<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

                   Annual report pursuant to Section 13 of the
                   Securities Exchange Act of 1934, as amended

                    For the fiscal year ended March 31, 2000

                          Commission File No.: 0-27404

                                PFF BANCORP, INC.
             (exact name of registrant as specified in its charter)

             DELAWARE                                      95-4561623
  (State or other jurisdiction of                  (I.R.S. Employer I.D. No.)
   incorporation or organization)

                350 SOUTH GAREY AVENUE, POMONA, CALIFORNIA 91766
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (909) 623-2323
        Securities registered pursuant to Section 12(b) of the Act: NONE
           Securities registered pursuant to Section 12(g) of the Act:

                     COMMON STOCK, PAR VALUE $0.01 PER SHARE
                                (Title of class)


         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 [_].

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [X]

         The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant, i.e., persons other than the directors
and executive officers of the registrant, was $208,905,112, based upon the last
sales price as quoted on The NASDAQ National Market for June 16, 2000.

         The number of shares of Common Stock outstanding as of June 16, 2000:
13,314,505

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Registrant's Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the Annual Meeting of
Stockholders to be held September 27, 2000 are incorporated by reference in Part
III hereof.
<PAGE>

                                      INDEX

                                     PART I
                                                                            PAGE
                                                                            ----

Item 1.    Description of Business                                            3
Item 2.    Properties                                                        39
Item 3.    Legal Proceedings                                                 40
Item 4.    Submission of Matters to a Vote of Security Holders               40

                                     PART II

Item 5.    Market for Registrant's Common Equity and Related
             Stockholders' Matters                                           40
Item 6.    Selected Financial Data                                           41
Item 7.    Management's Discussion and Analysis of Financial
             Condition and Results of Operations                             44
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk        56
Item 8.    Financial Statements and Supplementary Data                       57
Item 9.    Changes in and Disagreements with Accountants
             on Accounting and Financial Disclosure                          98

                                    PART III

Item 10.   Directors and Executive Officers of the Registrant                98
Item 11.   Executive Compensation                                            98
Item 12.   Security Ownership of Certain Beneficial Owners
             and Management                                                  98
Item 13.   Certain Relationships and Related Transactions                    98

                                     PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports
             on Form 8-K                                                     99

                                       2
<PAGE>

                                     PART I

FORWARD-LOOKING STATEMENTS

         Except for historical information contained herein, the matters
discussed in this report contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that involve substantial risks and uncertainties. When used in
this report, or in the documents incorporated by reference herein, the words
"anticipate," "believe," "estimate," "may," "intend," "expect" and similar
expressions identify certain of such forward-looking statements. Actual results
of PFF Bancorp, Inc. (the "Bancorp") and PFF Bank & Trust (the "Bank"),
(collectively referred to as the "Company") could differ materially from such
forward-looking statements contained herein. Factors that could cause future
results to vary from current expectations include, but are not limited to, the
following: changes in economic conditions (both generally and more specifically
in the markets in which the Company operates); changes in interest rates,
deposit flows, loan demand, real estate values and competition; changes in
accounting principles, policies or guidelines and in government legislation and
regulation (which change from time to time and over which the Company has no
control); other factors affecting the Company's operations, markets, products
and services; and other risks detailed in this Form 10-K and in the Company's
other Securities and Exchange Commission filings. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof.

ITEM 1.  DESCRIPTION OF BUSINESS.
--------------------------------

GENERAL

         The Bancorp completed its initial public offering of 19,837,500 shares
of common stock on March 28, 1996, in connection with the conversion of Pomona
First Federal Savings and Loan Association from the mutual to stock form of
ownership (the "conversion") and the change of the Association's name to PFF
Bank & Trust. The Bancorp received $198.4 million from this initial public
offering before offering expenses of $4.5 million. The Bancorp utilized $105.0
million of the net proceeds of the initial public offering to acquire all of the
issued and outstanding stock of the Bank. The Bancorp is headquartered in
Pomona, California and its principal business currently consists of the
operations of its wholly owned subsidiary, the Bank. The Bancorp had no
operations prior to March 28, 1996, and accordingly, the results of operations
prior to that date reflect only those of the Bank and its subsidiaries. At March
31, 2000, on a consolidated basis, the Company had total assets of $3.03
billion, total deposits of $1.91 billion and total stockholders' equity of
$221.8 million. The Bancorp, as a unitary savings and loan holding company, and
the Bank, as a federal savings bank, are subject to regulation by the Office of
Thrift Supervision (the "OTS"), the Federal Deposit Insurance Corporation (the
"FDIC") and the Securities and Exchange Commission (the "SEC").

         Prior to the conversion, the Bank's historical focus had been on
attracting retail deposits from the general public in the areas surrounding its
branch offices and investing those deposits, together with funds generated from
operations and borrowings, primarily in one-to-four family residential mortgage
loans. To a lesser extent, the Bank engaged and continues to engage in secondary
market activities, the origination of multi-family mortgage loans and investment
in mortgage-backed securities ("MBS"), collateralized mortgage obligations
("CMOs") and other investment securities (collectively "investment securities").
The Bank's current asset generation emphasis is on originating commercial,
construction and land (primarily tract construction), commercial real estate and
consumer loans (collectively the "Four-C's"). Loan sales come from loans held in
the Bank's portfolio designated as being held for sale. The Bank generally
retains all the servicing rights of loans sold. The Bank's revenues are derived
principally from interest on its loans, and to a lesser extent, interest and
dividends on investment securities. The Bank's primary sources of funds are
deposits and Federal Home Loan Bank ("FHLB") advances and other borrowings,
principal and interest payments on loans, and investment securities. Scheduled
payments on loans and investment securities are

                                       3
<PAGE>

a relatively stable source of funds, while prepayments on loans and investment
securities and deposit flows are subject to significant fluctuation. The Bank
engages in trust activities through its trust department and offers certain
annuity and mutual fund non-deposit investment products through a subsidiary.

MARKET AREA AND COMPETITION

         The Bank is a community-oriented savings institution whose lending,
deposit gathering and trust activities are concentrated in eastern Los Angeles,
San Bernardino, Riverside and central Orange counties. The Bank also originates
loans on a wholesale basis throughout Southern California and has expanded its
lending markets outside of Southern California on a limited basis. The Bank's
deposit gathering is concentrated in the communities surrounding its offices.

         The Bank's primary market area is highly competitive for financial
services and the Bank faces significant competition both in making loans and in
attracting deposits. The Bank faces direct competition from a significant number
of financial institutions operating in its market area, many with a state-wide,
regional or national presence. Many of these financial institutions are
significantly larger and have greater financial resources than the Bank. The
Bank's competition for loans comes principally from savings and loan
associations, mortgage banking companies, commercial banks, credit unions and
insurance companies. Its most direct competition for deposits has historically
come from savings and loan associations and commercial banks. In addition, the
Bank faces increasing competition for deposits and other financial products from
non-bank institutions such as brokerage firms and insurance companies in such
areas as short-term money market funds, mutual funds and annuities. Competition
may also increase as a result of the lifting of restrictions on the interstate
operations of financial institutions. Additionally, the Bank's operations are
significantly influenced by general economic conditions, the monetary and fiscal
policies of the federal government and the regulatory policies of governmental
authorities. Deposit flows and the costs of interest-bearing liabilities to the
Bank are influenced by interest rates on competing investments and general
market interest rates. Similarly, the Bank's loan volume and yield on loans and
investment securities and the level of prepayments on loans and investment
securities are affected by market interest rates, as well as additional factors
affecting the supply of and demand for housing and the availability of funds.

TRUST ACTIVITIES

         In January 1995, the Bank acquired the trust operations of another bank
for $3.5 million. As a result of the acquisition, the Bank now has additional
fiduciary responsibilities acting as trustee, executor, administrator, guardian,
custodian, record keeper, agent, registrar, advisor and manager. The trust
assets are not the assets of the Bank and are not included in the balance sheet
of the Bank. Trust fee income for the years ended March 31, 2000 and 1999 was
$2.1 million and $1.9 million, respectively. See Note 19 to the Consolidated
Financial Statements.

                                       4
<PAGE>

LENDING ACTIVITIES

         Loan Portfolio Composition.  The Bank's loan portfolio consists
         --------------------------
primarily of conventional first mortgage loans secured by one-to-four family
residences. At March 31, 2000, the Bank had total gross loans outstanding of
$2.56 billion, of which $1.54 billion were one-to-four family residential
mortgage loans, or 60% of the Bank's total gross loans. The remainder of the
portfolio consisted of $85.2 million of multi-family mortgage loans, or 3% of
total gross loans; $169.0 million of commercial real estate loans, or 7% of
total gross loans; $517.7 million of construction and land loans, or 20% of
total gross loans; consumer loans of $126.4 million or 5% of total gross loans
and commercial business loans of $122.1 million or 5% of total gross loans. At
March 31, 2000, approximately $2.27 billion or 89% of the Bank's total loans had
adjustable interest rates of which approximately $661.0 million or 29% are
indexed to the 11th FHLB District Cost of Funds Index ("COFI"), approximately
$795.2 million or 35% are indexed to the one year constant maturity Treasury
("CMT") and approximately $565.1 million or 25% are indexed to Wall Street
Journal Prime ("Prime"). The Bank's portfolio of adjustable rate loans includes
approximately $685.9 million of loans whose rates are fixed for an initial term
of three to five years prior to transitioning to a semi-annual or annually
adjustable rate loan ("hybrid ARM's"). The Bank's hybrid ARM's are primarily
indexed to the one year CMT.

         The types of loans that the Bank may originate are subject to federal
and state laws and regulations. Interest rates charged by the Bank on loans are
affected by the demand for such loans, the supply of money available for lending
purposes and the rates offered by competitors. These factors are, in turn,
affected by, among other things, economic conditions, monetary policies of the
federal government, including the Federal Reserve Board, and legislative tax
policies.

                                       5
<PAGE>

         The following table sets forth the composition of the Bank's loan
portfolio in dollar amounts and as a percentage of the portfolio at the dates
indicated.

<TABLE>
<CAPTION>
                                                                          AT MARCH 31,
                                      -----------------------------------------------------------------------------
                                                2000                        1999                     1998
                                      -----------------------------------------------------------------------------
                                                       PERCENT                     PERCENT                 PERCENT
                                                         OF                         OF                       OF
                                          AMOUNT        TOTAL        AMOUNT        TOTAL       AMOUNT       TOTAL
                                      -----------------------------------------------------------------------------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                   <C>             <C>            <C>          <C>        <C>          <C>
Real estate: (1)
  Residential:
    One-to-four family                $ 1,537,233        60.1%    1,482,839         66.8%    1,467,857        75.3%
    Multi-family                           85,169         3.3        87,856          4.0        97,350         5.0
  Commercial real estate                  169,010         6.6       156,474          7.0       144,035         7.4
  Construction and land                   517,659        20.2       349,119         15.7       185,225         9.5
Commercial                                122,095         4.8        74,451          3.3        12,468         0.6
Consumer                                  126,424         5.0        70,686          3.2        42,826         2.2
                                      -----------     -------     ---------      -------     -----------  --------
     Total loans, gross                 2,557,590       100.0%    2,221,425        100.0%    1,949,761       100.0%

Undisbursed loan funds                   (198,656)                 (167,042)                   (95,457)
Net premiums on loans                       1,215                     1,665                      1,114
Deferred loan origination fees, net         1,753                      (276)                    (1,101)
Allowance for loan losses                 (27,838)                  (26,160)                   (26,002)
                                      -----------                 ---------                  ---------
     Total loans, net                   2,334,064                 2,029,612                  1,828,315
Less:
Loans held for sale                        (7,362)                   (3,531)                      (701)
                                      -----------                 ---------                  ---------
     Loans receivable, net            $ 2,326,702                 2,026,081                  1,827,614
                                      ===========                 =========                  =========
</TABLE>

<TABLE>
<CAPTION>

                                                          AT MARCH 31,
                                      ----------------------------------------------------
                                                1997                        1996
                                      ----------------------------------------------------
                                                       PERCENT                   PERCENT
                                                         OF                        OF
                                          AMOUNT        TOTAL        AMOUNT       TOTAL
                                      ----------------------------------------------------
                                                               (DOLLARS IN THOUSANDS)
<S>                                   <C>             <C>            <C>          <C>
Real estate: (1)
  Residential:
    One-to-four family                  1,499,858        79.4%    1,269,099         77.9%
    Multi-family                          108,896         5.8       114,477          7.0
  Commercial real estate                  137,169         7.2       148,300          9.1
  Construction and land                   113,188         6.0        76,529          4.7
Commercial                                  3,100         0.2          --             --
Consumer                                   26,931         1.4        21,853          1.3
                                      -----------     -------     ---------      -------
     Total loans, gross                 1,889,142       100.0%    1,630,258        100.0%

Undisbursed loan funds                    (38,485)                  (25,030)
Net premiums on loans                      (1,629)                     (803)
Deferred loan origination fees, net        (1,362)                   (3,384)
Allowance for loan losses                 (27,721)                  (19,741)
                                      -----------                 ---------
     Total loans, net                   1,819,945                 1,581,300
Less:
Loans held for sale                          (736)                   (6,365)
                                      -----------                 ---------
     Loans receivable, net              1,819,209                 1,574,935
                                      ===========                 =========
</TABLE>

---------
(1) Includes loans held for sale.

