<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q



[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                For the Quarterly period ended DECEMBER 31, 1995
                                               -----------------

                                       OR


[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission file number 1-11515
                       -------

                        COMMERCIAL FEDERAL CORPORATION
                        ------------------------------
            (Exact name of registrant as specified in its charter)

            NEBRASKA                                           47-0658852
            --------                                           ----------
      (State or other jurisdiction of                      (I.R.S. Employer
      incorporation or organization)                     Identification Number)

 
   2120 SOUTH 72ND STREET, OMAHA, NEBRASKA                     68124
--------------------------------------------                   -----
  (Address of principal executive offices)                   (Zip Code)


                                (402) 554-9200
                                --------------
             (Registrant's telephone number, including area code)

                                Not Applicable
--------------------------------------------------------------------------------
                    (Former name, former address and former
                  fiscal year, if changed since last report)

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

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.


            Class                             Outstanding at February 9, 1996
            -----                             -------------------------------
Common Stock, $0.01 Par Value                        15,054,555 Shares

                   The exhibit index is located on page 30.
                   This document is comprised of 31 pages.
<PAGE>
 
                         COMMERCIAL FEDERAL CORPORATION
                         ------------------------------

                                   FORM 10-Q
                                   ---------

                                     INDEX
                                     -----



PART I.  FINANCIAL INFORMATION                                     PAGE NUMBER
         ---------------------                                     -----------

     Item 1.   Financial Statements:

         Consolidated Statement of Financial Condition as of
            December 31, 1995 and June 30, 1995                           3

         Consolidated Statement of Operations for the Three
            and Six Months Ended December 31, 1995 and 1994               4

         Consolidated Statement of Cash Flows for the Three
            and Six Months Ended December 31, 1995 and 1994             5-6

         Notes to Consolidated Financial Statements                    7-13

     Item 2.   Management's Discussion and Analysis of Financial
               Condition and Results of Operations                    14-26


PART II.  OTHER INFORMATION
          -----------------

     Item 4.  Submission of Matters to a Vote of Security Holders        27

     Item 5.  Other Information                                          28

     Item 6.  Exhibits and Reports on Form 8 - K                         28



SIGNATURE PAGE                                                           29
<PAGE>
 
                         PART I.  FINANCIAL INFORMATION
                         ------------------------------
                         ITEM 1.  FINANCIAL STATEMENTS
                         -----------------------------

                         COMMERCIAL FEDERAL CORPORATION
                 CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
(Dollars in Thousands)                                                          December 31,   June 30,
                                    ASSETS                                          1995         1995
------------------------------------------------------------------------------  ------------  ----------
<S>                                                                             <C>           <C>
 
Cash (including short-term investments of $3,700 and $6,345)..................    $   69,378  $   35,145
Investment securities available for sale, at fair value.......................        54,640       2,988
Mortgage-backed securities available for sale, at fair value..................       384,692      36,974
Loans held for sale...........................................................        79,158     113,385
Investment securities held to maturity (fair value of $250,035 and $294,805)..       249,355     297,493
Mortgage-backed securities held to maturity (fair value of
$933,780 and $1,319,333)......................................................       931,773   1,327,933
Loans receivable, net of allowances of $48,277 and $48,463....................     4,503,908   4,427,307
Federal Home Loan Bank stock..................................................        92,783     103,648
Interest receivable, net of reserves of $109 and $352.........................        41,871      42,211
Real estate...................................................................        15,927      16,786
Premises and equipment........................................................        68,899      67,204
Prepaid expenses and other assets.............................................        68,633      61,242
Goodwill and core value of deposits, net of accumulated
amortization of $140,432 and $136,032.........................................        32,863      37,263
                                                                                ------------  ----------
Total Assets..................................................................    $6,593,880  $6,569,579
                                                                                ------------  ----------

LIABILITIES AND STOCKHOLDERS' EQUITY
 
Liabilities:
Deposits......................................................................    $4,046,499  $4,011,323
Advances from Federal Home Loan Bank..........................................     1,773,687   1,787,352
Securities sold under agreements to repurchase................................       195,755     208,373
Other borrowings..............................................................        60,196      65,303
Interest payable..............................................................        21,257      24,223
Other liabilities.............................................................       133,956     135,391
                                                                                ------------  ----------
Total Liabilities.............................................................     6,231,350   6,231,965
                                                                                ------------  ----------
Commitments and contingencies.................................................            --          --
                                                                                ------------  ----------
 
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized;
none issued...................................................................            --          --
Common stock, $.01 par value; 25,000,000 shares authorized;
14,340,274 and 14,272,793 shares issued and outstanding.......................           143         143
Additional paid-in capital....................................................       148,036     146,530
Unrealized holding gain on securities available for sale, net.................         3,249          86
Retained earnings, substantially restricted...................................       211,102     190,855
                                                                                ------------  ----------
Total Stockholders' Equity....................................................       362,530     337,614
                                                                                ------------  ----------
Total Liabilities and Stockholders' Equity....................................    $6,593,880  $6,569,579
                                                                                ------------  ----------

See accompanying Notes to Consolidated Financial Statements.
</TABLE>

                                       3
<PAGE>
 
                         COMMERCIAL FEDERAL CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
         (Dollars in Thousands Except Per Share Data)              Three Months Ended         Six Months Ended
                                                                       December 31,             December 31,
                                                                    -----------------         ----------------
                                                                    1995         1994          1995        1994
<S>                                                                <C>         <C>            <C>        <C>
Interest Income:                                                                              
 Loans receivable.............................................      $ 94,597   $ 84,667       $188,926   $165,638
 Mortgage-backed securities...................................        21,743     20,912         43,809     40,868
 Investment securities........................................         6,017      6,334         12,324     12,656
  Total interest income.......................................       122,357    111,913        245,059    219,162
Interest Expense:                                                                             
 Deposits.....................................................        53,606     43,386        106,749     85,127
 Advances from Federal Home Loan Bank.........................        24,930     27,893         50,997     52,893
 Securities sold under agreements to repurchase...............         3,508      1,104          7,154      2,792
 Other borrowings.............................................         1,688      1,833          3,435      3,692
  Total interest expense......................................        83,732     74,216        168,335    144,504
Net Interest Income...........................................        38,625     37,697         76,724     74,658
Provision for Loan Losses.....................................        (1,508)    (1,658)        (3,091)    (3,241)
Net Interest Income After Provision for Loan Losses...........        37,117     36,039         73,633     71,417
Other Income (Loss):                                                                          
 Loan servicing fees..........................................         6,844      5,967         13,311     12,194
 Retail fees and charges......................................         3,024      2,482          5,708      4,475
 Real estate operations.......................................          (196)       492            169        171
 Gain (loss) on sales of loans................................           318       (950)           170     (1,170)
 Gain on sales of loan servicing rights.......................            --      1,431            452      1,865
 Other operating income.......................................         1,815      2,060          3,384      3,542
  Total other income..........................................        11,805     11,482         23,194     21,077
Other Expense:                                                                                
 General and administrative expenses:                                                         
  Compensation and benefits...................................        10,891     11,052         22,303     21,642
  Occupancy and equipment.....................................         6,015      5,199         11,573     10,139
  Regulatory insurance and assessments........................         2,595      2,275          5,110      4,541
  Advertising.................................................         1,447      1,109          2,871      2,262
  Amortization of purchased and originated mortgage                                           
   loan servicing rights                                               2,155      2,014          4,158      4,086
  Other operating expenses....................................         5,425      4,069         10,481      7,385
  Total general and administrative expenses...................        28,528     25,718         56,496     50,055
 Amortization of goodwill and core value of deposits..........         2,200      2,896          4,400      5,796
 Accelerated amortization of goodwill.........................            --     10,678             --     21,357
  Total other expense.........................................        30,728     39,292         60,896     77,208
Income Before Provision for Income Taxes......................        18,194      8,229         35,931     15,286
Provision for Income Taxes....................................         6,330      6,048         12,823     11,837
Net Income....................................................      $ 11,864   $  2,181        $23,108   $  3,449
                                                                                              
Per Common Share:                                                                             
 Net Income...................................................          $.82       $.15        $  1.59   $    .24
 Dividends Declared...........................................          $.20       $ --        $   .20   $     --
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

                                       4
<PAGE>
 
                         COMMERCIAL FEDERAL CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in Thousands)                                                      Six Months Ended
                                                                               December 31,
                                                                       -----------------------------
                                                                             1995            1994
<S>                                                                    <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...........................................................         $  23,108   $   3,449
Adjustments to reconcile net income to net cash provided
 (used) by operating activities:
  Accelerated amortization of goodwill...............................                --      21,357
  Amortization of goodwill and core value of deposits................             4,400       5,796
  Provisions for loss on loans and real estate.......................             2,623       3,434
  Depreciation and amortization......................................             3,216       3,822
  Accretion of deferred discounts and fees...........................            (6,290)     (3,760)
  Amortization of purchased and originated mortgage
   loan servicing rights.............................................             4,158       4,086
  Amortization of deferred compensation on restricted
   stock and premiums................................................             4,404       3,255
  Gain on sale of real estate, net...................................              (349)       (753)
  (Gain) loss on sales of loans, net.................................              (170)      1,170
  Gain on sales of loan servicing rights.............................              (452)     (1,865)
  Stock dividends from Federal Home Loan Bank........................            (1,507)         --
  Proceeds from the sale of loans....................................           333,139     351,592
  Origination of loans for resale....................................          (187,317)   (132,928)
  Purchase of loans for resale.......................................          (146,976)   (244,551)
  Decrease (increase) in interest receivable.........................               340      (2,729)
  Increase in interest payable.......................................            (2,966)     (6,667)
  Decrease in other liabilities......................................            (2,868)    (11,339)
  Other items, net...................................................            (1,634)       (481)
                                                                              ---------   ---------
Total adjustments....................................................             1,751     (10,561)
                                                                              ---------   ---------
Net cash provided (used) by operating activities                              $  24,859   $  (7,112)
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal repayments of mortgage-backed securities...................         $  93,377   $  75,490
Purchases of loans...................................................          (315,861)   (401,947)
Origination of loans, net of repayments..............................           223,109      71,671 
Maturities and repayments of investment securities...................            56,629       1,965
Maturities of investment securities available for sale...............             1,000          --
Purchases of investment securities...................................           (61,278)    (10,000)
Purchases of mortgage loan servicing rights..........................            (7,252)     (3,969)
Proceeds from sale of real estate....................................             7,034       5,978
Purchases of premises and equipment, net.............................            (4,911)     (7,523)
Payments to acquire real estate......................................            (1,229)       (395)
Proceeds from sale of mortgage-backed securities available for sale..             2,614      22,645
Purchases of mortgage-backed securities..............................                --     (10,628)
Acquisitions, net of cash (paid) received............................                --      (6,338)
Proceeds from sale of mortgage loan servicing rights.................               452       1,865
Proceeds from sale of Federal Home Loan Bank stock...................            16,085       1,525
Purchases of Federal Home Bank stock.................................            (3,713)     (7,816)
Proceeds from sale of investment securities available for sale.......                --      14,797
                                                                              ---------   ---------
Net cash used by investing activities                                         $   6,056   $(252,680)
</TABLE>

