<TABLE>
<CAPTION>
                        PULASKI BANCORP, INC. AND SUBSIDIARY
             SELECTED FINANCIAL CONDITION AND OTHER DATA OF THE COMPANY


                                                  At December 31,
                                ----------------------------------------------------
                                 1999        1998       1997       1996       1995
                                --------   --------   --------   --------   --------
(In Thousands)
<S>                             <C>        <C>        <C>        <C>        <C>
Financial Condition data:

Total amount of:

Assets                          $236,550   $199,792   $181,732   $160,722   $168,102
Loans receivable, net            134,522    100,894    102,212     96,258     95,605
Securities available for sale      5,906      5,642      5,367      5,034      4,842
Mortgage-backed securities        71,399     55,728     50,856     42,281     49,473
Investment securities              6,947      6,946     10,000      5,000      6,001
Deposits                         169,008    174,808    153,227    147,209    154,911
Advances and other borrowings     42,000        455      5,636       --         --
Stockholders' equity              23,783     22,806     21,689     12,445     12,134

<CAPTION>
                                         For the Year Ended December 31,
                                ------------------------------------------------
                                  1999      1998       1997     1996       1995
                                 -------   -------   -------   -------   -------
(In Thousands)
<S>                             <C>        <C>        <C>        <C>        <C>
Operating data:

Interest income                  $14,391   $13,426   $12,702   $11,614   $11,463
Interest expense                   8,317     7,790     7,347     6,872     7,106
                                 -------   -------   -------   -------   -------
Net interest income                6,074     5,636     5,355     4,742     4,357
Provision for loan losses            113       114       168       107        87
Non-interest income                  562       295       178       145       104
Non-interest expenses              4,600     4,160     3,571     4,243     3,204
Income taxes                         738       626       673       195       416
                                 -------   -------   -------   -------   -------
Net income                       $ 1,185   $ 1,031   $ 1,121   $   342   $   754
                                 =======   =======   =======   =======   =======

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                          PULASKI BANCORP, INC. AND SUBSIDIARY
               SELECTED FINANCIAL CONDITION AND OTHER DATA OF THE COMPANY

                                                At or For the Year Ended December 31,
                                          ---------------------------------------------
                                           1999      1998      1997     1996     1995
                                          ------    ------    ------    -----    -----
<S>                                        <C>       <C>       <C>      <C>      <C>
Selected Financial Ratios:

Return on average assets (1)                0.55%     0.54%     0.64%    0.59%    0.46%
Return on average equity (1)                5.11%     4.63%     6.01%    7.72%    6.42%
Average equity/average assets              10.85%    11.69%    10.64%    7.60%    7.15%
Interest rate spread                        2.49%     2.59%     2.80%    2.76%    2.50%
Net yield on average
 interest-earning assets                    2.94%     3.08%     3.18%    3.01%    2.74%
Non-interest expenses to
 average assets (1)                         2.15%     2.18%     2.04%    2.01%    1.95%
Efficiency ratios (1)                      69.32%    70.14%    64.55%   67.14%   71.82%
Equity/total assets                        10.05%    11.41%    11.93%    7.74%    7.22%
Capital ratios:
     Tangible                               9.67%    11.41%    11.93%    7.75%    7.21%
     Core                                   9.67%    11.41%    11.93%    7.75%    7.21%
     Risk-based                            20.95%    25.86%    28.28%   19.27%   19.36%
Non-performing loans
 to total assets                            0.29%     0.47%     0.49%    0.83%    0.78%
Non-performing loans
 to total loans receivable                  0.43%     0.80%     0.79%    1.29%    1.31%
Non-performing assets
 to total assets                            0.31%     0.53%     0.53%    0.92%    0.82%
Allowance for loan losses
 to non-performing loans                  167.95%   109.89%   102.47%   63.55%   64.88%
Average interest-earning
 assets/average
 interest-bearing liabilities               1.11x     1.12x     1.09x     1.06x    1.06x
Net interest income after
 provision for loan losses to
 non-interest expenses (1)                  1.30x     1.33x     1.45x     1.41x    1.33x
</TABLE>


(1)  Excludes  for the year ended  December  31,  1996,  one-time  SAIF  special
     assessment of $962,000 and the related income tax benefit of $346,000.

<PAGE>
                              PULASKI BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Formation of Stock Holding Company

On July 12, 1999, Pulaski Savings Bank (the "Bank")  reorganized into a two-tier
mutual  holding  company  structure   pursuant  to  an  Agreement  and  Plan  of
Reorganization  which  was  unanimously  adopted  by the Board of  Directors  on
January 28, 1999 and approved by the shareholders of the Bank on April 23, 1999.
Under the Plan of  Reorganization,  the Bank became a wholly owned subsidiary of
Pulaski  Bancorp,  Inc. (the  "Company"),  a  federally-chartered  stock holding
company,  a majority  of the Common  Stock of which is now owned by the  Pulaski
Bancorp,   M.H.C.,   the  Bank's  parent   mutual   holding   company.   In  the
Reorganization,  each outstanding  share of Bank common stock was converted into
one share of Company  common  stock and the holders of Bank common  stock became
the  holders  of  all  of  the  outstanding  shares  of  Company  common  stock.
Accordingly, as a result of the reorganization, the Bank's minority stockholders
became minority stockholders of the Company and the Bank's majority stockholder,
the Mutual Holding Company, became the majority stockholder of the Company.

After the reorganization,  the Bank has continued its business and operations as
a wholly owned  subsidiary of the Company and the  consolidated  capitalization,
assets,  liabilities,  income and financial  statements,  and  management of the
Company  immediately  following the  reorganization is substantially the same as
those of the Bank immediately prior to consummation of the  reorganization.  The
Charter and Bylaws of the Bank continue in effect, and have not been affected in
any manner by the  Reorganization.  The name "Pulaski Savings Bank" continues to
be utilized  by the Bank.  The  corporate  existence  of the Bank has  continued
unaffected  and  unimpaired  by  the  Reorganization  except  that  all  of  its
outstanding stock is now owned by the Company.

Discussion of Forward-Looking Statements

When used or  incorporated  by  reference  in  disclosure  documents,  the words
"anticipate",  "estimate",  "expect",  "project",  "target",  "goal" and similar
expressions   are  intended  to  identify   forward-looking   statements.   Such
forward-looking  statements  are  subject to certain  risks,  uncertainties  and
assumptions.  Should one or more of these risks or uncertainties materialize, or
should  underlying   assumptions  prove  incorrect,   actual  results  may  vary
materially  from those  anticipated,  estimated,  expected or  projected.  These
forward-looking  statements  speak  only  as of the  date of the  document.  The
Company  expressly  disclaims any obligation or undertaking to publicly  release
any updates or revisions to any  forward-looking  statement  contained herein to
reflect  any change in the  Company's  expectation  with  regard  thereto or any
change in events,  conditions or  circumstances  on which any such  statement is
based.
<PAGE>

General

The Company's principal business is the ownership and operation of the Bank. The
Bank's  principal  business  has  been and  continues  to be  attracting  retail
deposits from the general  public and investing  those  deposits,  together with
funds generated from operations, primarily in one-to-four family, owner occupied
residential mortgage loans and construction loans. In addition,  in times of low
loan demand,  the Bank will invest in  mortgage-backed  securities to supplement
its  lending  portfolio.   The  Bank  also  invests,  to  a  lesser  extent,  in
multi-family  residential  mortgage loans,  commercial  real estate loans,  home
equity and second mortgage loans and consumer loans.




                                      - 1 -
<PAGE>
                              PULASKI BANCORP, INC.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The earnings of the Bank depend primarily upon the level of net interest income,
which is the  difference  between the  interest  earned on assets such as loans,
mortgage-backed  securities,  investment  securities and other  interest-earning
assets and the interest paid on liabilities such as deposits and borrowings. Net
interest income is affected by many factors, including regulatory,  economic and
competitive factors that influence interest rates, loan demand and deposit flow.
Net interest  income is also  affected by the amount,  composition  and relative
interest rates of the Bank's assets and liabilities and by the repricing of such
assets and liabilities.  The Bank is vulnerable to interest rate fluctuations to
the extent that its interest-bearing  liabilities mature or reprice more rapidly
than its interest-earning  assets. Such asset/liability  structure may result in
lower net interest  income during  periods of rising  interest  rates and may be
beneficial in times of declining  interest rates.  The Bank's net income is also
affected  by  provisions  for loan  losses,  non-interest  income,  non-interest
expenses and income taxes.

Comparison of Financial Condition at December 31, 1999 and 1998

The  Company's  assets at  December  31, 1999  totalled  $236.6  million,  which
represents an increase of $36.8  million or 18.4% as compared to $199.8  million
at December 31, 1998 due to increases in  mortgage-backed  securities  and loans
receivable  portfolios  of  $15.7  million  and  $33.6  million,   respectively,
partially offset by a decrease in cash and cash equivalents of $16.6 million.

Cash and cash  equivalents  decreased  $16.6 million or 70.9% to $6.8 million at
December 31, 1999 from $23.4 million at December 31, 1998,  primarily reflecting
a $16.3 million  decrease in federal funds sold. The decrease was primarily used
to fund loan originations and purchases.

Trading  account  securities at December 31, 1999 amounted to $2.8 million.  The
Bank did not have trading account securities at December 31, 1998.

Securities  available  for sale  increased  $264,000 or 4.7% to $5.9  million at
December 31, 1999 compared with $5.6 million at December 31, 1998.  The increase
during the year ended  December 31, 1999,  resulted  primarily from purchases of
securities  available for sale of $310,000,  which were  sufficient to offset an
increase of unrealized loss on such portfolio of $46,000.  Investment securities
held to maturity at December 31, 1999 and 1998 amounted to $6.9 million.  During
the year ended  December 31, 1999,  proceeds  from calls and  maturities of such
securities totalled $3.0 million and were offset by purchases of $3.0 million.

Mortgage-backed  securities held to maturity increased $15.7 million or 28.2% to
$71.4  million at December 31, 1999 as compared  with $55.7  million at December
31,  1998.  The  increase  during  the year ended  December  31,  1999  resulted
primarily  from  purchases  of such  securities  of $37.1  million,  which  were
sufficient to offset principal repayments of $21.4 million.

Net loans amounted to $134.5 million and $100.9 million at December 31, 1999 and
1998, respectively,  which represents an increase of $33.6 million or 33.3%. The
increase  during the year ended  December 31, 1999 resulted  primarily from loan
originations and purchases exceeding loan principal repayments.

Real estate  owned  amounted to $50,000  and  $131,000 at December  31, 1999 and
1998, respectively.
<PAGE>
Deposits at December  31, 1999  decreased  $5.8  million to $169.0  million when
compared with $174.8  million at December 31, 1998.  During the third quarter of
1999, the Bank sold its deposits held at its Harrison,  New Jersey branch office
in the amount of $5.7 million, resulting in a gain of $423,000.

                                      - 2 -
<PAGE>
                              PULASKI BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


At December 31, 1999,  borrowed money  amounted to $42.0  million,  representing
advances  from Federal Home Loan Bank of New York  ("FHLB").  The Bank adopted a
strategy   where  such  advances  were   primarily  used  for  the  purchase  of
mortgage-backed securities held to maturity and the funding of loan originations
and  purchases  to seek  higher  rate of  return.  The  Bank  did not  have  any
outstanding advances from FHLB at December 31, 1998. At December 31, 1998, other
borrowed money amounted to $455,000, which was paid-off during 1999.

Stockholders' equity amounted to $23.8 million and $22.8 million at December 31,
1999 and 1998, respectively.  During the years ended December 31, 1999 and 1998,
cash dividends of $309,000 and $283,000,  respectively,  were paid on the Bank's
and Company's common stock. During the year ended December 31, 1999, the Company
repurchased  27,600 shares of its common stock,  at prices ranging from $8.00 to
$8.31, for $224,000 under a stock repurchase program.


Comparison of Operating Results for The Years Ended December 31, 1999 and 1998

GENERAL

Net income  increased by  $154,000,  or 14.9%,  to $1.2 million  during the year
ended  December 31, 1999 compared with $1.0 million for the year ended  December
31,  1998.  The  increase  in net income  during the 1999 period  resulted  from
increases  in total  interest  income of  $965,000  and  non-interest  income of
$267,000,  along with a decrease in provision  for loan losses of $1,000,  which
more than offset increases in total interest expense,  non-interest expenses and
income taxes of $527,000, $439,000 and $113,000, respectively.

INTEREST INCOME

Interest  income on loans during the year ended  December 31, 1999  increased by
$649,000,  or 7.6%, to $9.2 million when  compared to $8.5 million  during 1998.
The increase  during the 1999 period  resulted from an increase of $16.4 million
or 16.3% in the average  balance of loans  outstanding to $117.1 million in 1999
from $100.7  million in 1998,  sufficient to offset a decrease of 63 basis point
in the yield  earned on the loan  portfolio to 7.85% in 1999 from 8.48% in 1998.
Interest on mortgage-backed  securities held to maturity increased $613,000,  or
19.0%,  during the year ended December 31, 1999 to $3.8 million compared to $3.2
million for 1998.  During the year ended December 31, 1999, the average  balance
of mortgage-backed  securities  outstanding  increased $11.7 million or 21.8% to
$65.3  million  in 1999  from  $53.6  million  in 1998,  sufficient  to offset a
decrease  of 14 basis  point  from  6.01% in 1998 to 5.87% in 1999 in the  yield
earned  on  the  mortgage-backed   securities  portfolio.   Interest  earned  on
investment  securities  held to  maturity  decreased  by $45,000,  or 10.0%,  to
$406,000 for the year ended  December 31,  1999,  when  compared to $451,000 for
1998.  The decrease  during 1999 resulted  from a decrease of $1.4  million,  or
17.3%, in the average balance of the investment securities portfolio, sufficient
to offset an increase of 51 basis points in the yield  earned on the  investment
securities  portfolio  from 5.75% in 1998 to 6.26% in 1999.  Interest  earned on
<PAGE>
securities  available  for sale  amounted to $310,000 and $309,000 for the years
ended   December   31,   1999  and  1998,   respectively.   Interest   on  other
interest-earning  assets  decreased  $253,000,  or 27.9%, to $655,000 during the
year ended December 31, 1999,  compared to $908,000 for 1998.  Such decrease was
attributable  to a  decrease  of 44 basis  points in the  yield  earned on other
interest-earning  assets  from  6.06% in 1998 to 5.62%  in  1999,  along  with a
decrease  of  $3.3  million,   or  22.0%,   in  the  average  balance  of  other
interest-earning assets outstanding to $11.7 million in 1999 compared with $15.0
million in 1998. The decrease in other interest-earning assets was primarily the
result of a decrease in federal funds sold.

                                      - 3 -
<PAGE>
                              PULASKI BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



INTEREST EXPENSE

Interest on deposits  decreased  $160,000,  or 2.1%, to $7.5 million  during the
year ended  December 31, 1999  compared to $7.6  million for 1998.  The decrease
during  1999 was  attributable  to a decrease  of 35 basis  points in the Bank's
average cost of interest-bearing deposits to 4.39% for 1999 from 4.74% for 1998,
sufficient to offset an increase of $9.2 million,  or 5.7%, to $170.3 million in
1999 from  $161.1  million in 1998 in the  average  balance of  interest-bearing
deposits  outstanding.  Interest on  borrowed  money  amounted  to $846,000  and
$159,000  during the years ended December 31, 1999 and 1998,  respectively.  The
increase  during 1999 was  attributable  to an increase of $12.8  million in the
average  borrowings  outstanding,  sufficient  to offset a decrease  of 87 basis
points in the Bank's cost of borrowings to 5.54% for 1999 from 6.41% for 1998.