                                       6
<PAGE>

         Loan Maturity.  The following table shows the contractual maturity of
         -------------
the Bank's gross loans at March 31, 2000.

<TABLE>
<CAPTION>
                                                              AT MARCH 31, 2000
                                          ---------------------------------------------------------
                                             ONE-TO-                                   CONSTRUCTION
                                              FOUR           MULTI-     COMMERCIAL         AND
                                             FAMILY          FAMILY     REAL ESTATE       LAND
                                          ------------   -----------    -----------    -----------
                                                            (DOLLARS IN THOUSANDS)
<S>                                       <C>            <C>            <C>            <C>
Amounts due:
  One year or less                        $       758            808         11,213        361,517
  After one year:
    More than one year to three years          11,392            521         16,758        140,474
    More than three years to five years         2,250          3,203         16,792            277
    More than five years to ten years          17,000          5,186         60,219          8,995
    More than ten years to twenty years       142,025         49,124         61,028          5,500
    More than twenty years                  1,363,808         26,327          3,000            896
                                          -----------    -----------    -----------    -----------
      Total due after March 31, 2001        1,536,475         84,361        157,797        156,142
                                          -----------    -----------    -----------    -----------
        Total amount due                    1,537,233         85,169        169,010        517,659
  Less:
    Undisbursed loan funds                       --             --             --         (198,656)
    Net premiums on loans                       1,215           --             --             --
    Deferred loan origination fees, net         4,573           (276)          (630)        (3,035)
    Allowance for loan losses                  (3,385)          (609)        (1,445)       (12,472)
                                          -----------    -----------    -----------    -----------
        Total loans, net                    1,539,636         84,284        166,935        303,496
    Loans held for sale                        (7,362)          --             --             --
                                          -----------    -----------    -----------    -----------
        Loans receivable, net             $ 1,532,274         84,284        166,935        303,496
                                          ===========    ===========    ===========    ===========
</TABLE>

<TABLE>
<CAPTION>
                                                     AT MARCH 31, 2000
                                          -----------------------------------------
                                                                           TOTAL
                                                                           LOANS
                                           COMMERCIAL     CONSUMER      RECEIVABLE
                                          ------------   -----------    -----------
                                                   (DOLLARS IN THOUSANDS)
<S>                                       <C>            <C>            <C>
Amounts due:
  One year or less                             60,751         81,155        516,202
  After one year:
    More than one year to three years          22,564            453        192,162
    More than three years to five years        18,395            563         41,480
    More than five years to ten years          20,385          4,549        116,334
    More than ten years to twenty years          --           37,629        295,306
    More than twenty years                       --            2,075      1,396,106
                                          -----------    -----------    -----------
      Total due after March 31, 2001           61,344         45,269      2,041,388
                                          -----------    -----------    -----------
        Total amount due                      122,095        126,424      2,557,590
  Less:
    Undisbursed loan funds                       --             --         (198,656)
    Net premiums on loans                        --             --            1,215
    Deferred loan origination fees, net           131            990          1,753
    Allowance for loan losses                  (6,494)        (3,433)       (27,838)
                                          -----------    -----------    -----------
        Total loans, net                      115,732        123,981      2,334,064
    Loans held for sale                          --             --           (7,362)
                                          -----------    -----------    -----------
        Loans receivable, net                 115,732        123,981      2,326,702
                                          ===========    ===========    ===========
</TABLE>

                                       7
<PAGE>

         The following table sets forth at March 31, 2000, the dollar amount of
total gross loans receivable contractually due after March 31, 2001, and whether
such loans have fixed or adjustable interest rates.

                                          DUE AFTER MARCH 31, 2001
                                     ----------------------------------
                                       FIXED    ADJUSTABLE      TOTAL
                                     ---------  ----------   ----------
                                         (DOLLARS IN THOUSANDS)

Real estate loans: (1)
  Residential:
    One-to-four family               $ 134,571   1,401,904   1,536,475
    Multi-family                         2,997      81,364      84,361
    Commercial real estate               6,969     150,828     157,797
    Construction and land                2,545     153,597     156,142
Commercial                              43,521      17,823      61,344
Consumer                                44,777         492      45,269
                                     ---------   ---------   ---------
      Total gross loans receivable   $ 235,380   1,806,008   2,041,388
                                     =========   =========   =========

     (1)  Includes loans held for sale.

         Origination, Sale, Servicing and Purchase of Loans.  The Bank's lending
         --------------------------------------------------
activities are conducted primarily by loan representatives through its 23
banking branches, its loan origination center in Rancho Cucamonga, California, a
satellite loan office in Redding, California and up until March 2000 wholesale
brokers approved by the Bank. During March 2000, in connection with its strategy
of de-emphasizing one-to-four family residential lending in favor of a greater
focus on the Four-C's, the Bank discontinued one-to-four family first trust deed
residential mortgage originations through wholesale brokers. The Bank continues
to originate one-to-four family first trust deed residential mortgages through
internal sources. The Bank continues to originate a limited amount of
equity-based consumer loans through wholesale brokers. All loans originated by
the Bank, either through internal sources or through wholesale brokers, are
underwritten by the Bank pursuant to the Bank's policies and procedures. The
Bank originates both adjustable-rate and fixed-rate loans. The Bank's ability to
originate loans is influenced by general economic conditions affecting housing,
business and consumer activities as well as the relative customer demand for
fixed-rate or adjustable-rate loans, which is affected by the current and
expected future levels of interest rates.

         Loan originations were $1.27 billion for fiscal 2000 compared to $987.6
million for fiscal 1999. Beginning during fiscal 1997, the Bank began reducing
its emphasis on the origination of one-to-four family residential mortgage loans
with a corresponding increased emphasis on the origination of the Four-C's as a
means of enhancing the Bank's yield on interest-earning assets. Originations of
the Four-C's aggregated $833.0 million or 66% of total originations for fiscal
2000 compared to $577.8 million or 59% of total originations for fiscal 1999.
The weighted average initial contract rate on total originations was 8.25% for
fiscal 2000, compared to 8.58% for fiscal 1999.

         It is the general policy of the Bank to sell substantially all of the
15 and 30-year fixed-rate mortgage loans that it originates and retain
substantially all of the adjustable-rate mortgage loans that it originates. The
Bank generally utilizes 10-day Federal National Mortgage Association ("FNMA")
forward commitments in connection with the origination and funding of fixed-rate
loans held for sale. The Bank generally retains servicing of the loans sold. At
March 31, 2000, the Bank was servicing $282.9 million of loans for others. See
"Loan Servicing". When loans are sold on a servicing retained basis, the Company
records gains or losses from the sale based on the difference between the net
sales proceeds and the allocated basis of the loans sold. The Company
capitalizes mortgage servicing rights ("MSRs") through the sale of mortgage
loans which are sold with servicing rights retained. The total cost of the
mortgage loans designated for sale is allocated to the MSRs and the mortgage
loans without the MSRs based on their relative fair values. MSRs are included in
the financial statements in the category of "other assets." The Bank had $1.1
million and $1.2 million of MSRs as of March 31, 2000 and 1999, respectively.
Impairment losses are recognized through a valuation allowance, with any
associated provision recorded as a component of loan servicing fees. At

                                       8
<PAGE>

March 31, 2000, there were $7.4 million of mortgage loans categorized as held
for sale consisting of fixed-rate one-to-four family residential mortgage loans.

         To supplement loan production, based upon the Bank's investment needs
and market opportunities, the Bank engages in secondary marketing activities,
including the purchase of whole or participating interests in loans originated
by other institutions. The Bank intends to continue to purchase various types of
loans originated by other institutions both in its primary market area and to a
limited extent other geographic areas throughout the country depending on market
opportunities. The Bank generally purchases loans with servicing retained by the
seller.

         The following tables set forth the Bank's loan originations, purchases,
sales and principal repayments for the periods indicated.
<TABLE>
<CAPTION>
                                              FOR THE YEARS ENDED MARCH 31,
                                        -----------------------------------------
                                           2000            1999           1998
                                        -----------      ---------      ---------
                                                  (DOLLARS IN THOUSANDS)
<S>                                     <C>              <C>            <C>
Beginning balance(1)                    $ 2,029,612      1,828,315      1,819,945
  Loans originated:
    One-to-four family                      432,497        406,445        248,224
    Multi-family                              2,865          3,371          2,721
    Commercial real estate                   29,370         27,465         16,693
    Construction and land                   567,360        384,991        226,321
    Commercial                              140,558         89,852         19,988
    Consumer                                 95,674         75,480         43,481
                                        -----------    -----------    -----------
Total loans originated                    1,268,324        987,604        557,428
  Loans purchased                             1,560        168,395        163,045
                                        -----------    -----------    -----------
      Total                               3,299,496      2,984,314      2,540,418
Less:
  Principal payments                       (902,923)      (831,468)      (471,544)
  Sales of loans                            (25,253)       (38,829)      (163,035)
  Transfer to foreclosed real
    estate owned (REO)                       (5,793)       (14,038)       (25,274)
  Change in undisbursed loan funds          (31,614)       (71,585)       (56,972)
  Change in allowance for loan losses        (1,678)          (158)         1,719
  Other(2)                                    1,829          1,376          3,003
                                        -----------    -----------    -----------
Total loans                               2,334,064      2,029,612      1,828,315
  Loans held for sale, net                   (7,362)        (3,531)          (701)
                                        -----------    -----------    -----------
Ending balance loans receivable, Net    $ 2,326,702      2,026,081      1,827,614
                                        ===========    ===========    ===========
</TABLE>
------------------------
(1)Includes loans held for sale.
(2)Includes net capitalization of fees and amortization of premium or accretion
   of discount on loans.

                                       9
<PAGE>

         One-to-Four Family Residential Mortgage Lending.  The Bank offers both
         -----------------------------------------------
fixed-rate and adjustable-rate mortgage loans secured by one-to-four family
residences substantially all of which are located in the Bank's primary market
area. Loan originations are obtained from the Bank's loan representatives and
their contacts with the local real estate industry, existing or past customers,
members of the local communities and wholesale brokers who are compensated on a
fee basis. Prior to March 2000, adjustable rate loans were offered with
maturities up to 40 years. Effective during March 2000, in response to interest
rate risk considerations, the Bank discontinued offering 40 year maturities.

         At March 31, 2000, the Bank's one-to-four family residential mortgage
loans totaled $1.54 billion or 60% of total loans. Of the $1.54 billion, 28%
were classified as loans secured by non-owner-occupied properties of which 84%
were second homes. Non-owner-occupied properties are generally considered to
involve a higher degree of credit risk than loans secured by owner-occupied
properties because repayment is generally dependent upon the property producing
sufficient cash flow to cover debt service and other operating expenses. Of the
one-to-four family residential mortgage loans outstanding at March 31, 2000, 91%
were adjustable-rate loans. The Bank's one-to-four family residential
adjustable-rate mortgage loans have historically been primarily indexed to COFI.
The Bank has been increasing the origination of adjustable-rate mortgage loans
tied to other indices, primarily the one-year CMT index. The Bank currently
offers a number of adjustable-rate mortgage loan programs with interest rates
that adjust monthly, semi-annually or annually. A portion of the Bank's
adjustable-rate mortgage loans have introductory terms below the fully indexed
rate. In underwriting such loans, the Bank qualifies the borrowers based upon
the fully indexed rate. At the end of the introductory period, such loans will
adjust either monthly, semi-annually or annually according to their terms. The
Bank's adjustable-rate mortgage loans generally provide for periodic and overall
caps on the increase or decrease in interest rate at any adjustment date and
over the life of the loan.

