 1,610,897         1,425,240
Furniture and equipment                                1,904,618         1,638,611
                                                   -------------     -------------

                                                       6,925,080         3,873,416
Less accumulated deprecation and amortization         (2,058,041)       (1,741,306)
                                                   -------------     -------------

                                                   $   4,867,039     $   2,132,110
                                                   =============     =============
</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:

                                                              December 31,
                                                       -------------------------
                                                         1999             1998
                                                       -----------     ---------

            Land and building                          $ 2,600,000     $      --
            Less accumulated amortization                 (120,000)           --
                                                       -----------     ---------

            Net capital lease assets                   $ 2,479,570     $      --
                                                       ===========     =========

6.   INTEREST RECEIVABLE

                                                               December 31,
                                                        ------------------------
                                                          1999           1998
                                                        ----------    ----------
Loans, net of allowance for uncollected
 interest of $12,544  (1999) and $35,469 (1998)         $  880,630    $  846,417
Investment securities                                      658,702       468,167
Other interest-earnings assets                                  --         1,413
                                                        ----------    ----------

                                                        $1,539,332    $1,315,997
                                                        ==========    ==========

7.  DEPOSITS

                                                  December 31,
                               -------------------------------------------------
                                        1999                      1998
                               -----------------------   -----------------------
                               Weighted                  Weighted
                               Average                   Average
                                 Rate        Amount        Rate         Amount
                               --------   ------------   --------   ------------
Demand accounts:
    Non-interest bearing           --     $  4,600,293       --%    $  4,398,178
    Money Market                 2.79%       2,213,206     2.64%       2,586,665
    NOW                          1.56%      10,313,583     1.59%       9,995,226
Savings and clubs                3.00%      51,420,608     3.00%      49,196,933
Certificates of deposit          5.23%     151,984,857     5.46%     157,093,282
                                          ------------              ------------

                                 4.40%    $220,532,547     4.60%    $223,270,284
                                          ------------              ------------


                                                                             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,
                                                             --------------------------
                                                                 1999          1998
                                                             -----------    -----------
                                                                    (In Thousands)
            <S>                                              <C>            <C>
            One year or less                                 $   107,577    $   106,338
            After one through three years                         43,474         49,541
            After three years                                        934          1,214
                                                             -----------    -----------

                                                             $   151,985    $   157,093
                                                             -----------    -----------
</TABLE>

At December 31, 1999 and 1998, certificates of deposit of $100,000 or more
totaled approximately $10,626,000 and $8,312,000, respectively.

Interest expense on deposits consists of the following:

<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                                             --------------------------
                                                                 1999           1998
                                                             -----------    -----------
            <S>                                              <C>            <C>
            Money Market                                     $    69,991    $    74,610
            NOW                                                  148,130        145,010
            Savings and club                                   1,390,649      1,464,058
            Certificates of deposit                            8,393,680      8,158,431
                                                             -----------    -----------

                                                              10,002,450      9,842,109
            Less penalties for
             early withdrawal of certificates of deposits         35,006         25,219
                                                             -----------    -----------

                                                             $ 9,967,444    $ 9,816,890
                                                             -----------    -----------
</TABLE>


                                                                             18.
<PAGE>

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

8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

<TABLE>
<CAPTION>
                                                                Interest       December 31,
                   Lender                     Maturity            Rate             1999
            ----------------------       -----------------      --------       ------------
            <S>                          <C>                     <C>           <C>
            Federal Home Loan Bank       April 3, 2000           5.24%         $ 4,800,000
            Federal Home Loan Bank       February 15, 2000       5.83%          20,000,000
                                                                               -----------
                                                                               $24,800,000
                                                                               ===========
</TABLE>

Information concerning securities sold under agreements to repurchase is
summarized as follows:

                                                                    December 31,
                                                                        1999
                                                                    ------------

Average balance during the year                                     $13,258,000
Average interest rate during the year                                      5.15%
Maximum month end balance                                           $24,800,000

Investment securities underlying the
  agreement at year end
         Carrying value                                             $35,179,000
         Fair value                                                 $35,074,000

The Bank also has an available line of credit with Federal Home Loan Bank of New
York ("FHLB") subject to terms and conditions of the lender's overnight advance
program, in the amount of $27,869,000 at December 31, 1999. Advances under this
line of credit, which expires on December 1, 2000, are made for one day periods
only. The advances are secured by stock of the FHLB in the amount of $2,355,100
at December 31, 1999. No advances were outstanding at December 31, 1999.

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, 1999.