                                       5
<PAGE>
 
                         COMMERCIAL FEDERAL CORPORATION
                CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
 
(Dollars in Thousands)                                              Six Months Ended
                                                                      December 31,
                                                                   -----------------
                                                                   1995        1994
<S>                                                             <C>         <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits...............................  $  35,176   $  (5,996)
Proceeds from Federal Home Loan Bank advances.................    183,000     549,042
Repayment of Federal Home Loan Bank advances..................   (196,728)   (222,306)
Proceeds from securities sold under agreements to repurchase..         --     110,000
Repayment of securities sold under agreements to repurchase...    (12,618)   (157,432)
Repayment of other borrowings.................................     (5,151)     (2,704)
Payment of cash dividends on common stock.....................     (1,429)         --
Issuance of common stock......................................      1,006           3
Other items, net..............................................         62         148
                                                                ---------   ---------
Net cash provided by financing activities.....................  $   3,318   $ 270,755
 
 
CASH AND CASH EQUIVALENTS:
Increase in net cash position.................................  $  34,233   $  10,963
Balance, beginning of year....................................     35,145      28,005
                                                                ---------   ---------
Balance, end of period........................................  $  69,378   $  38,968
                                                                =========   =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
 Interest expense.............................................  $171,237    $ 151,022
 Income taxes, net............................................     8,036        3,884
Non-cash investing and financing activities:
 Securities transferable from held to maturity to available
  for sale, net...............................................   410,930           --
 Loans exchanged for mortgage-backed securities...............    42,756      164,386
 Loans transferred to real estate.............................     6,036        2,630
 Loans to facilitate the sale of real estate..................        51          480
</TABLE>
See accompanying Notes to Consolidated Financial Statements.

                                       6
<PAGE>
 
                         COMMERCIAL FEDERAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              AS OF AND FOR THE SIX MONTHS ENDED DECEMBER 31, 1995
                                  (UNAUDITED)

A.   BASIS OF CONSOLIDATION AND PRESENTATION: 
     ----------------------------------------                  


The unaudited consolidated financial statements are prepared on an accrual basis
and include the accounts of Commercial Federal Corporation (the Corporation) and
its wholly-owned subsidiary, Commercial Federal Bank, a Federal Savings Bank
(the Bank), and all majority-owned subsidiaries.  All significant intercompany
balances and transactions have been eliminated.

On October 2, 1995, the Corporation consummated its acquisition of Railroad 
Financial Corporation (Railroad), parent company of Railroad Savings Bank, fsb. 
This acquisition was accounted for as a pooling of interests and, accordingly, 
the Corporations's historical consolidated financial statements have been 
restated for all periods prior to the acquisition to include the accounts and 
results of operations of Railroad. See Note D for additional information 
regarding this merger.

The accompanying interim consolidated financial statements have not been audited
by independent auditors. However, in the opinion of management, all adjustments
(consisting only of normal recurring adjustments except for the restatement of
all periods prior to the merger with Railroad and the accelerated amortization
of goodwill recorded during the first six months of fiscal year 1995) considered
necessary to fairly present the financial statements have been included. The
consolidated financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Corporation's June 30,
1995, Annual Report to Stockholders. The results of operations for the three and
six month periods ended December 31, 1995, are not necessarily indicative of the
results which may be expected for the entire fiscal year 1996. Certain amounts
in the prior fiscal year periods have been reclassified for comparative
purposes.

B.  ACCOUNTING CHANGES:
    -------------------

ACCOUNTING FOR MORTGAGE SERVICING RIGHTS: 

As of July 1, 1995, the Corporation adopted the provisions of Statement of
Financial Accounting Standards No. 122 (SFAS No. 122) entitled "Accounting for
Mortgage Servicing Rights." SFAS No. 122 provides that an institution that
acquires mortgage servicing rights through either the purchase or origination of
mortgage loans and sells or securitizes those loans with servicing rights
retained should allocate the total cost of the mortgage loans to the mortgage
servicing rights and the loans (without the mortgage servicing rights) based on
their relative fair values. Mortgage servicing rights should be amortized in
proportion to and over the period of estimated net servicing income and should
be evaluated for impairment based on their fair value. The impairment evaluation
should stratify the mortgage servicing rights based upon one or more of the
predominant risk characteristics of the underlying loans. The effect of adopting
the provisions of SFAS No. 122 was to increase pre-tax earnings of approximately
$838,000 and $1,932,000, respectively, for the three and six months ended
December 31, 1995.

The unamortized book value of mortgage servicing rights totaled $41,111,000 at
December 31, 1995. The fair value of the Corporation's mortgage servicing rights
totaled approximately $65,800,000 at December 31, 1995. The fair value of
capitalized mortgage servicing rights is calculated using the present value of
estimated expected future cash flows using a discount rate commensurate with the
risk involved. For purposes of measuring impairment of mortgage servicing
rights, the predominant

                                       7
<PAGE>
 
B.  ACCOUNTING CHANGES (Continued):
    -------------------------------

risk characteristics used by the Corporation to stratify mortgage servicing
rights include the underlying loans' interest rates, prepayment speeds and loan
type. No valuation allowance for capitalized servicing rights was necessary to
be established as of December 31, 1995.

ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS:

As of July 1, 1995, the Corporation adopted the provisions of Statement of
Financial Accounting Standards No. 121 (SFAS No. 121) entitled "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of."  SFAS No. 121 establishes accounting standards for the recognition and
measurement of the impairment of long-lived assets, certain identifiable
intangibles and goodwill.  This statement does not apply to core deposit
intangibles or mortgage and other servicing rights.  The provisions of this
statement require that long-lived assets and certain identifiable intangibles to
be held and used be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.  In performing the review of recoverability, the provisions of SFAS
No. 121 require the estimation of the expected future cash flows (undiscounted
and without interest charges) to result from the use of the asset and its
eventual disposition with an impairment loss recognized if the sum of such cash
flows is less than the carrying amount of the asset.  Management of the
Corporation does not believe that the adoption of the provisions of this
statement will have a material effect on the Corporation's financial position or
results of operations.


C.     RECLASSIFICATION OF INVESTMENT AND MORTGAGE-BACKED SECURITIES:  
       -------------------------------------------------------------

As of July 1, 1994, the Corporation adopted the provisions of SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" which
required the classification of investments into three categories: Held-to-
Maturity, Trading and Available-For-Sale. At December 31, 1995, pursuant to the 
issuance of a special report by the Financial Accounting Standards Board 
entitled "A Guide to Implementation of Statement No. 115 on Accounting for 
Certain Investments in Debt and Equity Securities," and the reassessment of the 
appropriateness of the classification of all securities held, the Corporation 
reclassified $410,930,000 (net) of investment and mortgage-backed securities 
from securities held to maturity to securities available for sale.

Such reclassification consisted of substantially all existing 15- and 30-year
fixed rate mortgage-backed securities approximating $370.4 million held by the
Bank and approximately $49.9 million of agency investment securities from the
Held-to-Maturity classification into the Available-For-Sale account category. In
addition, approximately $9.4 million of adjustable rate mortgage-backed
securities were reclassified from Available-For-Sale to Held-to-Maturity.

The purpose of this reclassification is to sell such securities and use the
proceeds to fund Federal Home Loan Bank advances as such borrowings become due,
and to have the flexibility, should the opportunity arise, to reinvest proceeds
into adjustable rate or shorter duration interest-earning assets.

                                       8
<PAGE>
 
D.   ACQUISITION OF RAILROAD FINANCIAL CORPORATION:  
     ----------------------------------------------     

On October 2, 1995, the Corporation consummated its acquisition of Railroad
and, pursuant to the terms of the merger agreement, 2,156,232 shares of 
Railroad's common stock were delivered to the Corporation in exchange for
approximately 1,377,617 shares of the Corporation's common stock (exchange ratio
of .6389 based on an average closing price of $35.063). Cash was paid for
fractional shares. Railroad operated 18 branches and 71 agency offices
throughout the state of Kansas and at September 30, 1995, had assets of
approximately $602,900,000, deposits of approximately $421,400,000 and
stockholders' equity of approximately $27,700,000. This acquisition was
accounted for as a pooling of interests and, accordingly, the Corporation's
historical consolidated financial statements have been restated for all periods
prior to the acquisition to include the accounts and results of operations of
Railroad.