         The Bank currently has a number of mortgage loan programs that may be
subject to negative amortization. At March 31, 2000, the outstanding principal
balances of these loans totaled $377.4 million (including $21.4 million of loans
serviced by others in which the Bank has purchased a participating interest), or
25% of total one-to-four family residential mortgage loans. At March 31, 2000,
the total outstanding negative amortization on these loans (excluding the $21.4
million of loans serviced by others) was $1.6 million. The negative amortization
is generally capped at up to 110% of the original loan amount. Negative
amortization involves a greater risk to the Bank because during a period of
higher interest rates the loan principal may increase above the amount
originally advanced, which may increase the risk of default. However, the Bank
believes that the risk of default is reduced by negative amortization caps,
underwriting criteria and the stability provided by payment schedules.

         The Bank's policy is to originate one-to-four family residential
mortgage loans in amounts up to 85% of the lower of the appraised value or the
selling price of the property securing the loan and up to 95% of the appraised
value or selling price if private mortgage insurance is obtained. Mortgage loans
originated by the Bank generally include due-on-sale clauses which provide the
Bank with the contractual right to deem the loan immediately due and payable in
the event the borrower transfers ownership of the property without the Bank's
consent. Due-on-sale clauses are an important means of adjusting the rates on
the Bank's fixed-rate mortgage loan portfolio and the Bank has generally
exercised its rights under these clauses when it has been advantageous for the
Bank to do so.

         Multi-Family Lending.  The Bank originates multi-family mortgage loans
         --------------------
generally secured by properties located in Southern California. As a result of
declining economic conditions in its primary market area during the period of
1990 to 1995, the Bank de-emphasized the origination of multi-family loans
through fiscal 1996. With the improvement in the Southern California economy,
the Bank has selectively increased loan originations in this type of product. In
reaching its decision on whether to make a multi-family loan, the Bank considers
a number of factors including: the net operating income of the mortgaged
premises before debt service and depreciation; the debt service ratio (the ratio
of net operating income to debt service); and the ratio of loan amount to
appraised value. Pursuant to the Bank's current underwriting policies, a
multi-family mortgage loan may only be made in an amount up to 80% of the
appraised value of the underlying property. In addition, the Bank generally
requires a debt service ratio of at least 120-125%.

                                       10
<PAGE>

Properties securing these loans are appraised and title insurance is required on
all loans. Declines in the real estate values in the Bank's primary market area
as a result of adverse economic conditions during the mid 1990's resulted in an
increase in the loan-to-value ratios on some mortgage loans subsequent to
origination. However, most segments of the Bank's primary market area are
presently experiencing strong economic conditions and real estate value
appreciation.

          When evaluating a multi-family loan, the Bank also considers the
financial resources and income level of the borrower, the borrower's experience
in owning or managing similar properties, and the Bank's lending experience with
the borrower. The Bank's underwriting policies require that the borrower be able
to demonstrate strong management skills and the ability to maintain the property
from current rental income. The borrower is required to present evidence of the
ability to repay the mortgage and a history of making mortgage payments on a
timely basis. In making its assessment of the creditworthiness of the borrower,
the Bank generally reviews the financial statements, employment and credit
history of the borrower, as well as other related documentation.

          Loans secured by multi-family residential properties generally involve
a greater degree of risk than one-to-four family residential mortgage loans.
Because payments on loans secured by multi-family properties are often dependent
on successful operation or management of the properties, repayment of such loans
may be subject to a greater extent to adverse conditions in the real estate
market or the economy. The Bank seeks to minimize these risks through its
underwriting policies, which require such loans to be qualified at origination
on the basis of the property's income and debt service ratio.

          The Bank's multi-family loan portfolio at March 31, 2000 totaled $85.2
million or 3% of total gross loans. At March 31, 2000, 90% of the Bank's
multi-family loans were adjustable-rate indexed to COFI. The Bank's largest
multi-family loan at March 31, 2000, had an outstanding balance of $2.8 million
and is secured by a 51-unit apartment complex.

          Commercial Real Estate Lending. The Bank originates commercial real
          ------------------------------
estate loans that are generally secured by properties such as small office
buildings or retail facilities located in Southern California. The Bank's
underwriting policies provide that commercial real estate loans may be made in
amounts up to 75% of the appraised value of the property. These loans may be
made with terms up to thirty years and have generally been indexed to COFI.
However, the Bank has begun to originate loans of this type which are indexed to
the one-year CMT in an effort to diversify away from COFI indexed loan products.
Competitive market factors have also prompted the Bank to originate such loans
with fixed rates of interest. Terms on commercial real estate loans are
generally 5 to 7 years with 25 to 30 year amortization. The Bank's underwriting
standards and procedures are similar to those applicable to its multi-family
loans, whereby the Bank considers the net operating income of the property and
the borrower's expertise, credit history and profitability. The Bank has
generally required that the properties securing commercial real estate loans
have debt service ratios of at least 120%. The largest commercial real estate
loan in the Bank's portfolio at March 31, 2000 was $3.4 million and is secured
by a gas station in Ontario, California. At March 31, 2000, the Bank's
commercial real estate loan portfolio was $169.0 million, or 7% of total gross
loans.

          Loans secured by commercial real estate properties are generally
larger and involve a greater degree of risk than one-to-four family residential
mortgage loans. Because payments on loans secured by commercial real estate
properties are often dependent upon the successful operation or management of
the properties, repayment of such loans may be influenced to a great extent by
conditions in the real estate market or the economy. The Bank seeks to minimize
these risks through its underwriting standards, which require such loans to be
qualified on the basis of the property's income and debt service ratio.

          Construction and Land Lending. The Bank generally originates
          -----------------------------
construction loans to real estate developers and individuals in Southern
California. The Bank has expanded, on a selective basis, construction lending to
western states other than California. Such expansion has been undertaken with
developers with whom the Bank has had long-term lending relationships. As of
March 31, 2000, the Bank had construction loans outstanding for development of
residential properties located in Nevada, Arizona and Oregon totaling $21.9
million, $11.5 million of which was disbursed. As of March 31, 2000, the
remainder of the Bank's

                                       11
<PAGE>

construction loans were for development of real estate located in California.
The Bank's construction loans primarily are made to finance tract construction
of one-to-four family residential properties. These loans are generally indexed
to Prime, have maturities of two years or less and generally include extension
options of six to eighteen months upon payment of an additional fee. The Bank's
policies provide that construction loans may be made in amounts up to 75% of the
appraised value of the property for construction of commercial properties, up to
80% for multi-family properties and up to 85% for one-to-four family residences.
The Bank requires an independent appraisal of the property and generally
requires personal guarantees. Loan proceeds are disbursed as construction
progresses and as inspections warrant. The Bank's inspectors generally visit
projects twice a month to monitor the progress of construction. At March 31,
2000, the Bank had $17.7 million of land loans on which construction is not
scheduled to begin within six months. All such land is planned for residential
developments. The largest credit exposure in the construction loan portfolio as
of March 31, 2000 consists of a $20.2 million loan for the development of 177
finished lots located in northern Los Angeles County. The aggregate disbursed
balance of this loan at March 31, 2000 was $15.5 million. Repayment is to come
from the release of lots into phased construction loans. The second largest loan
in the Bank's construction loan portfolio at March 31, 2000 had a balance of
$18.5 million, for a multi-phase residential development in San Diego County.
Repayment is to come from home sales to individual home buyers. At March 31,
2000, the balance of the Bank's construction and land loan portfolio was $517.7
million (20% of total gross loans), $319.0 million of which was disbursed. At
March 31, 2000 the aggregate balances of loans for the construction of
properties other than one-to-four family residences was $70.3 million, $38.6
million of which was disbursed.

          Construction financing is generally considered to involve a higher
degree of credit risk than long-term financing on improved, owner-occupied real
estate. Mitigation of risk of loss on a construction loan is dependent largely
upon the accuracy of the initial estimate of the property's value at completion
of construction or development compared to the estimated cost (including
interest) of construction. If the estimate of value proves to be inaccurate, the
Bank may be confronted with a project, when completed, having a value which is
insufficient to assure full repayment of the Bank's loan. Land loans are
underwritten on an individual basis, but generally do not exceed 65% of the
actual cost or current appraised value of the property, whichever is less.

          Consumer and Other Lending. The Bank's originated consumer loans
          --------------------------
consist primarily of home equity lines of credit ($52.3 million) and secured and
unsecured personal loans and lines of credit ($74.1 million). At March 31, 2000,
the Bank's total consumer loan portfolio was $126.4 million or 5% of total gross
loans.

          Commercial Lending. The Bank has expanded its operations to include
          ------------------
commercial business lending. The year ended March 31, 1997 was the Bank's first
full year of originating commercial business loans. Total term and revolving
line of credit loans in the portfolio as of March 31, 2000 were $183.4 million,
$122.1 million of which was outstanding. The largest loan in the commercial
portfolio is a $30.4 million term loan to an equipment leasing company
specializing in the dental industry. This loan is secured by the assignment of
underlying leases and equipment as well as inventory and accounts receivable and
repayment is expected to come from earnings. The second largest loan is a $27.5
million commitment to another equipment leasing company. This loan is also
secured by the assignment of underlying leases and equipment as well as
inventory and accounts receivable and repayment is expected to come from
earnings. The size of the equipment leases underlying these loans is generally
in the $10,000 to $700,000 range.

          Commercial business lending is generally considered to involve a
higher degree of credit risk than the forms of secured real estate lending in
which the Bank has traditionally engaged. Commercial business loans may be
originated on an unsecured basis or may be secured by collateral that is not
readily marketable. The Bank generally requires personal guarantees on its
commercial business loans. The risk of default by a commercial business borrower
may be influenced by numerous factors which may include the strength of the
worldwide, regional or local economies or sectors thereof, changes in technology
or demand for particular goods and services and the ongoing ability of the
commercial business borrower to successfully manage the business. Because of
these risks, the Bank monitors the performance of its commercial business loans
and the underlying businesses and individuals with a different focus than is
typical of traditional one-

                                       12
<PAGE>

to-four family residential mortgage lending. The monitoring of commercial
business loans typically involves the periodic review of the financial
statements and on-site visits to the businesses to which credit has been
extended.

          Loan Approval Procedures and Authority. The Board of Directors
          --------------------------------------
establishes the lending policies of the Bank and delegates lending authority and
responsibility to the Loan Origination and Asset Review Committee ("LOARC"), the
Management Loan Committee and specified officers of the Bank. The LOARC includes
four of the six outside Directors of the Bank as well as selected senior
management staff. All loans must be approved by a majority of a quorum of the
designated committee, group of officers or by the designated individual. The
following committees, groups of officers and individual officers are granted the
authority to approve and commit the Bank to the funding of the following
categories of loans: mortgage loans in amounts up to $299,999 and consumer loans
in amounts up to $199,999 may be approved by the Bank's staff underwriters;
mortgage loans in excess of $299,999 and up to $499,999 and consumer loans in
excess of $199,999 and up to $299,999 may be approved by certain department
managers; commercial business loans up to $499,999 may be approved by the
Commercial Credit Administrator or Chief Lending Officer; mortgage loans in
excess of $499,999 and up to $999,999 may be approved by the Major Loan Manager,
the Senior Executive Vice President or Chief Lending Officer; mortgage loans in
excess of $999,999 and up to $2,999,999, consumer loans in excess of $299,999
and up to $449,999 and commercial business loans in excess of $499,999 and up to
$1,999,999 must be approved by the Management Loan Committee; and mortgage loans
of $3.0 million or more, consumer loans in excess of $450,000 and commercial
business loans of $2.0 million or more require the approval of the LOARC. The
LOARC presently reviews all commercial business loans, post funding, for
consistency with the Bank's goals and objectives. Since March 31, 1998 the Bank
has also contracted with an independent credit review firm for the post funding
review of all commercial business loans in excess of $500,000. This credit
review firm is comprised of experienced former federal bank examiners. The Bank
will not make loans-to-one borrower that are in excess of regulatory limits.
Pursuant to OTS regulations, loans-to-one borrower cannot exceed 15% of the
Bank's unimpaired capital and surplus. At March 31, 2000 the Bank's limit on
loans-to-one borrower was $34.0 million.

          Loan Servicing. The Bank also services mortgage loans for others. Loan
          --------------
servicing includes collecting and remitting loan payments, accounting for
principal and interest, making inspections of mortgaged premises as required,
contacting delinquent mortgagors, supervising foreclosures and property
dispositions in the event of unremedied defaults, making certain borrower
insurance and tax payments are made and generally administering the loans. All
of the loans currently being serviced for others are loans that have been sold
by the Bank. At March 31, 2000, the Bank was servicing $282.9 million of loans
for others. The Bank currently does not purchase servicing rights related to
mortgage loans originated by other institutions.

