Oswego County Bancorp, Inc.
                          Annual Report to Shareholders
<PAGE>

                           Oswego County Savings Bank

Mission Statement:

Our mission is to be a financial service organization of undisputed integrity
serving central New York.
Our goal is to maximize the value of our shareholders' equity by helping our
customers attain their financial goals and potential.
Our specialty is providing individuals and small businesses with the personal,
professional and innovative financial services they desire delivered in a manner
that is above their expectations.
Our pledge is to manage entrusted resources for the benefit of our stockholders,
customers, communities and staff.

Strategic Objectives 2000-2002
Become a diversified financial service organization.
Expand traditional markets and methods of delivery.
Provide a work environment that attracts and retains highly qualified
individuals dedicated to the bank's goals.
Use technology to improve staff efficiency and provide electronic service
options.
<PAGE>

           Oswego County Bancorp, Inc. and Oswego County Savings Bank

Board of Directors

[picture]

Back row, left to right: Paul J. Heins, Vice Chairman, Gregory J. Kreis, Bruce
P. Frassinelli, Deborah F. Stanley. Front row, left to right: Michael L. Brower,
Paul W. Schneible, Chairman, Carl K. Walrath. Missing: Bernard Shapiro.

Management Team

[picture]

Back row, left to right: Stephen Albright, Gregory J. Kreis, Gregory H. May,
Ronald Tascarella. Front row: Judith S. Percy, Mary E. Lilly.
<PAGE>

                         Annual Message to Shareholders

The year 1999 saw the most dramatic change for Oswego County Savings Bank in the
129 history of the Bank. Oswego County Savings Bank and Oswego City Savings Bank
jointly announced the termination of the merger agreement between the two banks
in January, seventeen months after signing the agreement. Although both banks
believed the merger would have been positive for our customers and the Oswego
County community, we were unsuccessful in gaining necessary regulatory
approvals. The Board of Trustees voted unanimously to begin the process to
convert from a mutual savings bank to a mutual holding company and stock bank
form of ownership. The Board felt strongly that to accommodate the strategic
vision for the future that the Bank would need additional capital. The
conversion was accomplished on the 14th of July with the completion of a
successful initial public offering of our stock.

In 1997 the Bank started an extensive review of all of our systems to determine
what needed to be done to ensure that a smooth transition to the year 2000 would
be accomplished. Hundreds of man-hours were dedicated to the project as well as
a substantial investment in new computer equipment and computer software. The
effort was successful and the New Year rolled in without a problem.

The good news regarding all of the Y2K preparation work was that our technology
took a significant step forward. New high-speed phone lines were installed to
all of our locations and a wide area network was established to improve customer
service and internal communication. Faster and more efficient personal computers
were acquired and additional software was installed to streamline tasks and add
new services.

The Main Office facility was renovated from top to bottom. Our Main Office
branch received new ceilings, lighting, carpet, fresh paint and a redesigned
teller line with a manager's office located next to it. All of our back room
operations were consolidated on our third floor in freshly remodeled space which
improved workflow.

In August a new branch located at 700 North Main Street in North Syracuse was
opened and represented the Bank's first branch outside of Oswego County. The
reception in that market has been gratifying and our growth is on target to meet
our first year budget. Also in August the Bank installed an ATM in the Hewitt
Student Union on the Oswego State University campus.

The Bank also began offering several new products during the year. A home equity
line of credit and several new fixed rate residential mortgage products were
introduced. An automatic overdraft privilege was added for our consumer checking
account customer's convenience. The OCSB MasterMoney Card was also introduced to
our checking account customers. This debit card may be used at OCSB ATMs as well
as a worldwide network of ATMs. Additionally the debit card can be used at
businesses worldwide that accept MasterCard transactions. The amount is
automatically deducted from the customer's checking account giving them
universal access to their funds.

<PAGE>

We expanded our services to the business community and were received warmly by
that group. Business loan and deposit balances grew substantially and two more
staff members were added to accommodate that growth. Our strategic direction is
to continue to grow this very important segment of the market. Based on the
volume of activity we are currently experiencing additional staff will be added
in 2000 to keep up with the demand.

The year 1999 was truly exciting as the Bank positioned itself to succeed in the
twenty first century. The year 2000 promises to be an equally exciting year as
many new loan and deposit product offerings are being readied for introduction.
A package to allow our customer's to bank from home or work via the Internet
will also be introduced. Non traditional banking services will also be available
in 2000 with a goal of being one stop financial services provider.

The Bank will celebrate our 130th anniversary in August. The Board's and
management's that have guided the Bank throughout those 130 years have steered a
course that kept the Bank sound and allowed it to grow and serve the citizens
and businesses of this region. The current Board, management team and staff are
equally committed to operating a strong and growing financial institution
dedicated to excellent service while meeting the changing needs of our
customers.


Paul W. Schneible                       Gregory J. Kreis
Chairman of the Board                   President & CEO
<PAGE>

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

On July 13, 1999, Oswego County Savings Bank (the "Bank") reorganized under a
mutual holding company structure as a wholly owned subsidiary of Oswego County
Bancorp, Inc. (the "Company" or "OCB"), a mid-tier stock holding company that
became the majority-owned subsidiary of Oswego County MHC (the "MHC").
Contemporaneously with the reorganization, the Company sold in a public offering
399,500 shares of its common stock, par value $.01 ("Company Common Stock") at
$10.00 per share, raising net proceeds of $3.0 million. As an integral part of
the reorganization and public offering and in furtherance of the Company's
commitment to the communities it serves, the Bank and the Company have
established a charitable foundation known as the Oswego County Charitable
Foundation (the "Foundation") and have contributed 15,980 shares to the
Foundation. The Foundation will provide funding to support charitable causes and
community development activities, which will complement the Bank's existing
community activities. In addition, the Company established an Employee Stock
Ownership Plan (ESOP) for employees of the Company and the Bank, which became
effective with completion of the reorganization. The ESOP plan acquired 31,960
shares of OCB stock through January 2000 and has no immediate plans to purchase
additional shares.

The consolidated financial condition and operating results of the Company are
primarily dependent on its wholly owned subsidiary, the Bank, and all references
to the Company prior to July 13, 1999, except where otherwise indicated are to
the Bank.

Comparison of Financial Condition at December 31, 1999 and December 31, 1998

Total assets increased by $12.0 million or 10.8% to $122.8 million at December
31, 1999 from $110.9 million at December 31, 1998. The increase was primarily
due to a $2.6 million or 18.8% increase in securities held to maturity and a
$6.1 million or 40.9% increase in securities available for sale. Loans
outstanding increased $1.0 million from $72.1 million at December 31, 1998 to
$73.1 million at December 31, 1999. These asset increases were funded with net
stock offering proceeds of $3.0 million, $5.0 million in long-term borrowings
and a $3.6 million increase in total deposits from $96.6 million at December 31,
1998 to $100.1 million at December 31, 1999.

While total loans increased $1.0 million during 1999, the mix of outstanding
loans changed due to continued mortgage refinancings and successful efforts in
commercial lending. Total residential and home equity loans decreased $5.2
million from $60.8 million at December 31, 1998 to $55.6 million at December 31,
1999. The decrease in mortgage and home equity loans reflects consumer
preference in lower interest rate environments for fixed-rate residential
mortgage loans and the continued high levels of mortgage loan refinancings in
1999. As interest rates have risen in the latter part of 1999 and in early 2000,
refinancing has slowed and consumer interest in adjustable-rate mortgages has
increased. Commercial loans increased from $265,000 at December 31, 1998 to $5.9
million at December 31, 1999. This increase reflects the Company's continued
efforts to diversify the loan portfolio and to expand product offerings to
include commercial term loans and lines of credit. At December 31, 1999, net
loans amounted
<PAGE>

to $72.0 million or 58.6% of total assets, compared to $71.0 million or 64.1% at
December 31, 1998. Total securities available for sale increased $6.1 million
from $14.8 million at December 31, 1998 to $20.8 million at December 31, 1999.
Securities held to maturity increased $2.6 million from $13.7 million at
December 31, 1998 to $16.3 million at December 31, 1999. The increase in
securities available for sale was funded by increased deposit balances and long
term borrowings. The increases in securities held to maturity were primarily in
municipal issues which offer the Company favorable income tax benefits.
Securities represented 30.2% of total assets at December 31, 1999 and 25.7% of
total assets at December 31, 1998.