The following table summarizes results of operations of the Corporation and 
Railroad for the three months ended September 30, 1995, as separately reported 
prior to the merger, that are including in results of operations for the six 
months ended December 31, 1995:

--------------------------------------------------------------------------------
<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------------
(In Thousands)                          Corporation     Railroad      Combined
--------------------------------------------------------------------------------
<S>                                     <C>             <C>          <C> 
Total interest income and other income. $  120,560      $ 13,531     $  134,091
Total interest expense.................     76,320         8,283         84,603 
Net income (loss)......................     11,859          (615)        11,244
</TABLE> 
--------------------------------------------------------------------------------
The following table reconciles revenue and earnings previously reported by the 
Corporation to give effect to the merger as currently presented in the financial
statements for the three and six months ended December 31, 1994.
--------------------------------------------------------------------------------
<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------------
(In Thousands)                          Corporation     Railroad      Combined
--------------------------------------------------------------------------------
<S>                                     <C>             <C>          <C> 
Three months ended December 31, 1994:   
Total interest income and other income. $  111,436      $ 11,959     $  123,395
Total interest expense.................     68,010         6,206         74,216 
Net income.............................      1,250           931          2,181

Six months ended December 31, 1994:
Total interest income and other income. $  217,513      $ 22,726     $ 240,239
Total interest expense.................    132,935        11,569       144,504
Net income.............................      1,757         1,692         3,449
</TABLE> 
--------------------------------------------------------------------------------
Railroad's results of operations were reported on a calendar year basis previous
to its merger into the Corporation. However, in restating prior periods for the 
most recent fiscal year, Railroad's accounts and results of operations were 
conformed to the Corporation's four quarters ended June 30, 1995. Accordingly, 
in changing fiscal years Railroad's accounts and results of operations for the 
six months ended June 30, 1994 were excluded from reported results of operations
for the restated combined companies. As such, the following table summarizes the
details of changes in retained earnings for such period:
--------------------------------------------------------------------------------
(In Thousands)
--------------------------------------------------------------------------------
<TABLE> 
<S>                                                                   <C> 
Balance, June 30, 1994 (restated).................................... $ 159,489
Reported net income from fiscal year ended June 30, 1995 (restated)..    31,181
Results of operations not reported adjusted for pooling of interests.       185
Balance, June 30, 1995 (restated).................................... $ 190,855
</TABLE> 
--------------------------------------------------------------------------------

                                       9
<PAGE>
 
E.     COMMON STOCK DIVIDENDS:
       -----------------------

On October 4, 1995, the Corporation's Board of Directors established a quarterly
dividend policy and, on the same day, declared a cash dividend of $.10 per share
on the Corporation's common stock.  Accordingly, a cash dividend totaling
$1,429,000 was paid on October 31, 1995, to stockholders of record on October
16, 1995.  In addition, on January 12, 1996, the Corporation paid a second
quarterly cash dividend of $.10 per share to stockholders of record on December
29, 1995. The declaration of such dividend on December 20, 1995 reduced retained
earnings/total stockholders equity by $1,434,000 as of December 31, 1995. The
Corporation currently plans to continue paying dividends on a quarterly basis 
subject to the Board of Director's continuing evaluation of the Corporation's 
consolidated earnings, financial condition, liquidity, capital and other 
factors, including economic conditions and any regulatory restrictions.


F.   COMMITMENTS AND CONTINGENCIES:
     ------------------------------

At December 31, 1995, the Corporation had issued commitments totaling
$114,970,000 to fund and purchase loans as follows:  $23,221,000 of single-
family adjustable-rate mortgage loans, $69,065,000 of single-family fixed-rate
mortgage loans, $15,152,000 of consumer loan lines of credit and $7,532,000 of
commercial real estate loans.  In addition, outstanding commitments from
mortgage banking operations to purchase mortgage loan servicing rights totaled
$2,290,000 at December 31, 1995.  These outstanding loan commitments to extend
credit in order to originate loans or fund consumer loan lines of credit do not
necessarily represent future cash requirements since many of the commitments may
expire without being drawn.  Loans sold subject to recourse provisions totaled
approximately $44,470,000 at December 31, 1995, which represents the total
potential credit risk associated with these particular loans.  Such credit risk
would, however, be offset by the value of the single-family residential
properties which collateralize these loans.

The Corporation is subject to a number of lawsuits and claims for various
amounts which arise out of the normal course of its business.  In the opinion of
management, the disposition of claims currently pending will not have a material
adverse effect on the Corporation's financial position or results of operations.

On September 13, 1994, the Bank commenced litigation against the United States
in the United States Court of Federal Claims seeking to recover monetary relief
for the government's refusal to honor certain contracts between the Bank and the
Federal Savings and Loan Insurance Corporation.  The suit alleges that such
governmental action constitutes breach of contract and an unlawful taking of
property by the United States without just compensation or due process in
violation of the Constitution of the United States.  The litigation status and
process of the multiple legal actions, such as that instituted by the Bank with
respect to supervisory goodwill and regulatory capital credits, make the value
of the claims asserted by the Bank uncertain as to ultimate outcome, and
contingent on a number of factors and future events which are beyond the control
of the Bank, both as to substance, timing and the dollar amount of damages which
may be awarded to the Bank if it finally prevails in this litigation.

                                       10
<PAGE>
 
G. REGULATORY CAPITAL:
   -------------------

At December 31, 1995, the Bank's estimates of its capital amounts and the
capital levels required under Office of Thrift Supervision (OTS) capital
regulations are as follows:

<TABLE>
<CAPTION>
 
 
(Dollars in Thousands)                            Actual   Requirement  Excess
------------------------------------------------  ------   -----------  ------
<S>                                               <C>      <C>         <C>   
 
Bank's stockholder's equity.....................  $398,915

Less unrealized holding gain on
  securities available for sale, net............    (3,249)
Less intangible assets..........................   (31,096)

Less phase-out of investment
  in non-includable subsidiaries................    (2,880)
                                                  --------
Tangible capital................................  $361,690   $ 98,488  $263,202
                                                  ========   ========  ========

Tangible capital to adjusted assets (1).........      5.51%      1.50%     4.01%
                                                  ========   ========  ========


Tangible capital................................  $361,690

Plus certain restricted amounts
  of other intangible assets....................    18,816
                                                  --------
Core capital (Tier 1 capital)...................  $380,506   $197,541  $182,965
                                                  ========   ========  ========


Core capital to adjusted assets (2).............      5.78%      3.00%     2.78%
                                                  ========   ========  ========


Core capital....................................  $380,506
Plus general loan loss allowances...............    34,700
Less amount of land loans and
  non-residential construction loans in
  excess of an 80.0% loan-to-value ratio........      (523)
                                                  --------
Risk-based capital (Total capital)..............  $414,683   $242,176  $172,507
                                                  ========   ========  ========

Risk-based capital to risk weighted assets (3)..     13.70%      8.00%     5.70%
                                                  ========   ========  ========
 
</TABLE>
(1)  Based on adjusted total assets totaling $6,565,892,000.
(2)  Based on adjusted total assets totaling $6,584,708,000.
(3)  Based on risk-weighted assets totaling $3,027,204,000.

Effective July 1, 1994, the OTS amended its risk-based capital standards to
include an interest rate risk component.  The amendment requires thrifts with
interest rate risk in excess of certain levels to maintain additional capital.
Under this amendment, thrifts are divided into two groups, those with "normal"
levels of interest rate risk and those with "greater than normal" levels of
interest rate risk.  Thrifts with greater than normal levels are subject to a
deduction from total capital for purposes of calculating risk-based capital.  In
a letter dated August 21, 1995, the OTS notified all savings associations that
it had delayed this interest rate risk capital deduction until further notice,
pending the testing of the OTS appeals process pursuant to Thrift Bulletin No.
67.  Based on the Bank's interest rate risk profile and the level of interest
rates at December 31, 1995, as well as the Bank's level of risk-based capital at
December 31, 1995, management believes that the Bank does not have a greater
than normal level of interest rate risk as measured under the OTS rule and will
not be required to increase its capital as a result of the rule.

The Federal Deposit Insurance Corporation Improvement Act of 1991 established
five regulatory capital categories:  well-capitalized, adequately-capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized; and authorized banking regulatory agencies to take prompt
corrective action with respect to institutions in the three undercapitalized
categories.  These corrective actions become increasingly more stringent as the
institution's regulatory capital declines.  At December 31, 1995, the Bank
exceeded the minimum requirements for the well-capitalized category as shown in
the following table.

<TABLE>
<CAPTION>
                                 Tier 1 Capital    Tier 1 Capital     Total Capital
                                   to Adjusted        to Risk -         to Risk -
(Dollars in Thousands)            Total Assets     Weighted Assets   Weighted Assets
                                 --------------    ---------------   ---------------
<S>                              <C>              <C>               <C>               
Actual capital.................      $380,506          $380,506          $414,683
Percentage of adjusted assets..          5.78%            12.57%            13.70%
Minimum requirements to be
 classified well-capitalized...          5.00%             6.00%            10.00%
</TABLE>

In April 1991, the OTS proposed to amend its core capital requirement to
establish a minimum 3.0% core capital ratio for savings institutions in the
strongest financial and managerial condition.  For all other savings
institutions, the minimum core capital ratio would be 3.0% plus at least an
additional 1.0% to 2.0%, determined on a case-by-case basis by the OTS after
assessing both the quality of risk management systems and the level of overall
risk in each individual savings institution.  The Bank does not anticipate that
it will be materially affected by this regulation if adopted in its current
form.  In addition to the proposed rule, the OTS has adopted a prompt corrective
action rule under which a savings institution that has a core capital ratio of
less than 4.0% would be deemed to be "undercapitalized" and may be subject to
certain sanctions.

                                       11
<PAGE>
 
H.     SUBSEQUENT EVENT - DISPOSITION OF LEVERAGE LEASES:
       -------------------------------------------------

Commercial Federal Investment Corporation (CFIC), a wholly-owned subsidiary of 
the Bank, purchased through a trustee in two separate transactions in 1986 
portions of El Paso Electric Company's (El Paso) ownership interest in a nuclear
generating facility located in Palo Verde, Arizona. The transactions effectively
involved a sale by El Paso of a portion of the interest in the generating 
facility  and the leaseback of the facility El Paso. In December 1991, CFIC's 
investment in the leveraged leases was reduced to zero after CFIC drew two 
letters of credit which collateralized such investment.