          Delinquencies and Classified Assets. The Board of Directors generally
          -----------------------------------
performs a monthly review of all delinquent loans ninety days or more past due.
In addition, management reviews on an ongoing basis all loans 15 or more days
delinquent. The procedures taken by the Bank with respect to delinquencies vary
depending on the nature of the loan and period of delinquency. The Bank
generally sends the borrower a written notice of non-payment 15 days after the
loan is first past due. In the event payment is not then received, additional
letters and phone calls generally are made. If the loan is still not brought
current and it becomes necessary for the Bank to take legal action, which
typically occurs after a loan is delinquent at least 30 days or more, the Bank
will commence foreclosure proceedings against the real property that secures the
loan. If a foreclosure action is instituted and the loan is not brought current,
paid in full, or refinanced before the foreclosure sale, the Bank generally
takes possession of the real property securing the loan ("REO") and subsequently
sells the property.

          Federal regulations and the Bank's Internal Asset Review Policy
require that the Bank utilize an internal asset classification system as a means
of reporting problem and potential problem assets. The Bank has incorporated the
OTS internal asset classifications as a part of its credit monitoring system.
The Bank currently classifies problem and potential problem assets as
"Substandard," "Doubtful," or "Loss". An asset is considered Substandard if it
is inadequately protected by the current net worth and paying capacity of the

                                       13
<PAGE>

obligor or of the collateral pledged, if any. Substandard assets include those
characterized by the "distinct possibility" that the Bank will sustain "some
loss" if the deficiencies are not corrected. Assets classified as Doubtful have
all of the weaknesses inherent in those classified Substandard with the added
characteristic that the weaknesses present make "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values, "highly
questionable and improbable." Assets classified as Loss are those considered
"uncollectible" and of such little value that their continuance as assets
without the establishment of a specific loss allowance is not warranted. Assets
which do not currently expose the Bank to sufficient risk to warrant
classification in one of the aforementioned categories but possess weaknesses
are required to be designated "Special Mention."

          When the Bank classifies one or more assets, or portions thereof, as
Substandard or Doubtful, under current OTS policy, the Bank is required to
consider establishing a valuation allowance in an amount deemed prudent by
management to recognize the inherent credit risk associated with the asset. When
the Bank classifies one or more assets, or portions thereof, as Loss, it is
required either to establish a valuation allowance equal to 100% of the amount
of the asset so classified or to charge off such amount. The Bank has adopted a
policy of charging off all amounts classified as Loss.

          The Bank's determination as to the classification of its assets and
the amount of its valuation allowances is subject to review by the OTS who can
order the establishment of additional loss allowances. The OTS, in conjunction
with the other federal banking agencies, has adopted an interagency policy
statement on the allowance for loan and lease losses. The policy statement
provides guidance for financial institutions on both the responsibilities of
management for the assessment and establishment of adequate allowances and
guidance for banking agency examiners to use in determining the adequacy of
valuation allowances. Generally, the policy statement recommends that
institutions have effective systems and controls to identify, monitor and
address asset quality problems; that management analyze all significant factors
that affect the collectibility of the portfolio in a reasonable manner; and that
management establish acceptable allowance evaluation processes that meet the
objectives set forth in the policy statement. As a result of the declines in
local and regional real estate market values and the significant losses
experienced by many financial institutions in the past, there has been a greater
level of scrutiny by regulatory authorities of the loan portfolios of financial
institutions undertaken as part of the examination of institutions by the OTS
and the FDIC. While the Bank believes that it has established an adequate
allowance for loan losses, there can be no assurance that regulators, in
reviewing the Bank's loan portfolio, will not request the Bank to materially
increase its allowance for loan losses, thereby negatively affecting the Bank's
financial condition and earnings. Although management believes that an adequate
allowance for loan losses has been established, further additions to the level
of allowance for loan losses may become necessary.

          The LOARC reviews and classifies the Bank's assets monthly and reports
the results of its review to the Board of Directors. The Bank classifies assets
in accordance with the management guidelines described above. REO is classified
as Substandard. The Bank utilizes an internal appraisal staff and Board approved
independent appraisers to conduct appraisals at the time of foreclosure and
subsequent appraisals on REO on a periodic basis. Qualified staff appraisers are
also utilized for annual property inspections on all income producing properties
with a loan balance over $1.0 million and other specified properties. Property
inspections are intended to provide updated information concerning occupancy,
maintenance, current rent levels, and changes in market conditions.

          At March 31, 2000 and 1999 the Bank had $15.9 million and $17.2
million, respectively of assets classified as Special Mention, on which there
were no allowances. The main component of assets classified as Special Mention
at March 31, 2000 were: 20 loans totaling $2.0 million secured by one-to-four
family residences; and 10 large non-homogeneous loans (defined as loans with
unpaid principal balances in excess of $500,000). The composition of the
non-homogeneous loans is as follows: four commercial property loans totaling
$4.8 million; one nine unit residential property loan for $600,000; one sixteen
unit residential property loan for $600,000; two commercial credit loans
totaling $2.0 million; and two construction loans totaling $4.6 million. At
March 31, 2000, the Bank had $36.3 million of assets classified as Substandard,
net of specific allowances of $1.0 million, compared to $35.9 million classified
as Substandard, net of specific allowances of $3.0 million at March 31, 1999.
Included in the Substandard total is a construction

                                       14
<PAGE>

loan to develop 177 residential lots in a 296 home development in Castaic,
California with a committed balance reported as a classified asset of $20.2
million and an actual outstanding balance of $15.5 million. This loan was
classified Substandard during fiscal 2000 due to delays in construction and
increased costs caused by grading problems. The Bank has an additional $12.6
million of construction loans on additional phases of this project, $8.7 million
of which is disbursed as of March 31, 2000. In the aggregate, the Bank is
financing the development and construction of all 296 homes in this project
through phased loans totaling $32.8 million, $24.2 million of which has been
disbursed as of March 31, 2000. Grading work is nearing completion and the
Castaic project has progressed to the construction and sales stage with 64 homes
completed and sold through May 2000. Based upon the most recent project
proforma, the borrowers estimate, with which the Bank agrees, there will be
approximately $3.8 million of developers profit in this project over and above
all amounts to be due the Bank as well as the Bancorp (see discussion of
mezzanine financing under "Real Estate") over the remaining term of the project.
As a result, no specific allowance for loss has been established nor is deemed
necessary. This borrower presently projects, with which the Bank agrees, this
project will be completed with all homes sold by the fourth quarter of 2001.
Excluding this construction loan, the Bank would have experienced a $19.9
million decrease in assets classified as Substandard, net between March 31, 1999
and 2000. Commercial real estate loans classified as Substandard decreased from
9 loans totaling $5.8 million, before specific allowances at March 31, 1999 to 2
loans totaling $3.5 million, before specific allowances at March 31, 2000.

          The Bank's present policy is generally to continue to classify a
troubled-debt restructured ("TDR") loan as Substandard until the asset has
performed at normal contract terms for a period of six to twelve months. Where
there has been a forgiveness of principal or interest or a submarket interest
rate granted, the loan is generally considered a TDR. Although the economy, in
general, improved during fiscal 2000, the Bank continued to utilize early
intervention and flexibility in restructuring some troubled loans with borrowers
rather than foreclosing on the underlying properties. See "Non-Accrual and
Past-Due Loans".

          At March 31, 2000 and 1999 there were no assets classified as Loss and
only two assets for $300,000 classified as Doubtful at March 31, 2000. The
composition of assets classified Substandard at March 31, 2000 and 1999 is set
forth on the following page.

                                       15
<PAGE>

<TABLE>
<CAPTION>
                                                                       AT MARCH 31, 2000
                                     ---------------------------------------------------------------------------------------
                                                 LOANS                         REO                TOTAL SUBSTANDARD ASSETS
                                     ---------------------------------------------------------------------------------------
                                                           NUMBER                        NUMBER                        NUMBER
                                      GROSS       NET       OF       GROSS      NET       OF       GROSS      NET        OF
                                     BALANCE    BALANCE(1) LOANS    BALANCE   BALANCE(1) LOANS    BALANCE   BALANCE(1) LOANS
                                     --------   ---------  ------   -------   -------   -------   -------   ---------  ------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                  <C>       <C>         <C>      <C>       <C>        <C>      <C>       <C>       <C>
Real Estate:
  Residential:
    One-to-four family               $ 7,935    $ 7,618       70    $ 1,522   $ 1,466       15    $ 9,457   $ 9,084       85
    Multi-family                       2,071      1,713        4       --        --       --        2,071     1,713        4
  Commercial real estate               3,493      3,148        2       --        --       --        3,493     3,148        2
  Construction and land               20,430     20,430        2       --        --       --       20,430    20,430        2
                                     -------    -------    -----    -------   -------    -----    -------   -------    -----
     Sub Total                        33,929     32,909       78      1,522     1,466       15     35,451    34,375       93
Commercial                             1,959      1,959        3       --        --       --        1,959     1,959        3
                                     -------    -------    -----    -------   -------    -----    -------   -------    -----
Grand Total                          $35,888    $34,868       81    $ 1,522   $ 1,466       15    $37,410   $36,334       96
                                     =======    =======    =====    =======   =======    =====    =======   =======    =====
</TABLE>
<TABLE>
<CAPTION>

                                                                       AT MARCH 31, 1999
                                     ------------------------------------------------------------------------------------------
                                                 LOANS                          REO                  TOTAL SUBSTANDARD ASSETS
                                     ------------------------------------------------------------------------------------------
                                                           NUMBER                         NUMBER                         NUMBER
                                      GROSS       NET       OF       GROSS      NET        OF       GROSS      NET        OF
                                     BALANCE   BALANCE(1)  LOANS    BALANCE   BALANCE(1)  LOANS     BALANCE   BALANCE(1) LOANS
                                     --------  ---------   ------   -------   ---------   ------    -------   ---------  -----
                                                                      (DOLLARS IN THOUSANDS)
<S>                                  <C>       <C>         <C>      <C>       <C>         <C>       <C>       <C>        <C>
Real Estate:
  Residential:
    One-to-four family               $18,327   $17,179       144    $ 4,996    $ 4,974        56    $23,323    $22,153      200
    Multi-family                       4,038     3,249        12       --         --        --        4,038      3,249       12
  Commercial real estate               5,769     5,427         9       --         --        --        5,769      5,427        9
  Construction and land                2,448     2,213         4        767        344         1      3,215      2,557        5
                                     -------   -------     -----    -------    -------     -----    -------    -------    -----
     Sub Total                        30,582    28,068       169      5,763      5,318        57     36,345     33,386      226
                                     -------   -------     -----    -------    -------     -----    -------    -------    -----
Commercial                             2,504     2,504         9       --         --        --        2,504      2,504        9
                                     -------   -------     -----    -------    -------     -----    -------    -------    -----
Grand Total                          $33,086   $30,572       178    $ 5,763    $ 5,318        57    $38,849    $35,890      235
                                     =======   =======     =====    =======    =======     =====    =======    =======    =====
</TABLE>
----------
(1) Net balances are reduced for specific loss allowances established against
Substandard loans and REO.

                                       16
<PAGE>

          Non-Accrual and Past-Due Loans. The following table sets forth
          ------------------------------
information regarding non-accrual loans, REO and TDR loans. There were 2 TDR
loans and 15 REO properties at March 31, 2000. It is the policy of the Bank to
cease accruing and establish an allowance for all previously accrued but unpaid
interest on loans 90 days or more past due. For the years ended March 31, 2000,
1999, 1998, 1997, and 1996, the amount of interest income that would have been
recognized on non-accrual loans, if such loans had continued to perform in
accordance with their contractual terms, was $466,000, $1.1 million, $1.7
million, $2.2 million, and $858,000 respectively, none of which was recognized.
For the same period, the amount of interest income that would have been
recognized on TDR loans, if such loans had continued to perform in accordance
with their contractual terms, was $499,000, $1.0 million, $1.2 million, $1.3
million, and $1.2 million, respectively; $369,000, $887,000, $779,000, $942,000,
and $891,000, of which was recognized. During the year ended March 31, 2000 and
1999, the Company's average investment in impaired loans was $13.8 million and
$17.9 million, respectively and interest income recorded during these periods
was $381,000 and $916,000, respectively of which $369,000 and $887,000,
respectively was recorded utilizing the cash basis method of accounting. The
decrease in TDR loans from $11.3 million at March 31, 1999 to $2.0 million at
March 31, 2000 reflects a decrease in the number of TDR loans from 24 at March
31, 1999 to 2 at March 31, 2000.