Real estate owned at December 31, 1999 was $255,000 compared to $195,000 at
December 31, 1998. During 1999, the Company continued to reduce the level of
non-performing loan amounts. Total non-performing loans decreased from $1.7
million at December 31, 1998 to $1.3 million at December 31, 1999. Loan
charge-offs have also decreased from $526,000 in 1998 to $157,000 in 1999. At
December 31, 1999, the allowance for loan losses equaled $1.1 million
representing 1.46% of total loans outstanding and 81.35% of total non-performing
loans.

Total deposits increased during 1999 by $3.6 million to $100.1 million at
December 31, 1999 from $96.6 million at December 31, 1998. The increase was
centered in demand and savings deposits which increased $1.7 million and $2.3
million, respectively. Time deposit levels were consistent with the prior year.

Total shareholders' equity was $14.2 million at December 31, 1999, an increase
of $2.5 million from December 31, 1998. The increase was due primarily to the
offering proceeds offset by the increase in accumulated other comprehensive loss
and the unallocated ESOP shares, which are presented as a reduction of
shareholders' equity.

Results of Operations for the Year Ended December 31, 1999 Versus the Year Ended
December 31, 1998

Net income was $169,000 for the year ended December 31, 1999, compared to
$309,000 in 1998, reflecting the Company's 1999 contribution of $160,000 worth
of common stock to a charitable foundation and costs associated with opening a
fifth banking office. Fiscal 1999 was a year of transition to public company
status and to an expanded base of operations.

Net Interest Income. Net interest income is determined by the average interest
rate spread (i.e., the difference between the average yields earned on
interest-earning assets and the average rates paid on interest-bearing
liabilities) and the relative amounts of interest-earning assets and
interest-bearing liabilities. Net interest income increased from $4.5 million in
1998 to $4.6 million in 1999 during a year in which market levels for short-term
interest rates increased by approximately 1.50%. The Company views favorably its
ability in 1999 to maintain a consistent level of net interest income in a
rising rate environment. OCB can offer no assurance, however, that it would be
able to achieve similar results during future periods. For the year ended
December 31, 1999, taxable equivalent net interest income increased by $57,000
due to volume and $49,000 as the result of interest rate variances.
<PAGE>

Interest Income. Total interest income decreased by $134,000, or 2.1%, to $7.8
million for 1999 compared to $7.9 million for 1998. The primary reason for the
decrease in interest income was a $483,000 decrease in interest earned on
outstanding loans reflecting mainly the pay down of higher yielding adjustable
rate residential mortgage loans. The average balance of loans decreased $3.5
million from $75.6 million in 1998 to $72.1 million in 1999. The average yield
on the loan portfolio also decreased from 8.27% in 1998 to 8.01% in 1999.

Income from securities increased by $374,000 during 1999 to $1.9 million,
compared to $1.5 million in 1998. The increase in interest income from
securities during 1999 was due primarily to a $6.4 million increase in the
average balance of securities to $31.1 million for 1999 compared to $24.7
million in 1998. The average yield on the securities portfolio decreased
slightly to 6.01% in 1999 compared to 6.05% in 1998.

Other interest income, which consists of interest on federal funds sold and
other short-term investments, was $156,000 in 1999 as compared to $181,000 in
1998. The average amount of federal funds and short-term investments decreased
from $3.2 million in 1998 to $2.9 million in 1999. The average yields on these
investments decreased from 5.60% in 1998 to 5.32% in 1999.

Interest Expense. Interest expense, which consisted primarily of interest paid
on deposits, was $3.1 million in 1999 compared to $3.4 million in 1998. The
primary reason for the $240,000 decrease in interest expense was a 31 basis
point reduction in the average rate paid on these deposits in 1999 compared to
1998. This reflects the Company's increase in lower costing savings and demand
deposits, and reduced average rates paid on savings, demand and time deposits.
OCB offers its deposit customers tiered pricing schedules whereby higher
balances earn higher rates of interest.

Provision for Loan Losses. The provision for loan losses was $120,000 in both
1999 and 1998. Provisions for loan losses are recorded to maintain the allowance
for loan losses at an amount management considers adequate to cover losses which
are deemed probable and can be estimated. These provisions were based upon a
number of factors, including asset classifications, management's assessment of
the credit risk inherent in the portfolio, historical loan loss experience,
economic trends, industry experience and trends, estimated collateral values and
underwriting policies. Net loan charge-offs were $119,000 in 1999 and $461,000
in 1998, reflecting the Company's efforts during the past three years to address
problem loan situations in a timely manner. As a result of improvement in loan
portfolio quality, charge-offs and non-performing loans declined during 1999.
Total non-performing loans decreased from $1.7 million at December 31, 1998 to
$1.3 million at December 31, 1999. At December 31, 1999, the allowance for loan
losses equaled $1.1 million, representing 1.46% of total loans outstanding and
81.35% of total non-performing loans.

Noninterest Income. Noninterest income increased by $116,000 during 1999 as
compared to 1998. The increase reflects the Company's efforts to expand
commercial loan and deposit products, which result in greater service fee
levels. In addition, the Company extended efforts to reduce fee and service
charge waivers during 1999.
<PAGE>

Noninterest Expenses. Noninterest expenses increased during 1999 by $459,000, or
10.4%, to $4.9 million compared to $4.4 million in 1998. The primary reasons for
the increase were a 10.3% increase in salaries and benefits, a 15.6% increase in
occupancy and equipment expenses, a $170,000 increase in professional fees, a
$98,000 increase in data processing costs and a $160,000 increase in charitable
contributions. Partially offsetting these increases were the absence in 1999 of
$171,000 in terminated merger expenses, and a reduction of $217,000 in ORE
expenses. Higher salary and benefit costs reflect the branch opening, wage
increases and inflationary increases in benefit expenses. The increase in
occupancy and equipment expense was caused by higher depreciation expense on
capital expenditures, primarily for the new branch and computer equipment. The
increase in data processing costs in 1999 reflects efforts to continue to
improve data processing capabilities, inflationary increases in a data
processing servicing contract, expenses associated with ATMs installed in mid
1998, and costs to bring a new branch on line. Professional fees include the
costs of a profitability study, Y2K consulting costs, and increased costs from
operating as a publicly held company. Increased charitable contributions reflect
the $160,000 contribution of common stock to Oswego County Charitable
Foundation.

Income Taxes. Income tax expense decreased by $125,000 in 1999 to $37,000 as
compared to $162,000 in 1998, reflecting reduced pretax income and a greater
volume of tax exempt securities in 1999. The effective income tax rate declined
to 18.0% in 1999 from 34.4% in 1998.

[picture]

700 North Main Street, North Syracuse
Our newest branch opened August of 1999.
Stephen Sharkey Assistant Vice President and Branch Manager.

<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                        Consolidated Financial Statements

                     Years ended December 31, 1999 and 1998

                   (With Independent Auditors' Report Thereon)
<PAGE>

                          Independent Auditors' Report

The Board of Directors
Oswego County Bancorp, Inc.:

We have audited the accompanying consolidated statements of financial condition
of Oswego County Bancorp, Inc. and subsidiary (the "Company") as of December 31,
1999 and 1998, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Oswego County
Bancorp, Inc. and subsidiary as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.

                                        KPMG LLP

February 28, 2000
Syracuse, New York
<PAGE>

                     Statements of Financial Condition, p. 2

                         Statements of Operations, p. 4

                    Statements of Changes in Net Worth, p. 7

                         Statements of Cash Flows, p. 9
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                 Consolidated Statements of Financial Condition

                           December 31, 1999 and 1998
                        (In thousands, except share data)

     Assets                                                     1999       1998
                                                                ----       ----
Cash and due from banks                                      $  6,450      4,007
Federal funds sold and other short-term investments                --      2,600
Securities held to maturity, fair value of $15,829 in
  1999 and $13,792 in 1998                                     16,307     13,730
Securities available for sale, at fair value                   20,834     14,784

Loans                                                          73,098     72,081
     Less allowance for loan losses                             1,069      1,068
                                                             --------    -------
             Loans, net                                        72,029     71,013
                                                             --------    -------
Real estate owned                                                 255        195
Premises and equipment, net                                     3,056      2,245
Accrued interest receivable                                       938        856
Other assets                                                    2,980      1,436
                                                             --------    -------
             Total assets                                    $122,849    110,866
                                                             ========    =======

              Liabilities and Shareholders' Equity

Liabilities:
  Deposits:
    Demand                                                   $ 13,329     11,630
    Savings and money market                                   49,000     46,687
    Time                                                       37,789     38,247
                                                             --------    -------
                                                              100,118     96,564

  Escrow deposits                                               1,286      1,319
  Short-term borrowings                                           900         --
  Long-term debt                                                5,000         --
  Other liabilities                                             1,326      1,289
                                                             --------    -------
             Total liabilities                               $108,630     99,172
                                                             --------    -------
Commitments and contingencies (note 13)


                                       2
<PAGE>

<TABLE>
<CAPTION>

<S>                                                                <C>            <C>
Shareholders' equity:
  Preferred stock, $0.01 par value, 1,000,000 shares authorized,
    no shares issued                                                      --           --
  Common stock, $0.01 par value, 7,500,000 shares authorized,
    887,230 shares issued at December 31, 1999                             9           --
  Additional paid-in capital                                           3,182           --
  Retained earnings                                                   11,764       11,695
  Accumulated other comprehensive income (loss)                         (498)          (1)
  Unallocated common stock held by Employee Stock
  Ownership
    Plan (ESOP), 24,284 shares at December 31, 1999                     (238)          --
                                                                   ---------      -------
             Total shareholders' equity                               14,219       11,694
                                                                   ---------      -------
             Total liabilities and shareholders' equity            $ 122,849      110,866
                                                                   =========      =======
</TABLE>

See accompanying notes to consolidated financial statements.