Effective February 12, 1996, after a series of actions and plans of 
reorganization in bankruptcy court, El Paso's Fourth Amended Plan of 
Reorganization was approved, providing for the transfer of CFIC's ownership 
interest in the Palo Verde facility back to El Paso. Accordingly, the 
disposition of CFIC's ownership interest in this asset results in the 
recognition of income approximating $154,900,000 for tax purposes only and in 
estimated federal and state tax liabilities totaling approximately $54,827,000. 
Such tax cash payments are due June 1996 for the federal liability and in 
September and October 1996 for the state liabilities. Such amounts are  
recorded as deferred income taxes payable on CFIC's statement of financial 
condition.
                                       12
<PAGE>
 
I.     SUBSEQUENT EVENT - ACQUISITION OF CONSERVATIVE SAVINGS CORPORATION:
       -------------------------------------------------------------------

On February 1, 1996, the Corporation consummated its acquisition of Conservative
Savings Corporation (Conservative), parent company of Conservative Savings Bank,
FSB.  Under the terms of the Reorganization and Merger Agreement (the Merger
Agreement), the Corporation acquired all of the outstanding shares of
Conservative's common stock (1,844,838 shares) and preferred stock (460,000
shares).  Each share of Conservative's common stock was exchanged for $6.34
in cash and .2453 shares of the Corporation's common stock.  Each share of
Conservative's preferred stock was exchanged for $14.33 in cash and .5544
shares of the Corporation's common stock.  Based on the Corporation's closing
stock price of $36.50 at February 1, 1996, the total consideration for this
acquisition approximates $44,114,000.

At January 26, 1996, Conservative had assets of approximately $303,979,000,
deposits of approximately $198,375,000 and stockholders' equity of approximately
$36,278,000.  Conservative operated nine branches with seven located in
Nebraska, one in Overland Park, Kansas and one in Harlan, Iowa. It is
anticipated that three of the former Conservative branches and two branches of
the Corporation will be closed in the consolidation process pursuant to this
acquisition. The Conservative acquisition will be accounted for as a purchase
with the fair value of the assets and liabilities being determined including an
independent core value study, branch appraisals and a valuation of the loan
servicing portfolio, to be completed on or before June 30, 1996. In addition,
costs and expenses associated with this acquisition are estimated to approximate
$1,800,000. Core value of deposits resulting from this transaction will be
amortized on an accelerated basis over a period not to exceed 10 years and
goodwill, if any, amortized on a straight-line basis over a period not to exceed
20 years. The effect of this acquisition on the Corporation's consolidated
financial statements will not be material.

                                       13
<PAGE>
 
                ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                ------------------------------------------------
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------

On October 2, 1995, the Corporation consummated its acquisition of Railroad 
Financial Corporation, parent company of Railroad Savings Bank, fsb.  This 
acquisition was accounted for as a pooling of interests and, accordingly, the 
Corporation's historical consolidated financial statements have been restated 
for all periods prior to the acquisition to include the accounts and results of 
operations of Railroad.


LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------

The Corporation's principal asset is its investment in the capital stock of the
Bank, and because it does not generate any significant revenues independent of
the Bank, the Corporation's liquidity is dependent on the extent to which it
receives dividends from the Bank.  The Bank's ability to pay dividends to the
Corporation is dependent on its ability to generate earnings and is subject to a
number of regulatory restrictions and tax considerations.  Under capital
distribution regulations of the OTS, a savings institution that, immediately
prior to, and on a pro forma basis after giving effect to, a proposed dividend,
has total capital that is at least equal to the amount of its fully phased-in
capital requirements (a "Tier 1 Association") is permitted to pay dividends
during a calendar year in an amount equal to the greater of (i) 75.0% of its net
income for the recent four quarters, or (ii) 100.0% of its net income to date
during the calendar year plus an amount that would reduce by one-half the amount
by which its ratio of total capital to assets exceeded its fully phased-in risk-
based capital ratio requirement at the beginning of the calendar year.  At
December 31, 1995, the Bank qualified as a Tier 1 Association, and would be
permitted to pay an aggregate amount approximating $90.2 million in dividends
under these regulations.  Should the Bank's regulatory capital fall below
certain levels, applicable law would require prior approval by the OTS of such
proposed dividends and, in some cases, would prohibit the payment of dividends.

At December 31, 1995, the cash of Commercial Federal Corporation (the parent
company) totaled $11.0 million of which $3.5 million is required to be retained
under the terms of the Indenture governing the $40.25 million of subordinated
notes due December 1999.  Due to the parent company's limited independent
operations, management believes that the cash balance at December 31, 1995, is
currently sufficient to meet operational needs.  However, the parent company's
ability to make future interest and principal payments on the subordinated
notes, and on the $6.9 million of 10.0% senior notes acquired in the Railroad
merger, is dependent upon its receipt of dividends from the Bank.  Accordingly,
on December 13, 1995, a dividend totaling $3.63 million was paid by the Bank to
the parent company.  This dividend from the Bank was paid primarily to cover (i)
the semi-annual interest payments on the parent company's subordinated debt and
(ii) the initial common stock cash dividend of $1.43 million paid on October 31,
1995.  See Note E for additional information regarding cash dividends on common
stock paid to date by the parent company.  Future payment of dividends by the
parent company will depend on the parent company's consolidated earnings,
financial condition, liquidity, capital and other factors, including economic
conditions and any regulatory restrictions.  The Bank will continue to pay
dividends to the parent company, pursuant to regulatory restrictions, to cover
the cash dividends on common stock that the parent company intends to pay on a
quarterly basis.  A dividend totaling $2.2 million was paid by the Bank to the
parent company during the three months ended December 31, 1994.  The parent
company also receives cash from the exercise of stock options and the sale of
stock under its employee benefit plans.

The Bank's primary sources of funds are (i) deposits, (ii) principal repayments
on loans, mortgage-backed and investment securities, (iii) advances from the
Federal Home Loan Bank (FHLB) of Topeka and (iv) cash generated from operations.
As reflected in the Consolidated Statement of Cash Flows, net cash flows
provided by operating activities totaled $24.9 million for the six months
ended December 31, 1995, and net cash flows used by operating activities totaled
$7.1 million for the six months ended December 31, 1994.  Amounts
fluctuate from period to period primarily as a result of mortgage banking
activity relating to the purchase and origination of loans for resale and the
subsequent sale of such loans.  

                                       14
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES (Continued):
--------------------------------------------

Net cash flows provided by investing activities for the six months ended
December 31, 1995 totaled $6.1 million and net cash flows used by investing
activities totaled $252.7 million for the six months ended December 31, 1994.
Amounts fluctuate from period to period primarily as a result of (i) principal
repayments on loans and mortgage-backed securities and (ii) the purchase and
origination of loans and mortgage-backed securities. During the first quarter of
fiscal year 1995 the Corporation acquired the assets and liabilities of Home
Federal Savings and Loan (Home Federal), located in Ada, Oklahoma, for which it
paid cash totaling $9.0 million. The acquisition of Railroad had no material
effect on liquidity, except for the cash outlay totaling $3.3 million relating
to non-recurring merger related costs, since such transaction was consummated in
an exchange of common stock between companies. The acquisition of Conservative,
however, will result in a cash payment totaling approximately $18.3 million, in
addition to the issuance of common stock of the Corporation, for Conservative's
common and preferred stock. On February 1, 1996, cash totaling $18.3 million was
disbursed in the acquisition of Conservative. See Note I for information
regarding details of the acquisition of Conservative.

As discussed in Note C, management of the Corporation developed an 
asset/liability management strategy to reclassify substantially all 15 and 
30-year fixed-rate mortgage-backed securities approximately $370.4 million and 
agency investment securities approximating $49.9 million from held to maturity 
to available for sale. The purpose of this strategy is to sell such securities 
and use the proceeds to fund FHLB advances as they become due, and to have the 
flexibility, should the opportunity arise, to reinvest proceeds into 
adjustable-rate or shorter duration interest-earning assets. During January 
1996, approximately $190.0 million of such investment and mortgage-backed 
securities were sold with the proceeds used to pay maturing FHLB advances.

Net cash flows provided by financing activities for the six months ended
December 31, 1995 and 1994, totaled $3.3 million and $270.8 million,
respectively.  Advances from the FHLB and retail deposits have been the primary
sources to balance the Bank's funding needs during each of the periods
presented. In addition, during the six months ended December 31, 1994, the
Corporation utilized securities sold under agreements to repurchase primarily
for liquidity and asset liability management purposes. The Corporation
experienced net increases of $35.2 million and $78.1 million, respectively, in
deposits for the six months ended December 31, 1995 and 1994 due to a broadened
retail deposit base created from acquisitions, opening new branches and to
increased marketing efforts and product promotion.

The Corporation's subordinated notes became redeemable effective December 15, 
1995. Accordingly, given the current interest rate environment in relation to 
the interest rates such notes now bear (10.25% on $40.25 million and 10.0% on 
$6.9 million), management is pursuing the refinancing of its outstanding 
subordinated debt totaling $47.15 million. The interest rate on the proposed 
refinanced debt is anticipated to be lower by approximately 200 to 250 basis 
points than what the current notes presently bear.

The Corporation has considered and will continue to consider possible mergers
with and acquisitions of other selected financial institutions.  During fiscal
year 1995, the Corporation consummated the acquisitions of Home Federal and
Provident Federal Savings Bank (Provident) located in Lincoln, Nebraska; and
during fiscal year 1996 to date, consummated the acquisitions of Railroad and
Conservative.  See Notes D and I for additional information on the acquisitions
of Railroad and Conservative.  Such acquisitions present the Corporation with
the opportunity to further expand its retail network in the Oklahoma, Kansas,
Nebraska and Iowa markets; and to increase its earnings potential by increasing
its mortgage and consumer loan volumes funded by deposits which generally bear
lower rates of interest than alternative sources of funds.