NET INTEREST INCOME

Net interest income for the year ended December 31, 1999,  increased $438,000 or
7.8%, to $6.1 million for 1999 from $5.6 million for 1998. The net interest rate
spread  decreased  from  2.59% in 1998 to 2.49%  in 1999 and the  interest  rate
margin  decreased  from 3.08% in 1998 to 2.94% in 1999.  The decrease  primarily
resulted from a 37 basis points decrease in the yield on interest-earning assets
to 6.98% in 1999 from  7.35% in 1998 which  more than  offset a  decrease  of 28
basis points in the cost of average  interest-bearing  liabilities from 4.76% in
1998 to 4.48% in 1999.  The  Company was able to increase  net  interest  income
despite shrinking  margins by increasing net  interest-earning  assets,  such as
loans and mortgage-backed securities.

PROVISION FOR LOAN LOSSES

During the years ended  December 31, 1999 and 1998,  the Bank provided  $113,000
and $114,000, respectively, for loan losses. The Bank maintains an allowance for
loan losses based on  management's  evaluation of the risks inherent in its loan
portfolio which gives due  consideration to changes in general market conditions
and in the nature and volume of the Bank's loan activity. The allowance for loan
losses  amounted to $1.14  million at December  31, 1999,  representing  .73% of
total loans and 167.9% of  non-performing  loans as compared to an  allowance of
$1.02 million at December 31, 1998,  representing .88% of total loans and 109.9%
of  non-performing  loans.  The Bank monitors its loan  portfolio and intends to
continue to provide for loan losses based on its ongoing  periodic review of the
loan portfolio and general market conditions.

NON-INTEREST INCOME

Non-interest  income  increased by $267,000 or 90.5% to $562,000 during the year
ended  December 31, 1999 as compared to $295,000 for the year ended December 31,
1998. The increase in non-interest income during 1999 resulted from increases in
fees and service charges of $63,000,  a gain on sale of deposits of the Harrison
branch of $423,000 and miscellaneous  income of $2,000,  which was sufficient to
offset an increase in trading account losses of $221,000.


                                      - 4 -
<PAGE>
                              PULASKI BANCORP, INC.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



During the years ended December 31, 1999 and 1998,  the Bank  purchased  trading
account securities of $7.1 million and $17.2 million, respectively, and proceeds
from  sales  of  such  securities  amounted  $4.3  million  and  $17.3  million,
respectively, resulting in realized gains on such sales of $41,000 and $123,000,
respectively.  Unrealized losses on trading account securities totalled $139,000
for the year ended  December 31, 1999.  During the year ended  December 31, 1999
the Bank sold its  deposits of $5.7  million  held at its  Harrison,  New Jersey
branch office at a gain of $423,000.

NON-INTEREST EXPENSES

Non-interest  expenses increased $440,000,  or 10.6%, to $4.6 million during the
year  ended  December  31,  1999  compared  to $4.2  million  for the year ended
December  31,  1998.  Salaries and  employee  benefits,  the major  component of
non-interest expenses, increased $158,000 or 6.4% during the year ended December
31,  1999,  while  occupancy,   advertising,   federal  insurance  premiums  and
miscellaneous  expenses  increased by $132,000,  $100,000,  $7,000 and $123,000,
respectively,  which  increases were partially  offset by decreases in equipment
and loss on  foreclosed  real estate of $74,000 and  $6,000,  respectively.  The
increase in occupancy expense, advertising and miscellaneous expenses is largely
the result of a new branch  located at  Bayville,  New Jersey,  which was opened
during the second  quarter of 1999 and a new  branch  located at  Milltown,  New
Jersey,  which was opened during the fourth quarter of 1999.  Equipment expenses
during the 1998 period  included the cost incurred in connection with the change
of the Bank's outside computer center.

INCOME TAXES

Income tax expense totaled $738,000 and $625,000 during the years ended December
31, 1999 and 1998, respectively. The increase in 1999 resulted primarily from an
increase in pre-tax income of $267,000.  The Bank's  effective  income tax rates
were  38.4%  and  37.7%  during  the year  ended  December  31,  1999 and  1998,
respectively.


Comparison of Operating Results for The Years Ended December 31, 1998 and 1997

GENERAL

Net income  decreased by $90,000 or 8.0%, to $1.0 million  during the year ended
December 31, 1998  compared  with $1.1  million for the year ended  December 31,
1997.  The decrease in net income during the 1998 period was due to increases in
total  interest  expense and  non-interest  expenses of $443,000  and  $588,000,
respectively,  which more than  offset  increases  in total  interest  income of
$724,000 and  non-interest  income of $117,000 along with decreases in provision
for loan losses and income taxes of $54,000 and $47,000, respectively.

INTEREST INCOME

Interest  income on loans during the year ended  December 31, 1998  increased by
$202,000 or 2.4%, to $8.5 million when compared to $8.3 million during 1997. The
<PAGE>
increase during the year ended December 31, 1998 resulted from an increase of 11
basis  points in the yield  earned on the loan  portfolio  to 8.48% in 1998 from
8.37% in 1997  along with an  increase  of $1.1  million or 1.1% in the  average
balance of loans  outstanding  to $100.7  million in 1998 from $99.6  million in
1997.

                                      - 5 -
<PAGE>
                              PULASKI BANCORP, INC.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Interest on mortgage-backed  securities held to maturity increased $245,000,  or
8.2%,  during the year ended December 31, 1998 to $3.2 million  compared to $3.0
million for the year ended December 31, 1997. During the year ended December 31,
1998, the average balance of mortgage-backed  securities  outstanding  increased
$8.0  million or 17.6% to $53.6  million in 1998 from $45.6  million in 1997 and
more than  offset the  decrease  of 52 basis  points in the yield  earned on the
mortgage-backed  securities  portfolio  from  6.53%  in 1997 to  6.01%  in 1998.
Interest earned on investment  securities held to maturity decreased by $75,000,
or 14.3%,  to $451,000 for the year ended  December 31, 1998,  when  compared to
$526,000  for 1997.  The  decrease  during  1998  resulted  from a  decrease  of
$462,000,  or  5.6%,  in  the  average  balance  of  the  investment  securities
portfolio,  along with a decrease of 58 basis  points in the yield earned on the
investment  securities  portfolio from 6.33% in 1997 to 5.75% in 1998.  Interest
earned on  securities  available  for sale  decreased  by  $4,000,  or 1.3%,  to
$309,000 for the year ended  December 31,  1998,  when  compared to $313,000 for
1997.  The decrease  during 1998  resulted from a decrease of 42 basis points in
the yield earned on the  securities  available for sale  portfolio from 6.01% in
1997 to 5.59% in 1998  sufficient  to offset an increase of $311,000 or 6.0%, in
the average balance of such portfolio. Interest on other interest-earning assets
increased  $356,000,  or 64.5%,  to $908,000  during the year ended December 31,
1998,  compared to $552,000 for the year ended December 31, 1997.  Such increase
was  attributable to an increase of 41 basis points in the yield earned on other
interest-earning  assets  from  5.65% in 1997 to 6.06%  in 1998,  along  with an
increase  of  $5.2  million,   or  53.5%,   in  the  average  balance  of  other
interest-earning assets outstanding.

INTEREST EXPENSE

Interest on deposits  increased  $541,000,  or 7.6%, to $7.6 million  during the
year ended  December 31, 1998  compared to $7.1  million for 1997.  The increase
during 1998 was  attributable  to an increase of five basis points in the Bank's
average cost of interest-bearing deposits to 4.74% for 1998 from 4.69% for 1997,
along with an increase of $9.8 million,  or 6.4%, to $161.1 million in 1998 from
$151.3  million in 1997,  in the average  balance of  interest-bearing  deposits
outstanding. Interest on borrowed money amounted to $159,000 and $257,000 during
the years ended December 31, 1998 and 1997,  respectively.  Such decrease during
1998 was  attributable  to a decrease of $1.1  million,  or 30.4% in the average
borrowings  outstanding,  along with a decrease of 80 basis points in the Bank's
cost of borrowings from 7.21% for 1997 to 6.41% for 1998.

NET INTEREST INCOME

Net interest income for the year ended December 31, 1998, increased $281,000, or
5.2%, to $5.6 million for 1998 from $5.4 million for 1997. The net interest rate
spread  decreased  to 2.59% in 1998  from  2.80% in 1997 and the  interest  rate
margin decreased to 3.08% in 1998 from 3.18% in 1997. These decreases  primarily
resulted from a 19 basis points decrease in the yield on interest-earning assets
to 7.35% in 1998 from 7.54% in 1997 along with an increase  of two basis  points
in the cost of average interest-bearing  liabilities to 4.76% in 1998 from 4.74%
in 1997.  The Bank was able to increase net interest  income  despite  shrinking
margins by increasing net interest-earning assets.


                                      - 6 -
<PAGE>
                              PULASKI BANCORP, INC.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



PROVISION FOR LOAN LOSSES

During the years ended  December 31, 1998 and 1997,  the Bank provided  $114,000
and $168,000, respectively, for loan losses. The Bank maintains an allowance for
loan losses based on  management's  evaluation of the risks inherent in its loan
portfolio which gives due  consideration to changes in general market conditions
and in the nature and volume of the Bank's loan activity. The allowance for loan
losses  amounted to $1.02  million at December  31, 1998,  representing  .88% of
total  loans and 109.9% of  non-performing  loans  compared to an  allowance  of
$913,000 at December  31, 1997,  representing  .81% of total loans and 102.5% of
non-performing  loans.  During the years ended  December 31, 1998 and 1997,  the
Bank charged off loans aggregating $5,000 and $125,000,  respectively.  The Bank
continually  monitors the loan  portfolio and intends to continue to provide for
loan  losses  based on its ongoing  periodic  review of the loan  portfolio  and
general market conditions.

NON-INTEREST INCOME

Non-interest  income  increased by $117,000 or 65.7% to $295,000 during the year
ended  December 31, 1998 as compared to $178,000 for the year ended December 31,
1997. The increase in non-interest income during 1998 resulted from increases in
fees and  service  charges of $43,000  and  trading  account  income of $74,000.
During  1998,  and 1997,  proceeds  from  sales of  trading  account  securities
totalled  $17.3 million and $3.0 million,  respectively,  while the purchases of
such securities totalled $17.2 million and $2.9 million, respectively, resulting
in trading account income of $123,000 and $49,000, respectively.

NON-INTEREST EXPENSES

Non-interest  expenses  increased  $588,000 or 16.5%, to $4.2 million during the
year ended  December 31, 1998  compared to $3.6  million for 1997.  Salaries and
employee  benefits,  the major  component of  non-interest  expenses,  increased
$341,000  or 15.9%  during the year ended  December  31,  1998 while  occupancy,
equipment and miscellaneous expenses increased by $5,000,  $250,000 and $23,000,
respectively,  which  increases  were  partially  offset by decreases in loss on
foreclosed real estate,  advertising and federal  insurance  premium of $11,000,
$17,000 and $2,000, respectively. The increase in salaries and employee benefits
during the 1998 period  resulted  primarily  from the increase in Employee Stock
Ownership Plan ("ESOP") expense of $58,000 recorded in accordance with Statement
of Position  ("SOP")  93-6,  which was  implemented  in April 1997 and  $124,000
related  to  the  Recognition  and  Retention  Plan  ("RRP"),   which  was  also
implemented  during the year ended  December 31, 1997.  Excluding the effects of
the ESOP and RRP, salaries and employee benefits increased $159,000 or 7.4%. The
increase during the 1998 period in the equipment expense resulted primarily from
the cost incurred in connection  with the change of the Bank's outside  computer
service center.
<PAGE>
INCOME TAXES
Income tax  expense  totalled  $625,000  and  $673,000  during  the years  ended
December  31,  1998  and  1997,  respectively.  The  decrease  in 1998  resulted
primarily  from a decrease in pre-tax income of $137,000.  The effective  income
tax rates were 37.7% and 37.5%  during the years  ended  December  31,  1998 and
1997, respectively.


                                      - 7 -
<PAGE>
                              PULASKI BANCORP, INC.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Liquidity and Capital Resources

The  Company's   primary  sources  of  funds  are  deposits,   amortization  and
prepayments of loan and  mortgage-backed  securities  principal,  FHLB advances,
maturities of investment  securities and funds provided from  operations.  While
scheduled loan and  mortgage-backed  securities  amortization  and maturities of
investment securities are a relatively predictable source of funds, deposit flow
and loan and  mortgage-backed  securities  prepayments are greatly influenced by
market interest rates, economic conditions and competition.

The Bank is required to maintain  minimum  levels of liquid assets as defined by
the Office of Thrift Supervision ("OTS")  regulations.  This requirement,  which
may vary from time to time,  depending  upon  economic  conditions  and  deposit
flows,  is based upon a percentage of deposits and  short-term  borrowings.  The
required  ratio  currently is 4.0%. The Bank's  liquidity  averaged 28.6% during
December,  1999. The Bank adjusts its liquidity  levels in order to meet funding
needs for deposit  outflows,  payments of real estate taxes from escrow accounts
on mortgage loans,  repayment of borrowings,  when applicable,  and loan funding
commitments.  The Bank also adjusts its liquidity  level as  appropriate to meet
its asset/liability  objectives.  In addition, the Bank invests its excess funds
in federal funds and overnight  deposits with the FHLB, which provides liquidity
to meet lending requirements.  Federal funds sold and interest-bearing  deposits
in other banks at December 31, 1999 and 1998  amounted to $2.8 million and $21.0
million, respectively.

During  the years  ended  December  31,  1999 and 1998,  cash was  generated  by
operating  activities.  The  primary  source of cash from  operating  activities
during each period was net income.

The primary  sources of  investing  activities  are lending  and  investment  in
mortgage-backed  securities.  In addition to funding new loan production and the
purchases  of  mortgage-backed   securities  through  operations  and  financing
activities,  new loan production and the purchase of mortgage-backed  securities
were also funded by principal  repayments on existing loans and  mortgage-backed
securities.

During the years ended  December 31, 1999 and 1998,  cash  dividends paid on the
Company's  and the Bank's  common  stock  amounted  to  $309,000  and  $283,000,
respectively.  The mutual holding company waived its right to receive dividends.
If the mutual holding company had not waived its right to receive dividends, the
amount of such  dividends,  during the years ended  December  31, 1999 and 1998,
would have been $358,000 and $341,000, respectively.

Liquidity  management  is  both a  daily  and  long-term  function  of  business
management.  Excess liquidity is generally  invested in short-term  investments,
such as federal funds and interest-earning  deposits. If the Bank requires funds
beyond its ability to generate them internally,  borrowing agreements exist with
the FHLB,  which  provide an additional  source of funds.  At December 31, 1999,
borrowed money amounted to $42.0 million.  The Bank had no outstanding  advances
from the FHLB at December 31, 1998.
<PAGE>
The Bank  anticipates  that it will have sufficient  funds available to meet its
current  loan  commitments.  At  December  31,  1999,  the Bank has  outstanding
commitments to originate, fund or purchase loans of $15.8 million.  Certificates
of  deposit  scheduled  to mature in one year or less,  at  December  31,  1999,
totaled  $97.4  million.   Management   believes  that,  based  upon  historical
experience, a significant portion of such deposits will remain with the Bank.