                                       3
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                        Consolidated Statements of Income

                     Years ended December 31, 1999 and 1998
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                    1999              1998
                                                               -------------     -------------
<S>                                                                <C>               <C>
Interest income:
  Loans                                                            $ 5,770           6,253
  Securities                                                         1,827           1,481
  Federal funds sold and other short-term investments                  156             181
                                                                   -------         -------

          Total interest income                                      7,753           7,915

Interest expense:
  Deposits and escrow accounts                                       3,131           3,388
  Borrowings                                                            17              --
                                                                   -------         -------

          Total interest expense                                     3,148           3,388
                                                                   -------         -------

          Net interest income                                        4,605           4,527

Provision for loan losses                                              120             120
                                                                   -------         -------

          Net interest income after provision for loan losses        4,485           4,407
                                                                   -------         -------

Noninterest income:
  Service charges                                                      450             387
  Nationar recovery                                                     --              22
  Net gains on securities transactions                                   7               2
  Other                                                                128              58
                                                                   -------         -------

          Total noninterest income                                     585             469
                                                                   -------         -------

Noninterest expenses:
  Salaries and employee benefits                                     2,122           1,924
  Occupancy and equipment                                              776             671
  Data processing                                                      435             337
  Office supplies, printing and postage                                219             187
  Professional fees                                                    421             251
  Merger expenses                                                       --             171
  Real estate owned, net                                                85             302
  Director fees                                                        128             138
  Marketing and advertising                                            159             121
  Contributions                                                        200              40
</TABLE>


                                       4
<PAGE>

<TABLE>

<S>                                                                <C>               <C>
  Deposit insurance premiums                                            11              12
  Other                                                                308             251
                                                                   -------         -------

          Total noninterest expenses                                 4,864           4,405
                                                                   -------         -------

Income before income tax expense                                       206             471

Income tax expense                                                      37             162
                                                                   -------         -------

          Net income                                               $   169             309
                                                                   =======         =======

Basic loss per share (for period after conversion to stock form)   $ (0.17)             ~~
</TABLE>

See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

           Consolidated Statements of Changes in Shareholders' Equity

                     Years ended December 31, 1999 and 1998
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                        Additional
                                                                        Common            paid-in            Retained
                                                                         Stock            capital            earnings
                                                                    ----------------  ----------------   ------------------
<S>                                                              <C>                        <C>                 <C>
Balance at December 31, 1997                                     $           --                --               11,386

Comprehensive income:
     Net income                                                              --                --                  309

     Net change in the unrealized gain (loss) on securities
        available for sale, net of taxes                                     --                --                   --


              Total comprehensive income
                                                                 -------------------  ----------------   ------------------

Balance at December 31, 1998                                                 --                --               11,695

Net proceeds from sale of 399,500 shares of common
     stock in initial public offering                                         4             3,027                   --

Initial capital contributions and issuance of common
     stock to Oswego MHC (471,750 shares)                                     5                (5)                (100)

Charitable contribution of common stock to the
     Oswego County Charitable Foundation (15,980                             --               160                   --
</TABLE>


                                       6
<PAGE>

<TABLE>

     shares)

Acquisition of common stock by ESOP (26,460 shares)                          --                --                   --

Allocation of ESOP stock (2,176 shares)                                      --                --                   --

Comprehensive income:
     Net income                                                              --                --                  169

     Net change in the unrealized gain (loss) on securities
        available for sale, net of taxes                                     --                --                   --


              Total comprehensive income (loss)
                                                                 -- ----------------  ----------------   ------------------

Balance at December 31, 1999                                     $            9             3,182               11,764
                                                                 ===================  ================   ==================

<CAPTION>
                                                                                         Unallocated
                                                                    Accumulated             common
                                                                       other                stock
                                                                   comprehensive           held by
                                                                   income (loss)             ESOP               Total
                                                                 -------------------   -----------------   -----------------
<S>                                                                        <C>                 <C>               <C>
Balance at December 31, 1997                                                  5                  --              11,391

Comprehensive income:
     Net income                                                              --                  --                 309

     Net change in the unrealized gain (loss) on securities
        available for sale, net of taxes                                     (6)                 --                  (6)
                                                                                                           -----------------

              Total comprehensive income                                                                            303
                                                                 -------------------   -----------------   -----------------

Balance at December 31, 1998                                                 (1)                 --              11,694

Net proceeds from sale of 399,500 shares of common
     stock in initial public offering                                        --                  --               3,031

Initial capital contributions and issuance of common
     stock to Oswego MHC (471,750 shares)                                    --                  --                (100)

Charitable contribution of common stock to the
     Oswego County Charitable Foundation (15,980 shares)                     --                  --                 160

Acquisition of common stock by ESOP (26,460 shares)                          --                (259)               (259)

Allocation of ESOP stock (2,176 shares)                                      --                  21                  21

Comprehensive income:
     Net income                                                              --                  --                 169

     Net change in the unrealized gain (loss) on securities
        available for sale, net of taxes                                   (497)                 --                (497)
                                                                                                           -----------------

              Total comprehensive income (loss)                                                                    (328)
                                                                 -------------------   -----------------   -----------------

Balance at December 31, 1999                                               (498)               (238)             14,219
                                                                 ===================   =================   =================
</TABLE>


See accompanying notes to consolidated financial statements.


                                       7
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                      Consolidated Statements of Cash Flows

                     Years ended December 31, 1999 and 1998

    (In
 thousands)

<TABLE>
<CAPTION>
                                                                                  1999          1998
                                                                                  ----          ----
<S>                                                                             <C>             <C>
Cash flows from operating activities:
  Net income                                                                    $    169         309
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
      Depreciation                                                                   318         256
      Provision for loan losses                                                      120         120
      Nationar recovery                                                               --         (22)
      Writedown on real estate owned                                                  46          32
      (Gain) loss on sale of real estate owned                                       (34)        113
       Net gains on securities transactions                                           (7)         (2)
       Net amortization on securities                                                 31          32
       Deferred income tax expense (benefit)                                        (160)         99
       Contribution to foundation                                                    160          --
       ESOP compensation expense                                                      21          --
       Change in:
         Accrued interest receivable                                                 (82)         69
         Other assets                                                             (1,052)       (538)
         Escrow deposits                                                             (33)       (140)
         Other liabilities                                                            37          44
                                                                                 -------     -------
                  Net cash provided by (used in) operating activities               (466)        372
                                                                                 -------     -------
Cash flows from investing activities:
  Proceeds from maturity of and principal collected on
    securities held to maturity                                                    3,428       9,723
  Proceeds from sale of securities available for sale                              2,019       2,002
  Proceeds from maturity of and principal collected on
    securities available for sale                                                  7,440       6,896
  Purchases of securities held to maturity                                        (6,039)    (13,039)
  Purchases of securities available for sale                                     (16,328)    (12,778)
  Net (disbursements) receipts on loan originations and principal collections     (1,496)      7,644
  Proceeds from sale of real estate owned                                            288         534
  Purchases of premises and equipment, net of disposals                           (1,129)       (177)
                                                                                 -------     -------
                  Net cash provided by (used in)  investing activities           (11,817)        805
                                                                                 -------     -------
Cash flows from financing activities:
  Net increase in demand, savings and money market deposits                        4,012         116
  Net decrease in time deposits                                                     (458)     (1,450)
  Net increase in short-term borrowings                                              900          --
  Proceeds from issuance of long-term debt                                         5,000          --
  Net proceeds from the issuance of common stock                                   3,031          --
  Purchase of common stock by ESOP                                                  (259)         --
  Capitalization of Oswego MHC                                                      (100)         --
                                                                                 -------     -------
                  Net cash provided by (used in) in financing activities          12,126      (1,334)
                                                                                 -------     -------
Net decrease in cash and cash equivalents                                           (157)       (157)

Cash and cash equivalents at beginning of year                                     6,607       6,764
                                                                                 -------     -------


                                       8
<PAGE>

Cash and cash equivalents at end of year                                        $  6,450       6,607
                                                                                ========     =======
Supplemental disclosure of cash flow information:
  Cash paid (received) during the year for:
    Interest                                                                    $  3,131       3,388
    Income taxes                                                                      (1)        196
                                                                                ========     =======
  Non-cash investing and financing activities:
    Transfer of loans to real estate owned                                      $    360         275
                                                                                ========     =======
    Adjustment of securities available for sale to fair value, net of taxes     $   (497)         (6)
                                                                                ========     =======
</TABLE>


See accompanying notes to consolidated financial statements.