                                                                             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,
                    2000                                                          $  272       $  178
                    2001                                                             280          132
                    2002                                                             288           54
                    2003                                                             297           28
                    2004                                                             305           27
                    Years subsequent                                               4,596           --

                    Total minimum net lease payments                               6,038       $  419

                    Imputed interest                                               3,442

                    Present value of minimum capitalized lease payments           $2,596
</TABLE>

Rentals, including related expenses, under long-term operating leases for
certain branch offices amounted to approximately $242,000 and $168,000 for the
years ended December 31, 1999 and 1998, 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:

                                                               December 31,
                                                         ----------------------
                                                           1999          1998
                                                         --------      --------
                                                             (In Thousands)

GAAP capital                                             $ 25,949      $ 25,537
Less: unrealized loss (gain) on securities
       available for sale                                     349          (585)
                                                         --------      --------

Core and tangible capital                                  26,298        24,952
Add: loan valuation allowance                                 788           761
                                                         --------      --------

       Total regulatory capital                          $ 27,086      $ 25,713
                                                         ========      ========


                                                                             20.
<PAGE>

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

10. REGULATORY CAPITAL (Cont'.d)

<TABLE>
<CAPTION>
                                                              December 31, 1998
                                  --------------------------------------------------------------------
                                                                                        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)       $25,713      23.78%      $ 8,650       8.00%     $10,812      10.00%

Tier 1 Capital
  (to risk-weighted assets)        24,952      23.08%           --         --        6,487       6.00%

Core (Tier 1) Capital
  (to adjusted total assets)       24,952       9.60%       10,397       4.00%      12,996       5.00%

Tangible Capital
  (to adjusted total assets)       24,952       9.60%        3,899       1.50%          --         --

<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)       $27,086      21.63%      $10,015       8.00%     $12,519      10.00%

Tier 1 Capital
  (to risk-weighted assets)        26,298      21.01%           --         --        7,512       6.00%

Core (Tier 1) Capital
  (to adjusted total assets)       26,298       9.38%       11,213       4.00%      14,016       5.00%

Tangible Capital
  (to adjusted total assets)       26,298       9.38%        4,205       1.50%          --         --
</TABLE>

As of December 22, 1998, 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, 1999 and 1998.


                                                                             21.
<PAGE>

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

11. BENEFIT PLANS

Retirement plan

The Bank has a non-contributory pension plan covering all eligible employees.
The plan is a defined benefit plan which provides benefits based on a
participant's years of service and compensation. The Bank's funding policy is to
contribute annually the maximum amount that can be deducted for federal income
tax purposes.

Plan assets are 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,
                                                                             -----------------------------
                                                                                 1999             1998
                                                                             -----------       -----------
<S>                                                                          <C>               <C>
      Actuarial present value of benefit obligations,
        including vested benefits of $1,221,745 and

        $1,034,596, respectively                                             $ 1,221,745       $ 1,051,640
                                                                             -----------       -----------

      Projected benefit obligation - beginning                               $ 1,474,206       $ 1,366,657
        Service cost                                                              52,621            76,958
        Interest cost                                                             89,222            90,832
        Actuarial loss                                                          (222,658)          108,154
        Settlements                                                              (51,515)         (168,395)
        Curtailment                                                             (120,131)               --
                                                                             -----------       -----------

      Projected benefit obligation - ending                                    1,221,745         1,474,206
                                                                             -----------       -----------

      Plan assets at fair value - beginning                                    1,088,924         1,047,217
        Actual return on plan assets                                             145,703            99,221
        Employer contribution                                                     56,640           110,881
        Settlements                                                              (51,515)         (168,395)
                                                                             -----------       -----------

      Plan assets at fair value - ending                                       1,239,752         1,088,924
                                                                             -----------       -----------

      Projected benefit obligation (less than) in excess of plan assets          (18,007)          385,282
      Unrecognized net transition obligation                                          --           (61,080)
      Unrecognized gain (loss)                                                    78,502          (251,397)
      Unrecognized past service liability                                             --           (15,644)
                                                                             -----------       -----------

      Accrued pension cost included in other liabilities                     $    60,495       $    57,161
                                                                             -----------       -----------
</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,
                                                               -------------------------
                                                                  1999            1998
                                                               ---------       ---------
      <S>                                                      <C>             <C>
      Service cost                                             $  52,621       $  76,958
      Interest cost                                               89,222          90,832
      Expected return on plan assets                             (88,259)        (83,174)
      Amortization of net transition obligation                    8,867          11,822
      Amortization of unrecognized loss                            8,391           9,686
      Amortization of unrecognized past service liability          1,326           1,768
      Settlement charge                                               --          28,711
      Curtailment gain                                           (12,194)             --
                                                               ---------       ---------

      Net periodic pension cost
       included in salaries and employee benefits              $  59,974       $ 136,603
                                                               =========       =========
</TABLE>

Assumptions used in accounting for the plan were as follows:

<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                                               -------------------------
                                                                  1999            1998
                                                               ---------       ---------
      <S>                                                           <C>             <C>
      Discount rate                                                 6.00%           6.50%
      Rate of increase in compensation                              0.00%           4.50%
      Long-term rate of return on plan assets                       6.00%           8.00%
</TABLE>

Effective October 1, 1999, the plan ceased all benefit accruals. The Bank
expects to terminate the plan during 2000.