                                      - 8 -
<PAGE>
                              PULASKI BANCORP, INC.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



At  December  31,  1999,  the  Bank  exceeded  each  of the  three  OTS  capital
requirements.  The Bank's  tangible,  core and  risk-based  capital  ratios were
9.67%,  9.67% and 20.95%,  respectively,  which is above the required  levels of
1.5%  for  tangible  capital,  4.0%  for core  capital  and 8.0% for  risk-based
capital.  The Bank qualifies as  "well-capitalized"  under the prompt corrective
action regulations of the OTS.

Impact of Inflation and Changing Prices

The consolidated financial statements and the related data presented herein have
been prepared in accordance with generally accepted accounting principles, which
requires the measurement of financial position and operating results in terms of
historical dollars, without considering changes in the relative purchasing power
of money over time due to inflation.

Unlike most industrial companies, virtually all of the assets and liabilities of
the Bank and Company are monetary in nature. As a result,  interest rates have a
more significant impact on the performance than the effects of general levels of
inflation.  Interest rates do not  necessarily  move in the same direction or in
the same  magnitude as the prices of goods and services  because such prices are
affected by inflation to a larger extent than interest rates.

Impact of the Year 2000 Issue

The Year 2000 Issue is the result of computer  programs  being written using two
digits  rather  than four to define the  applicable  year.  Any of the Bank's or
Company's  computer  programs  that  would  have  date  sensitive  software  may
recognize a date  during  "00" as the year 1900 rather than the year 2000.  This
could  result in a system  failure or  miscalculations  causing  disruptions  of
operations,  including  among  other  things a  temporary  inability  to process
transactions, or engage in similar normal business activities.

As of March 1, 2000, a mission  critical  hardware and software has proved to be
year 2000 compliant. We are presently  contemplating  modifications to update or
replace   some   non-critical,   non-compliant   software;   however,   if  such
modifications  or  conversions  are not  completed,  there  would be no material
impact on the operations of the Bank or Company.  The cost of these improvements
should not exceed $5,000.

The Bank and Company are not aware of any year 2000 issues  existing with any of
its significant suppliers and vendors. The third party data processing vendor of
the Bank has been and will  continue to be closely  monitored  for its year 2000
compliance.

At this time the Bank and Company are not aware of any problems that have led or
will lead to a material loss of revenue related to year 2000 issue. To date, the
Bank has incurred  approximately  $15,200  related to efforts in connection with
its year 2000 project.  This amount nor the projected amount of $5,000 as stated
above do not  include  internal  year 2000  related  costs  which are  primarily
payroll costs which are not separately tracked.




                                      - 9 -
<PAGE>
                               PULASKI BANCORP, INC.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Management of Interest Rate Risk and Market Risk Analysis

The  ability to  maximize  net  interest  income is largely  dependent  upon the
achievement  of a positive  interest  rate spread that can be  sustained  during
fluctuations  in  prevailing  interest  rates.  Interest rate  sensitivity  is a
measure  of the  difference  between  amounts  of  interest-earning  assets  and
interest-bearing  liabilities  which  either  reprice  or mature  within a given
period of time. The difference,  or the interest rate repricing "gap",  provides
an indication of the extent to which an institution's  interest rate spread will
be affected by changes in interest rates. A gap is considered  positive when the
amount of  interest-rate  sensitive  assets exceeds the amount of  interest-rate
sensitive   liabilities,   and  is  considered   negative  when  the  amount  of
interest-rate   sensitive   liabilities  exceeds  the  amount  of  interest-rate
sensitive  assets.  Generally,  during a period  of  rising  interest  rates,  a
negative  gap within  shorter  maturities  would  adversely  affect net interest
income,  while a  positive  gap within  shorter  maturities  would  result in an
increase in net interest income,  and during a period of falling interest rates,
a negative  gap within  shorter  maturities  would  result in an increase in net
interest income while a positive gap within shorter maturities would result in a
decrease in net interest income.

Because the Bank's  interest-bearing  liabilities which mature or reprice within
shorter periods exceed its interest-earning assets with similar characteristics,
material and prolonged  increases in interest rates  generally  would  adversely
affect net interest income,  while material and prolonged  decreases in interest
rates generally would have a positive effect on net interest income.

The Bank's  current  investment  strategy is to  maintain an overall  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 is concentrated in U.S.  Treasury and
federal government agency securities providing high asset quality to the overall
balance  sheet  mix.  Securities   classified  as  available  for  sale  provide
management  with the  flexibility  to make  adjustments  to the portfolio  given
changes in the economic or interest rate environment,  to fulfill  unanticipated
liquidity needs, or to take advantage of alternative investment opportunities.

         Gap Analysis. The matching of assets and liabilities may be analyzed by
examining the extent to which such assets and  liabilities  are  "interest  rate
sensitive" and by monitoring a bank's interest rate sensitivity  "gap". An asset
and  liability  is said to be interest  rate  sensitive  within a specific  time
period if it will mature or reprice  within that time period.  The interest rate
sensitivity   gap  is  defined  as  the   difference   between   the  amount  of
interest-earning  assets maturing or repricing within a specific time period and
the amount of  interest-bearing  liabilities  maturing or repricing  within that
same time period.  At December 31, 1999, the Bank's cumulative one year interest
rate gap (which is the difference between the amount of interest-earning  assets
maturing or repricing within one year and interest-bearing  liabilities maturing
or repricing  within one year) as a percentage of total  assets,  was a negative
20.93%.
<PAGE>
The  following  table sets  forth the  amounts  of  interest-earning  assets and
interest-bearing  liabilities  outstanding  at  December  31,  1999,  which  are
expected to mature or reprice in each of the future time periods  shown.  Except
as stated  below,  the amount of assets and  liabilities  shown which  mature or
reprice  during a  particular  period were  determined  in  accordance  with the
contractual  terms of the related  assets or  liabilities.  The Bank has assumed
that its savings accounts, which totaled $25.8 million at December 31, 1999, are
withdrawn at the following rates, 17.00%,  31.11%,  29.44%,  52.96%,  77.87% and
100.00% on the cumulative  declining balance of such accounts during the periods
shown. The Bank has further assumed that its  interest-bearing  demand accounts,
which totaled $25.6 million at December 31, 1999, are withdrawn at the following
rates,  37.00%,  53.76%,  31.11%,  60.63%,  84.50% and 100.00% on the cumulative
declining balance of such accounts during the periods shown.


                                     - 10 -
<PAGE>
                           PULASKI BANCORP, INC.

<TABLE>
<CAPTION>
                                               MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                                            FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                                                  More Than    More Than     More Than     More Than
                                                     1 Year       1 Year to    3 Years      5 Years to   10 Years to    More Than
                                                     or Less       3 Years    to 5 Years     10 Years     20 Years       20 Years
                                                     ---------    ---------   ---------     ---------     ---------     ---------
<S>                                                   <C>         <C>         <C>           <C>           <C>           <C>
Interest-earning assets:

      Loans (1)                                      $  32,421    $   5,096   $   2,996     $  19,626     $  18,109     $  58,203
                                                     ---------    ---------   ---------     ---------     ---------     ---------
      Mortgage-backed securities                        59,441        2,530       1,682          --           4,087         3,659
      Investments held to maturity                         947         --         1,000         5,000          --            --
      Other interest-earning assets (2)                 11,008         --          --            --           1,220         1,570
                                                     ---------    ---------   ---------     ---------     ---------     ---------
                Total interest-earning assets          103,817        7,626       5,678        24,626        23,416        63,432
                                                     ---------    ---------   ---------     ---------     ---------     ---------
Interest-bearing liabilities:

      Demand deposits                                    9,487        8,684       2,324         3,119         1,712           314
      Savings account                                    4,390        6,668       4,347         5,518         3,817         1,085
      Certificates of deposits                          97,446       15,236       2,265            --            --            --
      Borrowed money                                    42,000         --            --            --            --            --
                                                     ---------    ---------   ---------     ---------     ---------     ---------

                Total interest-bearing liabilities     153,323       30,588       8,936         8,637         5,529         1,399
                                                     ---------    ---------   ---------     ---------     ---------     ---------

Interest sensitivity gap per period                  $ (49,506)   $ (22,962)  $  (3,258)    $  15,989     $  17,887     $  62,033
                                                     =========    =========   =========     =========     =========     =========

Cumulative gap as a percent of total assets             (20.93)%    (30.64)%     (32.01)%     (25.25)%      (17.69)%         8.53%

Cumulative interest-sensitive assets as a
  percent of interest-sensitive liabilities              67.71%      60.60%        60.73%        70.35%       79.78%       109.68%

</TABLE>
(1)  Excludes loans in process.
(2)  Includes securities available for sale, trading account securities, federal
     funds sold and interest-bearing deposits with other institutions.
<PAGE>
<TABLE>
<CAPTION>
                                                           Total      Fair Value
                                                          ---------   ----------
<S>                                                       <C>         <C>
Interest-earning assets:

      Loans (1)                                           $ 136,451   $ 134,145
      Mortgage-backed securities                             71,399      70,547
      Investments held to maturity                            6,947       6,697
      Other interest-earning assets (2)                      13,798      13,798

                Total interest-earning assets               228,595     225,187
                                                           ---------   ---------
Interest-bearing liabilities:

      Demand deposits                                         25,640      25,640
      Savings account                                         25,825      25,825
      Certificates of deposits                               114,947     115,070
      Borrowed money                                          42,000      42,019
                                                           ---------   ---------

                Total interest-bearing liabilities           208,412     208,554
                                                           ---------   ---------

Interest sensitivity gap per period                        $  20,183   $  16,633
                                                           =========   =========

Cumulative gap as a percent of total assets

Cumulative interest-sensitive assets as a
  percent of interest-sensitive liabilities

</TABLE>
(1)  Excludes loans in process.

(2)  Includes securities available for sale, trading account securities, federal
     funds sold and interest-bearing deposits with other institutions.



                                     - 11 -
<PAGE>
                              PULASKI BANCORP, INC.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



         Net Portfolio  Value. The Bank's interest rate sensitivity is monitored
by management through the use of the OTS model which estimates the change in the
Bank's net portfolio value ("NPV") over a range of interest rate scenarios.  NPV
is the  present  value of  expected  cash flows from  assets,  liabilities,  and
off-balance sheet contracts. The NPV ratio, under any interest rate scenario, is
defined as the NPV in that scenario divided by the market value of assets in the
same  scenario.  The OTS produces its analysis  based upon data submitted on the
Bank's quarterly Thrift  Financial  Reports.  The following table sets forth the
Bank's NPV as of December 31, 1999, as calculated by the OTS.

<TABLE>
<CAPTION>
                                                                                          NPV as % of Portfolio
    Change in                               Net Portfolio Value                              Value of Assets
  Interest Rates              --------------------------------------------            ----------------------------
  In Basis Points                                  $                   %                NPV                %
   (Rate Shock)                Amount            Change             Change             Ratio            Change (1)
   ------------                ------            ------             ------             -----            ----------
                                                         (Dollars in Thousands)
<S>                           <C>              <C>                   <C>                <C>             <C>
        300                   $ 3,440          $ (17,690)            (83.72)%            1.60 %          (82.24)%
        200                     9,528            (11,602)            (54.91)             4.30            (52.28)
        100                    15,467             (5,662)            (26.80)             6.78            (24.75)
         0                     21,129               -                  -                 9.01              -
       (100)                   25,780              4,651              22.01             10.75             19.31
       (200)                   28,229              7,099              33.60             11.62             28.97
       (300)                   30,631              9,502              44.97             12.45             38.18

</TABLE>

(1)  Based on the  portfolio  value of the Bank's  assets  assuming no change in
     interest rates.


Certain  shortcomings are inherent in the methodology used in the above interest
rate risk  measurements.  Modeling  changes in NPV require the making of 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 model
presented  assumes that the composition of the Bank's interest  sensitive assets
and liabilities  existing at the beginning of a period remains constant over the
period being  measured  and also  assumes  that a particular  change in interest
rates is reflected  uniformly  across the yield curve regardless of the duration
to  maturity  or  repricing  of specific  assets and  liabilities.  Accordingly,
although  the NPV  measurements  and  net  interest  income  models  provide  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.


                                     - 12 -
<PAGE>



                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------






To The Board of Directors
Pulaski Bancorp, Inc. and Subsidiary



We have audited the accompanying  consolidated statements of financial condition
of Pulaski Bancorp,  Inc. (the "Company") and Subsidiary as of December 31, 1999
and  1998 and the  related  consolidated  statements  of  income,  comprehensive
income,  changes in stockholders' equity and cash flows for each of the years in
the three-year  period ended  December 31, 1999.  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. These 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 above mentioned  consolidated  financial statements present
fairly,  in all material  respects,  the financial  position of Pulaski Bancorp,
Inc. and  Subsidiary as of December 31, 1999 and 1998,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1999,  in  conformity  with  generally  accepted  accounting
principles.



                                                            /s/Radics & Co., LLC
                                                            --------------------
                                                               Radics & Co., LLC

February 11, 2000




                                       15
<PAGE>
                     PULASKI BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
                                          CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                          ----------------------------------------------
                                                                                                           December 31,
                                                                                                --------------------------------
<S>                                                                    <C>                      <C>                 <C>
Assets                                                                   Note(s)                    1999                1998
------                                                                   -------                -----------          -----------

Cash and amounts due from depository institutions                                               $ 3,966,072          $ 2,336,949
Interest-bearing deposits                                                                           454,547            2,377,613
Federal funds sold                                                                               2,350,000            18,650,000

              Cash and cash equivalents                                  1 and 16                 6,770,619           23,364,562

Term deposits                                                            3 and 16                   197,000              197,000
Trading account securities                                                  1                     2,790,500                   --
Securities available for sale                                          1, 4 and 16                5,906,451            5,642,498
Investment securities held to maturity                                 1, 5 and 16                6,947,017            6,946,353
Mortgage-backed securities held to maturity                            1, 6 and 16               71,399,443           55,728,490
Loans receivable                                                       1, 7 and 16              134,522,001          100,894,180
Real estate owned                                                           1                        49,822              130,626
Premises and equipment                                                   1 and 8                  4,037,888            3,862,532
Federal Home Loan Bank of New York stock                                    11                    2,100,000            1,446,200
Accrued interest receivable                                            1, 9 and 16                1,218,056              971,566
Other assets                                                           1, 13 and 14                 611,493              607,896
                                                                                              -------------        -------------

              Total assets                                                                    $ 236,550,290        $ 199,791,903
                                                                                              =============        =============

Liabilities and stockholders' equity
------------------------------------
Liabilities
-----------
Deposits                                                                10 and 16             $ 169,007,650        $ 174,808,024
Borrowed money                                                          11 and 16                42,000,000              454,805
Advance payments by borrowers for taxes                                                             919,231              773,361
Other liabilities                                                           13                      840,521              950,124
                                                                                              -------------        -------------

              Total liabilities                                                                 212,767,402          176,986,314
                                                                                              -------------        -------------
Commitments and contingencies                                               15                         -                    -

Stockholders' equity                                                  1,2,12,13, 14
--------------------                                                         and 17