The Corporation will seek to continue its growth through expansion of the
Corporation's operations in its market areas and may seek to enter markets in
other adjoining states.  The Corporation will also seek to expand its operations
both through competition for market share within its market areas and through
mergers with and acquisitions of other selected financial institutions.
Management of the Corporation believes that its emphasis on operating acquired
entities as consumer-oriented financial institutions is attractive to potential
acquisition candidates and is advantageous in competing with larger banks for
acquisitions of selected financial institutions.

At December 31, 1995, the Corporation had issued commitments totaling $115.0
million to fund and purchase loans as follows:  $23.2 million of single-family
adjustable-rate mortgage loans, $69.1 million of single-family fixed-rate
mortgage loans, $15.2 million of consumer loan lines of credit and $7.5 million
of commercial real estate loans.  In addition, outstanding commitments from
mortgage banking operations to purchase mortgage loan servicing rights totaled
$2.3 million at December 31, 1995.  These outstanding loan commitments to extend
credit in order to originate loans or fund consumer loan lines of credit do not
necessarily represent future cash requirements since many of the commitments may
expire without being drawn.  The Corporation expects to fund these commitments,
as necessary, from the sources of funds previously described.

                                       15
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES (Continued):
--------------------------------------------

The maintenance of an appropriate level of liquid resources to meet not only
regulatory requirements but also to provide funding necessary to meet the
Corporation's current business activities and obligations is an integral element
in the management of the Corporation's assets.  The Corporation is required by
federal regulation to maintain a minimum average daily balance of cash and
certain qualifying liquid investments equal to 5.0% of the aggregate of the
prior month's daily average savings deposits and short-term borrowings.  The
Corporation's liquidity ratio was 8.01% at December 31, 1995.  Liquidity levels
will vary depending upon savings flows, future loan fundings, cash operating
needs, collateral requirements and general prevailing economic conditions.  The
Corporation does not foresee any difficulty in meeting its liquidity
requirements.  


RECENT EVENTS:
--------------

The Bank's savings deposits are insured by the Savings Association Insurance
Fund (SAIF), which is administered by the Federal Deposit Insurance Corporation
(FDIC). The assessment rate currently ranges from 0.23% of deposits for well-
capitalized institutions to 0.31% of deposits for undercapitalized institutions.
The FDIC also administers the Bank Insurance Fund (BIF), which has the same
designated reserve ratios as the SAIF. On August 8, 1995, the FDIC adopted an
amendment to the BIF risk-based assessment schedule which lowered the deposit
insurance assessment rate for most commercial banks and other depository
institutions with deposits insured by the BIF to a range of from 0.31% of
insured deposits for undercapitalized BIF-insured institutions to 0.04% of
deposits for well-capitalized institutions, which constitute over 90% of BIF-
insured institutions. The FDIC amendment became effective September 30, 1995.
Subsequently, the FDIC reduced the assessment rate for the most highly rated 
BIF-insured institutions to zero percent. The amendment creates a substantial
disparity in the deposit insurance premiums paid by BIF and SAIF members and
could place SAIF-insured savings institutions at a significant competitive
disadvantage to BIF-insured institutions.

A number of proposals have been considered to recapitalize the SAIF in order to
eliminate the premium disparity.  The Senate and the House of Representatives
have both, as part of a budget reconciliation package to balance the federal
budget, approved legislation requiring a one-time assessment of .85% of insured
deposits to be imposed on all SAIF-insured deposits held as of March 31, 1995.
This assessment was scheduled to be payable during the first quarter of 1996.
The assessment would result, on a pro forma basis as of December 31, 1995, in a
one-time after-tax charge of approximately $21.8 million to the Corporation.
Such assessment would have the effect of reducing the tangible capital of the
Bank to $339.9 million, or 5.19%, of adjusted total assets, core capital to
$358.7 million, or 5.47%, of adjusted total assets, and risk-based capital to
$392.9 million, or 13.07%, of risk-weighted assets. Including the insured
deposits of Conservative as if the Corporation and Conservative had merged as of
December 31, 1995, the assessment would have resulted in a one-time after-tax
charge of approximately $22.9 million, and reduced the pro forma combined
tangible, core and risk-based capital to $371.2 million (5.38%), $390.0 million
(5.64%) and $425.0 million (13.35%), respectively. The Bank would, on such pro
forma basis as of December 31, 1995, continue to exceed the minimum requirements
to be classified as a "well-capitalized" institution under applicable
regulations. See Note C for information on the Bank's regulatory capital and the
minimum requirements to be classified well-capitalized. If such a special
assessment were required and the SAIF as a result was fully recapitalized, it
could have the effect of reducing the Bank's deposit insurance premiums to the
SAIF, thereby increasing net income in future periods.

Also under consideration by Congress are proposals relating to merger of the BIF
and SAIF funds, the elimination of the thrift charter and the federal tax
implications of conversion to a national bank.  Management of the Corporation is
unable to accurately predict at this time whether any of these proposals will be
adopted in their current form or the impact of these proposals on the
Corporation.

                                       16
<PAGE>
 
RESULTS OF OPERATIONS:
----------------------

Net income for the three months ended December 31, 1995, was $11.9 million, or
$.82 per share, compared to $2.2 million of net income for the three months
ended December 31, 1994, or $.15 per share.  The increase in net income for the
three months ended December 31, 1995, compared to the three months ended
December 31, 1994, is primarily due to the following:  a $10.7 million non-
recurring charge for accelerated amortization of goodwill recorded in the prior
quarter and not incurred in the current quarter, an increase of $1.1 million in
net interest income after provision for loan losses, an increase of $877,000 in
loan servicing fees, a decline of $696,000 in amortization expense of intangible
assets, and an increase of $542,000 in retail fees and charges.  These increases
to net income were partially offset by an increase of $2.8 million in general
and administrative expenses, a decline of $688,000 in real estate operations, an
increase of $282,000 in the provision for income taxes, a decrease of $245,000
in other operating income and a decrease of $163,000 in the gain on sales of
loans and loan servicing rights.

Net income for the six months ended December 31, 1995, was $23.1 million, or
$1.59 per share, compared to $3.4 million of net income for the six months ended
December 31, 1994, or $.24 per share.  The increase in net income for the six
months ended December 31, 1995, compared to the six months ended December 31,
1994, is primarily due to the following:  a $21.4 million non-recurring charge
for accelerated amortization of goodwill recorded in the prior period and not
incurred in the current period, an increase of $2.2 million in net interest
income after provision for loan losses, a decline of $1.4 million in
amortization expense of intangible assets, an increase of $1.2 million in retail
fees and charges and an increase of $1.1 million in loan servicing fees.  These
increases to net income were partially offset by an increase of $6.4 million in
general and administrative expenses, an increase of $986,000 in the provision
for income taxes, a decrease of $158,000 in other operating income and a
decrease of $73,000 in the gain on sales of loans and loan servicing rights.

Net Interest Income:
--------------------

Net interest income was $38.6 million for the three months ended December 31,
1995, compared to $37.7 million for the three months ended December 31, 1994,
resulting in an increase of $928,000, or 2.5%.  Net interest income was $76.7
million for the six months ended December 31, 1995, compared to $74.7 million
for the six months ended December 31, 1994, resulting in an increase of $2.1
million, or 2.8%. The interest rate spread was 2.35% at December 31, 1995,
compared to 2.21% at December 31, 1994, an increase of 14 basis points. However,
during the three months ended December 31, 1995 and 1994, interest rate spreads
were 2.26% and 2.34%, respectively, a decrease of 8 basis points; and during the
six months ended December 31, 1995 and 1994, interest rate spreads were 2.24%
and 2.35%, respectively, a decrease of 11 basis points. The current interest
rate environment has put pressure on the Corporation's interest rate spreads and
yields and the resulting net interest income. However, it is expected that the
sale subsequent to December 31, 1995 of approximately $190.0 million of the
$420.3 million of the investment and mortgage-backed securities reclassed from
held-to-maturity to available-for-sale (see Note C), and the utilization of the
proceeds to repay maturing FHLB advances, will improve the interest rate spreads
and yields in future periods. The future trend in interest rate spreads and net
interest income will be dependent upon such factors as the composition and size
of the Corporation's interest-earning assets and interest-bearing liabilities,
the interest rate risk exposure of the Corporation, and the maturity and
repricing activity of interest-sensitive assets and liabilities, as influenced
by changes in and levels of both short-term and long-term market interest rates.

Net interest income increased during the three and six months ended December 31,
1995, compared to the same periods ended December 31, 1994, even though the
interest rate spreads and the net yields on interest-earning assets decreased.
Such increases are due to average interest-earning assets increasing $303.1
million to $6.315 billion for the six months ended December 31, 1995, compared
to $6.012 billion for the six months ended December 31, 1994; and increasing
$219.2 million to $6.293 billion from $6.073 billion, comparing the three months
ended December 31, 1995 to 1994.  This increase in average interest-earning
assets is primarily due to internal growth and to the Provident acquisition in
April 1995.

                                       17
<PAGE>
 
Net Interest Income (Continued):
--------------------------------

The Corporation has historically invested in interest-earning assets that have a
longer duration than its interest-bearing liabilities.  The shorter duration of
the interest-sensitive liabilities indicates that the Corporation is exposed to
interest rate risk.  In a rising rate environment, in addition to reducing the
market value of long-term interest-earning assets, liabilities will reprice
faster than assets, therefore decreasing net interest income.

To mitigate this risk, the Bank has utilized certain financial instruments to
hedge the interest rate exposure on certain interest-sensitive liabilities.
However, it has been the general policy of the Bank to move toward a natural,
rather than a synthetic, management of its interest rate risk.  The Bank has
allowed these financial instruments to expire upon maturity while extending the
maturities and locking in fixed interest rates on certain borrowings, primarily
advances from the FHLB.  Such strategy has helped to reduce the Bank's one-year
cumulative gap mismatch.  In addition, the Bank's continued concentration of
adjustable-rate assets as a percentage of total assets benefits the one-year
cumulative gap as such adjustable-rate assets reprice and are more responsive to
the sensitivity of more frequently repricing interest-bearing liabilities.