          During March 1999, the Bank entered into an agreement to sell for $1.8
million, 12 TDR loans with principal balances aggregating $2.3 million before
previously established specific allowances for losses aggregating $860,000. Upon
consummation of this sale during April 1999, the TDR loans balance decreased by
$2.3 million and the Bank's allowance for losses decreased by $860,000.

<TABLE>
<CAPTION>



                                                            AT MARCH 31,
                                         ------------------------------------------------
                                           2000       1999      1998       1997    1996
                                         -------    -------   -------   -------   -------
                                                      (DOLLARS IN THOUSANDS)
<S>                                      <C>        <C>       <C>       <C>       <C>
Non-accrual loans:
Residential real estate
    One-to-four family                   $ 4,415     10,061    13,834    19,258    17,794
    Multi-family                            --          122       467       790     1,558
Commercial real estate                      --         --       2,717     1,331      --
Construction and land                       --          647       131     1,447     3,254
Commercial                                   243       --        --        --        --
Consumer                                     769        182        40       524       345
                                         -------    -------   -------   -------   -------
      Total                                5,427     11,012    17,189    23,350    22,951
REO, net(1)                                1,466      5,318     7,595     7,745     6,733
                                         -------    -------   -------   -------   -------
Non-performing assets                    $ 6,893     16,330    24,784    31,095    29,684
                                         =======    =======   =======   =======   =======
TDR loans                                $ 1,950     11,291    12,505    14,559    13,810
                                         =======    =======   =======   =======   =======
Classified assets, gross                 $37,354     39,058    46,758    56,462    53,702
Allowance for loan losses as a
  percent of gross loans receivable(2)      1.09%      1.18      1.33      1.47      1.21
Allowance for loan losses as a
  percent of total non-performing
  loans(3)                                512.96     237.56    151.27    118.72     86.01
Non-performing loans as a percent
  of gross loans receivable(2)(3)           0.21       0.50      0.88      1.24      1.41
Non-performing assets as a percent
  of total assets(3)                        0.23       0.56      0.88      1.23      1.48
</TABLE>
----------
(1)  REO balances are shown net of related loss allowances.
(2)  Gross loans include loans receivable held for investment and loans
     receivable held for sale and excludes loans held for accelerated
     disposition.
(3)  Non-performing assets consist of non-performing loans and REO.
     Non-performing loans consist of all loans 90 days or more past due and all
     other non-accrual loans.

                                       17
<PAGE>

          The following table sets forth delinquencies in the Bank's loan
portfolio as of the dates indicated.
<TABLE>
<CAPTION>



                                          AT MARCH 31, 2000                      AT MARCH 31, 1999
                                ---------------------------------------------------------------------------------
                                    60-89 DAYS      90 DAYS OR MORE(1)       60-89 DAYS        90 DAYS OR MORE(1)
                                ---------------------------------------------------------------------------------
                                NUMBER  PRINCIPAL   NUMBER   PRINCIPAL   NUMBER    PRINCIPAL   NUMBER   PRINCIPAL
                                  OF     BALANCE      OF      BALANCE      OF       BALANCE      OF      BALANCE
                                 LOANS  OF LOANS    LOANS    OF LOANS     LOANS    OF LOANS    LOANS    OF LOANS
                                ------- ---------   ------   ---------   -------   ---------   ------   ---------
                                                            (DOLLARS IN THOUSANDS)
<S>                             <C>     <C>         <C>      <C>         <C>       <C>         <C>      <C>
One-to-four family                 16   $  1,869       35    $ 4,415        22     $ 1,837        91    $10,061
Multi-family                        1        106     --         --        --          --           1        122
Commercial real estate           --         --       --         --        --          --        --         --
Construction and land               1        990     --         --        --          --        --         --
Commercial                       --         --          1        243      --          --           1        647
Consumer                            8        226       21        769         2          41        14        182
                                -----   --------   ------    -------    ------     -------     -----    -------
  Total                            26   $  3,191       57    $ 5,427        24     $ 1,878       107    $11,012
                                =====   ========   ======    =======    ======     =======     =====    =======
</TABLE>
<TABLE>
<CAPTION>
                                                  AT MARCH 31, 2000
                                ---------------------------------------------------
                                      60-89 DAYS               90 DAYS OR MORE(1)
                                ---------------------------------------------------
                                NUMBER       PRINCIPAL        NUMBER      PRINCIPAL
                                 OF           BALANCE          OF          BALANCE
                                LOANS        OF LOANS         LOANS       OF LOANS
                                ------       ---------       -------      ---------
                                             (DOLLARS IN THOUSANDS)
<S>                             <C>          <C>              <C>         <C>
One-to-four family                 38        $  3,774          117        $13,834
Multi-family                       --              --            3            467
Commercial real estate             --              --            5          2,717
Construction and land              --              --            1            131
Commercial                         --              --           --             --
Consumer                            5              46           16             40
                                 ----         -------         ----        -------
  Total                            43         $ 3,820          142        $17,189
                                 ====         =======         ====        =======
</TABLE>
----------
(1) Loans 90 days or more past due are included in non-accrual loans. See
    "Non-Accrual and Past Due Loans."

                                       18
<PAGE>

          Allowance for Loan Losses. The allowance for loan losses is
          -------------------------
established through a provision for loan losses based on management's evaluation
of the risks inherent in the Bank's loan portfolio and the general economy. The
Bank's allowance evaluation methodology takes into account the changing
composition of the loan portfolio and the increased proportion of the portfolio
comprised by the Four-C's. The allowance for loan losses is maintained at an
amount management considers adequate to cover losses on loans receivable, which
are deemed probable and estimable. The allowance is based upon a number of
factors, including current economic conditions, actual loss experience and
industry trends. In addition, various regulatory agencies, as an integral part
of their examination process, periodically review the Bank's allowance for loan
losses. Such agencies may require the Bank to make additional provisions for
loan losses based upon information available at the time of the examination. At
March 31, 2000, the Bank's allowance for loan losses was $27.8 million or 1.09%
of gross loans and 512.96% of non-performing loans compared to $26.2 million or
1.18% of gross loans and 237.56% of non-performing loans at March 31, 1999. At
March 31, 2000, the Bank had non-performing loans of $5.4 million or .21% of
gross loans compared to $11.0 million or .50% of gross loans at March 31, 1999.
The Bank will continue to monitor and modify its allowance for loan losses as
economic conditions, loss experience, changes in portfolio composition and other
factors dictate.

          During the year ended March 31, 1996, the Bank identified loans for
accelerated disposition with an aggregate principal balance of $8.8 million,
which resulted in a $2.7 million provision for loan losses and a charge-off of
the same amount for the year ended March 31, 1996.

          The following table sets forth activity in the Bank's allowance for
loan losses for the periods set forth in the table.

<TABLE>
<CAPTION>

                                                           FOR THE YEAR ENDED MARCH 31,
                                           ------------------------------------------------------------
                                             2000         1999         1998         1997         1996
                                           --------     --------     --------     --------     --------
                                                              (DOLLARS IN THOUSANDS)
<S>                                        <C>          <C>          <C>          <C>          <C>
Beginning balance                          $ 26,160       26,002       27,721       19,741       19,294
Provision for loan losses                     4,000        4,020        7,099       13,661       10,895
Charge-offs:
  Real estate:
    One-to-four family                       (1,522)      (3,361)      (7,251)      (4,190)      (5,089)
    Multi-family                               (319)        (115)        (316)        (134)      (1,635)
    Commercial real estate                     --           --           (188)        (842)         --
    Construction and land                      --            (31)      (1,012)        (313)        (589)
  Consumer                                     (549)        (372)        (343)        (303)        (422)
  Loans held for accelerated disposition       --           --           --             --       (2,716)
                                           --------     --------     --------     --------     --------
      Total                                  (2,390)      (3,879)      (9,110)      (5,782)     (10,451)
Recoveries                                       68           17          292          101            3
                                           --------     --------     --------     --------     --------
Ending balance                             $ 27,838       26,160       26,002       27,721       19,741
                                           ========     ========     ========     ========     ========
Net charge-offs to average gross
  loans outstanding                            0.11%        0.17%        0.47%        0.31%        0.64%

</TABLE>

                                       19
<PAGE>

          The following tables set forth the amount of the Bank's allowance for
loan losses, the percent of allowance for loan losses to total allowance and the
percent of gross loans to total gross loans in each of the categories listed at
the dates indicated.

<TABLE>
<CAPTION>
                                                                   AT MARCH 31,
                         ----------------------------------------------------------------------------------------------------------
                                     2000                               1999                                   1998
                         ----------------------------------------------------------------------------------------------------------
                                              PERCENT OF                         PERCENT OF                           PERCENT OF
                                                GROSS                              GROSS                                 GROSS
                                                LOANS                              LOANS                                 LOANS
                                  PERCENT OF   IN EACH              PERCENT OF    IN EACH                 PERCENT OF    IN EACH
                                  ALLOWANCE    CATEGORY TO           ALLOWANCE  CATEGORY TO               ALLOWANCE   CATEGORY TO
                                   TO TOTAL   TOTAL GROSS            TO TOTAL   TOTAL GROSS                TO TOTAL   TOTAL GROSS
                          AMOUNT  ALLOWANCE      LOANS     AMOUNT    ALLOWANCE     LOANS      AMOUNT      ALLOWANCE      LOANS
                         -------  ----------  -----------  -------  ----------  -----------   -------     ----------  -----------
                                                              (DOLLARS IN THOUSANDS)
<S>                      <C>      <C>         <C>          <C>      <C>         <C>           <C>         <C>         <C>
One-to-four family       $ 3,453    12.40%     60.10%      $ 5,721    21.87%      66.75%      $10,766        41.40%      75.28%
Multi-family                 783     2.81       3.33         2,026     7.74        3.95         3,133        12.05        4.99
Commercial real estate     1,593     5.72       6.61         2,048     7.83        7.04         3,898        14.99        7.39
Construction and land     12,186    43.78      20.24         8,911    34.06       15.72         4,454        17.13        9.50
Commercial                 6,367    22.88       4.94         2,761    10.56        3.36         3,024        11.63        0.64
Consumer                   3,455    12.41       4.78         4,690    17.93        3.18           473         1.82        2.20
Unallocated                    1       --         --             3     0.01          --           254         0.98          --
                         -------  -------     ------       -------   ------     -------      --------     --------     -------
Total allowance for
  loan losses            $27,838   100.00%    100.00%      $26,160   100.00%     100.00%      $26,002       100.00%     100.00%
                         =======  =======     ======       =======   ======     =======      ========     ========     =======
</TABLE>
<TABLE>
<CAPTION>
                                                   AT MARCH 31,
                         --------------------------------------------------------------------
                                     1997                               1996
                         --------------------------------------------------------------------
                                              PERCENT OF                          PERCENT OF
                                                GROSS                                GROSS
                                                LOANS                                LOANS
                                  PERCENT OF   IN EACH               PERCENT OF     IN EACH
                                  ALLOWANCE   CATEGORY TO             ALLOWANCE   CATEGORY TO
                                   TO TOTAL   TOTAL GROSS             TO TOTAL    TOTAL GROSS
                         AMOUNT   ALLOWANCE     LOANS       AMOUNT   ALLOWANCE       LOANS
                         -------  ----------  -----------  -------   ----------   -----------
                                                    (DOLLARS IN THOUSANDS)
<S>                      <C>      <C>         <C>          <C>       <C>          <C>
One-to-four family       $13,841    49.93%     79.39%      $ 9,687      49.07%       77.85%
Multi-family               3,410    12.30       5.77         3,468      17.57         7.02
Commercial real estate     4,648    16.77       7.26         3,116      15.78         9.10
Construction               4,103    14.80       5.99         2,413      12.22         4.69
Commercial                    56     0.20       0.16            --         --           --
Consumer                   1,586     5.72       1.43           730       3.70         1.34
Unallocated                   77     0.28         --           327       1.66           --
                         -------  -------    -------       -------    -------      -------
Total allowance for
    loan losses          $27,721   100.00%    100.00%      $19,741     100.00%      100.00%
                         -------  -------    -------       -------    -------      -------
</TABLE>

                                       20
<PAGE>

REAL ESTATE

         At March 31, 2000, the Company had $1.5 million of REO and $4.9 million
of real estate acquired for investment ("REI"), net of allowances. If the Bank
acquires any REO, it is initially recorded at fair value. If there is a further
deterioration in value, the Bank provides for a specific valuation allowance and
charges operations for the diminution in value. It is the policy of the Bank to
obtain an appraisal on all REO at the time of possession.