Preferred stock; $.01 par value, 2,000,000 (1999) and
  5,000,000 (1998) shares authorized; issued and                                                                            -
  outstanding - none
Common stock; $.01 par value, 13,000,000 (1999) and
  10,000,000 (1998) shares authorized, 2,108,088 shares issued;
  2,080,488 shares (1999) and 2,108,088 (1998) outstanding                                           21,081               21,081
Paid-in capital                                                                                   9,833,349            9,854,730
Retained earnings - substantially restricted                                                     14,912,410           14,029,016
Unearned Recongnition Retention Plan ("RRP") shares                                                (428,702)            (581,054)
Unearned Employee Stock Ownership Plan ("ESOP")                                                    (278,439)            (495,144)
Accumulated other comprehensive income (loss)                                                       (52,480)             (23,040)
Treasury stock, at cost; 27,600 shares (1999)                                                      (224,331)                -
                                                                                              -------------        -------------
              Total stockholders' equity                                                         23,782,888           22,805,589

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

              Total liabilities and stockholders' equity                                      $ 236,550,290        $ 199,791,903
                                                                                              =============        =============
</TABLE>
See notes to consolidated financial statements.
                                                                              17

<PAGE>
<TABLE>
<CAPTION>
                                           PULASKI BANCORP, INC. AND SUBSIDIARY
                                            CONSOLIDATED STATEMENTS OF INCOME
                                            ---------------------------------


                                                                                  Year Ended December 31,
                                                                          ----------------------------------------------
                                                           Note(s)           1999              1998              1997
                                                          ---------       -----------       -----------      -----------
<S>                                                        <C>            <C>               <C>              <C>
Interest income:
      Loans                                                1 and 7        $ 9,187,993       $ 8,538,663      $ 8,337,426
      Mortgage-backed securities held to maturity             1             3,832,019         3,219,434        2,974,111
      Investment securities held to maturity                  1               406,383           450,467          526,176
      Securities available for sale                           1               309,953           309,032          312,910
      Other interest-earning assets                                          654,679           908,408           551,742
                                                                          -----------       -----------      -----------

           Total interest income                                          14,391,027        13,426,004        12,702,365
Interest expense:
      Deposits                                                10           7,471,264         7,630,618         7,089,813
      Borrowed money                                          11             845,478           159,380           257,507
                                                                          -----------       -----------      -----------

           Total interest expense                                          8,316,742         7,789,998         7,347,320
                                                                          -----------       -----------      -----------

Net interest income                                                        6,074,285         5,636,006         5,355,045
Provision for loan losses                                  1 and 7           113,000           114,000           167,789
                                                                          -----------       -----------      -----------

Net interest income after provision for loan losses                        5,961,285         5,522,006         5,187,256
                                                                          -----------       -----------      -----------
Non-interest income:
      Fees and service charges                                               216,510           153,454           110,679
      Trading account (loss) income                           1              (97,894)          122,716            49,040
      Gain on sale of deposits                                               422,554              -                 -
      Miscellaneous                                                           20,949            18,719            18,533
                                                                          -----------       -----------      -----------

           Total non-interest income                                         562,119           294,889           178,252
                                                                          -----------       -----------      -----------
Non-interest expenses:
      Salaries and employee benefits                          13            2,639,764         2,481,510        2,140,316
      Occupancy expense of premises                           1               431,907           300,416          295,589
      Equipment                                               1               397,220           470,648          220,998
      Loss on real estate owned                               1                   631             7,344           17,798
      Advertising                                                             107,906             8,192           25,325
      Federal insurance premium                                               101,835            95,347           97,526
      Miscellaneous                                           13              920,465           796,786          774,208
                                                                          -----------       -----------      -----------

           Total non-interest expenses                                      4,599,728         4,160,243        3,571,760
                                                                          -----------       -----------      -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                        <C>            <C>               <C>              <C>
Income before income taxes                                                  1,923,676         1,656,652        1,793,748
Income taxes                                               1 and 14           738,431           625,340          672,670
                                                                          -----------       -----------      -----------

Net income                                                                $ 1,185,245       $ 1,031,312      $ 1,121,078
                                                                          ===========       ===========      ===========

Net income per common share:                               1 and 13
      Basic/diluted                                                           $ 0.58            $ 0.51           $ 0.56
                                                                          ===========       ===========      ===========
Weighted average number of common shares
  outstanding:                                             1 and 13
      Basic/diluted                                                        2,043,181         2,018,095        1,999,537
                                                                          ===========       ===========      ===========
</TABLE>
                                                                              18
<PAGE>
<TABLE>
<CAPTION>
                                                PULASKI BANCORP, INC. AND SUBSIDIARY
                                           CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                           -----------------------------------------------

                                                                                      Year Ended December 31,
                                                                          -----------------------------------------------
                                                                             1999              1998              1997
                                                                          -----------       -----------      -----------
<S>                                                                       <C>               <C>              <C>
Net income                                                                $ 1,185,245       $ 1,031,312      $ 1,121,078
Other comprehensive income (loss):
      Unrealized (loss) gain on securities available
       for sale, net of income taxes (benefit) of
       $(16,560), $(12,960) and $8,276, respectively                          (29,440)          (21,040)          12,724
                                                                          -----------       -----------      -----------

Comprehensive income                                                      $ 1,155,805       $ 1,010,272      $ 1,133,802
                                                                          ===========       ===========      ===========


</TABLE>


See notes to consolidated financial statements.
                                                                              19

<PAGE>
<TABLE>
<CAPTION>
                                              PULASKI BANCORP, INC. AND SUBSIDIARY
                                   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


                                                                                                  Unearned           Unearned
                                               Common           Paid-in          Retained           RRP                ESOP
                                               stock            Capital          Earnings          Shares             Shares
                                               -----            -------          --------          ------             ------
<S>                                          <C>             <C>              <C>              <C>              <C>
Balance - December 31, 1996                  $       --      $       --       $ 12,459,228     $       --       $       --
Net income for the year ending
  December 31, 1997                                  --              --          1,121,078             --               --
Unrealized gain on securities
  available for sale, net of income taxes            --              --               --               --               --
Net proceeds from initial public
  offering of common stock                         20,700       8,946,026             --               --           (761,760)
Common stock issued to RRP                            381         761,379             --          (761,760)             --
Cash dividend                                        --              --           (199,963)            --               --
Initial capitalization of
  Mutual Holding Company                             --              --           (100,000)            --               --
ESOP shares committed to
  be released                                        --            63,531             --               --            114,264
Amortization of unearned
  RRP shares                                         --              --               --            28,354             --
                                               ----------      ----------     ------------     -----------       -----------

Balance - December 31, 1997                        21,081       9,770,936       13,280,343        (733,406)         (647,496)
Net income for the year ending
  December 31, 1998                                  --              --          1,031,312             --               --
Unrealized (loss) on securities
 available for sale, net of income taxes             --              --               --               --               --
Cash dividend                                        --              --           (282,639)            --               --
ESOP shares committed to
  to be released                                     --            83,794             --               --            152,352
Amortization of unearned
 RRP shares                                          --              --               --           152,352             --
                                             ----------      ----------       ------------     -----------       -----------

Balance - December 31, 1998                        21,081       9,854,730       14,029,016        (581,054)         (495,144)

Net income for the year ending
  December 31, 1999                                  --              --          1,185,245             --               --
Unrealized (loss) on securities
 available for sale, net of income taxes             --              --               --               --            (29,440)
Cash dividend                                        --              --           (309,127)            --               --
ESOP shares committed to
  to be released                                     --         (21,381)             7,276             --            216,705
Amortization of unearned
 RRP shares                                          --              --               --           152,352              --
Treasury stock, at cost                              --              --               --               --               --
                                             ----------      ----------       ------------     -----------      -----------

Balance - December 31, 1999                  $   21,081     $ 9,833,349       $ 14,912,410     $  (428,702)     $  (278,439)
                   === ====                  ==========     ===========       ============     ===========      ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                              Accumulated
                                                Other                                 Total
                                            Comprehensive         Treasury        Stockholders'
                                            Income (Loss)           Stock             Equity
                                            -------------           -----             ------
<S>                                          <C>              <C>              <C>
Balance - December 31, 1996                  $    (14,724)    $       --       $ 12,444,504
Net income for the year ending
  December 31, 1997                                  --               --          1,121,078
Unrealized gain on securities
  available for sale, net of income taxes          12,724             --             12,724
Net proceeds from initial public
  offering of common stock                           --               --          8,204,966
Common stock issued to RRP                           --
Cash dividend                                        --               --           (199,963)
Initial capitalization of
  Mutual Holding Company                             --               --           (100,000)
ESOP shares committed to
  be released                                        --               --            177,795
Amortization of unearned
  RRP shares                                         --               --             28,354
                                             ------------     -----------      ------------

Balance - December 31, 1997                        (2,000)            --         21,689,458
Net income for the year ending
  December 31, 1998                                  --               --          1,031,312
Unrealized (loss) on securities
 available for sale, net of income taxes          (21,040)            --            (21,040)
Cash dividend                                        --               --           (282,639)
ESOP shares committed to
  to be released                                     --               --            236,146
Amortization of unearned
 RRP shares                                          --               --            152,352

                                             ------------     -----------      ------------
Balance - December 31, 1998                       (23,040)            --         22,805,589

Net income for the year ending
  December 31, 1999                                  --               --          1,185,245
Unrealized (loss) on securities
 available for sale, net of income taxes          (29,440)            --            (29,440)
Cash dividend                                        --               --           (309,127)
ESOP shares committed to
  to be released                                     --               --            202,600
Amortization of unearned
 RRP shares                                          --               --            152,352
Treasury stock, at cost                              --           (224,331)        (224,331)
                                             ------------     -----------      ------------

Balance - December 31, 1999                  $    (52,480)    $   (224,331)    $ 23,782,888
                                             ============     ============     ============

</TABLE>

<PAGE>

See notes to consolidated financial statements.
                                                                              20

<PAGE>
<TABLE>
<CAPTION>
                                            PULASKI BANCORP, INC. AND SUBSIDIARY
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                      Year Ended December 31,
                                                                        --------------------------------------------------
                                                                          1999                 1998                1997
                                                                        -----------         -----------        -----------
<S>                                                                    <C>                 <C>                <C>
Cash flows from operating activities:
     Net income                                                        $ 1,185,245         $ 1,031,312        $ 1,121,078
     Adjustments to reconcile net income to net cash
       (used in) provided by operating activities:
         Depreciation and amortization of premises
           and equipment                                                   270,239             217,028            174,399
         Amortization of premiums and accretion of
           discounts, net                                                    5,929             137,705             14,440
         Accretion of deferred loan fees                                  (247,540)           (571,215)          (329,059)
         Provision for loan losses                                         113,000             114,000            167,789
         Purchases of trading account securities                        (7,074,557)        (17,215,974)        (2,930,441)
         Proceeds from sales of trading account securities               4,289,672          17,338,690          2,979,481
         Realized gain on sale of trading account securities               (41,011)           (122,716)           (49,040)
         Unrealized loss on trading account securities                     138,905                -               -
         Gain on sale of deposits                                         (422,554)               -               -
         (Gain) loss on sale of real estate owned                           (3,225)              2,382             14,029
         (Increase) decrease in accrued interest receivable               (246,490)             62,862           (179,495)
         Deferred income taxes (benefit)                                   (93,270)              8,934            (12,660)
         Decrease (increase) in other assets                                12,963            (129,543)           312,607
         (Decrease) increase in accrued interest payable
           on deposits                                                    (210,538)             42,903             24,937
         (Decrease) increase in other liabilities                          (16,333)            613,594            109,078
         Amortization of cost of stock contributed to RRP                  152,352             152,352             28,354
         Shares committed to be released ESOP                              202,600             236,146            177,795
                                                                       -----------         -----------        -----------

         Net cash (used in) provided by opreating activities            (1,984,613)          1,918,460          1,623,292
                                                                       -----------         -----------        -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                        Year Ended December 31,
                                                                       --------------------------------------------------
                                                                          1999                 1998                1997
                                                                       -----------         -----------        -----------
<S>                                                                    <C>                 <C>                <C>
Cash flows from investing activities:
     Proceeds from maturities of term deposits                                 -               197,000            395,965
     Purchases of term deposits                                                -              (197,000)           -
     Purchases of securities available for sale                           (309,953)           (309,032)          (312,911)
     Proceeds from calls of investment securities
       held to maturity                                                  2,000,000           6,000,000          1,000,000
     Proceeds from maturities of investment securities
       held to maturity                                                  1,000,000           4,000,000            -
     Purchases of investment securities held to maturity                (3,000,000)         (6,946,250)        (6,000,000)
     Principal repayments on mortgage-backed securities
       held to maturity                                                 21,367,610          26,665,711         10,128,329
     Purchases of mortgage-backed securities held
       to maturity                                                     (37,148,665)        (31,676,403)       (18,717,561)
     Purchases of loans                                                (12,278,685)           (216,000)          (498,000)
     Net change in loan receivable                                     (21,254,415)          1,862,363         (5,361,608)
     Proceeds from sales of real estate owned                              133,851              66,647            130,560
     Capitalized costs on real estate owned                                (10,003)             (2,184)            (1,493)
     Additions to premises and equipment                                  (445,595)           (432,921)          (128,082)
     Purchase of Federal Home Loan Bank of New
       York stock                                                         (653,800)              -               -
                                                                       -----------         -----------        -----------

         Net cash (used in) investing activities                       (50,599,655)           (988,069)       (19,364,801)
                                                                       -----------         -----------        -----------
</TABLE>
See notes to consolidated financial statements.
                                                                              21
<PAGE>
<TABLE>
<CAPTION>
                                   PULASKI BANCORP, INC. AND SUBSIDIARY
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                        Year Ended December 31,
                                                          ----------------------------------------------
                                                              1999             1998             1997
                                                          ------------     ------------     ------------
<S>                                                       <C>              <C>              <C>
Cash flows from financing activities:
     Net proceeds from initial public offering of
       common stock                                       $       --       $       --       $  8,966,726
     Net increase in deposits                                   78,585       21,538,617        5,992,497
     Cash paid for sale of deposits                         (5,245,867)            --               --
     Proceeds from borrowed money                           42,000,000             --          5,000,000
     Repayments of borrowed money                             (454,805)      (5,181,265)        (125,690)
     Net increase (decrease) in advance payments
      by borrowers for taxes                                   145,870          (70,251)           2,664
     Capitalization of Mutual Holding Company                     --               --           (100,000)
     Cash dividend paid                                       (309,127)        (282,639)        (199,963)
     Purchase of treasury stock                               (224,331)            --               --
                                                          ------------     ------------     ------------

        Net cash provided by financing activities           35,990,325       16,004,462       19,536,234
                                                          ------------     ------------     ------------

Net (decrease) increase in cash and cash
     equivalents                                           (16,593,943)      16,934,853        1,794,725
Cash and cash equivalents - beginning                       23,364,562        6,429,709        4,634,984
                                                          ------------     ------------     ------------

Cash and cash equivalents - ending                        $  6,770,619     $ 23,364,562     $  6,429,709
                                                          ============     ============     ============


Supplemental disclosure of cash flow information:
     Cash paid during the year for:
        Income taxes                                      $    635,588     $    711,740     $    530,383
        Interest                                             8,488,175        7,747,095        7,273,772

Supplemental schedule of noncash investing activities:
     Unrealized (loss) gain on securities available
      for sale, net of deferred income taxes                   (29,440)         (21,040)          12,724
     Transfer of loans receivable to real estate owned          39,819          128,538           67,440
     Funds borrowed to finance common stock
       purchased by the ESOP                                      --               --            761,760
     Contributions of common stock to the RRP                     --               --            761,760



</TABLE>
See notes to consolidated financial statements.
                                                                              22
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------

         Basis of financial statement presentation
         -----------------------------------------

         The  consolidated  financial  statements,  which have been  prepared in
         conformity with generally accepted accounting  principles,  include the
         accounts of Pulaski Bancorp,  Inc. (the "Company") and its wholly owned
         subsidiary,  Pulaski Savings Bank (the "Bank"),  a federally  chartered
         stock   institution.   All   significant   intercompany   accounts  and
         transactions have been eliminated in the consolidation.