In connection with its asset/liability management program, the Bank has interest
rate swap agreements and an interest rate cap agreement with other
counterparties under terms that provide an exchange of interest payments on the
outstanding notional amount of the swap or cap agreement.  Such agreements have
been used to artificially lengthen the maturity of various interest-bearing
liabilities.  In accordance with these arrangements, the Bank pays fixed rates
and receives variable rates of interest according to a specified index.  The
Bank has reduced its level of such swap agreements to a notional principal
amount of $35.0 million at December 31, 1995, from a balance of $78.5 million at
June 30, 1995, and $93.5 million at December 31, 1994.  The interest rate cap
agreement, which was assumed in the Railroad merger, has a notional principal
amount of $10.0 million with terms requiring the Corporation to pay a 7.0% fixed
rate of interest and receiving a variable rate with a quarterly cash settlement.
For the six months ended December 31, 1995 and 1994, the Bank recorded $1.6
million and $2.4 million, respectively, in interest expense from these interest
rate swap and cap agreements.  In the 12 months ending December 31, 1996, an
additional $25.0 million of these swap agreements mature.  The interest rate cap
agreement terminates March 1997.  

                                       18
<PAGE>

Net Interest Income (Continued):
-------------------------------- 

The following table presents certain information concerning yields earned on
interest-earning assets and rates paid on interest-bearing liabilities during
and at the end of each of the periods presented.

<TABLE>
<CAPTION>
                                      For the Three  For the Six
                                      Months Ended   Months Ended         At
                                      December 31,   December 31,     December 31,
                                      -------------  ------------   ---------------
                                      1995     1994  1995   1994     1995     1994
                                      ------  -----  -----  -----   ------   -----
<S>                                   <C>     <C>    <C>    <C>     <C>      <C>
Weighted average yield on:
 Loans.............................   8.29%  7.96%   8.29%   7.90%   8.27%    8.02%
 Mortgage-backed securities........   6.50   5.96    6.47    5.83    6.64     6.04
 Investments.......................   6.12   6.02    6.09    6.03    6.07     6.01
                                     -----   ----    ----    ----    ----     ----
  Interest-earning assets             7.78   7.37    7.76    7.29    7.79     7.43
                                     -----   ----    ----    ----    ----     ----

Weighted average rate paid on:
 Savings deposits..................   3.11   3.32    3.12    3.11    2.92     3.50
 Other time deposits...............   6.00   5.08    5.99    5.04    5.97     5.20
 Advances from FHLB................   5.84   5.58    5.86    5.50    5.76     5.84
 Securities sold under agreements
  to repurchase                       7.01   8.07    7.01    7.46    7.04     7.72
 Other borrowings..................  10.87  11.10   10.83   11.05   10.95    11.14
                                     -----   ----    ----    ----    ----     ----
  Interest-bearing liabilities        5.52   5.03    5.52    4.94    5.44     5.22
                                     -----   ----    ----    ----    ----     ----

Interest rate spread...............   2.26%  2.34%   2.24%   2.35%   2.35%    2.21%
                                     =====   ====    ====    ====    =====    ====

Net annualized yield on
 interest-earning assets...........   2.46%  2.48%   2.46%   2.52%   2.54%    2.37%
                                     =====   ====    ====    ====    =====    ====

</TABLE>

                                       19
<PAGE>
 
Net Interest Income (Continued):
--------------------------------

The following table presents average interest-earning assets and average
interest-bearing liabilities, interest income and interest expense and average
yields and rates during the three and six months ended December 31, 1995.  The
table below includes nonaccruing loans averaging $34.1 million and $32.7
million, respectively, for the three and six months ended December 31, 1995, as
interest-earning assets at a yield of zero percent. 

<TABLE>
<CAPTION>
                                                         Three Months Ended                   Six Months Ended
                                                          December 31, 1995                   December 31, 1995
                                                 ----------------------------------  -----------------------------------
                                                                         Annualized                           Annualized
                                                  Average                  Yield/     Average                   Yield/
(Dollars in Thousands)                            Balance    Interest       Rate      Balance     Interest       Rate
-----------------------------------------------  ----------  --------    ----------  -----------  ----------  ----------
<S>                                              <C>         <C>          <C>        <C>          <C>         <C>

Interest-earning assets:
 Loans.........................................  $4,564,977  $ 94,597      8.29%     $4,558,545  $188,926       8.29%
 Mortgage-backed securities....................   1,337,337    21,743      6.50       1,354,904    43,809       6.47
 Investments...................................     390,385     6,017      6.12         401,177    12,324       6.09
   Interest-earning assets.....................   6,292,699   122,357      7.78       6,314,626   245,059       7.76

Interest-bearing liabilities:
 Savings deposits..............................   1,078,747     8,459      3.11       1,063,994    16,710       3.12
 Other time deposits...........................   2,986,662    45,147      6.00       2,987,654    90,039       5.99
 Advances from FHLB............................   1,693,991    24,930      5.84       1,727,408    50,997       5.86
 Securities sold under
   agreements to repurchase....................     195,755     3,508      7.01         199,732     7,154       7.01
 Other borrowings..............................      62,168     1,688     10.87          63,441     3,435      10.83
   Interest-bearing
    liabilities................................   6,017,323    83,732      5.52       6,042,229   168,335       5.52

Net earnings balance...........................  $  275,376                          $  272,397
                                                 ==========                          ==========

Net interest income............................              $ 38,625                            $ 76,724
                                                             ========                            ========

Interest rate spread...........................                            2.26%                                2.24%
                                                                           ====                                 ====

Net annualized yield on
 interest-earning assets.......................                            2.46%                                2.46%
                                                                           ====                                 ====
</TABLE>

During the three and six months ended December 31, 1995, the Corporation
experienced higher costs on interest-bearing liabilities and a lower interest
rate spread and yield compared to the three and six months ended December 31,
1994, primarily due to increases in the interest rates offered on certain types
of deposit products.  The Corporation, and most of its competitors in its
deposit markets, raised interest rates on deposits during the last 18 months in
order to maintain such deposits as an attractive investment vehicle for
consumers.  The net earnings balance (the difference between average interest-
bearing liabilities and average interest-earning assets) improved by $55.3
million and $59.4 million, respectively, for the three and six months ended
December 31, 1995, compared to the three and six months ended December 31, 1994,
primarily from internal growth.

                                       20
<PAGE>
 
Net Interest Income (Continued):
--------------------------------

The following table presents the dollar amount of changes in interest income and
expense for each major component of interest-earning assets and interest-bearing
liabilities, respectively, and the amount of change in each attributable to:
(1) changes in volume (change in volume multiplied by prior year rate), and (2)
changes in rate (change in rate multiplied by prior year volume).  The net
change attributable to change in both volume and rate, which cannot be
segregated, has been allocated proportionately to the change due to volume and
the change due to rate.  This table demonstrates the effect of the increased
volume of interest-earning assets and interest-bearing liabilities, the
increasing interest rates and the decline in interest rate spreads previously
discussed.

<TABLE>
<CAPTION>
                                           Three Months Ended              Six Months Ended
                                       December 31, 1995 Compared     December 31, 1995 Compared
                                          to December 31, 1994           to December 31, 1994
                                      -----------------------------  -----------------------------
                                       Increase (Decrease) Due to     Increase (Decrease) Due to
                                      -----------------------------  -----------------------------
(In Thousands)                         Volume     Rate       Net      Volume      Rate      Net
------------------------------------  --------  ---------  --------  ---------  --------  --------
<S>                                   <C>       <C>        <C>       <C>        <C>       <C>
Interest Income:
  Loans.............................  $ 6,380    $ 3,550   $ 9,930    $14,936   $ 8,352   $23,288
  Mortgage-backed securities........   (1,014)     1,845       831     (3,568)    6,509     2,941
  Investments.......................     (416)        99      (317)      (688)      356      (332)
                                      -------    -------   -------    -------   -------   -------
       Interest income..............    4,950      5,494    10,444     10,680    15,217    25,897
                                      -------    -------   -------    -------   -------   -------
 
Interest expense:
  Savings deposits..................      262       (561)     (299)     5,628    (5,266)      362
  Other time deposits...............    3,837      6,682    10,519      2,518    18,742    21,260
  Advances from FHLB................   (4,189)     1,226    (2,963)    (9,178)    7,282    (1,896)
  Securities sold under agreements
    to repurchase...................    2,567       (163)    2,404      4,851      (489)    4,362
  Other borrowings..................     (108)       (37)     (145)      (185)      (72)     (257)
                                      -------    -------   -------    -------   -------   -------
        Interest expense............    2,369      7,147     9,516      3,634    20,197    23,831
                                      -------    -------   -------    -------   -------   -------
 
Net effect on net interest income...  $ 2,581    $(1,653)  $   928    $ 7,046   $(4,980)  $ 2,066
                                      =======    =======   =======    =======   =======   =======
</TABLE>

The decreases due to changes in rates between the three and six months ended
December 31, 1995 compared to 1994, reflects the decreases in interest rate
spreads.  The improvements due to changes in volume in part reflects the
increases in the differences between average interest-bearing liabilities and
average interest-earning assets of $55.3 million and $59.4 million,
respectively, between the three and six months ended December 31, 1995 compared
to 1994.  The percentage of average interest-earning assets to average interest-
bearing liabilities was 104.5% for the six months ended December 31, 1995,
compared to 103.7% for the six months ended December 31, 1994, with such
improvement primarily due to internal growth.

                                       21
<PAGE>
 
Provision for Loan Losses and Real Estate Operations:
-----------------------------------------------------

The Corporation recorded loan loss provisions totaling $1.5 million and $3.1
million, respectively, for the three and six months ended December 31, 1995
compared to $1.7 million and $3.2 million, respectively, for the three and six
months ended December 31, 1994.  The loan loss provisions decreased slightly
even though the net loan portfolio increased approximately $312.0 million at
December 31, 1995, compared to December 31, 1994, indicating the credit quality
of the loan portfolio and the low level of nonperforming loans over the
respective periods of time.  The allowance for loan losses is based upon
management's continuous evaluation of the collectibility of outstanding loans,
which takes into consideration such factors as changes in the composition of the
loan portfolio and current economic conditions that may affect the borrower's
ability to pay, regular examinations by the Corporation's credit review group of
specific problem loans and of the overall portfolio quality and real estate
market conditions in the Corporation's lending areas.