                                       9
<PAGE>


                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

(1)   Summary of Significant Accounting Policies

      The accounting and reporting policies of Oswego County Bancorp, Inc. (the
      "Parent Company") and its subsidiary (referred to together as the
      "Company") conform to generally accepted accounting principles and
      reporting practices followed by the banking industry. The more significant
      policies are described below.

      (a)   Reorganization and Stock Offering

            Oswego County Bancorp, Inc. is the parent company of Oswego County
            Savings Bank (the "Bank"). On July 13, 1999, Oswego County Savings
            Bank reorganized into the mutual holding company form of
            organization as a wholly owned subsidiary of Oswego County Bancorp,
            Inc., a mid-tier stock holding company that became the
            majority-owned subsidiary of Oswego County MHC (the "MHC").
            Contemporaneously with the reorganization, Oswego County Bancorp,
            Inc. sold 399,500 shares of its common stock at $10.00 per share,
            raising net proceeds of $3.0 million, after offering costs of
            $900,000. As an integral part of the reorganization and public
            offering, the Company established a charitable foundation known as
            the Oswego County Charitable Foundation (the "Foundation") and
            contributed 15,980 shares to the Foundation. Contributions expense
            for 1999 includes $160,000 for the fair value of these shares at the
            contribution date. The Foundation will provide funding to support
            charitable causes and community development activities. In addition,
            the Company established an Employee Stock Ownership Plan (ESOP)
            which became effective with the completion of the reorganization.

      (b)   Merger Termination

            On January 28, 1999, the Bank terminated a proposed merger, as a
            result of certain regulatory considerations. Expenses related to
            this terminated merger totaling $171,000 in 1998 are included in
            noninterest expenses.

      (c)   Basis of Presentation

            The consolidated financial statements include the accounts of Oswego
            County Bancorp, Inc. and its subsidiary, Oswego County Savings Bank.
            All inter-company accounts and transactions have been eliminated in
            consolidation. The Company utilizes the accrual method of accounting
            for financial reporting purposes. Amounts in the prior years'
            consolidated financial statements have been reclassified whenever
            necessary to conform to the current year's presentation.

                                                                     (Continued)


                                       10
<PAGE>
                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

      (d)   Use of Estimates

            The preparation of financial statements in conformity with generally
            accepted accounting principles requires management to make estimates
            and assumptions that affect the reported amounts of assets and
            liabilities and disclosure of contingent assets and liabilities at
            the date of the financial statements and the reported amounts of
            income and expenses during the reporting period. Actual results
            could differ from those estimates.

      (e)   Securities

            The Company classifies its securities as either available for sale
            or held to maturity, as the Company does not hold any securities
            considered to be trading. Held to maturity securities are those debt
            securities for which the Company has the positive intent and the
            ability to hold until maturity. All other securities not included in
            held to maturity are classified as available for sale.

            Held to maturity securities are recorded at cost, adjusted for the
            amortization or accretion of premiums or discounts. Available for
            sale securities are recorded at fair value. Unrealized holding gains
            and losses, net of the related tax effect, on available for sale
            securities are excluded from earnings and are reported as
            accumulated other comprehensive income or loss until realized.
            Non-marketable equity securities (principally Federal Home Loan Bank
            Stock) are included in securities available for sale at cost since
            there is no readily available market value.

            A decline in the fair value of any available for sale or held to
            maturity security below cost, that is deemed other than temporary,
            is charged to earnings resulting in the establishment of a new cost
            basis for the security.

            Premiums and discounts are amortized or accreted over the life of
            the related security as an adjustment to yield using the effective
            interest method. Dividends and interest income are recognized when
            earned. Realized gains and losses on securities are recognized on
            the trade date and are calculated using the specific identification
            method for determining the cost of securities sold.

      (f)   Loans

            Loans (other than those held for sale) are reported at the principal
            amount outstanding. Fees and certain direct origination costs
            related to lending activities are recognized in income as incurred,
            as the amounts are immaterial.

            Mortgage loans originated and intended for sale in the secondary
            market are carried at the lower of cost or estimated market value in
            the aggregate. Net unrealized losses are recognized through a
            valuation allowance by charges to income.

                                                                     (Continued)


                                       11
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

            Generally, the Company places all loans that are 90 days or more
            past due on non-accrual status. In addition, the Company places any
            loan on non-accrual status if any part of it is classified as
            doubtful or loss, or if any part has been charged off. When a loan
            is placed on non-accrual status, total interest accrued and unpaid
            to date is reversed by a charge to interest income. Subsequent
            payments are either applied to the outstanding principal balance or
            recorded as interest income, depending on the assessment of the
            ultimate collectibility of the loan.

      (g)   Allowance for Loan Losses

            The Company's provision for loan losses charged to operations is
            based upon management's evaluation of the loan portfolio. The
            allowance for loan losses is maintained at an amount management
            deems adequate to provide for probable loan losses considering the
            character of the loan portfolio, economic conditions, analysis of
            specific loans and historical loss experience. While management uses
            available information to recognize losses on loans, future additions
            to the allowance may be necessary based on changes in economic
            conditions. In addition, various regulatory agencies, as an integral
            part of their examination process, periodically review the Company's
            allowance for loan losses. Such agencies may require the Company to
            recognize additions to the allowance based on their judgments about
            information available to them at the time of their examinations.

            The Company considers a loan impaired when, based on current
            information and events, it is probable that it will be unable to
            collect all amounts of principal and interest under the original
            terms of the agreement. Large groups of smaller balance, homogeneous
            loans such as the Company's residential mortgages, home equity loans
            and consumer loans are collectively evaluated for impairment.
            Accordingly, the Company measures impaired commercial mortgages and
            commercial loans based on the present value of future cash flows
            discounted at the loan's effective interest rate, or at the fair
            value of the collateral if the loan is collateral dependent.
            Impairment losses are recognized as a component of the allowance for
            loan losses.

      (h)   Real Estate Owned

            Real estate owned includes property acquired through, or in lieu of,
            formal foreclosure. Write-downs to estimated fair value which are
            required at the time of foreclosure are charged to the allowance for
            loan losses. After transfer, the property is carried at the lower of
            cost or fair value, less estimated selling expenses. Adjustments to
            the carrying value of such properties that result from subsequent
            declines in fair value are charged to operations in the period in
            which the declines occur.

      (i)   Premises and Equipment

            Land is carried at cost, and buildings, furniture and equipment are
            stated at cost less accumulated depreciation. Depreciation is
            computed primarily on the straight-line method over the estimated
            service lives of the assets.

                                                                     (Continued)


                                       12
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

      (j)   Income Taxes

            Deferred tax assets and liabilities are recognized 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
            are also recognized for tax carryforwards such as charitable
            contributions. Deferred tax assets and liabilities are measured
            using enacted tax rates in effect for the year in which those
            temporary differences are expected to be recovered or settled. If it
            is more likely than not that all, or a portion of the Company's
            deferred tax assets will not be realized a valuation must be
            established. The effect on deferred tax assets and liabilities of a
            change in tax rates is recognized in income tax expense in the
            period which includes the enactment date.

      (k)   Pension and Other Postretirement Benefits

            The Company has a defined benefit pension plan covering
            substantially all of its employees. Benefits are based on credited
            years of service and the employee's average compensation prior to
            retirement. The Company's funding policy is to contribute annually
            at least the minimum required by law.