         Prior to fiscal 1999, REI consisted of a former branch facility and
land acquired for a new branch site, which the Bank subsequently decided to not
pursue, and a security interest in 26 lots held for development through the
Bank's service corporation. The former branch facility was disposed of during
the year ended March 31, 1996 and the security interest in the 26 lots paid in
full in February 1999. The Bank is currently exploring opportunities for sale of
the land originally acquired for the new branch site. During fiscal 1999, the
Bancorp provided "mezzanine" financing for three residential real estate
development projects. The three projects are being undertaken by developers with
whom the Bank has had a long history of successful construction lending
activities. The largest loan was $6.0 million on a project for lot development
and construction of 296 single-family homes in the city of Castaic located in
northern Los Angeles County. At March 31, 2000 and 1999, the balance of this
loan was $3.9 million and $4.0 million, respectively. This loan is subordinated
to $32.8 million in development and phased construction loans made by the Bank
on this project, $24.2 million of which has been disbursed as of March 31, 2000.
The Bancorp expects this loan to be repaid along with all associated profits by
December 2001. (See "Delinquencies and Classified Assets".) The second loan was
$1.7 million for a project for development of 56 lots in a new master-planned
community in southeastern San Bernardino County. This loan was made in March
1999 and has been paid down to $423,000 at March 31, 2000. The developer of this
project is not related to nor affiliated with the first project noted. This loan
is subordinated to three loans of the Bank totaling $4.5 million with a net
balance of $2.8 million. The Bank also has a loan commitment of $13.6 million
outstanding to an unrelated developer for infrastructure improvements (e.g.
flood control channels, etc.) in connection with this master-planned community.
The Bancorp expects this loan to be repaid in full, along with the associated
profits by September 2000. The third loan was for $112,000 to provide a short
term escrow deposit on a property in Ventura County. This loan was paid down to
$36,000 during fiscal 2000. As of March 31, 2000 all of these mezzanine loans
provided for a preferential return to the Bancorp of between 10.00% and 30.25%
per annum on the outstanding balance of the Bancorp's investment. As of March
31, 2000 the Bancorp was accounting for these loans as direct investments in
real estate and as such was deferring all profit in excess of its cost of
capital until its principal was paid down by funds received from third party
buyers of finished lots or homes. During the years ended March 31, 1999 and
2000, the Company recognized profit of $246,000 and zero on these financings.
Pursuant to an OTS interpretation of regulations regarding transactions with
affiliates, during April 2000 the Bancorp restructured the loan on the project
in northern Los Angeles County. The restructuring, which was prompted by
regulatory considerations and not by any concerns over full realizability of the
principal or original expected return, reduced the Bancorp's expected return
from Prime +21.5% to Prime +4.0%. During April 2000, again for regulatory
compliance purposes, the Bancorp sold its loan on the project in southeastern
San Bernardino County to an unrelated third party. Upon sale, the Bancorp
realized a gain of $144,000. No restructuring is required for the Ventura and
Riverside Counties loans.

                                       21
<PAGE>

         The following table sets forth certain information with regard to the
Bank's REO and REI.

<TABLE>
<CAPTION>
                                                     AT MARCH 31,
                                  --------------------------------------------------
                                    2000      1999       1998       1997      1996
                                  -------   -------    -------    -------    -------
                                                 (DOLLARS IN THOUSANDS)
<S>                               <C>       <C>        <C>        <C>        <C>
REO
---
Properties acquired in
  settlement of loans(REO)        $ 1,466     5,763      8,198      8,074     11,495
Allowance for losses                 --        (445)      (603)      (329)    (4,762)
                                  -------   -------    -------    -------    -------
  REO, net                          1,466     5,318      7,595      7,745      6,733
                                  -------   -------    -------    -------    -------

REI
---
Properties wholly owned               558       558        731      1,113        911
Mezzanine real estate
  financing                         4,370     5,813       --         --         --
Allowance for losses                 --        --         --         --         --
                                  -------   -------    -------    -------    -------
  REI, net                          4,928     6,371        731      1,113        911
                                  -------   -------    -------    -------    -------
Total real estate, net            $ 6,394    11,689      8,326      8,858      7,644
                                  =======   =======    =======    =======    =======
</TABLE>


INVESTMENT ACTIVITIES

         Federally chartered savings institutions have the authority to invest
in various types of liquid assets, including United States Treasury obligations,
securities of various federal agencies, certificates of deposit of insured banks
and savings institutions, bankers' acceptances, repurchase agreements and
federal funds. Subject to various restrictions, federally chartered savings
institutions may also invest their assets in commercial paper, investment-grade
corporate debt securities and mutual funds whose assets conform to the
investments that a federally chartered savings institution is otherwise
authorized to make directly. Additionally, the Bank must maintain minimum levels
of investments that qualify as liquid assets under OTS regulations. See
"Regulation and Supervision - Federal Savings Institution Regulation -
Liquidity." Historically, the Bank has maintained liquid assets above the
minimum OTS requirements and at a level considered to be adequate to meet its
normal daily activities.

         The investment policy of the Bank, as established by the Board of
Directors, attempts to provide and maintain liquidity, generate a favorable
return on investments without incurring undue interest rate or credit risk, and
complement the Bank's lending activities. Specifically, the Bank's policies
generally limit investments to government and federal agency-backed securities
and MBS and other non-government guaranteed securities, including corporate debt
obligations, that are investment grade. On November 4, 1998 the OTS issued
Thrift Bulletin 73 ("TB73") "Trust Preferred Securities" which, among other
things, limits the aggregate investment in investment grade trust preferred
securities for OTS supervised institutions to 15 percent of total capital. At
the time TB73 was issued, the Bank's aggregate investment in such securities of
$52.4 million, exceeded the OTS limitation by $23.0 million. The Bank applied
for and was granted a waiver by the OTS permitting the Bank to continue to hold
its trust preferred securities. At March 31, 2000, the Bank's aggregate
investment in trust preferred securities is $43.5 million which represents 22%
of the Bank's total capital.

         The investment powers of the Bancorp are substantially broader than
those permitted for the Bank. The investment policy of the Bancorp as
established by its Board of Directors, while generally consistent with that of
the Bank, permits the investment by the Bancorp in equity securities and
non-rated corporate debt obligations. At March 31, 2000, the Bancorp had direct
equity investments (excluding REI) of $6.5 million, investments in equity mutual
funds of $3.2 million and investments in non-rated corporate debt obligations
(trust preferred debt securities) of $4.8 million. Given the non-rated nature of
the Bancorp's investments in trust preferred debt securities along with the
longer-term (typically 30 years) structure of the obligations, the Bancorp
undertakes a review of the historical and current financial condition and
operating

                                       22
<PAGE>

results of the issuer prior to making an investment. These reviews are
updated periodically during the holding periods for the investments.

         A portion of Bancorp's direct equity investments are managed by the
Bank's trust department on a no fee basis. The Bancorp's equity mutual fund
investments are placed with fund managers with whom the Bancorp's Senior
Management is familiar. The performance of the Bancorp's direct and mutual fund
equity investments is reviewed no less frequently than monthly by the Bancorp's
Senior Management and no less frequently than quarterly by the Bancorp's Board
of Directors.

         Unlike the securities comprising the Bank's investment portfolio, which
by their nature present little to no risk of loss of principal or interest, the
trust preferred debt securities and equity investments of the Bancorp are
subject to partial or complete diminution in market value upon the occurrence of
adverse economic events affecting the issuers of the securities.

         At March 31, 2000, the Company had $92.8 million in investment
securities consisting primarily of investment grade corporate and U.S. agency
securities including $34.1 million of U.S. agency securities that are callable
at par by the issuers at specified dates prior to maturity. The Company invests
in such callable securities when the yields to each call date and to final
maturity exceed those available from comparable term and credit quality
non-callable securities by amounts which management deems sufficient to
compensate the Company for the call options inherent in the securities. The
Company's MBS portfolio consists of adjustable-rate securities tied to the
one-year CMT (45% of the portfolio), or six-month LIBOR (1% of the portfolio),
seasoned fixed-rate securities (14% of the portfolio) and five and seven year
balloon securities (40% of the portfolio). At March 31, 2000, the carrying value
of the Company's MBS portfolio totaled $381.3 million. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Comparison of Financial Condition at March 31, 2000 and March 31, 1999." All of
the Company's MBS were insured or guaranteed by either the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC").

         Investments in MBS involve a risk that actual prepayments will vary
from the estimated prepayments over the life of the security. This may require
adjustments to the amortization of any premium or accretion of any discount
relating to such instruments, thereby reducing the net yield on such securities.
There is also reinvestment risk associated with the cash flows from such
securities. In addition, the market value of such securities may be adversely
affected by changes in interest rates.

         The Company's Collateralized Mortgage Obligations (CMO) portfolio
consists principally of adjustable rate securities tied to the one or three
month LIBOR or the Prime rate. The adjustment intervals for these securities are
generally monthly. All of the Company's $85.7 million CMO portfolio is backed by
mortgages insured by FNMA or FHLMC. As with MBS, CMOs involve a risk that actual
levels of prepayments will require an adjustment to the amortization of any
premium or accretion of any discounts on the security with an adverse impact on
the yield on the security. Additionally, the structure of many CMOs is such that
their cash flows exhibit greater sensitivity to changes in prepayments than do
traditional MBS.

                                       23
<PAGE>

         The following table sets forth certain information regarding the
carrying and fair values of the Company's mortgage-backed securities at the
dates indicated.

<TABLE>
<CAPTION>
                                                           AT MARCH 31,
                               ---------------------------------------------------------------
                                       2000                  1999                 1998
                               ---------------------------------------------------------------
                               CARRYING    FAIR      CARRYING     FAIR    CARRYING     FAIR
                                VALUE      VALUE       VALUE      VALUE     VALUE      VALUE
                               --------   --------   --------   --------  ---------   --------
                                                 (DOLLARS IN THOUSANDS)
<S>                            <C>        <C>        <C>        <C>        <C>        <C>
Held-to-maturity:
  FHLMC                        $   --         --          556        560      1,373      1,375
                               --------   --------   --------   --------   --------   --------
    Total held-to-maturity         --         --          556        560      1,373      1,375
                               --------   --------   --------   --------   --------   --------

Available-for-sale:
  GNMA                           14,879     14,879     19,650     19,650     35,094     35,094
  FHLMC                         111,830    111,830    158,475    158,475    137,706    137,706
  FNMA                          254,568    254,568    347,435    347,435    308,820    308,820
                               --------   --------   --------   --------   --------   --------
    Total available-for-sale    381,277    381,277    525,560    525,560    481,620    481,620
                               --------   --------   --------   --------   --------   --------
      Total                    $381,277    381,277    526,116    526,120    482,993    482,995
                               ========   ========   ========   ========   ========   ========
</TABLE>


         The following table sets forth certain information regarding the
carrying and fair values of the Company's investment securities at the dates
indicated.

<TABLE>
<CAPTION>
                                                                 AT MARCH 31,
                                         ---------------------------------------------------------
                                                2000                1999                1998
                                         ---------------------------------------------------------
                                         CARRYING   FAIR    CARRYING    FAIR    CARRYING    FAIR
                                          VALUE     VALUE     VALUE     VALUE     VALUE     VALUE
                                         -------   -------   -------   -------   -------   -------
                                                          (DOLLARS IN THOUSANDS)
<S>                                      <C>       <C>       <C>       <C>       <C>       <C>
Held-to-maturity:
  U.S. government and
    federal agency obligations           $   701       719       709       716       714       725
                                         -------   -------   -------   -------   -------   -------
Total held-to-maturity                       701       719       709       716       714       725
                                         -------   -------   -------   -------   -------   -------

Available-for-sale:
  FHLMC non-cumulative preferred stock      --        --        --        --       5,768     5,768
  Corporate debt securities               48,315    48,315    57,765    57,765    17,359    17,359
  Equity securities
    Direct                                 3,770     3,770     5,370     5,370     6,239     6,239
    Mutual funds                           1,663     1,663     1,780     1,780     7,490     7,490
  U.S. government and federal agency
     obligations                          34,062    34,062    17,472    17,472    56,052    56,052
                                         -------   -------   -------   -------   -------   -------
Total available-for-sale                  87,810    87,810    82,387    82,387    92,908    92,908
                                         -------   -------   -------   -------   -------   -------

      Total                              $88,511    88,529    83,096    83,103    93,622    93,633
                                         =======   =======   =======   =======   =======   =======
</TABLE>

                                       24
<PAGE>

         The following table sets forth certain information regarding the
carrying and fair values of the Company's collateralized mortgage obligations at
the dates indicated.