The Corporation recorded a net loss on real estate operations of $196,000 for
the three months ended December 31, 1995 and net income of $169,000 for the six
months ended December 31, 1995, compared to net income of $492,000 and $171,000,
respectively, for the three and six months ended December 31, 1994. Real estate
operations reflect provisions for real estate losses, net real estate operating
activity, and gains and losses on dispositions of real estate. The decline in
real estate operations for the three months ended December 31, 1995, compared to
the three months ended December 31, 1994, is primarily due to gains recorded in
the second quarter ended December 31, 1994 totaling $412,000 from the sale of
certain commercial real estate. Management believes that such improvements in
real estate operations are indicative of the improvements made in the reduction
of the Corporation's real estate portfolio and to the improvement in the real
estate markets in general.

Although management of the Corporation believes that present levels of
allowances for loan losses are adequate to reflect the risks inherent in its
portfolios, there can be no assurance that the Corporation will not experience
increases in its nonperforming assets, that it will not increase the level of
its allowances in the future or that significant provisions for losses will not
be required based on factors such as deterioration in market conditions, changes
in borrowers' financial conditions, delinquencies and defaults.  In addition,
regulatory agencies review the adequacy of allowances for losses on loans on a
regular basis as an integral part of their examination process.  Such agencies
may require additions to the allowances based on their judgments of information
available to them at the time of their examinations.

                                       22
<PAGE>
 
Provision for Loan Losses and Real Estate Operations (Continued):
-----------------------------------------------------------------

Nonperforming assets are monitored closely on a regular basis by the
Corporation's internal credit review and asset workout groups.  Nonperforming
assets, after restating the June 30, 1995 balances to reflect the merger with
Railroad, decreased by $3,000 at December 31, 1995, compared to June 30, 1995,
resulting from net decreases of $2.9 million in troubled debt restructurings and
$62,000 in real estate offset by a net increase of $2.9 million in nonperforming
loans.  Nonperforming assets as of the dates indicated are summarized below:

<TABLE>
<CAPTION>
 
                                              December 31,    June 30,
(Dollars in Thousands)                            1995          1995
                                              -----------    ----------
<S>                                           <C>            <C> 
 Nonperforming loans:
  Residential real estate..................     $ 34,267      $ 30,784
  Commercial real estate...................          442           773
  Consumer.................................          461           701
                                                --------      --------
   Total...................................       35,170        32,258
                                                --------      --------
 Real estate:
  Commercial...............................        8,757         8,795
  Residential..............................        4,217         4,241
                                                --------      --------
   Total...................................       12,974        13,036
                                                --------      --------
 
 Troubled debt restructurings:
  Commercial...............................       13,310        15,708
  Residential..............................        1,240         1,695
                                                --------      --------
   Total...................................       14,550        17,403
                                                --------      --------

 Total nonperforming assets................     $ 62,694      $ 62,697
                                                ========      ========

 Nonperforming loans to total loans........          .76%          .70%
 Nonperforming assets to total assets......          .95%          .95%
 
 Allowance for loan losses:
  Other loans (1)..........................     $ 34,700      $ 33,261
  Bulk purchased loans (2).................       13,995        15,280
                                                --------      --------
   Total...................................     $ 48,695      $ 48,541
                                                --------      --------
 
 Allowance for loan losses to total loans..         1.05%         1.06%
 Allowance for loan losses to total
  nonperforming assets.....................        77.67%        77.42%
</TABLE>

(1) Includes $418,000 and $78,000, respectively, at December 31, 1995 and June
    30, 1995 in general allowance for losses established primarily to cover
    risks associated with borrowers' delinquencies and defaults on loans held
    for sale.

(2) Represents the allowance for loan losses for single-family residential whole
    loans purchased between January 1991 and June 30, 1992 (bulk purchased
    loans), which had been allocated from the amount of net discounts associated
    with the Bank's purchase of these loans to provide for the credit risk
    associated with such bulk purchased loans. These bulk purchased loans had
    principal balances of $633.1 million and $701.9 million, respectively, at
    December 31, 1995 and June 30, 1995. These allowances are available only to
    absorb losses associated with respective bulk purchased loans, and are not
    available to absorb losses from other loans.

                                       23
<PAGE>
 
Provision for Loan Losses and Real Estate Operations (Continued):
-----------------------------------------------------------------

The ratio of nonperforming loans to total loans was .76% at December 31, 1995,
based on loan balances of $4.632 billion, compared to .70% at June 30, 1995,
based on loan balances approximating $4.589 billion.  Management believes that
these ratios reflect the quality of the Bank's loan portfolio, which consists
primarily of loans secured by single-family residential properties.  The ratio
of nonperforming assets to total assets of .95% at December 31, 1995, which
management believes is favorable compared to industry standards, is one of
several indicators of the continued improvement made in stabilizing
nonperforming assets.  The percentages for allowance for loan losses to total
loans and to total nonperforming assets remained relatively unchanged comparing
December 31, 1995 to June 30, 1995.

Nonperforming loans at December 31, 1995, increased by $2.9 million compared to
June 30, 1995, primarily due to a net increase in delinquent residential real
estate loans partially offset by net decreases in delinquent commercial real
estate and consumer loans.  The net decrease of $62,000 in real estate at
December 31, 1995, compared to June 30, 1995, indicated no major net changes
between the commercial and residential real estate categories.  The net decrease
of $2.9 million in troubled debt restructurings at December 31, 1995, compared
to June 30, 1995, is primarily attributable to the loan principal repayment of
one commercial loan totaling $1.6 million and the transfer of another commercial
loan totaling $527,000 to the nonperforming loans category.

Loan Servicing Fees:
--------------------

Fees from loans serviced for other institutions totaled $6.8 million and $13.3
million, respectively, for the three and six months ended December 31, 1995,
compared to $6.0 million and $12.2 million, respectively, for the three and six
months ended December 31, 1994.  These increases comparing the respective
periods are primarily due to increases in the size of the Corporation's loan
servicing portfolio.  At December 31, 1995 and 1994, the Corporation's mortgage
servicing portfolio approximated $5.547 billion and $4.867 billion,
respectively.

The value of the Corporation's loan servicing portfolio increases as mortgage
interest rates rise and loan prepayments decrease.  It is expected that income
generated from the Corporation's loan servicing portfolio will increase in such
an environment.  However, this positive effect on the Corporation's income is
offset, in part, by a decrease in additional servicing fee income attributable
to new loan originations, which historically decrease in periods of higher, or
increasing, mortgage interest rates, and by an increase in expenses from loan
production costs since a portion of such costs cannot be deferred due to lower
loan originations.  Conversely, the value of the Corporation's loan servicing
portfolio will decrease as mortgage interest rates decline.

Retail Fees and Charges:
------------------------

Retail fees and charges totaled $3.0 million and $5.7 million, respectively, for
the three and six months ended December 31, 1995, compared to $2.5 million and
$4.5 million, respectively, for the three and six months ended December 31,
1994.  These net increases in retail fees and charges primarily result from
increases in certain checking account fees and from the Corporation's expanding
retail customer deposit base over the same respective periods.

Gain (Loss) on Sales of Loans:
------------------------------

During the three and six months ended December 31, 1995, the Corporation sold
loans to third parties through its mortgage banking operations resulting in net
pre-tax gains of $318,000 and $170,000, respectively. Such loan sales during the
three and six months ended December 31, 1994, resulted in net pre-tax losses of
$950,000 and $1.2 million, respectively. The net gains recorded in the current
fiscal year periods are attributable to the relatively stable interest rate
environment currently in place the last six months and to the adoption of the
provisions of SFAS No. 122 effective July 1, 1995 which prescribes accounting
methods that generally result in comparatively higher amounts of gains realized
from the sales of loans. The net losses recorded in the prior fiscal year
periods are primarily from mortgage banking operations of the former Railroad
Savings Bank which have been combined under the pooling of interests accounting
treatment. Such losses were incurred primarily from the sales of loans which
were originated pursuant to unhedged commitments.

                                       24
<PAGE>
 
Gain on Sales of Loan Servicing Rights:
---------------------------------------

Gain on the sales of loan servicing rights totaled $452,000 for the six months
ended December 31, 1995 compared to gains of $1.4 million and $1.9 million,
respectively, for the three and six months ended December 31, 1994.  There were
no sales of loan servicing rights in the second quarter of this fiscal year.
Such sales activity was entirely from the mortgage banking operations of the
former Railroad Savings Bank which have been combined under the pooling of
interests accounting treatment.

Other Operating Income:
-----------------------

Other operating income totaled $1.8 million and $3.4 million, respectively, for
the three and six months ended December 31, 1995, compared to $2.1 million and
$3.5 million, respectively, for the three and six months ended December 31,
1994.  The decrease of $245,000 comparing the current quarter results to the
prior quarter is primarily due to decreases in insurance commission income of
$211,000; and the decrease of $158,000 comparing the six months ended December
31, 1995 to 1994 is primarily due to net losses on sales of fixed assets
totaling $177,000 and net decreases of $95,000 in insurance commission income
partially offset by a net increase of $120,000 in brokerage commission income.

General and Administrative Expenses:
------------------------------------                                            

General and administrative expenses totaled $28.5 million and $56.5 million,
respectively, for the three and six months ended December 31, 1995, compared to
$25.7 million and $50.1 million, respectively, for the three and six months
ended December 31, 1994.  The increase of $2.8 million for the three months
ended December 31, 1995, compared to the three months ended December 31, 1994,
was primarily due to net increases in other operating expenses of $1.4 million,
occupancy and equipment of $816,000, advertising of $338,000, regulatory
insurance and assessments of $320,000 and amortization of purchased and
originated mortgage loan servicing rights of $141,000 partially offset by a net
decrease of $161,000 in compensation and benefits.