            The Company sponsors an unfunded defined benefit plan that covers
            all of its full time employees and provides postretirement medical
            and life insurance benefits. Employees are eligible for these
            benefits if they retire under the Company's defined benefit pension
            plan and have attained age 55 with at least 5 years of service.
            Employees are required to contribute a portion of the medical
            insurance premium. The Company accrues the cost of these benefits to
            employees and the employees' beneficiaries during the years that the
            employees render the necessary service.

      (l)   Cash and Cash Equivalents

            For purposes of reporting cash flows, cash and cash equivalents
            include cash on hand, amounts due from banks and Federal funds sold
            and other short-term investments with maturities less than 90 days.

      (m)   Financial Instruments With Off-Balance Sheet Risk

            The Company does not engage in the use of derivative financial
            instruments and the Company's only financial instruments with
            off-balance sheet risk are commercial and residential mortgage
            commitments. These off-balance sheet items are shown in the
            Company's statement of financial condition upon funding.

                                                                     (Continued)


                                       13
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

      (n)   Comprehensive Income

            Comprehensive income, presented in the consolidated statements of
            changes in shareholders' equity, consists of net income and the net
            change for the period in after-tax unrealized gains or losses on
            securities available for sale. Accumulated other comprehensive
            income in the accompanying statements of financial condition
            represents the net unrealized gains or losses on securities
            available for sale as of the reporting dates.

      (o)   Segment Information

            Statement of Financial Accounting Standards No. 131, Disclosures
            about Segments of an Enterprise and Related Information requires
            public companies to report financial and other information about key
            revenue producing segments of the entity for which such information
            is available and is utilized by the chief operating decision maker.
            Specific information to be reported for individual segments includes
            profit or loss, certain specific revenue and expense items, and
            total assets. A reconciliation of segment financial information to
            amounts reported in the financial statements is also provided. As a
            community-oriented financial institution, substantially all of the
            Company's operations involve the delivery of loan and deposit
            products to customers. Management makes operating decisions and
            assesses performance based on an ongoing review of these community
            banking operations, which constitute the Company's only operating
            segment for financial reporting purposes. Therefore, the adoption of
            SFAS No. 131 in 1998 did not result in any changes in the Company's
            reporting.

      (p)   Other Accounting Standards

            SFAS No. 133, Accounting for Derivative Instruments and Hedging
            Activities, was issued in June 1998. This statement requires that
            all derivatives be recognized as either assets or liabilities in the
            statement of financial condition and that those instruments be
            measured at fair value. 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. This statement,
            after amendment by SFAS No. 137, is effective for fiscal years
            beginning after June 15, 2000, although earlier adoption is
            permitted. The Company anticipates, based on current activities,
            that the adoption of SFAS No. 133 will not have a significant effect
            on its financial position or results of operations. SFAS No. 133
            also permits certain reclassification of securities to the available
            for sale category from the held to maturity category.

                                                                     (Continued)


                                       14
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

In 1999, the Company adopted SFAS No. 134, Accounting for Mortgage-Backed
Securities Retained After the Securitization of Mortgage Loans Held for Sale by
a Mortgage-Banking Enterprise, which amends SFAS No. 65, Accounting for Certain
Mortgage Banking Activities. This statement conforms the subsequent accounting
for securities retained after the securitization of mortgage loans by a mortgage
banking enterprise with the accounting for such securities by a nonmortgage
banking enterprise. Adoption of SFAS No. 134 did not have any impact on the
Company's financial position or results of operations.

(2) Securities

The amortized cost and fair value of securities are as follows:

<TABLE>
<CAPTION>

                                                                     December 31, 1999
                                              --------------------------------------------------------------
                                                               Gross              Gross
                                              Amortized      unrealized         unrealized              Fair
                                                 cost          gains             losses                value
                                              ---------      ----------         ----------              ----
                                                                           (in thousands)
<S>                                           <C>                <C>                <C>                <C>
Securities available for sale
Debt securities:
       United States Government
        agency obligations                    $    21,032        --                 830                20,202


       Corporate stocks                               632        --                  --                   632
                                              -----------        --                 ---                ------
            Total securities available
                for sale                      $    21,664        --                 830                20,834
                                              ===========        ==                 ===                ======

Securities held to maturity
Debt securities:
       United States Government
         agency obligations                   $     4,995        --                  77                 4,918
       Corporate and municipal securities           8,171        --                 339                 7,832
       Mortgage-backed securities:
        Ginnie Mae                                  1,369        --                  17                 1,352
        Fannie Mae                                  1,014         1                  37                   978
        Freddie Mac                                    47         1                  --                    48
        Small Business Administration                 711        --                  10                   701
                                              -----------        --                 ---                ------
         Total securities held
             to maturity                      $    16,307         2                 480                15,829
                                              ===========        ==                 ===                ======
</TABLE>

                                                                     (Continued)


                                       15
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                                     December 31, 1998
                                              --------------------------------------------------------------
                                                               Gross              Gross
                                              Amortized      unrealized         unrealized              Fair
                                                 cost          gains             losses                value
                                              ---------      ----------         ----------              ----
                                                                           (in thousands)
<S>                                           <C>               <C>                <C>                  <C>
Securities available for sale
Debt securities:
  United States Treasury                      $ 1,007           13                 --                    1,020
  United States Government
    agency obligations                         13,776           47                 61                   13,762

        Total debt securities                  14,783           60                 61                   14,782

Equity securities:
  Corporate stocks                                  2           --                 --                        2

        Total securities available
          for sale                            $14,785           60                 61                   14,784

Securities held to maturity
Debt securities:
  United States Government
    agency obligations                          6,491           57                  4                    6,544
  Corporate and municipal securities            4,125           37                  6                    4,156
  Mortgage-backed securities:
    Ginnie Mae                                  2,164            3                 17                    2,150
    Fannie Mae                                    426            1                  8                      419
    Freddie Mac                                    22            1                 --                       23
    Small Business Administration                 502           --                  2                      500

        Total securities held
          to maturity                         $13,730           99                 37                   13,792
</TABLE>

Proceeds from the sale of securities available for sale during 1999 were
approximately $2,019,000 with gross gains of approximately $12,000 and no gross
losses realized on those sales. No gross gains and gross losses of approximately
$5,000 were realized from securities called during 1999. Proceeds from the sale
of securities available for sale during 1998 were approximately $2,002,000, with
gross gains of approximately $2,000 and no gross losses realized on those sales.
No securities held to maturity were sold in 1999 and 1998.

                                                                     (Continued)


                                       16
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

The net gains on securities transactions included in 1999 net income, net of
tax, was approximately $4,000 which adjusted the unrealized holding loss on
securities available for sale arising during the year ended December 31, 1999 to
approximately $493,000. Net gains on securities transactions included in 1998
net income, net of tax, was approximately $1,000 which adjusted the unrealized
holding loss on securities available for sale arising during the year ended
December 31, 1998 to approximately $5,000.

Securities available for sale with an amortized cost of approximately $6.2
million at December 31, 1999 were pledged to secure borrowings from the Federal
Home Loan Bank. There were no securities pledged at December 31, 1998.

The following is a tabulation of debt securities, excluding mortgage-backed
securities, by contractual maturity as of December 31, 1999. Expected maturities
will differ from contractual maturities because issuers may have the right to
call or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>

                                                              Available for sale                       Held to maturity
                                                              ------------------                       ----------------
                                                          Amortized            Fair               Amortized             Fair
                                                            cost               value                cost                value
                                                          ---------            ----               ---------             ----
                                                                                     (in thousands)
<S>                                                     <C>                   <C>                 <C>                  <C>
Due in one year or less                                 $       --                --               1,252                1,251
Due after one year through five years                        6,785             6,565               7,462                7,303
Due after five years through ten years                      14,247            13,637               3,401                3,201
Due after ten years                                             --                --               1,051                  995

        Total                                           $   21,032            20,202              13,166               12,750
                                                        ==========            ======              ======               ======
</TABLE>

(3) Loans

      The following is a summary of loans outstanding:

                                                          December 31,
                                                --------------------------------
                                                1999                      1998
                                                ----                      ----
                                                       (in thousands)
Residential mortgages and
    home equity loans                     $    55,594                    60,829
Commercial mortgages                            7,857                     8,950
Commercial loans                                5,903                       265
Consumer loans                                  3,744                     2,037
                                          -----------                    ------
         Total loans                           73,098                    72,081

Allowance for loan losses                      (1,069)                   (1,068)
                                          -----------                    ------
         Net loans                        $    72,029                    71,013
                                          ===========                    ======

                                                                     (Continued)


                                       17
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

Included in residential mortgages and home equity loans at December 31, 1998
were $4.3 million of mortgage loans held for sale. During the second quarter of
1999 all mortgage loans held for sale were transferred to the loan portfolio.
Fair value of the loans held for sale approximated the carrying value at the
date of transfer.