<TABLE>
<CAPTION>
                                                                 AT MARCH 31,
                                        ---------------------------------------------------------
                                                2000                1999               1998
                                        ---------------------------------------------------------
                                        CARRYING   FAIR     CARRYING   FAIR    CARRYING    FAIR
                                         VALUE     VALUE     VALUE     VALUE     VALUE     VALUE
                                        -------   -------   -------   -------   -------   -------
                                                        (DOLLARS IN THOUSANDS)
<S>                                     <C>        <C>      <C>       <C>       <C>       <C>
Available-for-sale:
  Collateralized mortgage obligations
    FHLMC                               $58,254    58,254    70,359    70,359   130,818   130,818
    FNMA                                 27,399    27,399    32,341    32,341    92,684    92,684
                                        -------   -------   -------   -------   -------   -------
      Total                             $85,653    85,653   102,700   102,700   223,502   223,502
                                        =======   =======   =======   =======   =======   =======
</TABLE>

                                       25
<PAGE>

         The table below sets forth certain information regarding the carrying
value, weighted average yields and maturities of the Company's mortgage-backed
securities, investment securities and collateralized mortgage obligations as of
March 31, 2000. Table presented represents stated maturities and does not
reflect scheduled principal payments.

<TABLE>
<CAPTION>
                                                                 AT MARCH 31, 2000
                                            ----------------------------------------------------------
                                                                    MORE THAN ONE     MORE THAN FIVE
                                             ONE YEAR OR LESS    YEAR TO FIVE YEARS YEARS TO TEN YEARS
                                            -------------------------- --------------------------- ---
                                                       WEIGHTED           WEIGHTED            WEIGHTED
                                            CARRYING   AVERAGE   CARRYING AVERAGE   CARRYING  AVERAGE
                                              VALUE     YIELD     VALUE    YIELD      VALUE    YIELD
                                            --------   -------   -------- -------   --------  --------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                         <C>        <C>       <C>        <C>     <C>          <C>
Mortgage-backed securities:
  Available-for-sale
    FHLMC                                   $  6,279      7.97%  $ 31,417    7.22%  $ 12,875      7.05%
    FNMA                                         929      6.50    101,081    7.38      9,741      7.18
    GNMA                                        --         --          65    8.84        --        --
                                            --------      ----   --------    ----   --------      ----
Total mortgage-backed securities            $  7,208      7.78%  $132,563    7.34%  $ 22,616      7.11%
                                            ========      ====   ========    ====   ========      ====

Investment securities:
  Held-to-maturity:
    U.S. government and Federal agency
      obligations                           $    701      6.28%$      --      -- %       --        --
                                            --------      ----   --------    ----   --------      ----
  Total held-to-maturity                         701      6.28        --      --         --        --
                                            --------      ----   --------    ----   --------      ----
  Available-for-sale:
    Corporate debt securities                   --         --         --      --         --        --
    Equity securities
      Direct (1)                                --         --         --      --         --        --
      Mutual funds (1)                          --         --         --      --         --        --
    U.S. government and federal agency
      obligations                               --         --      34,062    7.37        --        --
                                            --------      ----   --------    ----   --------      ----
  Total available-for-sale                      --         --      34,062    7.37        --        --
                                            --------      ----   --------    ----   --------      ----

Total investment securities                 $    701      6.28%  $ 34,062    7.37%       --        --
                                            ========      ====   ========    ====   ========      ====

Collateralized mortgage obligations:
  Available-for-sale
    FHLMC                                       --         --         --      --         --        --
    FNMA                                        --         --         --      --         --        --
                                            --------      ----   --------    ----   --------      ----
Total collateralized mortgage obligations       --         --         --      --         --        --
                                            ========      ====   ========    ====   ========      ====
</TABLE>

<TABLE>
<CAPTION>
                                                        AT MARCH 31, 2000

                                            ----------------------------------------
                                               MORE THAN TEN
                                                    YEARS              TOTAL
                                            ----------------------------------------
                                                        WEIGHTED            WEIGHTED
                                            CARRYING    AVERAGE  CARRYING   AVERAGE
                                             VALUE       YIELD    VALUE      YIELD
                                            --------   --------  --------   -------
<S>                                         <C>        <C>       <C>        <C>
Mortgage-backed securities
  Available-for-sale
    FHLMC                                   $ 61,258      6.82%  $111,829    7.02%
    FNMA                                     142,817      6.87    254,568    7.08
    GNMA                                      14,815      7.17     14,880    7.18
                                            --------     -----   --------   -----
Total mortgage-backed securities            $218,890      6.88%  $381,277    7.07%
                                            ========     =====   ========   =====

Investment securities:
  Held-to-maturity:
    U.S. government and Federal agency
      obligations                           $   --         -- %   $   701    6.28%
                                            --------     -----    -------   -----
  Total held-to-maturity                        --         --         701    6.28
                                            --------     -----   --------   -----
  Available-for-sale:
    Corporate debt securities                 48,315      7.27     48,315    7.27
    Equity securities
      Direct (1)                               3,770      2.44      3,770    2.44
      Mutual funds (1)                         1,663    (10.33)     1,663  (10.33)
    U.S. government and federal agency
      obligations                               --         --      34,062    7.37
                                            --------     -----   --------   -----
  Total available-for-sale                    53,748      6.54     87,810    6.86
                                            --------     -----   --------   -----

Total investment securities                 $ 53,748      6.54%  $ 88,511    6.85%
                                            ========     =====   ========   =====

Collateralized mortgage obligations
  Available-for-sale
    FHLMC                                   $ 58,254      7.30%  $ 58,254    7.30%
    FNMA                                      27,399      7.27     27,399    7.27
                                            --------     -----   --------   -----
Total collateralized mortgage obligations   $ 85,653      7.29%  $ 85,653    7.29%
                                            ========     =====   ========   =====
</TABLE>
----------
(1) "Yield" derived from unrealized change in market value of equity securities
is not included in totals for purposes of the calculation of weighted average
yield on the portfolio here or on average balance sheets in Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

                                       26
<PAGE>

SOURCES OF FUNDS

         General. Deposits, loan repayments and prepayments, proceeds from sales
         -------
of loans, cash flows generated from operations and FHLB advances and other
borrowings are the primary sources of the Bank's funds for lending, investing
and other general purposes.

         Deposits. The Bank offers a variety of deposit accounts with a range of
         --------
interest rates and terms. The Bank's deposits consist of passbook accounts, NOW
and other demand accounts, money market savings accounts and certificate
accounts. The terms of the fixed-rate certificate accounts offered by the Bank
vary from 90 days to five years and the offering rates are established by the
Bank on a weekly basis. Once an account is established, no additional amounts
are permitted to be deposited in fixed-rate accounts. The Bank also presently
offers or has recently offered a number of variable rate certificates whose
rates are indexed to COFI or the one year CMT. Additions are permitted prior to
maturity for certain of the Bank's variable rate accounts. The Bank also offers
a 12 month step-up certificate account that permits additions and the ability to
increase the interest rate one time if the offering rate increases during the
term of the account. Specific terms of an individual account vary according to
the type of account, the minimum balance required, the time period funds must
remain on deposit and the interest rate, among other factors. The flow of
deposits is influenced significantly by general economic conditions, changes in
money market rates, prevailing interest rates and competition. At March 31,
2000, the Bank had $1.01 billion of certificate accounts maturing in less than
one year. The Bank expects to retain a substantial portion of these maturing
dollars. The Bank's deposits are obtained predominantly from the areas in which
its branch offices are located. The Bank relies primarily on customer service
and long-standing relationships with customers to attract and retain these
deposits. However, market interest rates and rates offered by competing
financial institutions significantly affect the Bank's ability to attract and
retain deposits.

         During the fourth quarter of fiscal 1998, the Bank opened a wholesale
deposit operation (Money Desk) through its Telebanking Center. The Bank's Money
Desk solicited deposits directly from individual and institutional investors.
During the fourth quarter of fiscal 1999, the Bank made the decision to
discontinue its Money Desk effective April 6, 1999 due to the availability of
alternative, cost-effective sources of funds, including retail deposit growth
and FHLB advances. At March 31, 2000, the Bank's certificate accounts include
$8.3 million generated through the Money Desk. The weighted average interest
rate on these deposits is 5.91%.

         The following table presents the deposit activity of the Bank for the
periods indicated.

                                              FOR THE YEAR ENDED MARCH 31,
                                              2000        1999      1998
                                           --------------------------------
                                               (DOLLARS IN THOUSANDS)
Net deposits (withdrawals)                 $ 16,047      24,561    (49,543)
Sale of branch deposits                     (45,859)       --         --
Interest credited on deposit accounts        92,808      78,153     79,318
                                           --------    --------   --------
      Total increase in deposit accounts   $ 62,996     102,714     29,775
                                           ========    ========   ========

         At March 31, 2000, the Bank had $361.2 million in certificate accounts
in amounts of $100,000 or more maturing as follows:

                                                          WEIGHTED
   MATURITY PERIOD                         AMOUNT       AVERAGE RATE
--------------------------------------------------------------------
                                            (DOLLARS IN THOUSANDS)
Three months or less                      $114,044             5.76%
Over three through six months              110,609             5.70
Over six through 12 months                  87,435             5.86
Over 12 months                              49,067             5.82
                                          --------
      Total                               $361,155             5.77
                                          ========

                                       27
<PAGE>

         The following table sets forth the distribution of the Bank's average
deposit accounts for the periods indicated and the weighted average interest
rates on each category of deposits presented.

<TABLE>
<CAPTION>
                                                                FOR THE YEAR ENDED MARCH 31,
                                          ------------------------------------------------------------------
                                                           2000                            1999
                                          ------------------------------------------------------------------
                                                         PERCENT                         PERCENT
                                                         OF TOTAL  WEIGHTED              OF TOTAL   WEIGHTED
                                            AVERAGE      AVERAGE   AVERAGE    AVERAGE    AVERAGE    AVERAGE
                                            BALANCE     DEPOSITS    YIELD     BALANCE    DEPOSITS    YIELD
                                          ------------------------------------------------------------------
                                                                (DOLLARS IN THOUSANDS)
<S>                                       <C>           <C>        <C>     <C>           <C>        <C>
Passbook accounts                         $  141,103       7.6%    2.24%   $  147,702       8.3%    2.31%
Money market savings accounts                401,394      21.6     4.39       290,917      16.3     4.51
NOW accounts                                 141,708       7.7     0.96       133,102       7.5     0.96
Non-interest bearing accounts                 71,044       3.8      --         55,028       3.1      --
                                          ----------     -----    ----     ----------     -----     ----
    Total                                    755,249      40.7     2.93       626,749      35.2     2.84

Certificate accounts:
  Variable-rate certificates of deposit       30,790       1.6     4.93        31,788       1.8     4.98
  Step-up certificates of deposit             55,206       3.0     4.75        76,681       4.3     5.12
  Less than 6 months                         108,842       5.9     5.76        47,040       2.7     4.61
  6 through 11 months                        279,592      15.0     5.07       290,462      16.3     5.22
  12 though 23 months                        458,097      24.7     5.08       533,774      30.0     5.43
  24 months through 47 months                 98,429       5.3     5.42        83,834       4.7     5.67
  48 months or greater                        68,356       3.7     5.56        85,498       4.8     5.84
  Other(1)                                     1,942       0.1     6.02         4,122       0.2     6.19
                                          ----------     -----     ----    ----------     -----     ----
    Total certificate accounts             1,101,254      59.3     5.19     1,153,199      64.8     5.35
                                          ----------     -----     ----    ----------     -----     ----
      Total average deposits              $1,856,503     100.0%    4.27%   $1,779,948     100.0%    4.47%
                                          ==========     =====     ====    ==========     =====     ====
</TABLE>



                                           FOR THE YEAR ENDED MARCH 31,
                                          --------------------------------
                                                         1998
                                          --------------------------------
                                                        PERCENT
                                                        OF TOTAL  WEIGHTED
                                            AVERAGE     AVERAGE   AVERAGE
                                            BALANCE     DEPOSITS   YIELD
                                          --------------------------------
                                               (DOLLARS IN THOUSANDS)

Passbook accounts                         $  162,874       9.5%    2.58%
Money market savings accounts                193,146      11.2     4.13
NOW accounts                                 126,244       7.4     0.96
Non-interest bearing accounts                 33,054       1.9      --
                                          ----------     -----     ----
    Total                                    515,318      30.0     2.60

Certificate accounts:
  Variable-rate certificates of deposit       26,852       1.6     5.03
  Step-up certificates of deposit            126,123       7.3     5.50
  Less than 6 months                          49,145       2.9     4.60
  6 through 11 months                        234,850      13.7     5.41
  12 though 23 months                        581,927      33.9     5.66
  24 months through 47 months                 76,129       4.4     5.68
  48 months or greater                        96,835       5.6     5.82
  Other(1)                                    10,128        .6     5.93
                                          ----------     -----     ----
    Total certificate accounts             1,201,989      70.0     5.55
                                          ----------     -----     ----
      Total average deposits              $1,717,307     100.0%    4.67%
                                          ==========     =====     ====



(1) Includes $31,000, $152,000 and $328,000 as of March 31, 2000, 1999 and 1998,
respectively of certificates of deposit which were acquired in connection with
various acquisitions of branch offices from other institutions.