         In preparing  the  consolidated  financial  statements,  management  is
         required to make  estimates  and  assumptions  that affect the reported
         amounts of assets and  liabilities  as of the date of the  statement of
         consolidated  financial  condition  and  revenues  and expenses for the
         period then ended. Actual results could differ significantly from those
         estimates.  A material  estimate that is  particularly  susceptible  to
         significant  change relates to the  determination  of the allowance for
         loan losses.  Management believes that the allowance for loan losses is
         adequate.  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 Bank's
         market area.

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

         Business
         --------

         The Company's  primary  business is the operation of the Bank. The Bank
         provides  the usual  products  and services of banking such as deposits
         and mortgage,  consumer and commercial loans.  Approximately 53% of the
         issued  and  outstanding  stock of the  Company  is  owned  by  Pulaski
         Bancorp,  M.H.C., a mutual holding company. (See Note 2 to consolidated
         financial statements.)

         Cash and cash equivalents
         -------------------------

         Cash and cash equivalents  include cash and amounts due from depository
         institutions,  interest-bearing  deposits with  original  maturities of
         three months or less, and federal funds sold. Generally,  federal funds
         sold are sold for one-day periods.
<PAGE>
         Investment and mortgage-backed securities
         -----------------------------------------

         Debt securities that the enterprise 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 deferred income taxes, reported in the accumulated other
         comprehensive income (loss) component of stockholders' equity.

                                                                              23
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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

         Investment and mortgage-backed securities (Cont'd.)
         ---------------------------------------------------

         Interest and dividend income on securities, which includes amortization
         of premiums and accretion of discounts,  is recognized when earned. The
         adjusted  cost basis of an  identified  security sold or called is used
         for determining  security gains and losses recognized in the statements
         of income.

         Loans receivable
         ----------------

         Loans  receivable  is  stated  at  unpaid  principal  balances  less an
         allowance for loan losses and deferred loan fees and costs. Interest is
         calculated by use of the actuarial  method. An allowance is established
         for the loss of uncollected  interest on loans,  other than passbook or
         certificate  loans,  which are more than ninety days  delinquent  as to
         principal or interest.  Such interest ultimately  collected is credited
         to income in the period of recovery.

         Loan  origination  fees and certain direct loan  origination  costs are
         deferred  and  accreted,  by  use  of  the  level-yield  method,  as an
         adjustment of yield over the contractual lives of the related loans.

         Allowance for loan losses
         -------------------------

         An  allowance  for loan  losses  is  maintained  at a level  considered
         adequate to absorb 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,
         type and estimated fair value of collateral and financial  condition of
         the  borrowers.  Specific  loan loss  allowances  are  established  for
         identified  loans based on a review of such  information.  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
         allowance for loan losses may be necessary.
<PAGE>
         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 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.



                                                                              24
 <PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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

         Allowance for loan losses (Cont'd.)
         -----------------------------------

         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 interest receivable and
         then to principal.

         Concentration of risk
         ---------------------

         The lending activities are concentrated in loans secured by real estate
         located in the State of New Jersey.

         Real estate owned
         -----------------

         Real estate owned  consists of real estate  acquired by  foreclosure or
         deed in lieu of foreclosure. Real estate owned is initially recorded at
         the  lower  of cost or  fair  value  at the  date of  acquisition  and,
         thereafter,  carried at the lower of such initially  recorded amount or
         fair value less estimated  selling costs.  Costs incurred in developing
         or preparing  properties for sale are capitalized.  Expenses of holding
         properties are charged to operations as incurred.  Gains or losses from
         sales of such properties are recognized as incurred.

         Premises and equipment
         ----------------------

         Premises and equipment are comprised of land, at cost,  and  buildings,
         building  improvements,  leasehold  improvements  and  furnishings  and
         equipment,  at cost less  accumulated  depreciation  and  amortization.
         Depreciation and amortization charges are computed on the straight-line
         method over the following estimated useful lives:

                    Buildings and improvement        10 to 40 years
                    Furnishings and equipment        5 to 10 years
                    Leasehold improvements           Shorter of useful
                                                     life or term of lease

         Significant  renewals and  betterments  are charged to the premises and
         equipment account. Maintenance and repairs are charged to operations in
         the period incurred.
<PAGE>
         Income taxes
         ------------

         The Company and its subsidiary  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.

         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.


                                                                              25
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

         Income taxes (Cont'd.)
         ----------------------

         Deferred  income tax expense or benefit is  determined  by  recognizing
         deferred  tax  assets  and  liabilities  for the  estimated  future tax
         consequences   attributable  to  temporary   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  realization  of  deferred  tax  assets is
         assessed and a valuation allowance provided,  when necessary,  for that
         portion of the asset which more  likely than not will not 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.  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.

         Accounting for stock based compensation
         ---------------------------------------

         In October 1995,  the Financial  Accounting  Standards  Board  ("FASB")
         issued Statement of Financial  Accounting  Standards  ("Statement") No.
         123  "Accounting  for  Stock-Based  Compensation".  Statement  No.  123
         establishes   financial   accounting   and   reporting   standards  for
         stock-based  employees  compensation  plans.  While  all  entities  are
         encouraged  to adopt the "fair value based  method" of  accounting  for
         employee  stock  compensation  plans,  Statement No. 123 also allows an
         entity to continue to measure  compensation cost under such plans using
         the "intrinsic value based method"  specified in Accounting  Principles
         Board Opinion No. 25,  "Accounting for Stock Issued to Employees" ("APB
         25").

         Under the fair value based method, compensation cost is measured at the
         grant date based on the value of the award and is  recognized  over the
         service period,  usually the vesting  period.  Fair value is determined
         using an option  pricing  model that takes into account the stock price
         at the grant date, the exercise price, the expected life of the option,
         the  volatility of the underlying  stock and the expected  dividends on
         it,  and the risk  free  interest  rate over the  expected  life of the
         option.  Under the intrinsic value based method,  compensation  cost is
         the  excess,  if any,  of the quoted  market  price of the stock at the
         grant date or other  measurement  date over the amount an employee must
         pay to acquire the stock.

         The Company has elected to account for stock-based  compensation  under
         APB 25 and the pro forma  disclosures  of net income and  earnings  per
         share  required by Statement  No. 123 have been  included in Note 13 to
         consolidated financial statements.
<PAGE>
         Net income per common share
         ---------------------------

         Basic net income per common share is  calculated by dividing net income
         by the weighted  average number of shares of common stock  outstanding,
         adjusted  for  unearned  shares  of the ESOP and the RRP.  Diluted  net
         income per share is calculated by adjusting the weighted average number
         of  shares  of  common  stock  outstanding  to  include  the  effect of
         potential  common shares,  if dilutive,  calculated  using the treasury
         stock method.


                                                                              26
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

         Net income per share (Cont'd.)
         ------------------------------

         Basic and diluted net income per common share were  computed in 1997 by
         dividing  net  income  for the  year  ended  December  31,  1997 by the
         weighted average number of shares of common stock outstanding, although
         the Bank converted to Stock form on April 2, 1997.

         During the years ended  December 31, 1999,  1998 and 1997,  diluted net
         income  per share did not  differ  from  basic net  income per share as
         there were no contracts or  securities  excercisable  or which could be
         converted into common stock which had a dilutive effect. Stock options,
         unearned  RRP  shares  and ESOP  shares not  committed  to be  released
         existed  at  December  31,  1999,   1998  and  1997  (see  Note  13  to
         consolidated financial statements).

         Interest rate risk
         ------------------

         The Bank is principally  engaged in the business of attracting deposits
         from the  general  public  and  using  these  deposits,  together  with
         borrowings  and other funds,  to purchase  securities and to make loans
         secured by real estate and, to a lesser  extent,  consumer  loans.  The
         potential  for  interest-rate  risk exists as a result of the generally
         shorter  duration  of  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 sensitive assets
         and liabilities in order to measure its level of interest-rate risk and
         to plan for future volatility.

         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
<PAGE>

         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.

                                                                              27
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

         Impact of new accounting standards (Cont'd.)
         --------------------------------------------

         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  subsidiary.  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 and subsidiary  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.

         Reclassification
         ----------------

         Certain amounts for prior periods have been  reclassified to conform to
         the current period's presentation.


2.   REORGANIZATION AND STOCKHOLDERS' EQUITY
--------------------------------------------

On December 11, 1996, the Board of Directors of the Bank unanimously adopted the
Plan of  Reorganization  from a Federal  Mutual Savings Bank to a Federal Mutual
Holding Company (the "Plan").  Pursuant to the Plan, the Bank reorganized from a

<PAGE>

federally-chartered  mutual Savings Bank into a Federal  Mutual Holding  Company
and concurrently converted to a federally-chartered  capital stock Savings Bank.
The Plan was approved by both the Office of Thrift  Supervision  (the "OTS") and
by the Bank's depositors and borrowers with outstanding loans as of November 16,
1995, which remained outstanding as of the voting record date (the "Members").



                                                                              28
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.   REORGANIZATION AND STOCKHOLDERS' EQUITY (Cont'd.)
------------------------------------------------------

As part of the Plan, Pulaski Bancorp,  M.H.C. (the "Holding Company") was formed
and a minority  stock offering was completed on April 2, 1997,  whereby  952,200
shares were sold to the public at a price of $10 per share,  for net proceeds of
$9.0  million,  which  represented  a minority  ownership of 46% of the Bank. At
December  31,  1999 and 1998,  the  total  minority  ownership  was 46% and 47%,
respectively.

On  January  28,  1999,  the Board of  Directors  of the Bank  adopted a Plan of
Reorganization  whereby the Bank would become a  wholly-owned  subsidiary of the
Company.  On April 23, 1999, the  stockholders  of the Bank approved the Plan of
Reorganization  and the formation of Pulaski  Bancorp,  Inc. The Company  issued
2,108,088  shares of common  stock to the existing  stockholders  of the Bank in
exchange  for the  common  stock of the Bank on a one for one  share  basis  and
became the owner of 100% of the common  stock of the Bank.  The Holding  Company
maintained  46% of the Company's  common  stock.  Such  reorganization  does not
materially  impact the financial  condition or operations of the Bank and/or the
Company.

During the year ended  December 31, 1999, the Company  repurchased,  in the open
market,  27,600  shares of its common  stock at an  aggregate  cost of $224,000.
These repurchases are reflected as treasury stock in the consolidated statements
of  financial  condition.  The  Company  has  received  regulatory  approval  to
repurchase,  and intends to repurchase,  subject to market  conditions and other
factors, an additional 120,943 shares of its outstanding common stock.

3.   TERM DEPOSITS
------------------
<TABLE>
<CAPTION>
                                                        December 31,
                                    ------------------------------------------------------
                                              1999                        1998
                                    ------------------------       -----------------------
                                                   Weighted                      Weighted
                                                    Average                      Average
                                      Amount         Rate           Amount         Rate
                                      ------         ----           ------         ----
<S>                                <C>                <C>        <C>                <C>
Due within one year                $   197,000        5.82%      $      --            --
Due after one through two years           --            --           197,000        5.82%
                                   -----------                   -----------

                                   $   197,000        5.82%      $   197,000        5.82%
                                   ===========                   ===========
</TABLE>
<PAGE>
4.   SECURITIES AVAILABLE FOR SALE
----------------------------------
<TABLE>
<CAPTION>
                                            December 31, 1999
                       ------------------------------------------------------------
                                             Gross Unrealized
                                        --------------------------        Carrying
                           Cost            Gains           Losses           Value
                        -----------     -----------       --------      -----------
<S>                     <C>             <C>               <C>           <C>
Equity securities:
       Mutual Fund      $ 5,988,451     $      -          $ 82,000      $ 5,906,451
                        ===========     ===========       ========      ===========
<CAPTION>
                                             December 31, 1998
                         -----------------------------------------------------------
                                             Gross Unrealized
                                       -----------------------------      Carrying
                           Cost           Gains          Losses             Value
                         ----------     ---------         ---------     -----------
<S>                     <C>             <C>               <C>           <C>
Equity securities:
       Mutual Fund      $ 5,678,498     $      -          $ 36,000      $ 5,642,498
                        ===========     ===========       ========      ===========
</TABLE>
There were no sales of  securities  available  for sale  during the years  ended
December 31, 1999, 1998 and 1997.

                                                                              29
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.   INVESTMENT SECURITIES HELD TO MATURITY
-------------------------------------------
<TABLE>
<CAPTION>
                                                                                December 31, 1999
                                                         --------------------------------------------------------------
                                                                                Gross Unrealized
                                                          Carrying         --------------------------       Estimated
                                                            Value            Gain            Losses         Fair Value
                                                         ----------       ----------       ----------       -----------
<S>                                                      <C>              <C>              <C>              <C>
U.S. Government Agencies securities:
       Maturing after one year through five years        $1,000,000       $     --         $   38,594       $  961,406
       Maturing after five years through ten years        5,000,000             --            192,034        4,807,966
Trust preferred                                             947,017             --             19,607          927,410
                                                         ----------       ---------        ----------       ----------

                                                         $6,947,017       $     --         $  250,235       $6,696,782
                                                         ==========       =========        ==========       ==========
<CAPTION>


                                                                                December 31, 1998
                                                          ---------------------------------------------------------------
                                                             Carrying            Gross Unrealized           Estimated
                                                                           -----------------------------
                                                              Value           Gains          Losses         Fair Value
                                                          ---------------  ------------   --------------  ---------------

<S>                                                         <C>               <C>             <C>           <C>
U.S. Government Agencies securities:
       Maturing within one year                             $ 1,000,000       $     -         $     -       $ 1,000,000
       Maturing after five years through ten years            5,000,000         2,500            7,750        4,994,750
Trust preferred                                                 946,353             -            1,283          945,070

                                                            $ 6,946,353       $ 2,500         $  9,033      $ 6,939,820
                                                            ===========       =======         ========      ===========
</TABLE>

There were no sales of investment  securities  held to maturity during the years
ended December 31, 1999, 1998 and 1997.