The increase of $6.4 million for the six months ended December 31, 1995,
compared to the six months ended December 31, 1994, was primarily due to net
increases in other operating expenses of $3.1 million, occupancy and equipment
of $1.4 million, compensation and benefits of $661,000, advertising of $609,000,
regulatory insurance and assessments of $569,000 and $72,000 in amortization of
purchased and originated mortgage loan servicing rights.

The net increases of $2.8 million and $6.4 million, respectively, for the three
and six months ended December 31, 1995, compared to the respective prior year
periods are primarily attributable to nonrecurring expenses associated with the
Railroad merger and the 1995 proxy contest. During the three and six months
ended December 31, 1995 nonrecurring costs and expenses related to the Railroad
merger (accounting, legal, investment banking, severance benefits, advertising
and miscellaneous transition and conversion expenses) totaled $2.0 million and
$3.3 million, respectively. Costs attributable to the proxy contest were
primarily incurred in the second quarter of fiscal year 1996, consisting of
consulting services, legal fees, solicitation fees and printing and mailing,
totaled $894,000. In addition, the Corporation's recent net increases in general
and administrative expenses directly resulting from the acquisitions (excluding
Railroad) totaled $215,000 and $408,000, respectively, comparing the three and
six months ended December 31, 1995, to the respective prior year periods. Such
increases in general and administrative expenses result from increased personnel
wages and benefits, costs of operating additional branches and higher regulatory
insurance costs from the deposits acquired. Other expenses were also incurred on
an indirect basis attributable to such acquisitions. Other increases comparing
the three and six months ended December 31, 1995, to the three and six months
ended December 31, 1994, are partly due to additional expenses associated with
the addition of five new branches over the same periods of time.

Amortization of Goodwill and Core Value of Deposits:
----------------------------------------------------

Amortization of goodwill and core value of deposits totaled $2.2 million and
$4.4 million, respectively, for the three and six months ended December 31,
1995, compared to $2.9 million and $5.8 million, respectively, for the three and
six months ended December 31, 1994.  The net decreases of $696,000 and $1.4
million, respectively, are primarily attributable to a reduction in amortization
expense on core value of deposits from acquisitions before fiscal year 1994.
Such a reduction is due to an adjustment totaling $6.8 million which reduced
core value of deposits effective January 1, 1995, as a result of the
Corporation's recognition of pre-acquisition tax credits and net operating
losses.

                                       25
<PAGE>
 
Accelerated Amortization of Goodwill:
-------------------------------------

Effective June 30, 1994, the Corporation changed its method of valuation of
intangible assets incorporating a fair value concept using a lower of cost or
market methodology.  An appraisal performed by an independent third party of the
existing intangible assets relating to acquisitions during 1986 through 1988 of
five troubled savings institutions located in Colorado, Kansas and Oklahoma
resulted in a fair value estimate of $41.0 million.  This appraisal of $41.0
million as of June 30, 1994, was classified by management as core value of
deposits totaling $19.6 million and goodwill totaling $21.4 million.  The $21.4
million of goodwill has been completely amortized to expense in fiscal year 1995
($10.7 million amortized in each of the two quarters ended December 31, 1994);
and for reporting purposes separately disclosed in the Consolidated Statement of
Operations.

Provision for Income Taxes:
---------------------------

For the three and six months ended December 31, 1995, the provision for income
taxes totaled $6.3 million and $12.8 million, respectively, compared to $6.0
million and $11.8 million, respectively, for the three and six months ended
December 31, 1994. The effective income tax rates for the three and six months
ended December 31, 1995 were 34.8% and 35.7%, respectively, compared to 73.5%
and 77.4%, respectively, for the three and six months ended December 31, 1994.

The provision for income taxes is computed on an interim basis based on an
estimated effective tax rate expected to be applicable for the entire fiscal
year.  In arriving at such an effective tax rate, no effect is included for the
income tax related to unusual items which are separately reported.  For the
three and six months ended December 31, 1994, the Corporation recorded and
separately reported accelerated amortization of goodwill totaling $10.7 million
and $21.4 million, respectively.  The effect of the accelerated amortization of
this nondeductible goodwill has been excluded from the determination of the
annualized effective tax rate.  As a result, the effective tax rate for the
first two quarters of fiscal year 1995 are higher compared to the three and six
months ended December 31, 1995.  See "Accelerated Amortization of Goodwill" for
additional information on the amortization of this goodwill.

The effective tax rates for both periods vary from the federal statutory rate
primarily due to the nondeductibility of amortization of goodwill and core value
of deposits in relation to the level of taxable income for the respective
periods.

                                       26
<PAGE>
 
                          PART II.  OTHER INFORMATION
                          ---------------------------

Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

         (a). The Corporation held its Annual Meeting of Stockholders on
              November 21, 1995 in Omaha, Nebraska. The inspectors of election
              issued their certified final report on December 11, 1995 for the
              matters voted upon at the Annual Meeting.

         (b). The following individuals were elected as directors of the
              Corporation at the Annual Meeting: William A. Fitzgerald, Steven
              M. Ellis and Robin R. Glackin.

              In addition, the following individuals have terms of office as
              directors of the Corporation that continue after the Annual
              Meeting: Talton K. Anderson, Robert F. Krohn, Charles M. Lillis,
              Carl G. Mammel, Robert S. Milligan and James P O'Donnell.

         (c). The following matters were voted upon at the Annual Meeting: (i)
the election of three individuals as directors; (ii) a proposal recommending
that the Board of Directors of the Corporation continue, with the assistance of
its financial advisor, the active and ongoing evaluation of strategic
alternatives and remain open to all options available for maximizing shareholder
value, including through possible merger, acquisition and/or other business
combination proposals; and (iii) a stockholder proposal requesting that the
Board of Directors of the Corporation promptly proceed to effect a sale or
merger of the Corporation by retaining a leading investment banking firm to
solicit offers to acquire the Corporation and establishing a committee of
independent non-management directors to recommend to the full Board of Directors
for approval the best available offer to acquire the Corporation. The results of
voting were as follows:

      Proposal 1 -- Election of Directors:
      --------------------------------------

      Nominee                             Votes For (1)
      -------                             -------------

      William A. Fitzgerald...........    14,117,283
      Sharon G. Marvin................         6,039
      Michael T. O'Neil...............        21,072
      Robin R. Glackin................    10,426,577
      Steven M. Ellis.................    10,426,576

      (1) Stockholders are entitled to cumulate their votes in the election of
          directors. Unless otherwise indicated by the stockholder, a vote for 
          the Board of Directors' nominees or the opposing slate of nominees 
          gave the proxies named discretionary authority to cumulate all votes 
          to which the stockholder was entitled and to allocate such votes in
          favor of one or more of the Board's nominees or the opposing slate 
          of nominees, as the proxies determined. The votes reported herein 
          reflect the allocation of votes by the Board's and the opposition's 
          proxies. 







 
      Proposal 2 -- Proposal of the Board of Directors:
      ------------------------------------------------

      Votes For                Votes Against           Abstentions (1)
      ---------                -------------           ---------------

      4,981,954                  6,631,991                  183,016
 
       (1) Includes broker non-votes.
 

      Proposal 3 -- Stockholder Proposal:
      ----------------------------------

      Votes For                Votes Against           Abstentions (1)
      ---------                -------------           ---------------

      6,892,707                  4,671,154                  228,214

       (1)  Includes broker non-votes.

   (d). Not applicable.

                                       27
<PAGE>
 
Item 5.  Other Information
         -----------------

         Effective February 1, 1996 the Corporation consummated the acquisition
            of Conservative Savings Corporation. See Note G for information on
            the Conservative Savings Corporation acquisition, including the
            terms, consideration and accounting treatment.

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

         (a).  Exhibits:

               Exhibit 11.  Computation of Earnings Per Share

         (b).  Reports on Form 8-K

         The Corporation filed a Current Report on Form 8-K on October 17,
         reporting that on October 2, 1995, the merger with Railroad Financial
         Corporation was consummated. See Note E for additional information
         concerning this acquisition. The Corporation also reported on this Form
         8-K that on October 4, 1995 the Corporation announced that its Board of
         Directors established a quarterly dividend policy and, as such,
         effective October 4, 1995 declared a cash dividend on its common stock
         of $.10 per share. This initial cash dividend totaling $1,428,985 was
         paid on October 31, 1995 to stockholders of record on October 16, 1995.

         On December 18, 1995, the Corporation filed Amendment No. 1 on Form 
         8-K/A to the aforementioned Form 8-K providing the required financial
         statements and pro forma financial information on the Railroad
         Financial Corporation acquisition pursuant to Item 7 of Form 8-K.

         The Corporation filed a Current Report on Form 8-K on December 20,
         1995, reporting on December 12, 1995 the certified results on the
         stockholder voting on the three proposals in connection with the
         Corporation's Annual Meeting held on November 21, 1995. See Item 4 of
         Part II for the results concerning such proposals.

                                       28
<PAGE>
 
                                   SIGNATURES
                                   ----------


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                   COMMERCIAL FEDERAL CORPORATION
                                   ------------------------------
                                   (Registrant)



Date:  February 14, 1996           /s/ James A. Laphen
       -----------------           -------------------------------------
                                   James A. Laphen, President, Chief
                                   Operating Officer and Chief
                                   Financial Officer (Duly Authorized
                                   and Principal Financial Officer)



Date: February 14, 1996            /s/ Gary L. Matter
      ------------------           -------------------------------------
                                   Gary L. Matter, Senior Vice President,
                                   Controller and Secretary
                                   (Principal Accounting Officer)

                                       29
<PAGE>
 
                                 EXHIBIT INDEX
                                 -------------


                                                            Page No.
                                                            --------

Exhibit 11.       Computation of Earnings Per Share             31