The Company's market area is generally Oswego County and Onondaga County in
Central New York State. Substantially all of the Company's portfolio is located
in its market area and, accordingly, the ultimate collectibility of the
Company's loan portfolio is susceptible to changes in market conditions in this
area. The Company's concentration of credit risk by loan type is shown in the
above schedule of loans outstanding. Other than general economic risks,
management is not aware of any material concentrations of credit risk to any
industry or individual borrower.

(4) Allowance for Loan Losses

      The following is a summary of changes in the allowance for loan losses:

                                              Years ended December 31,
                                              ------------------------
                                           1999                       1998
                                           ----                       ----
                                                    (in thousands)

Balance at beginning of year          $      1,068                     1,409
                                      ------------                     -----
Provision for loan losses                      120                       120

Loan charge-offs                              (157)                     (526)

Recoveries                                      38                        65
                                      ------------                     -----
Balance at end of year                $      1,069                     1,068
                                      ============                     =====

The principal balance of all loans not accruing interest amounted to
approximately $1,064,000 and $1,688,000 at December 31, 1999 and 1998,
respectively. The forgone interest income on non-accruing loans was
approximately $56,000 and $81,000 for the years ended December 31, 1999 and
1998, respectively.

At December 31, 1999 and 1998, the recorded investment in impaired loans totaled
approximately $558,000 and $979,900, respectively. The impairment allowance
associated with these loans was approximately $99,000 and $168,000 at December
31, 1999 and 1998, respectively. The average recorded investment in impaired
loans during the year was approximately $701,000 and $1,301,000 for 1999 and
1998, respectively. The amount of interest income recognized on impaired loans
(while such loans were considered impaired) was not significant for the years
ended December 31, 1999 and 1998.

                                                                     (Continued)


                                       18
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

(5) Premises and Equipment

      Premises and equipment at December 31 consist of the following:

                                                1999                      1998
                                                ----                      ----
                                                         (in thousands)

Land                                        $       601                     426
Buildings and improvements                        3,270                   2,569
Furniture, fixtures and equipment                 2,155                   1,933
                                            -----------                     ---
                                                  6,026                   4,928

Accumulated depreciation                         (2,970)                 (2,683)
                                            -----------                     ---
         Premises and equipment, net        $     3,056                   2,245
                                            ===========                   =====

Depreciation expense was approximately $318,000 and $256,000 for the years ended
December 31, 1999 and 1998, respectively.

(6) Deposits

      Time deposit contractual maturities are summarized as follows:

                                                         December 31,
                                                         ------------
                                                1999                     1998
                                                ----                     ----
                                                        (in thousands)

Within one year                              $  27,076                  28,299
After one year and within two years              5,420                   4,122
After two years and within three years           1,650                   1,897
After three years and within four years          2,977                   1,169
After four years and within five years             666                   2,760
                                             ---------                  ------
                                             $  37,789                  38,247
                                             =========                  ======

Certificates of deposit of $100,000 and over were approximately $6,541,000 and
$5,578,000 at December 31, 1999 and 1998, respectively.

                                                                     (Continued)


                                       19
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

(7) Long-Term Debt

      In 1999, the Company began using fixed rate long-term borrowings,
principally convertible advances from the FHLB, as a source of funds.
Information on the borrowings at December 31, 1999 is summarized as follows:

 Maturity date               Amount             Rate           Call Date
                           (in thousands)

 December 13, 2004       $       5,000          6.00%       Quarterly, beginning

                                                            December 13, 2001

(8) Income Taxes

      Total income tax expense for the years ended December 31 was allocated as
follows:

                                                             1999          1998
                                                               (in thousands)

Income before income tax expense                            $  37           162
Change in shareholders' equity
  for unrealized loss on securities
  available for sale                                         (332)           (4)

             Total                                          $(295)          158

                                                                     (Continued)


                                       20
<PAGE>
                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

        Income tax expense attributable to income before income taxes consisted
of the following:

<TABLE>
<CAPTION>
                                                Current                     Deferred                     Total
                                                -------                     --------                     -----
                                                                         (in thousands)
<S>                                             <C>                            <C>                        <C>
Year ended December 31, 1999:
  Federal                                       $  139                         (96)                        43
  State                                             58                         (64)                        (6)
                                                ------                         ---                         --
       Total                                    $  197                        (160)                        37
                                                ======                        ====                         ==

Year ended December 31, 1998:
  Federal                                       $   51                          74                        126
  State                                             12                          25                         36
                                                ------                         ---                         --
       Total                                    $   63                          99                        162
                                                ======                        ====                        ===
</TABLE>

Actual income tax expense attributable to income before income taxes differed
from the amounts computed by applying the Federal statutory income tax rate to
pre-tax income as follows:

                                                        Years ended December 31,
                                                        ------------------------
                                                           1999           1998
                                                           ----           ----
                                                                (in thousands)
Federal income tax expense
  at statutory rate                                        $ 70           160
Increase (decrease) resulting from:
  Tax-exempt interest income                                (36)          (13)
  State taxes, net of Federal income
    tax effect                                               (4)           24
  Merger costs                                               --           (46)
  Other, net                                                  7            37
                                                           ----           ---
         Actual income tax expense                         $ 37           162
                                                           ====           ===

                                                                     (Continued)


                                       21
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31 are
presented below:

                                                                1999       1998
                                                               ------      -----
                                                                  (in thousands)
Deferred tax assets:
     Allowance for loan losses                                 $  417        427
     Postretirement benefits                                      189        163
     Deferred compensation                                        179        150
     Charitable contribution carryover                             74         --
     Net unrealized loss on securities
         available for sale                                       332         --
     Other                                                         12         63
                                                               ------       ----

              Total gross deferred tax assets                   1,203        803
                                                               ------       ----

Deferred tax liabilities:
     Excess tax bad debt reserve over base year                   158        211
     Depreciation                                                  73         97
     Prepaid pension expenses                                     101        114
     Net unrealized gain on securities
         available for sale                                        --         --
     Other                                                         12         14
                                                               ------       ----

              Total gross deferred tax liabilities                344        436
                                                               ------       ----

 Net deferred tax asset, included in
     other assets                                             $   859        367
                                                              =======       ====

In accordance with SFAS No. 109, the Company has not recognized deferred tax
liabilities with respect to the Bank's Federal and state base-year reserves of
approximately $1,107,000 at December 31, 1999, since the Company does not expect
that these amounts will become taxable in the foreseeable future. Under the tax
laws, as amended, events that would result in taxation of these reserves include
redemptions of the Bank's stock or certain excess distributions to the Parent
Company. The unrecognized deferred tax liability at December 31, 1999 with
respect to the base-year reserve was approximately $450,000.

Realization of deferred tax assets is dependent upon the generation of future
taxable income or the existence of sufficient taxable income within the loss
carryback period. A valuation allowance is provided when it is more likely than
not that some portion or all of the deferred tax assets will not be realized. In
assessing the need for a valuation allowance, management considers the scheduled
reversal of the deferred tax liabilities, the level of historical taxable income
and projected future taxable income over the periods in which the temporary
differences comprising the deferred tax assets will be deductible. Based on its
assessment, management determined that no valuation allowance is necessary.


                                                                     (Continued)
                                       22
<PAGE>


                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

(9)   Earnings Per Share

      The following table sets forth certain information regarding the
      calculation of basic earnings per share for the year ended December 31,
      1999, based on net loss for the period from July 14, 1999 to December 31,
      1999. Earnings per share information for periods prior to the Company's
      initial public offering on July 13, 1999 is not applicable. Unallocated
      ESOP shares are not considered outstanding for earnings per share
      computations. The shares become outstanding for earnings per share
      computations when they are released for allocation. During the year ended
      December 31, 1999, the Company did not have any potentially dilutive
      securities outstanding.