<PAGE>

6.    MORTGAGE-BACKED SECURITIES HELD TO MATURITY
-------------------------------------------------
<TABLE>
<CAPTION>
                                                                   December 31, 1999
                                              ----------------------------------------------------------
                                                                   Gross Unrealized
                                              Carrying       ----------------------------    Estimated
                                                Value            Gains         Losses        Fair Value
                                             -----------     -----------     -----------     -----------
<S>                                          <C>             <C>             <C>             <C>
Government National Mortgage Association     $14,272,475     $   106,640     $   357,326     $14,021,789
Federal National Mortgage Association         20,033,644          29,588         417,371      19,645,861
Federal Home Loan Mortgage Corporation        36,686,065          11,370         220,446      36,476,989
Small Business Administration                    407,259            --             4,636         402,623
                                             -----------     -----------     -----------     -----------

                                             $71,399,443     $   147,598     $   999,779     $70,547,262
                                             ===========     ===========     ===========     ===========
<CAPTION>
                                                                   December 31, 1998
                                              ----------------------------------------------------------
                                                                   Gross Unrealized
                                              Carrying       ----------------------------    Estimated
                                                Value            Gains         Losses        Fair Value
                                             -----------     -----------     -----------     -----------
<S>                                          <C>             <C>             <C>             <C>
Government National Mortgage Association     $10,426,823     $   169,974     $      --       $10,596,797
Federal National Mortgage Association         29,874,277         165,343          26,922      30,012,698
Federal Home Loan Mortgage Corporation        14,894,840          77,822          12,206      14,960,456
Small Business Administration                    532,550            --             1,723         530,827
                                             -----------     -----------     -----------     -----------

                                             $55,728,490     $   413,139     $    40,851     $56,100,778
                                             ===========     ===========     ===========     ===========
</TABLE>

                                                                              30

<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6.    MORTGAGE-BACKED SECURITIES HELD TO MATURITY (Cont'd.)
-----------------------------------------------------------

There were no sales of  mortgage-backed  securities  held to maturity during the
years ended  December  31, 1999,  1998 and 1997.  At December 31, 1999 and 1998,
mortgage-backed   securities   held  to  maturity   with   carrying   values  of
approximately $366,000 and $454,000, respectively, were pledged to secure public
funds on deposit.


7.    LOANS RECEIVABLE
----------------------
<TABLE>
<CAPTION>
                                                           December 31,
                                                  ------------------------------
                                                      1999             1998
                                                  ------------     -------------
<S>                                               <C>              <C>
Real estate mortgage:
        One-to-four family                        $ 99,743,852     $ 77,555,405
        Multi-family dwellings                       2,500,609        2,903,116
        Non-residential                              6,967,956        3,689,413
        VA guaranteed                                  292,531          414,360
        FHA insured                                     75,072          140,276
                                                  ------------     ------------
                                                   109,580,020       84,702,570
                                                  ------------     ------------
Real estate construction and land acquisition       36,900,620       23,897,946
                                                  ------------     ------------

Consumer:
        Second mortgages                             6,575,574        4,830,822
        Equity lines of credit                       3,027,747        2,168,478
        Passbook or certificate                        126,669          285,663
                                                  ------------     ------------
                                                     9,729,990        7,284,963

                                                  ------------     ------------
                Total loans                        156,210,630      115,885,479
                                                  ------------     ------------

Less:   Loans in process                            19,759,682       13,142,922
        Deferred loan fees                             793,947          826,377
        Allowance for loan losses                    1,135,000        1,022,000
                                                  ------------     ------------
                                                    21,688,629       14,991,299
                                                  ------------     ------------
                                                  $134,522,001     $100,894,180
                                                  ============     ============

</TABLE>
                                                                              31
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.    LOANS RECEIVABLE (Cont'd.)
--------------------------------

The Bank has  entered  into  lending  transactions,  in the  ordinary  course of
business,  with executive  officers and directors of the Company and Bank and to
their   associates  on  the  same  terms  as  those  prevailing  for  comparable
transactions  with other borrowers.  A summary of activity related to such loans
is as follows:

<TABLE>
<CAPTION>
                                                              Year Ended
                                                              December 31,
                                                       -------------------------
                                                       1999               1998
                                                       ------             ------
                                                           (In Thousands)
<S>                                                    <C>                <C>
Balance - beginning                                    $ 352              $ 466
New loans                                               --                 --
Repayments                                               (10)              (114)
                                                       -----              -----

Balance - ending                                       $ 342              $ 352
                                                       =====              =====

</TABLE>
The following is an analysis of the allowance for loan losses:

<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                                      ---------------------------------------------
                                                         1999             1998             1997
                                                      -----------     -----------      -----------
<S>                                                   <C>             <C>              <C>
Balance - beginning                                   $ 1,022,000     $   913,000      $   844,000
Provision charged to operations                           113,000         114,000          167,789
Recoveries of loans previously charged off                   --              --             25,884
Loans charged off                                            --            (5,000)        (124,673)
                                                      -----------     -----------      -----------

Balance - ending                                      $ 1,135,000     $ 1,022,000      $   913,000
                                                      ===========     ===========      ===========
</TABLE>
Nonaccrual loans totalled $676,000,  $930,000 and $891,000 at December 31, 1999,
1998 and 1997,  respectively.  Nonaccrual  loans are those on which income under
the accrual  method has been  discontinued  with  subsequent  interest  payments
credited to interest income when received or, if the ultimate  collectibility of
principal is in doubt, applied as principal reductions. The amount of additional
interest  income that would have been  recognized on  non-accrual  loans if such
loans had continued to perform in accordance  with their  contractual  terms was
$51,000,  $54,000 and $7,000 for the years ended  December  31,  1999,  1998 and
1997, respectively.
<PAGE>
Impaired loans and related amounts recorded in the allowance for loan losses are
as follows:

<TABLE>
<CAPTION>

                                                              December 31,
                                                        ------------------------
                                                         1999             1998
                                                        --------        --------
<S>                                                     <C>             <C>
Recorded investment in impaired loans:
          With recorded allowances                      $277,179        $184,258
          Without recorded allowances                    183,248         598,183

               Total impaired loans                      460,427         782,441
Related allowance for loan losses                         41,000          54,000
                                                        --------        --------

               Net impaired loans                       $419,427        $728,441
                                                        ========        ========

</TABLE>
                                                                              32
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7.    LOANS RECEIVABLE  (Cont'd.)
---------------------------------

The average  recorded  investment in impaired  loans was $465,000,  $596,000 and
$522,000 for the years ended  December 31,  1999,  1998 and 1997,  respectively.
Interest income recognized on such loans totalled approximately $28,000, $42,000
and  $63,000  during  the  years  ended  December  31,  1999,   1998  and  1997,
respectively.   Interest  income  recognized  on  impaired  loans,   except  for
approximately $20,000 and $1,400 in 1998 and 1997, respectively, was recorded on
the cash basis.

8.    PREMISES AND EQUIPMENT
----------------------------
<TABLE>
<CAPTION>
                                                          December 31,
                                                   -----------------------------
                                                     1999                1998
                                                   ----------         ----------
<S>                                                <C>                <C>
Land                                               $  613,561         $  613,561
                                                   ----------         ----------
Buildings and improvements                          3,769,185          3,613,000
Less accumulated depreciation                       1,028,028            901,650
                                                   ----------         ----------
                                                    2,741,157          2,711,350
                                                   ----------         ----------
Future office site                                     63,698             21,950
                                                   ----------         ----------
Leashold improvements                                  82,305               --
Less accumulated amortization                           3,914               --
                                                   ----------         ----------
                                                       78,391               --
                                                   ----------         ----------
Furnishings and equipment                           1,225,184          1,059,827
Less accumulated depreciation                         684,103            544,156
                                                   ----------         ----------
                                                      541,081            515,671
                                                   ----------         ----------

                                                   $4,037,888         $3,862,532
                                                   ==========         ==========
</TABLE>
<PAGE>
9.    ACCRUED INTEREST RECEIVABLE
---------------------------------

<TABLE>
<CAPTION>
                                                             December 31,
                                                      --------------------------
                                                         1999            1998
                                                      ----------      ----------
<S>                                                   <C>             <C>
Loans                                                 $  673,166      $  519,206
Mortgage-backed securities held to maturity              459,024         374,771
Other interest-earning assets                             85,866          77,589
                                                      ----------      ----------

                                                      $1,218,056      $  971,566
                                                      ==========      ==========
</TABLE>
                                                                              33
<PAGE>
                                       PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.      DEPOSITS
-----------------
<TABLE>
<CAPTION>
                                                                           December 31,
                                                -----------------------------------------------------------------
                                                           1999                                     1998
                                                --------------------------            ---------------------------
                                                Weighted                              Weighted
                                                 Average                               Average
                                                   Rate             Amount              Rate              Amount
                                                   ----             ------              ----              ------
<S>                                                <C>          <C>                      <C>          <C>
Demand accounts:
       Non-interest-bearing                          --%        $   2,596,191              --%        $  4,227,532
       Interest-bearing                            3.17%           25,639,560            3.08%          19,980,915
                                                                 ------------                         ------------
                                                   2.88%           28,235,751            2.54%          24,208,447

Savings and club accounts                          2.34%           25,825,091            2.32%          25,957,626
Certificates of deposit                            5.04%          114,946,808            5.35%         124,641,951
                                                                 ------------                         ------------

                                                   4.27%         $169,007,650            4.51%        $174,808,024
                                                                 ============                         ============

</TABLE>
The scheduled maturities of certificates of deposit are as follows:

<TABLE>
<CAPTION>
                                                       December 31,
                                               ---------------------------------
                                                   1999                 1998
                                               ------------          -----------
<S>                                            <C>                  <C>
One year or less                               $ 97,446,008         $ 99,668,551
After one to two years                           13,027,900           20,072,700
After two to three years                          2,208,100            2,088,600
After three years                                 2,264,800            2,812,100
                                               ------------         ------------

                                               $114,946,808         $124,641,951
                                               ============         ============

</TABLE>
<PAGE>
At December 31, 1999 and 1998,  certificates  of deposits with a denomination of
more  than  $100,000  amounted  to  approximately  $11,383,000  and  $9,692,000,
respectively.

Interest expense on deposits consists of:

<TABLE>
<CAPTION>
                                           Year Ended December 31,
                                   ----------------------------------------
                                       1999            1998          1997
                                   ----------     -----------    ----------
<S>                                <C>            <C>            <C>
Demand accounts                    $  727,804     $  496,013     $  279,032
Savings and club accounts             606,401        584,858        652,958
Certificates of deposit             6,137,059       6,549,747     6,157,823
                                   ----------     -----------    -----------

                                   $7,471,264     $ 7,630,618    $ 7,089,813
                                   ==========     ===========    ===========
</TABLE>

                                                                              34
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.   BORROWED MONEY

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                          -----------------------------------------------------------------
                                                               1999                                      1998
                                                           ---------------------------        -----------------------------
                                                            Weighted                           Weighted
                                                           Average Rate         Amount        Average Rate         Amount
                                                           ------------         ------        ------------         ------
<S>                                                           <C>             <C>                  <C>          <C>
ESOP loan payable                                               --           $        --           8.25%        $   454,805
Overnight line of credit advance due January 3, 2000          5.10%           10,000,000             --                 --
Advances from Federal Home Loan Bank
  maturing on February 28, 2000                               6.37%           18,000,000             --                 --
Securities sold under agreement to repurchase
  maturing February 1, 2000                                   5.96%           14,000,000             --                 --
                                                                             -----------                        -----------

                                                              5.93%          $42,000,000           8.25%        $   454,805
                                                                             ===========                        ===========

</TABLE>
The Bank has an  overnight  line of credit  with FHLB  subject  to the terms and
conditions of the lenders  overnight advance program under which $10,224,000 and
$18,785,000  was unused at December  31, 1999 and 1998,  respectively.  Advances
under this line of credit,  which expires on October 30, 2000,  are made for one
day  periods.  The  advances  are  secured by stock of the FHLB in the amount of
$2,100,000 and $1,446,200 at December 31, 1999 and 1998, respectively.

Information concerning securities sold under agreement to repurchase at December
31, 1999 (in thousands) is summarized as follows:


   Investment and mortgage-backed securities held to maturity
    underlying the agreement at year end:
       Carrying value                                                   $ 24,138
       Estimated fair value                                             $ 24,125



                                                                              35
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

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

<TABLE>
<CAPTION>
                                                                December 31,
                                                         -----------------------
                                                          1999             1998
                                                         -------         -------
                                                               (In Thousands)
<S>                                                      <C>             <C>
GAAP, core and tangible capital                          $22,880         $22,806
Add:  general valuation allowance                          1,068             968
                                                         -------         -------

Total regulatory capital                                 $23,948         $23,774
                                                         =======         =======
</TABLE>
                                                                              36
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.      REGULATORY CAPITAL (Cont'd.)
---------------------------
<TABLE>
<CAPTION>
                                                                                                       To Be Well
                                                                                                    Capitalized Under
                                                                        Minimum Capital             Prompt Corrective
                                                   Actual                Requirements               Actions Provisions
                                           ---------------------      -----------------------      ---------------------
                                            Amount       Ratio        Amount           Ratio        Amount       Ratio
                                            ------       -----        ------           -----        ------       -----
                                                                       (Dollars in Thousands)
<S>                                        <C>            <C>         <C>               <C>          <C>          <C>
December 31, 1999
-----------------

Total Capital
 (to risk-weighted assets)                 $23,948        20.95%      $ 9,146           8.00%      $ 11,433       10.00%

Tier 1 Capital
 (to risk-weighted assets)                  22,880        20.01%          -             -             6,860        6.00%

Core (Tier 1) Capital
 (to adjusted total assets)                 22,880         9.67%        9,462           4.00%        11,828        5.00%

Tangible Capital
 (to adjusted total assets)                 22,880         9.67%        3,548           1.50%          -              -


<CAPTION>
<S>                                        <C>            <C>         <C>               <C>          <C>          <C>
December 31, 1998
-----------------

Total Capital
 (to risk-weighted assets)                 $23,774        25.86%      $ 7,356           8.00%        $9,195       10.00%

Tier 1 Capital
 (to risk-weighted assets)                  22,806        24.80%          -           -               5,517        6.00%

Core (Tier 1) Capital
 (to adjusted total assets)                 22,806        11.41%        7,992           4.00%         9,990        5.00%

Tangible Capital
 (to adjusted total assets)                 22,806        11.41%        2,997           1.50%            -          -
</TABLE>
As of June 30,  1999,  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.


                                                                              37
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.  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 income tax
purposes. The following table sets forth the plan's funded status:

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                    ----------------------------
                                                                       1999             1998
                                                                    -----------      -----------
<S>                                                                 <C>              <C>
Actuarial present value of benefit obligations:
      Accumulated benefit obligation, including vested benefits
        of $1,861,302 (1999) and $1,539,658 (1998)                  $ 1,867,160      $ 1,792,835
                                                                    ===========      ===========

Projected benefit obligation - beginning                            $ 2,333,977      $ 2,003,055
      Service cost                                                      114,067          107,144
      Interest cost                                                     159,532          136,102
      Actuarial loss                                                    120,367           92,265
      Settlements                                                      (165,716)          (4,589)
                                                                    -----------      -----------

Projected benefit obligation - ending                                 2,562,227        2,333,977
                                                                    -----------      -----------

Plan assets at fair value - beginning                                 2,135,192        1,854,668
      Actual return on plan assets                                      119,023          114,908
      Contributions                                                     200,597          170,205
      Settlements                                                      (165,716)          (4,589)
                                                                    -----------      -----------

Plan assets at fair value - ending                                    2,289,096        2,135,192
                                                                    -----------      -----------

Projected benefit obligation in excess of fair value                   (273,131)        (198,785)
Unrealized net loss                                                     380,790          243,260
Unrecognized transition obligation                                       11,642           14,554
                                                                    -----------      -----------

Prepaid pension cost included in other assets                       $   119,301      $    59,029
                                                                    ===========      ===========

</TABLE>
                                                                              38
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



13.  BENEFIT PLANS (Cont'd.)
----------------------------

The following table sets forth the components of net periodic pension cost:

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                                     ---------------------------------------
                                                       1999           1998           1997
                                                     ---------      ---------      ---------
<S>                                                  <C>            <C>            <C>
Net periodic pension cost include the following:
     Service cost                                    $ 114,067      $ 107,144      $  96,960
     Interest cost                                     159,532        136,102        122,989
     Expected return on plan assets                   (145,307)      (126,885)      (116,771)
     Amortization of unrecognized net loss               9,121          1,771           --
     Amortization of transition obligation               2,912          2,912          2,912
                                                     ---------      ---------      ---------

                                                     $ 140,325      $ 121,044      $ 106,090
                                                     =========      =========      =========

<CAPTION>
                                                          Year Ended December 31,
                                                       ---------------------------
                                                        1999      1998       1997
                                                        ----      ----       ----
 <S>                                                    <C>        <C>        <C>
Discount rate                                           6.5%       6.5%       6.5%
Expected long-term rate of return                       6.5%       6.5%       6.5%
Rate of increase in compensation levels                 4.0%       4.0%       4.0%

</TABLE>
Directors' Consultation and Retirement Plan ("DCRP")
----------------------------------------------------

The  Bank  has an  unfunded  retirement  plan for  non-employee  directors.  The
benefits are payable  based on term of service as a director.  The discount rate
and expected  long-term  rate of return used in computing the actuarial  present
value of the  projected  benefit  obligation  was 6.5%.  The  increase in future
compensation levels used was 5.0%.