                                                                             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,
                                                                            -------------------------
                                                                               1999            1998
                                                                            ---------       ---------
            <S>                                                             <C>             <C>
            Accumulated postretirement benefit
                  obligation - beginning                                    $ 480,423       $ 555,818
                      Service cost                                             18,971          22,317
                      Interest cost                                            30,744          36,703
                      Actuarial (gain)                                       (135,112)       (110,281)
                      Premiums/claims paid                                    (11,939)        (24,134)
                                                                            ---------       ---------

            Accumulated postretirement benefit
                  obligation - ending (includes benefit obligation for
                     retirees and dependents of $176,846 and
                       $253,686, respectively                                 383,087         480,423
                       Employer contribution                                  (11,939)        (24,134)
                       Premium paid                                            11,939          24,134
                                                                            ---------       ---------

            Accumulated and unfunded postretirement
               benefit obligation                                             383,087         480,423
                  Unrecognized transition obligation                         (372,099)       (396,905)
                  Unrecognized gain                                           288,741         160,424
                                                                            ---------       ---------

            Accrued expense included in other liabilities                   $ 299,729       $ 243,942
                                                                            ---------       ---------
</TABLE>

The following table sets forth the components of net periodic postretirement
benefits costs:

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                            -------------------------
                                                                               1999            1998
                                                                            ---------       ---------
            <S>                                                             <C>             <C>
            Service cost                                                    $  18,971       $  22,317
            Interest cost on
             accumulated postretirement benefit obligation                     30,744          36,703
            Amortization of transition obligation                              24,806          24,806
            Amortization of unrecognized gain                                  (6,795)             --
                                                                            ---------       ---------

            Net postretirement benefit cost included in
              compensation and employee benefits                            $  67,726       $  83,826
                                                                            ---------       ---------
</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,
                                                        ------------------------
                                                          1999            1998
                                                        --------       ---------

            Discount rate                                 6.50%           6.50%
            Rate of increase in compensation              4.50%           4.50%

For the years ended December 31, 1999 and 1998, a medical cost trend rate of
6.50% and 7.00%, respectively, decreasing 0.5% per year thereafter until an
ultimate rate of 5.00% 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, 1999 and 1998,
by $52,000 and $76,000, respectively, and the aggregate of the service and
interest components of net periodic postretirement benefit cost for the years
ended December 31, 1999 and 1998, by $10,000 and $12,000, respectively.
Decreasing the assumed medical cost trend by one percent in each year would
decrease the accumulated postretirement benefit obligation as of December 31,
1999 and 1998, by $43,000 and $63,000, respectively, and the aggregate of the
service and interest components of net periodic postretirement benefit cost for
the year ended December 31, 1999 and 1998 by $8,000 and $10,000, 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, 1999 and 1998, the Bank made cash contributions of
$254,000 and $133,000, respectively, to the ESOP, of which $147,000 and $73,000,
respectively, was applied to loan principal. The loan had an outstanding balance
of $1,247,000 and $1,394,000 at December 31, 1999 and 1998, 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 $116,000 and $71,000 for the years ended
December 31, 1999 and 1998, 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,
                                                 --------------------------
                                                    1999             1998
                                                 ----------      ----------

            Allocated shares                         22,004              --
            Shares committed to be released              --           7,335
            Unreleased shares                       124,687         139,356

                                                    146,691         146,691

            Fair value of unreleased shares      $  748,122      $1,254,204

      Recognition and Retention Plan

      During 1999, the Company established the 1999 Recognition and Retention
      Plan ("RRP") to provide key employees and non-employee directors of the
      Company and their affiliates with a proprietary interest in the Company in
      a manner designed to encourage such persons to remain with the Company and
      its affiliates. The Company intends to contribute shares of authorized but
      unissued common stock or sufficient funds for the RRP to acquire 73,345
      shares of common stock of the Company. Such shares will be available to be
      awarded to employees and non-employee directors. 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. As of December 31, 1999, no shares had been
      transferred to the to RRP trust. During the year ended December 31, 1999,
      the Company/Bank awarded 70,203 shares of Company common stock under the
      RRP and recorded a related expense of $77,000.