                                                  Weighted
                                    Net           Average     Per Share
                                   Loss           Shares        Amount
                              --------------     --------     ---------
                                 (in thousands)
Basic loss per share            $  (150)           867,524      $ (0.17)

(10)  Benefit Plans

      Pension and Other Postretirement Benefit Plans

      The following table sets forth the defined benefit pension plan's and the
      other postretirement benefit plan's change in benefit obligation, change
      in fair value of plan assets, and the funded status for the years ended
      December 31, 1999 and 1998, using the most recent actuarial data measured
      at October 1, 1999 and 1998 for the defined benefit pension plan and at
      December 31, 1999 and 1998 for the other postretirement benefit plan:

<TABLE>
<CAPTION>
                                                                           Pension benefits    Postretirement benefits
                                                                        ----------------------  ----------------------
                                                                         1999         1998         1999         1998
                                                                        -------      ------       ------        -----
                                                                                      (in thousands)
Change in benefit obligation:
<S>                                                                      <C>          <C>             <C>        <C>
    Benefit obligation at beginning of year                              $ 3,238      2,961           841        756
    Service cost                                                             106         67            21         42
    Interest cost                                                            209        202            55         53
    Amendments                                                                --         --            --        (71)
    Actuarial (gain)/loss                                                   (375)       172           (16)        83
    Benefits paid                                                           (164)      (164)          (49)       (22)
    Settlements                                                              (93)        --            --         --
                                                                         --------    -------        ------     ------
        Benefit obligation at end of year                                  2,921      3,238           852        841
                                                                         --------    -------        ------     ------
Change in plan assets:
    Fair value of plan assets at beginning of year                         3,430      3,587            --         --
    Actual return on plan assets                                             612          7            --         --
    Employer contributions                                                    --         --            49         22
    Benefits paid                                                           (164)      (164)          (49)       (22)
    Settlements                                                              (93)        --            --         --
                                                                         --------    -------        ------     ------
        Fair value of plan assets at end of year                           3,785      3,430            --         --
                                                                         --------    -------        ------     ------
Funded status (deficit)                                                      864        192          (852)      (841)
Unamortized net (asset) obligation at transition                             (29)       (50)          407        434
Unamortized net (gain) loss subsequent to transition                        (577)       142           (44)        --
Unamortized prior service cost                                                 1          2            --         --
                                                                         --------    -------        ------     ------
        Prepaid (accrued) benefit cost                                   $   259        286          (489)      (407)
                                                                         ========    =======        ======     ======
</TABLE>


                                                                     (Continued)
                                       23
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

      Net periodic pension cost (income) consists of the following components
for the years ended December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                                        1999                       1998
                                                                                       ------                     ------
                                                                                              (dollars in thousands)
<S>                                                                                     <C>                          <C>
Service cost                                                                            $ 106                        67
Interest on projected benefit obligation                                                  209                       202
Expected return on plan assets                                                           (268)                     (281)
Amortization of net transition asset                                                      (21)                      (21)
Amortization of unrecognized gain                                                          --                        (3)
Amortization of prior service cost                                                          1                         1
Settlement credit                                                                          --                       (52)
                                                                                       -------                    -------
Net periodic pension cost (income)                                                      $  27                       (87)
                                                                                       =======                    =======
Weighted average discount rate                                                           7.75%                     6.50%
                                                                                       =======                    =======
Expected long-term rate of return                                                        8.00%                     8.00%
                                                                                       =======                    =======
</TABLE>

      The projected benefit obligation assumed a long-term rate of increase in
      future compensation levels of 5.5% for 1999 and 4.5% for 1998. The
      unamortized net asset at transition is being amortized over 12 years from
      inception.

      Net periodic postretirement benefit cost for the years ended December 31,
      1999 and 1998 included the following components:

<TABLE>
<CAPTION>
                                                                                          1999                      1998
                                                                                         -------                   ------
                                                                                                  (in thousands)

<S>                                                                                          <C>                      <C>
Service cost                                                                                 $ 49                     42
Interest cost on accumulated benefit
    obligation                                                                                 55                     53
Amortization of transition obligation                                                          27                     39
Amortization of prior service asset                                                            --                     (2)
Amortization of unrecognized loss                                                              --                     (8)
                                                                                          -------                 -------
Net periodic postretirement benefit cost                                                     $131                    124
                                                                                          =======                 =======
</TABLE>


                                                                     (Continued)
                                       24
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

      For measurement purposes, a 7.5% and 9.0% annual rate of increase in the
      per capita cost of average health care benefits for retirees was assumed
      for 1999 and 1998, respectively. The rate was assumed to decrease
      gradually to 5.0% by 2008 and remain at that level thereafter. The health
      care cost trend rate assumption has a significant effect on the amounts
      reported. To illustrate, increasing the assumed health care cost trend
      rates by 1% in each year would increase the accumulated postretirement
      benefit obligation at December 31, 1998 by approximately $89,000, and the
      net periodic postretirement benefit cost by approximately $10,000 for the
      year then ended. The weighted average discount rate used in determining
      the accumulated postretirement obligation was 7.0% for 1999 and 6.5% for
      1998.

      Other Benefit Plans

      In 1997, the Company instituted a nonqualified deferred compensation plan
      for directors, under which participants may elect to defer all or part of
      their annual director fees. The plan provides that deferred fees are to be
      invested in mutual funds, as selected by the individual directors. At
      December 31, 1999 and 1998, deferred director fees included in other
      liabilities aggregated approximately $330,000 and $204,000, respectively.

      The Company sponsors a defined contribution profit sharing 401(k) plan
      covering substantially all employees. The Company matches certain
      percentages of each eligible employee's contribution to the plan. Expense
      for the plan amounted to approximately $36,000 and $38,000 in 1999 and
      1998, respectively.


(11) Employee Stock Ownership Plan (ESOP)

      The Company established an ESOP in conjunction with the Company's initial
      public offering to provide substantially all employees of the Company the
      opportunity to also become shareholders. The ESOP borrowed approximately
      $259,000 from the Company and used the funds to purchase 26,460 shares of
      the common stock of the Company. The loan will be repaid from the
      Company's discretionary contributions to the ESOP over a period of
      approximately ten years. At December 31, 1999, the loan had an outstanding
      balance of approximately $259,000 and an interest rate of 8.5%. Both the
      loan obligation and the unearned compensation will be reduced by the
      amount of loan repayments to be made by the ESOP at the end of each plan
      year ending on December 31. Shares purchased with the loan proceeds are
      held in a suspense account for allocation among participants as the loan
      is repaid. Shares released from the suspense account are allocated among
      participants at the end of the plan year on the basis of relative
      compensation in the year of allocation.


                                                                     (Continued)
                                       25
<PAGE>
                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

      Unallocated ESOP shares are pledged as collateral on the loan and are
      reported as a reduction of shareholders' equity. The Company reports
      compensation expense equal to the average market price of the shares to be
      released from collateral at the end of the plan year. The Company recorded
      approximately $21,000 of compensation expense related to the ESOP for the
      year ended December 31, 1999.

            The ESOP shares as of December 31, 1999 were as follows:

Allocated shares                                                              --
Shares released for allocation                                             2,176
Unallocated shares                                                        24,284
                                                                         -------
           Total ESOP shares                                              26,460
                                                                         =======
Market value of unallocated shares at
      December 31, 1999 (in thousands)                                   $   228
                                                                         =======

(12) Shareholders' Equity and Regulatory Matters

      The Company's ability to pay dividends is primarily dependent upon the
      ability of its subsidiary bank to pay dividends to the Company. The
      payment of dividends by the Bank is subject to continued compliance with
      minimum regulatory capital requirements. In addition, regulatory approval
      is generally required prior to the Bank declaring dividends in an amount
      in excess of net income for that year plus net income retained in the
      preceding two years.

      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 Company's financial statements. 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 and the Company (consolidated) to maintain minimum
      amounts and ratios (set forth in the table below) of total and Tier I
      capital (as defined in the regulations) to risk-weighted assets (as
      defined), and Tier I capital (as defined) to average assets (as defined).
      Management believes that, as of December 31, 1999 and 1998, the Bank and
      the Company met all capital adequacy requirements to which they were
      subject.


                                                                     (Continued)
                                       26
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

As of December 31, 1999, the most recent notification from the FDIC categorized
the Bank as "well capitalized" under the regulatory framework for prompt
corrective action. To be categorized as "well capitalized" the Bank must
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
as set forth in the table. There have been no conditions or events since that
notification that management believes have changed the Bank's capital
classification.