                                                                              39
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.      BENEFIT PLANS (Cont'd.)
--------------------------------

The following  table sets forth the DCRP's status and components of net periodic
cost:
<TABLE>
<CAPTION>
                                                            December 31,
                                                  ------------------------------
                                                     1999                 1998
                                                  --------              --------
<S>                                               <C>                   <C>
Actuarial present value of benefit obligations:
Vested                                            $327,382              $290,146
Non-vested                                          42,852                81,194
                                                  --------              --------

                                                  $370,234              $371,340
                                                  ========              ========
<CAPTION>

                                                                      December 31,
                                                                ------------------------
                                                                  1999            1998
                                                                ---------      ---------
<S>                                                             <C>            <C>
Projected benefit obligation - beginning                        $ 380,737      $ 331,625

Service cost                                                       49,542         24,915
Interest cost                                                      20,021         21,717
Actuarial (gain) loss                                             (72,724)         2,480
                                                                ---------      ---------
Projected benefit obligation - ending                             377,576        380,737
                                                                ---------      ---------

Plan assets at fair value                                            --             --
                                                                ---------      ---------

Projected benefit obligation in excess of fair value             (377,576)      (380,737)
Unrealized net (gain) loss                                        (50,807)         2,480
Unrecognized transition obligation                                207,355        224,634
                                                                ---------      ---------

Accrued liability included in other liabilities                $ (221,028)     $(153,623)
                                                               ==========      =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                                            Year Ended December 31,
                                                       --------------------------------
                                                         1999        1998        1997
                                                       --------    --------     -------
<S>                                                     <C>         <C>         <C>
Net periodic pension cost include the following:
   Service cost                                         $49,542     $24,915     $55,586
   Interest cost                                         20,021      21,717      16,847
   Amortization of transition cost                       17,279      17,279      17,279
   Amortization of unrealized gain                      (19,437)        --           --
                                                       --------    --------     -------

                                                       $ 67,405    $ 63,911     $89,712
                                                       ========    ========     =======
</TABLE>
                                                                              40
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.      BENEFIT PLANS (Cont'd.)
--------------------------------

Savings Plan
------------

The Bank sponsors a Savings and Investment Plan (the "Savings  Plan"),  pursuant
to Section  401(k) of the Internal  Revenue  Code,  for all eligible  employees.
Employees may elect to save up to 10% of their compensation. The Bank will match
25% of the first 6% of each  employee's  contribution.  The Savings Plan expense
amounted  to  approximately  $17,000,  $15,000  and  $16,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.

ESOP
----

Effective upon the consummation of the  reorganization,  an ESOP was established
for all eligible employees who had completed a twelve-month period of employment
with the Bank and at least 1,000 hours of service  and had  attained  the age of
21.  The ESOP  used  $761,760  in  proceeds  from a term  loan  obtained  from a
third-party financial institution to purchase 76,176 shares of Bank common stock
in the initial public  offering.  The term loan principal is payable over twenty
equal  quarterly  installments  through  March  31,  2002.  Concurrent  with the
re-organization  on July 12, 1999,  the ESOP exchanged all the stock of the Bank
with the common stock of the Company and  refinanced the  outstanding  loan from
the third party financial institution with the Company on substantially the same
terms and  conditions.  Interest  on the term loan is  payable  quarterly,  at a
floating rate of 0.5% over the prime rate.  Each year,  the Bank intends to make
discretionary  contributions  to the ESOP which will be equal to  principal  and
interest  payments  required on the term loan.  The loan is further paid down by
the amount of dividends paid on the common stock owned by the ESOP.

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.

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  1993.
Accordingly, the ESOP shares pledged as collateral are reported as unearned ESOP
shares in the statements of financial  condition.  As shares are committed to be
released from collateral, compensation expense equal to the current market price
of the shares is  recorded,  and the  shares  become  outstanding  for basic net
income per common share  computations.  ESOP compensation  expense was $203,000,
$236,000  and $178,000  for the year ended  December  31,  1999,  1998 and 1997,
respectively.


                                                                              41
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.      BENEFIT PLANS (Cont'd.)
--------------------------------

ESOP (Cont'd.)
--------------

The ESOP shares were as follows:
<TABLE>
<CAPTION>
                                                              December 31,
                                                       -------------------------
                                                          1999            1998
                                                       --------         --------
<S>                                                    <C>              <C>
Allocated shares                                         48,332           30,695
Unreleased shares                                        27,844           45,481

Total ESOP shares                                        76,176           76,176
                                                       --------         --------

Fair value of unreleased shares                        $229,713         $454,810
                                                       ========         ========

</TABLE>
Stock-based Incentive Plan
--------------------------

In October  1997,  the Bank  adopted the 1997  Stock-based  Incentive  Plan (the
"Incentive  Plan").  Under the Incentive Plan,  stock awards are granted for the
benefit of directors,  officers and key employees in the form of the RRP.  These
awards  are  exercisable  at the rate of 20% per year over 5 years.  In  October
1997,  38,088 shares of Bank's common stock,  having a market value of $761,760,
were  contributed  to the  Incentive  Plan by the Bank from its  authorized  but
unissued common stock. $150,000,  $152,000 and $28,000 of expense related to the
Incentive Plan was recorded  during the years ended December 31, 1999,  1998 and
1997,  respectively.  Concurrent  with the  reorganization  in 1999, the Company
adopted the Incentive  Plan and the RRP exchanged all its shares of common stock
of the Bank for shares of common stock of the Company.

Pursuant to the Incentive  Plan,  the Bank adopted,  during 1997, a stock option
plan (the "Option Plan") for the benefit of directors,  officers,  and other key
employees.  Options granted under the Option Plan are exercisable  over a period
not to exceed  ten years  from the date of grant.  Under the  Option  Plan,  the
exercise price of each option equals the market price of the common stock on the
date of grant.  The  Company  adopted the  Incentive  Plan and it was amended to
substitute  shares of common  stock of the Company for shares of common stock of
the Bank. The following table summarizes the options granted and exercised under
the Option Plan:
<PAGE>
<TABLE>
<CAPTION>
                                                          Number      Exercise Price
                                                         of Shares        Per Share
                                                         ---------        ---------
<S>                                                         <C>           <C>
Balance at December 31, 1996                                  --          $     --

          Granted in 1997                                   95,220            20.00
          Exercised                                           --                --
                                                            ------
Balance at December 31, 1997, 1998 and 1999                 95,220        $   20.00
                                                            ======        =========

</TABLE>
                                                                              42
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.  BENEFIT PLANS (Cont'd.)
----------------------------

Stock-based Incentive Plan (Cont'd.)
------------------------------------

As permitted by Statement No. 123,  compensation cost for stock option's granted
has been  recognized  based on the  intrinsic  value method  instead of the fair
value based method.  The weighted  average fair value of options  granted during
1997, all of which have exercise  prices equal to the market price of the 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                 $7.70
     Expected common stock dividend yield                                1.50%
     Expected volatility                                                30.71%
     Expected option life                                             7 years
     Risk-free interest rate                                             6.11%

Had the fair  value  based  method  been used,  net  income for the years  ended
December  31,  1999,  1998  and  1997  would  have  decreased  to  approximately
$1,091,000,  $937,000 and  $1,103,000,  respectively,  and net income per share,
both  basic and  diluted,  would have been  reduced  to $0.53,  $0.46 and $0.55,
respectively.


14.  INCOME TAXES
-----------------

The Bank qualifies as a thrift  institution under the provisions of the Internal
Revenue Code and, therefore,  the tax bad debt deduction must be either based on
direct  charge offs and/or  calculated  under the  experience  method.  Retained
earnings at December 31, 1999,  includes  approximately $2.0 million of such bad
debt, for which income taxes have not been provided.  If such amount is used for
purposes other than to absorb bad debts, including distributions in liquidation,
it will be subject to income tax at the then current rate.
<PAGE>
The components of income taxes are summarized as follows:
<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                                        ---------------------------------------
                                           1999           1998          1997
                                        ---------      ---------      ---------
<S>                                     <C>            <C>            <C>
Current tax expense:
     Federal income                     $ 768,059      $ 571,150      $ 633,882
     State income                          63,642         45,256         51,448
                                        ---------      ---------      ---------

                                          831,701        616,406        685,330
                                        ---------      ---------      ---------
Deferred tax (benefit) expense:
     Federal income                       (85,493)         8,190        (11,606)
     State income                          (7,777)           744         (1,054)
                                        ---------      ---------      ---------

                                          (93,270)         8,934        (12,660)
                                        ---------      ---------      ---------

                                        $ 738,431      $ 625,340      $ 672,670
                                        =========      =========      =========

</TABLE>
                                                                              43
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  INCOME TAXES (Cont'd.)
---------------------------

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         1997
                                              --------     --------     --------
<S>                                           <C>          <C>          <C>
Federal income tax                            $654,050     $563,262     $609,874
Increases in taxes resulting from:
     New Jersey savings institution tax,
       net of federal income tax effect         36,871       30,360       33,260
     Other items, net                           47,510       31,718       29,536
                                              --------     --------     --------

Effective income tax                          $738,431     $625,340     $672,670
                                              ========     ========     ========
</TABLE>
Income  taxes  payable of  $104,874  at December  31,  1999,  is included in the
consolidated   statements  of  financial  condition  under  the  caption  "Other
liabilities".  Income tax refundable of $91,240 at December 31, 1998 is included
in the  consolidated  statement of financial  condition under the caption "Other
assets". The income tax effects of existing temporary differences that give rise
to significant portions of net deferred income tax assets are as follows:
<TABLE>
<CAPTION>
                                                                   December 31,
                                                             ------------------------
                                                               1999          1998
                                                             --------      ---------
<S>                                                           <C>          <C>
Deferred income tax assets:
     Deferred loan fees                                       $164,795     $176,463
     Deferred compensation                                      59,485       44,632
     Reserve for uncollected interest                           21,843       31,057
     Benefit plans                                              46,855       29,777
     Allowance for loan losses in excess of bad debt
       reserves                                                216,523      136,448
     Unrealized loss on available for sale securities           29,520       12,960
                                                              --------     --------

                                                               539,021      431,337
Deferred income tax liabilities:
     Depreciation                                               77,312       79,458
                                                              --------     --------

Deferred income tax assets, net, included in other assets     $461,709     $351,879
                                                              ========     ========
</TABLE>
                                                                              44
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



15.   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.  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 amounts  recognized  in the  statements  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.  The Bank had the following  outstanding
commitments:
<TABLE>
<CAPTION>
                                                                          December 31,
                                                                  ---------------------------
                                                                     1999            1998
                                                                  -----------     -----------
<S>                                                               <C>             <C>
Loan origination commitments expiring in three months or less     $10,186,000     $10,311,000
                                                                  ===========     ===========

Loan participation purchase commitments                           $ 1,513,000     $ 3,366,000
                                                                  ===========     ===========

Unused home equity lines of credit                                $ 4,096,000     $ 3,255,000
                                                                  ===========     ===========

To purchase mortgage-backed securities                            $      --       $ 1,009,000
                                                                  ===========     ===========


</TABLE>
At December  31,  1999,  of the  $10,186,000  in  outstanding  loan  origination
commitments,  $7,310,000 were for one through two year  construction  loans with
interest  rates which will float at either  1.00% or 1.50% above the prime rate,
$1,547,000  were for fixed rate mortgage  loans with interest rates ranging from
6.50% to 7.875%, $1,000,000 were for adjustable rate mortgage loans with initial
rates  ranging from 5.125% to 6.50 and $329,000 were for second  mortgages  with
fixed interest rates ranging from 7.09% to 7.75%.

At December 31, 1999,  the loan  participation  purchase  commitments  represent
commitments to purchase participation interests in loans where the interest rate
will be set at the  funding  date based upon the  Federal  Home Loan Bank of New
York C.I.P. advance rate plus a margin.

The  undisbursed  funds from approved lines of credit under a homeowners  equity
lending program, unless they are specifically cancelled by notice from the Bank,
represent firm commitments  available to the respective borrowers on demand. The
interest  rate  charged for any month on funds  disbursed  under this program is
from .25% below the prime rate to 1.75% above the prime rate.
<PAGE>
Commitments  to originate  loans are agreements to lend to 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. The Bank evaluates each customer's creditworthiness on
a  case-by-case  basis.  The  amount  of  collateral  obtained  by the Bank upon
extension  of  credit  is  based  on  management's   credit  evaluation  of  the
counterparty. Collateral held may vary but primarily includes one-to-four family
residential properties.

                                                                              45
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


15.   COMMITMENTS AND CONTINGENCIES (Cont'd.)
---------------------------------------------

Rentals under long-term  operating leases for certain branch offices amounted to
approximately  $87,000,  $11,000 and $11,000  for the years ended  December  31,
1999,  1998 and 1997,  respectively.  At December 31, 1999,  the minimum  rental
commitments under all non-cancellable  leases with initial or remaining terms of
more than one year are as follows:

         Year Ending                                     Minimum
         December 31,                                      Rate
         ------------                                      ----

         2000                                          $  137,000
         2001                                             142,000
         2002                                             147,000
         2003                                             151,000
         2004                                             155,000
         Thereafter                                     1,165,000
                                                       ----------

                                                       $1,897,000
                                                       ==========

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

The Company and Bank are parties to various 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.


16. ESTIMATED FAIR VALUES OF CONSOLIDATED 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.

         Cash and cash equivalents and accrued interest receivable
         ---------------------------------------------------------

         The carrying amounts for cash and cash equivalents and accrued interest
         receivable approximate fair value.

         Term deposits
         -------------

         The fair value of term deposits is estimated by discounting future cash
         flows,  using rates which are currently  available for term deposits of
         similar remaining maturities.

                                                                              46
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



16. ESTIMATED FAIR VALUES OF CONSOLIDATED FINANCIAL INSTRUMENTS (Cont'd.)
-------------------------------------------------------------------------

         Securities
         ----------

         The fair values for trading  account  securities and for investment and
         mortgage-backed  securities available for sale and held to maturity, as
         well as  commitments to purchase such  securities,  are based on quoted
         market prices or dealer prices,  if available.  If quoted market prices
         or dealer  prices  are not  available,  fair value is  estimated  using
         quoted market prices or dealer prices for similar securities.