      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. During the year ended December 31, 1999, options for 7,852
      shares were forfeited. At December 31, 1999, options for 165,148 shares
      were outstanding, of which none 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 value of options
      granted during 1999, all of which have exercise prices equal to the market
      price of the Company's common stock as of the grant date, is estimated
      using the Black-Sholes option-pricing model. Such fair value and the
      assumptions used for estimating fair value are as follows:

            Weighted average grant - date fair value per share         $ 4.02
            Expected common stock dividend yield                       0.84%
            Expected volatility                                        38.38%
            Expected option life                                       5 years
            Risk-free interest rate                                    5.88%

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

      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 year ended
      December 31, 1999 was approximately $10,000.

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, 1999, 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:

<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                                  ------------------------
                                                                    1999            1998
                                                                  ---------      ---------
      <S>                                                         <C>            <C>
      Current tax expense:
           Federal income                                         $ 856,416      $ 717,141
           State income                                              75,496         67,678
                                                                  ---------      ---------

                                                                    931,912        784,819
                                                                  ---------      ---------

      Deferred tax (benefit):
           Federal income                                           (96,830)       (17,545)
           State income                                              (8,909)        (1,524)
                                                                  ---------      ---------

                                                                   (105,739)       (19,069)
                                                                  ---------      ---------

                                                                  $ 826,173      $ 765,750
                                                                  =========      =========
</TABLE>

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:

<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                                  ------------------------
                                                                    1999            1998
                                                                  ---------      ---------
      <S>                                                         <C>            <C>
      Federal income tax expense                                  $ 770,430      $ 732,862
      Increases (reductions) in income taxes resulting from:
           New Jersey savings institution tax,
            net of federal income tax effect                         43,947         43,662
           Other items, net                                          11,796        (10,774)
                                                                  ---------      ---------

      Effective income tax                                        $ 826,173      $ 765,750
                                                                  =========      =========
</TABLE>


                                                                             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                                            1999          1998
                                                                  ---------      ---------
      <S>                                                         <C>            <C>
      Benefit plans                                               $ 116,255      $  88,084
      Deferred loan fees                                             45,033         62,947
      Uncollected interest                                           11,694         13,061
      Allowance for loss on loans                                   283,508        280,052
      Capitalized lease                                              44,374             --
      Unrealized loss on securities available for sale              204,818             --

                                                                    705,682        444,144
      Deferred tax liabilities

      Unrealized gain on securities available for sale                   --        343,671
      Depreciation                                                  135,621        125,692
      Bad debt deduction in excess of base year                     210,967        269,915

                                                                    346,588        739,278
      Net deferred tax assets (liabilities) included in
        other assets (liabilities)                                $ 359,094      $(295,134)
</TABLE>

Income taxes payable of $49,390 at December 31, 1999 are included in other
liabilities and refundable income taxes of $14,606 at December 31, 1998 are
included in other assets.

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,
                                               ---------------------------
                                                  1999             1998
                                               ----------       ----------
      Mortgage                                 $4,643,000       $4,934,000
      Fixed rate home equity loans                621,000          297,000
      Home equity credit lines                    120,000               --
                                               ----------       ----------

                                               $5,384,000       $5,231,000
                                               ==========       ==========

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, 1999 and 1998, outstanding commitments related to unused home
equity lines of credit totalled approximately $3,993,000 and $3,141,000,
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 1.75% 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,
                               ---------------------------------------------------
                                        1999                      1998
                               -----------------------     -----------------------
                               Carrying     Estimated      Carrying      Estimated
Financial assets                Amount      Fair Value      Amount      Fair Value
                               --------     ----------     --------     ----------
                                                 (In Thousands)
<S>                            <C>           <C>           <C>           <C>
Cash and cash equivalents      $  3,612      $  3,612      $ 13,824      $ 13,824
Investment securities            68,175        68,059        62,735        62,735
Loans receivable                202,031       202,818       177,877       181,861
Interest receivable               1,539         1,539         1,316         1,316

Financial liabilities

Deposits                        220,533       221,219       223,270       224,714
Borrowings                       24,800        24,792            --            --

Commitments

To originate loans                5,384         5,384         5,231         5,231
Unused lines of credit            3,993         3,993         3,141         3,141
</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 period ended
December 31, 1999 and 1998. The Company had no earnings prior to June 30, 1998.