The Bank and consolidated Company's regulatory capital amounts and ratios are
presented in the following table:

<TABLE>
<CAPTION>
                                                                                                    Required Ratios
                                                                  Actual                    -------------------------------
                                                            Regulatory Capital               Minimum           Classification
                                                        -------------------------            Capital              as Well
                                                        Amount              Ratio            Adequacy            Capitalized
                                                        ------              -----            --------            -----------
                                                          (dollars in thousands)
As of December 31, 1999:
<S>                                                     <C>                 <C>                 <C>                  <C>
Bank
             Total Capital
                 (to risk weighted assets)              $  14,451           15.0%               8.0%                 10.0%
             Tier I Capital
                 (to risk weighted assets)                 13,383           13.9                4.0                   6.0
             Tier I Capital
                 (to average assets)                       13,383           11.7                4.0                   5.0
Consolidated
             Total Capital
                 (to risk weighted assets)                 15,786           16.4                8.0                  10.0
             Tier I Capital
                 (to risk weighted assets)                 14,717           15.3                4.0                   6.0
             Tier I Capital
                 (to average assets)                       14,717           12.9                4.0                   5.0

As of December 31, 1998:
Bank
             Total Capital
                 (to risk weighted assets)                 12,639           16.7                8.0                  10.0
             Tier I Capital
                 (to risk weighted assets)                 11,694           15.5                4.0                   6.0
             Tier I Capital
                 (to average assets)                       11,694           10.7                4.0                   5.0
</TABLE>

In order to grant priority in the conversion to the eligible depositors, the
Bank established a special account at the time of conversion in an amount equal
to its total net worth at June 30, 1999. In the event of a future liquidation of
the converted bank (and only in such event), eligible account holders who
continue to maintain accounts shall be entitled to receive a distribution from
the special account. The total amount of the special account will be decreased
(as balances of eligible accounts are reduced) on annual determination dates. No
cash dividends may be paid to the shareholders and no shares may be repurchased
by the Company if such actions would reduce the Bank's shareholders' equity
below the amount required for the special account. At December 31, 1999, the
amount remaining in this liquidation account was $6.3 million.


                                                                     (Continued)
                                       27
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

(13) Commitments and Contingencies

      In the normal course of business, there are various outstanding
      commitments and contingent liabilities, such as guarantees, and
      commitments to extend credit, which are not reflected in the accompanying
      financial statements. The Company does not anticipate losses as a result
      of these transactions. Mortgage and other loan commitments outstanding at
      December 31, 1999 and 1998 amounted to approximately $5.9 million and $2.4
      million, respectively. Fixed interest rates on mortgage and other loan
      commitments outstanding can change prior to closing only if interest rates
      decrease. Variable rate loans float prior to closing. Outstanding
      commitments on letters of credit at December 31, 1999 and 1998 amounted to
      approximately $233,000 and $20,000, respectively.

      In the normal conduct of business, the Company is currently involved in
      various litigation matters. In the opinion of management, the ultimate
      disposition of these matters should not have a material adverse effect on
      the financial position of the Company.

(14) Fair Value of Financial Instruments

      SFAS No. 107, Disclosures About Fair Value of Financial Instruments, as
      amended by SFAS No. 119, Disclosure About Derivative Financial Instruments
      and Fair Value of Financial Instruments, requires disclosures about the
      fair value of financial instruments for which it is practicable to
      estimate fair value. The definition of a financial instrument includes
      many of the assets and liabilities recognized in the Bank's statement of
      financial condition, as well as certain off-balance sheet items. Fair
      value is defined in SFAS Nos. 107 and 119 as the amount at which a
      financial instrument could be exchanged in a current transaction between
      willing parties, other than in a forced or liquidation sale.

      The following methods and assumptions were used by the Company in
      estimating the fair values of its financial instruments:

      (a)   Short-Term Financial Instruments

            For short-term instruments that are available on demand or that
            generally mature in ninety days or less, the carrying value
            approximates fair value. Such instruments include cash and cash
            equivalents, accrued interest receivable and accrued interest
            payable.

      (b)   Securities

            Fair values for securities are based on quoted market prices, where
            available. Where quoted market prices are not available, fair values
            are based on quoted market prices of comparable instruments.


                                                                     (Continued)
                                       28
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

(c) Loans

For variable rate loans that reprice frequently and have no significant credit
risk, fair values are based on carrying amounts. The fair values of fixed rate
loans are estimated through discounted cash flow analyses using interest rates
currently being offered for loans with similar terms and credit quality.

Delinquent loans are valued using the discounted cash flow methods described
above. While credit risk is a component of the discount rate used to value
loans, delinquent loans are presumed to possess additional risk. Therefore, the
calculated fair values of loans are reduced by the allowance for loan losses.

(d) Deposits

The fair values disclosed for demand, savings and money market deposits are, by
definition, equal to the carrying amounts payable on demand at the reporting
date. The fair value of fixed maturity time deposits is estimated using a
discounted cash flow approach. This approach applies interest rates currently
being offered on these accounts to a schedule of weighted average expected
monthly maturities on time deposits.

The estimated fair values of the Company's financial instruments as of December
31, 1999 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                      1999                                     1998
                                                        -----------------------------           ------------------------------
                                                        Carrying              Fair               Carrying               Fair
                                                         amount               value               amount                value
                                                        --------             --------            --------              -------
                                                                                    (in thousands)
<S>                                                     <C>                    <C>                 <C>                  <C>
Financial assets:
             Cash and cash equivalents                  $  6,450                6,450               6,607                6,607
             Accrued interest receivable                     938                  938                 856                  856
             Securities                                   37,141               36,663              28,514               28,576
             Net loans                                    72,029               70,758              71,013               71,038
Financial liabilities:
             Demand, savings and
             money market deposits                        62,329               62,329              58,317               58,317
             Time deposits                                37,789               37,739              38,247               38,214
             Escrow deposits                               1,286                1,286               1,319                1,319
             Accrued interest payable                         16                   16                  --                   --
</TABLE>

The fair value of commitments to extend credit are equal to the deferred fees
outstanding, as the contractual rates and fees approximate those currently
charged to originate similar commitments.

Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.


                                                                     (Continued)
                                       29
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

(15) Condensed Financial Information of the Parent Company

      The Parent Company began operations in conjunction with the Bank's
      mutual-to-stock conversion and the Parent Company's initial public
      offering of its common stock. The following represents the Parent
      Company's statement of financial condition as of December 31, 1999, and
      its statement of income and statement of cash flows for the period from
      July 13, 1999 through December 31, 1999.

                        Statement of Financial Condition

                             as of December 31, 1999
                                 (in thousands)

       Assets
       Cash and cash equivalents                             $  1,268
       Loan receivable from ESOP                                  259
       Other assets                                                41
       Investment in equity of subsidiary                      12,885
                                                             --------

            Total assets                                     $ 14,453
                                                             ========
       Liabilities and Shareholders' Equity
       Liabilities:
       Payable to subsidiary                                 $    234

       Total shareholders' equity                              14,219
                                                             --------

            Total liabilities and shareholders' equity       $ 14,453
                                                             ========



                                                                     (Continued)
                                       30
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

                               Statement of Income
             For the period July 13, 1999 through December 31, 1999
                                 (in thousands)

     Interest income:
          Loans                                                    $      8
          Interest-bearing deposits                                      12
                                                                   --------
                     Total interest income                               20
                                                                   --------
     Non-interest expenses:
          Contributions                                                 160
          Other non-interest expenses                                    35
                                                                   --------
                     Total non-interest expenses                        195
                                                                   --------
     Loss before income tax benefit and equity
       in loss of subsidiary                                           (175)
     Income tax benefit                                                  71
                                                                   --------
                     Loss before equity in loss of
                          subsidiary                                   (104)

     Equity in loss of subsidiary                                       (46)
                                                                   --------
     Net loss                                                      $   (150)
                                                                   ========


                                                                     (Continued)
                                       31
<PAGE>

                   OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

                             Statement of Cash Flows
             For the period July 13, 1999 through December 31, 1999
                                 (in thousands)

<TABLE>
              <S>                                                                       <C>
              Cash flows from operating activities:
                   Net loss                                                             $   (150)
                   Adjustments to reconcile net loss to net
                        cash provided by operating activities:
                            Equity in loss of subsidiary                                      46
                            Contribution to foundation                                       160
                            Net increase in other assets                                     (41)
                            Net increase in intercompany payable to
                                subsidiary                                                   234
                                                                                        --------
                                   Net cash provided by operating
                                       activities                                            249
                                                                                        --------
              Cash flows from investing activities:
                   Investment in subsidiary                                               (1,753)
                   Loan made to ESOP                                                        (259)
                                                                                        --------
                                   Net cash used in investing activities                  (2,012)
                                                                                        --------
              Cash flows from financing activities:
                   Net proceeds from the issuance of common stock                         3,031
                                                                                        --------
                                   Net increase in cash and cash
                                       equivalents                                         1,268

              Cash and cash equivalents at beginning of period                                --
                                                                                        --------
              Cash and cash equivalents at end of period                                $  1,268
                                                                                        --------
</TABLE>

                                       32