         Loans receivable
         ----------------

         The fair value of loans  receivable is estimated by discounting  future
         cash flows, using the current rates at which similar loans with similar
         remaining  maturities  would be made to borrowers  with similar  credit
         ratings.

         Deposits
         --------

         For demand,  savings and club  accounts,  fair value  approximates  the
         carrying   amount   reported   in   the   financial   statements.   For
         fixed-maturity  certificates  of deposit,  fair value is  estimated  by
         discounting  future  cash  flows,  using  rates  currently  offered for
         deposits of similar remaining maturities.

         Borrowed money
         --------------

         The fair value of borrowed  money is  estimated by  discounting  future
         cash flows,  using the current  rates  available  for  borrowings  with
         similar remaining maturities.

         Commitments to extend credit
         ----------------------------

         The fair value of  commitments  is estimated  using the 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 rates and
         the committed rates.

                                                                              47
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


16. ESTIMATED FAIR VALUES OF CONSOLIDATED FINANCIAL INSTRUMENTS (Cont'd.)
-------------------------------------------------------------------------

The carrying  amounts and estimated fair values of financial  instruments are as
follows (in  thousands):

<TABLE>
<CAPTION>
                                                                    December 31,
                                               ------------------------------------------------------
                                                        1999                           1998
                                                -----------------------        ----------------------
                                                Carrying     Estimated         Carrying     Estimated
                                                  Value      Fair Value          Value     Fair Value
                                                --------     ----------         --------   ----------
<S>                                             <C>          <C>              <C>          <C>
Financial assets
----------------

Cash and cash equivalents                       $  6,771     $  6,771         $ 23,365     $ 23,365
Term deposits                                        197          197              197          197
Trading account securities                         2,791        2,791             --           --
Securities available for sale                      5,906        5,906            5,642        5,642
Investment securities held to maturity             6,947        6,697            6,946        6,940
Mortgage-backed securities held to maturity       71,399       70,547           55,728       56,101
Loans receivable                                 134,522      133,137          100,894      103,526
Accrued interest receivable                        1,218        1,218              972          972

Financial liabilities
---------------------

Deposits                                         169,008      169,131          174,808      175,413
Borrowed money                                    42,000       42,019              455          455

Commitments
-----------

To originate or purchase loans                    11,699       11,699           13,677       13,677
Unused lines of credit                             4,096        4,096            3,255        3,255
To purchase mortgage-backed securities              --           --              1,009        1,009

</TABLE>
Fair  value  estimates  are made at a specific  point in time based on  relevant
market  information  and  information  about  the  financial  instrument.  These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the entire holdings of a particular  financial  instrument.
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, involve uncertainties and matters of judgment and, therefore,  cannot be
determined with precision. Changes in assumptions could significantly affect the
estimates.
<PAGE>
In addition, fair value estimates are based on existing on-and-off balance sheet
financial  instruments  without  attempting to estimate the value of anticipated
future  business,  and exclude 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  advance  payments  by  borrowers  for  taxes and  insurance.  In
addition,  the tax ramifications  related to the realization of 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.

                                                                              48
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



17.   DIVIDENDS AND RESTRICTIONS THEREON
----------------------------------------

The Holding Company waived its right to receive  dividends  declared by the Bank
and the Company during the years ended December 31, 1999, 1998 and 1997. The OTS
requires  that  retained  earnings  be  restricted  by the amount of such waived
dividends. Such restricted amounts aggregated $950,000, $593,000 and $252,000 at
December 31, 1999, 1998 and 1997, respectively.

OTS regulations impose  limitations upon all capital  distributions by a savings
institution  including  cash  dividends,  payments to repurchase  its shares and
payments to shareholders of another  institution in a cash-out merger.  The rule
effective  through  the  first  quarter  of  1999  established  three  tiers  of
institutions  based primarily on an institution's  capital level. An institution
that  exceeded  all  capital  requirements  before and after a proposed  capital
distribution  ("Tier 1 Association") and had not been advised by the OTS that it
was in need of more than  normal  supervision,  could,  after  prior  notice but
without  obtaining  approval of the OTS, make capital  distributions  during the
calendar  year  equal to the  greater  of (i) 100% of its net  earnings  to date
during the  calendar  year plus the amount  that would  reduce by  one-half  the
excess  capital over its capital  requirements  at the beginning of the calendar
year  or  (ii)  75% of its  net  income  for the  previous  four  quarters.  Any
additional capital distributions required prior regulatory approval.

Effective  April 1, 1999,  the OTS's capital  distribution  regulation  changed.
Under the new regulation, an application to and the prior approval of the OTS is
required prior to any capital  distribution if the institution does not meet the
criteria for "expedited  treatment" of applications under OTS regulations (i.e.,
generally,  examination  ratings in the two top  categories),  the total capital
distributions  for the  calendar  year  exceed net income for that year plus the
amount of retained net income for the preceding two years, the institution would
be  undercapitalized  following  the  distribution  or  the  distribution  would
otherwise  be contrary to a statute,  regulation  or  agreement  with OTS. If an
application is not required,  the institution must still provide prior notice to
OTS of the capital distribution.  In the event the Bank's capital fell below its
regulatory  requirements or the OTS notified it that it was in need of more than
normal  supervision,  the Bank's ability to make capital  distributions could be
restricted.  In addition, the OTS could prohibit a proposed capital distribution
by any institution, which would otherwise be permitted by the regulation, if the
OTS  determines  that such  distribution  would  constitute an unsafe or unsound
practice.


18.  PARENT ONLY FINANCIAL INFORMATION
--------------------------------------

The Company operates its wholly owned subsidiary,  the Bank. The earnings of the
Bank are recognized 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.  The Company had no earnings  prior to
July 12, 1999.

                                                                              49
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


18.  PARENT ONLY FINANCIAL INFORMATION  (Con't.)
------------------------------------------------
<TABLE>
<CAPTION>
Condensed statement of financial condition
------------------------------------------
                                                                 December 31, 1999
                                                                 -----------------
<S>                                                                  <C>
Assets
------

Cash and amounts due from financial institution                      $   786,507
Investment in Pulaski Savings Bank                                    22,880,438
Loan receivable                                                          278,439
Other assets                                                              13,255
                                                                     -----------

     Total assets                                                    $23,958,639
                                                                     ===========

Liabilities and stockholders' equity
------------------------------------

Other liabilities                                                    $   175,751
Stockholders' equity                                                  23,782,888
                                                                     -----------

     Total liabilities and stockholders' equity                      $23,958,639
                                                                     ===========
<CAPTION>
Condensed statement of income
-----------------------------
                                                     From Inception
                                                   (July 12, 1999) to
                                                      December 31,
                                                          1999
                                                      ---------
<S>                                                   <C>
Interest income                                       $  18,537
Equity earnings in subsidiary                           829,122
                                                      ---------

                                                        847,659
                                                      ---------
Expenses                                                 41,660
                                                      ---------
Net income before income tax (benefit)                  805,999
Income tax (benefit)                                     (7,862)
                                                      ---------

Net income                                            $ 813,861
                                                      =========
</TABLE>
                                                                              50
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



18.  PARENT ONLY FINANCIAL INFORMATION  (Con't.)
------------------------------------------------
<TABLE>
<CAPTION>
Condensed statement of cash flows
---------------------------------
                                                                    From Inception
                                                                 (July 12, 1999) to
                                                                     December 31,
                                                                         1999
                                                                    ------------
<S>                                                                 <C>
Cash flows from operating activities
------------------------------------

Net income                                                          $   813,861
Equity earnings in the subsidiary                                      (829,122)
(Increase) in other assets                                              (13,255)
Increase in other liabilities                                           175,751
                                                                    -----------

   Net cash provided by operating activities                            147,235
                                                                    -----------

Cash flows from investing activities
------------------------------------

Net increase in loans receivable                                       (278,439)
Dividends from subsidiary                                             1,300,000
                                                                    -----------

   Net cash provided by investing activities                          1,021,561
                                                                    -----------

Cash flows from financing activities
------------------------------------

Dividend paid                                                          (157,958)
Purchase of treasury stock                                             (224,331)
                                                                    -----------

   Net cash used on financing activities                               (382,289)
                                                                    -----------

Net increase in cash and cash equivalents                               786,507
Cash and cash equivalents - beginning                                      --
                                                                    -----------

Cash and cash equivalents - ending                                  $   786,507
                                                                    ===========

</TABLE>
                                                                              51
<PAGE>
                      PULASKI BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.    QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)
--------------------------------------------------------
<TABLE>
<CAPTION>
                                              Year Ended December 31, 1999
                                       -------------------------------------------
                                         First     Second       Third      Fourth
                                       Quarter(1)  Quarter(1)   Quarter    Quarter
                                         ------     ------     ------     ------
                                            (In thousands, except per share data)
<S>                                      <C>        <C>        <C>        <C>
Interest income                          $3,320     $3,354     $3,685     $4,032
Interest expense                          1,920      1,906      2,129      2,362
                                         ------     ------     ------     ------

Net interest income                       1,400      1,448      1,556      1,670
Provision for loan losses                    25         36         25         27
Non-interest income                          68         18        450         26
Non-interest expenses                     1,082      1,152      1,148      1,218
Income taxes                                163        105        305        165
                                         ------     ------     ------     ------

Net income                               $  198     $  173     $  528     $  286
                                         ======     ======     ======     ======

Basic and diluted net income per
  common share                           $ 0.10     $ 0.08     $ 0.26     $ 0.14
                                         ======     ======     ======     ======
<CAPTION>
                                              Year Ended December 31, 1998
                                       -------------------------------------------
                                         First     Second       Third      Fourth
                                       Quarter(1)  Quarter(1)   Quarter    Quarter
                                         ------     ------     ------     ------
                                            (In thousands, except per share data)
<S>                                      <C>        <C>        <C>        <C>
Interest income                          $3,337     $3,388     $3,382     $3,319
Interest expense                          1,923      1,945      1,923      1,999
                                         ------     ------     ------     ------
Net interest income                       1,414      1,443      1,459      1,320
Provision for loan losses                    34         29         26         25
Non-interest income                          66         74         55        100
Non-interest expense                        971      1,217      1,053        919
Income taxes                                185        109        159        173
                                         ------     ------     ------     ------

Net income                               $  290     $  162     $  276     $  303
                                         ======     ======     ======     ======

Basic and diluted net income per
  common share                           $ 0.14     $ 0.08     $ 0.14     $ 0.15
                                         ======     ======     ======     ======
</TABLE>
(1)  Quarterly  financial  data  (unaudited)  for Pulaski  Savings Bank prior to
re-organization.

                                                                              52
<PAGE>


                      PULASKI BANCORP, INC. AND SUBSIDIARY


                               Board of Directors
--------------------------------------------------------------------------------

Edward J. Mizerski
    Chairman of the Board and retired banker

Peter C. Pietrucha
    Vice Chairman of the Board and attorney at law

Thomas Bentkowski
    President and Chief Executive Officer

Eugene J. Bogucki, M.D.
    Retired physician and surgeon

Anthony C. Majeski
    Certified Public Accountant and retired banker

Walter F. Rusak
    Principal of Grove Street School, K-5, Irvington,
    New Jersey

                               Officers
--------------------------------------------------------------------------------

Thomas Bentkowski................................... President & CEO
Lee Wagstaff.........................Vice President, Treasurer & CFO
Valerie Kaminski.................... Vice President, Secretary & COO
Kevin Aylward..................... Vice President & Mortgage Officer
Patrick Paolella................................Vice President & HRO
Lynn Carnevale............................. Assistant Vice President
Rose Ricciardi..............................Assistant Vice President
Angela Turi.................................Assistant Vice President
Valerie Nabb.................................... Assistant Secretary
Kristen Bourgeau.................................Assistant Treasurer
Marion Cottrell..................................Assistant Treasurer
Anna Fairfax.....................................Assistant Treasurer
Rana Hanclich....................................Assistant Treasurer
Kimberly Weichhan................................Assistant Treasurer
Ruth Wozniewicz..................................Assistant Treasurer
E. Cynthia Wyres.................................Assistant Treasurer

                         Stockholder Inquiries
--------------------------------------------------------------------------------

Patrick Paolella, Vice President
Pulaski Bancorp, Inc.
130 Mountain Avenue
Springfield, New Jersey  07081
(973) 564-9000

<PAGE>
                  Annual Report on Form 10-K

--------------------------------------------------------------------------------
       A copy of the Company's report on Form 10-K,
       is available without charge by
       written request addressed as set forth under
       Stockholder Inquiries.

                            Counsel
       --------------------------------------------------
       Alfred R. Kinney
       2040 Millburn Avenue - Suite 101
       Maplewood, New Jersey  07040

                        Special Counsel
       --------------------------------------------------


       Muldoon, Murphy & Faucette LLP
       5101 Wisconsin Avenue, N.W.
       Washington, D.C.  20016

                                Independent Auditors
       --------------------------------------------------

       Radics & Co., LLC
       55 U.S. Highway 46 East
       Pine Brook, New Jersey  07058

                                 Stock Transfer Agent
       --------------------------------------------------

       Registrar and Transfer Co.
       10 Commerce Drive
       Cranford, New Jersey  07016
       (908) 497-2300

                                 Market Makers
       --------------------------------------------------

       Friedman, Billings, Ramsey & Co., Inc.

       Sandler O'Neill & Partners

       Ryan, Beck & Co., Inc.

       Herzog, Heine, Geduld, Inc.

                                       53
<PAGE>
                              PULASKI BANCORP, INC.

                   Market For Common Stock and Related Matters
          -------------------------------------------------------------

                  Pulaski  Bancorp,  Inc.'s  common  stock is presently
                  quoted  on the  National  Association  of  Securities
                  Dealers automated  quotations small cap market system
                  under the symbol "PLSK". At March 1, 2000,  1,980,588
                  shares of the Company's outstanding common stock were
                  held by approximately 412 persons or entities.

                  The  following  table  sets  forth  the  high and low
                  closing  sales  prices  per  common  shares  for  the
                  periods  indicted.  Such  prices  do not  necessarily
                  reflect retail markups, markdowns or commissions.

<TABLE>
<CAPTION>
                                                     Closing Prices
                                              ---------------------------
Quarter Ended                                    High            Low
                                              -----------     -----------
Pulaski Savings Bank:
<S>                                              <C>             <C>
March 31, 1998                                    20 1/2          18 1/4
June 30, 1998                                     19 3/4          15 7/8
September 30, 1998                                    16          10 7/8
December 31, 1998                                     12           9 3/4
March 31, 1999                                    11 1/4           9 3/8
June 30, 1999                                    9 13/16          8 1/32

Pulaski Bancorp, Inc.:
September 30, 1999                                 8 3/4          8 3/16
December 31, 1999                                  8 1/2           6 3/4

<CAPTION>
                                                        Dividends
                                                          Paid
                                                          ----

<S>                                                       <C>
Pulaski Savings Bank:
March 31, 1998                                            $0.075
June 30, 1998                                              0.075
September 1998                                             0.075
December 1998                                              0.080
March 31, 1999                                             0.080
June 30, 1999                                              0.080

Pulaski Bancorp, Inc.:
September 30, 1999                                         0.080
December 31, 1999                                          0.080
</TABLE>

                  Future  dividend  policy  will be  determined  by the
                  Board of Directors after giving  consideration to the
                  Company's financial condition, results of operations,
                  tax status,  economic  conditions  and other factors.
                  The  Board may also  consider  the  payment  of stock
                  dividends  from time to time,  in addition  to, or in
                  lieu of cash dividends.

                                       54