      Condensed statements of financial condition

<TABLE>
<CAPTION>
                                                                  December 31,
                                                          ----------------------------
                                                             1999              1998
                                                          -----------      -----------
      <S>                                                  <C>              <C>
      Assets

      Cash and cash equivalents                           $   271,735      $   120,319
      Investments held to maturity                          3,489,427               --
      Investment in Liberty Bank                           26,041,585       25,536,981
      ESOP loan receivable                                  1,246,874        1,393,565
      Receivable from Liberty Bank                            947,804        7,398,861
      Accrued interest receivable                              43,567               --
                                                          -----------      -----------

           Total assets                                   $32,040,992      $34,449,726
                                                          ===========      ===========

      Liabilities and stockholder's equity

      Dividends payable                                   $    93,048      $        --
      Income taxes payable                                         --           16,668
      Stockholders' equity                                 31,947,944       34,433,058
                                                          -----------      -----------

          Total liabilities and stockholders' equity      $32,040,992      $34,449,726
                                                          ===========      ===========
</TABLE>


                                                                             33.
<PAGE>

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

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

    Condensed statements of income

                                                 Year          From Inception
                                                Ended        (June 30, 1998) to
                                              December 31,        December 31,
                                                 1999                1998
                                              ------------   ------------------

      Interest                                $  251,763          $   59,984
      Equity in earnings of Liberty Bank       1,322,928             738,151
                                              ----------          ----------

                                               1,574,691             798,135

      Expenses                                   132,751              13,012
                                              ----------          ----------

      Income before income taxes               1,441,940             785,123
      Income taxes                                 2,142              16,668
                                              ----------          ----------

      Net income                              $1,439,798          $  768,455
                                              ==========          ==========


                                                                             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          From Inception
                                                                        Ended        (June 30, 1998) to
                                                                     December 31,       December 31,
                                                                         1999               1998
                                                                     ------------     -----------------
<S>                                                                  <C>                <C>
Cash flow from operating activities

      Net income                                                     $  1,439,798       $    768,455
      Equity in earnings of Liberty Bank                               (1,322,927)          (738,151)
      (Decrease) increase in other liabilities                            (16,668)            16,668
      Increased in accrued interest receivable                            (43,567)                --
      Accretion of discounts                                               (2,552)                --
                                                                     ------------       ------------

         Net cash provided by operating activities                         54,084             46,972
                                                                     ------------       ------------

      Investing activities

      Purchase of investment securities                                (3,486,875)                --
      Decrease (increase) in loan receivable from Liberty Bank          6,451,057         (7,398,861)
      Loan made to ESOP                                                        --         (1,466,910)
      Repayment of loan receivable from ESOP                              146,691             73,345
      Purchase of 100% of the outstanding stock of Liberty Bank                --         (8,865,770)

         Net cash provided by (used in) investing activities            3,110,873        (17,658,196)
                                                                     ------------       ------------

      Financing activities

      Net proceeds from sale of common stock                                   --         17,731,543
      Purchase of treasury stock                                       (2,849,415)                --
      Dividends paid                                                     (164,126)                --
                                                                     ------------       ------------

         Net cash (used in) provided by financing activities           (3,013,541)        17,731,543
                                                                     ------------       ------------

      Net increase in cash and cash equivalents                           151,416            120,319
      Cash and cash equivalents at beginning of period                    120,319                 --
                                                                                        ------------

      Cash and cash equivalents at end of period                     $    271,735       $    120,319
                                                                     ============       ============
</TABLE>


                                                                             35.
<PAGE>

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

16. QUARTERLY FINANCIAL DATA (UNAUDITED)

Year Ended December 31, 1999

                                      First      Second      Third       Fourth
                                     Quarter    Quarter     Quarter     Quarter
                                         (In Thousands Except Per Share Data)

      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

Year Ended December 31, 1999

                                      First      Second      Third       Fourth
                                     Quarter    Quarter     Quarter     Quarter
                                         (In Thousands Except Per Share Data)

      Interest income                $3,753      $3,911      $4,201      $4,149
      Interest expense                2,305       2,451       2,448       2,613

         Net interest income          1,448       1,460       1,753       1,536

      Provision for loan losses          15          15          15          --
      Non-interest income                84          73          75          79
      Non-interest expense            1,023       1,035       1,175       1,074
      Income taxes                      186         172         221         187

      Net income                     $  308      $  311      $  417      $  354
      Net income per common
       share: Basic/diluted          N/A (1)     N/A (1)     $0.111      $0.094

(1)   Liberty Bancorp, Inc. converted to stock form on June 30, 1998.


                                                                             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 are
not permitted.

Management of the Company has not yet determined when SFAS No. 133 will be
implemented, but does not believe the ultimate implementation of SFAS No. 133
will have a material impact on their consolidated financial position or results
of operations.


                                                                             37.