                                       28
<PAGE>

         The following table presents, by various rate categories, the amount of
certificate accounts outstanding at the dates indicated and the periods to
maturity of the certificate accounts outstanding at March 31, 2000.

<TABLE>
<CAPTION>
                                        PERIOD TO MATURITY FROM MARCH 31, 2000                              AT MARCH 31,
                -------------------------------------------------------------------------------------------------------------------
                  LESS THAN       ONE TO       TWO TO       THREE TO     FOUR TO      MORE THAN
                  ONE YEAR       TWO YEARS   THREE YEARS   FOUR YEARS   FIVE YEARS   FIVE YEARS    2000         1999        1998
                -------------------------------------------------------------------------------------------------------------------
                                                                      (DOLLARS IN THOUSANDS)
<S>             <C>              <C>         <C>           <C>          <C>          <C>         <C>          <C>          <C>
0.00 to 4.00%   $      276           10            1         --           --           --            287          501          702
4.01 to 5.00%      197,153        7,294        2,755        3,723        1,257         --        212,182      498,901       60,740
5.01 to 6.00%      603,193       77,867       31,971        5,350       12,947          174      731,502      571,844    1,035,511
6.01 to 7.00%      205,021       10,017        4,767          274        3,055          207      223,341       28,690       81,086
7.01 to 8.00%         --             27         --           --           --           --             27          161          349
8.01 to 9.00%         --           --           --           --           --           --           --           --           --
Over 9.01%            --           --           --           --           --           --           --            127          127
                ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------

      Total     $1,005,643       95,215       39,494        9,347       17,259          381    1,167,339    1,100,224    1,178,515
                ==========   ==========   ==========   ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>

                                       29
<PAGE>

         FHLB Advances and Other Borrowings. The Bank utilizes FHLB advances and
         ----------------------------------
reverse repurchase agreements as alternative sources of funds to retail
deposits. These borrowings are collateralized by mortgage-backed securities,
investment securities and collateralized mortgage obligations and, in the case
of certain FHLB advances, certain of the Bank's mortgage loans and secondarily
by the Bank's investment in the capital stock of the FHLB. See "Regulation and
Supervision-Federal Home Loan Bank System". The FHLB provides advances pursuant
to several different credit programs, each of which has its own interest rate,
range of maturities and collateralization requirements. The maximum amount that
the FHLB will advance to member institutions, including the Bank, fluctuates
from time to time in accordance with the policies of the OTS and FHLB.

         At March 31, 2000, the Bank had outstanding FHLB advances and other
borrowings of $884.0 million at a weighted average cost of 6.02% secured by
GNMA, FNMA and FHLMC MBS, CMOs and other investment securities. The original
terms of the FHLB advances and other borrowings outstanding at March 31, 2000,
range from 1 year to 10 years. The Bank expects to continue to utilize FHLB
advances and other borrowings including reverse repurchase agreements as
secondary sources of funds to deposit liabilities. FHLB advances and other
borrowings are utilized to balance the differential net cash flows arising from
loan and deposit activities and as a primary funding vehicle for the Bank's
investment in MBS and other investment securities. Reverse repurchase agreements
take the form of sales of securities under agreements to repurchase the
identical securities at a later date. These transactions are accounted for as
financing arrangements with the obligations to repurchase securities sold
reflected as a liability while the securities underlying the agreements remain
in the respective asset account.

         During fiscal 1998, the Bank began making increased use of putable
borrowings (primarily FHLB advances). Under the putable advance program, in
exchange for a favorable interest rate on the borrowing, the Bank grants to the
FHLB an option to "put" the advance back to the Bank at specified quarterly
"put" dates prior to maturity but after the conclusion of a specified lock out
period. Under the putable advance program, the Bank obtains funds below the cost
of non-putable FHLB advances which have fixed maturities between the first "put"
date and the final maturity date of the putable advance. In exchange for this
favorable funding rate, the Bank is exposed to the risk that the advance is
"put" back to the Bank following an increase in the general level of interest
rates causing the Bank to initiate a new borrowing at a less advantageous cost.
The Bank's increased use of putable advances has allowed the Bank to extend the
term to maturity and initial "put" dates of its funding in connection with
increased investment in balloon MBS products. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Asset/Liability
Management".

          The use of reverse repurchase agreements involves the risk that
between the dates of "sale" and subsequent repurchase, a decline in the market
value of the underlying security may require the sale of additional securities
to the counterparty to the reverse repurchase agreement. See "Sources of Funds -
FHLB Advances and Other Borrowings".

                                       30
<PAGE>

         The following table sets forth certain information regarding the Bank's
borrowed funds at or for the periods ended on the dates indicated.

<TABLE>
<CAPTION>
                                                             AT OR FOR THE
                                                         YEARS ENDED MARCH 31,
                                                   -------------------------------
                                                     2000        1999        1998
                                                   -------------------------------
                                                        (DOLLARS IN THOUSANDS)
<S>                                                <C>          <C>        <C>
FHLB advances:
  Average balance outstanding                      $792,778     855,197    601,078
  Maximum amount outstanding at any
    month-end during the year                       884,000     949,000    790,086
  Balance outstanding at end of year (1)            884,000     764,000    735,886
  Weighted average interest rate during the year       5.63%       5.57       5.87
  Weighted average interest rate end of year           6.02        5.37       5.70

Reverse repurchase agreements:
  Average balance outstanding                      $ 43,750      50,000     50,000
  Maximum amount outstanding at any
    month-end during the year                        50,000      50,000     50,000
  Balance outstanding at end of year (1)               --        50,000     50,000
  Weighted average interest rate during the year       5.87%       5.87       5.87
  Weighted average interest rate end of year           --          5.87       5.87
</TABLE>
----------
(1)  Included in the balance of FHLB advances outstanding at March 31, 2000 are
     putable borrowings of $255.0 million with initial put dates ranging from
     May 2000 to February 2003. The weighted average term to maturity for these
     putable borrowings is 34 months and the weighted average term to first put
     date is 10 months.

SUBSIDIARY ACTIVITIES

         Pomona Financial Services, Inc. ("PFS"), a California corporation, is a
         -------------------------------
wholly owned subsidiary of the Bank. PFS acts as a holding company for the
service corporations described below and acts as trustee under deeds of trusts.
For the year ended March 31, 2000, PFS had net earnings of $72,000.

         PFF Financial Services, Inc. ("PFFFS"), a California corporation, is a
         ---------------------------
wholly owned subsidiary of PFS. Prior to July 1994, PFFFS operated as an agency
selling various personal and business insurance policies strictly as an adjunct
to the Bank's traditional thrift business. As part of the Bank's strategy to
diversify the products and services it offers and restructure its balance sheet,
a decision was made to expand the role of PFFFS. In July 1994, PFFFS was
authorized to sell fixed annuities to the Bank's customers through the Bank's
branches. In August 1995, PFFFS was further authorized to offer variable
annuities and mutual funds through a relationship with a third party marketer of
annuity and mutual fund non-deposit investment products. In addition, PFFFS is
working with vendors of other insurance products, such as auto, home and life
insurance, to further expand the products and services offered to the Bank's
customers and members of the local community. For the year ended March 31, 2000,
PFFFS had net earnings of $159,000.

         Diversified Services, Inc. ("DSI"), a California corporation, is a
         -------------------------
wholly owned subsidiary of PFS. DSI had historically participated as an investor
in residential real estate projects. DSI may consider additional real estate
activities as market conditions warrant. For the year ended March 31, 2000, DSI
had minimal activity and net earnings of $1,000.

                                       31
<PAGE>

PERSONNEL

         As of March 31, 2000, the Bank had 454 full-time employees and 124
part-time employees. The employees are not represented by a collective
bargaining unit and the Bank considers its relationship with its employees to be
good. See Item 11 "Executive Compensation" for a description of certain
compensation and benefit programs offered to the Bank's employees.


                           REGULATION AND SUPERVISION

GENERAL

         The Bancorp, as a savings and loan holding company, is required to file
certain reports with, and otherwise comply with the rules and regulations of the
OTS under the Home Owners' Loan Act, as amended (the "HOLA"). In addition, the
activities of savings institutions, such as the Bank, are governed by the HOLA
and the Federal Deposit Insurance Act ("FDI Act").

         The Bank is subject to extensive regulation, examination and
supervision by the OTS, as its primary federal regulator, and the FDIC, as the
deposit insurer. The Bank is a member of the Federal Home Loan Bank ("FHLB")
System and its deposit accounts are insured up to applicable limits by the
Savings Association Insurance Fund ("SAIF") managed by the FDIC. The Bank must
file reports with the OTS and the FDIC concerning its activities and financial
condition in addition to obtaining regulatory approvals prior to entering into
certain transactions such as mergers with, or acquisitions of, other savings
institutions. The OTS and/or the FDIC conduct periodic examinations to test the
Bank's safety and soundness and compliance with various regulatory requirements.
This regulation and supervision establishes a comprehensive framework of
activities in which an institution can engage and is intended primarily for the
protection of the insurance fund and depositors. The regulatory structure also
gives the regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss allowances for regulatory purposes. Any change in such
regulatory requirements and policies, whether by the OTS, the FDIC or the
Congress, could have a material adverse impact on the Bancorp, the Bank and
their operations. Certain of the regulatory requirements applicable to the Bank
and to the Bancorp are referred to below or elsewhere herein. The description of
statutory provisions and regulations applicable to savings institutions and
their holding companies set forth in this Form 10-K does not purport to be a
complete description of such statutes and regulations and their effects on the
Bank and the Bancorp.

HOLDING COMPANY REGULATION

         The Bancorp is a non diversified unitary savings and loan holding
company within the meaning of the HOLA. As a unitary savings and loan holding
company, the Bancorp generally is not restricted under existing laws as to the
types of business activities in which it may engage, provided that the Bank
continues to be a qualified thrift lender ("QTL"). See "Federal Savings
Institution Regulation - QTL Test." Upon any non-supervisory acquisition by the
Bancorp of another savings institution or savings bank that meets the QTL test
and is deemed to be a savings institution by the OTS, the Bancorp would become a
multiple savings and loan holding company (if the acquired institution is held
as a separate subsidiary) and would be subject to extensive limitations on the
types of business activities in which it could engage. The HOLA limits the
activities of a multiple savings and loan holding company and its non-insured
institution subsidiaries primarily to activities permissible for bank holding
companies under Section 4(c)(8) of the Bank Holding Company Act ("BHC Act"),
subject to the prior approval of the OTS, and certain activities authorized by
OTS regulation, and no multiple savings and loan holding company may acquire
more than 5% of the voting stock of a company engaged in impermissible
activities.

         The HOLA prohibits a savings and loan holding company, directly or
indirectly, or through one or more subsidiaries, from acquiring more than 5% of
the voting stock of another savings institution or holding

                                       32
<PAGE>

company thereof, without prior written approval of the OTS or acquiring or
retaining control of a depository institution that is not insured by the FDIC.
In evaluating applications by holding companies to acquire savings institutions,
the OTS must consider the financial and managerial resources and future
prospects of the company and institution involved, the effect of the acquisition
on the risk to the insurance funds, the convenience and needs of the community
and competitive factors.

         The OTS is prohibited from approving any acquisition that would result
in a multiple savings and loan holding company controlling savings institutions
in more than one state, subject to two exceptions: (i) the approval of
interstate supervisory acquisitions by savings and loan holding companies and
(ii) the acquisition of a savings institution in another state if the laws of
the state of the target savings institution specifically permit such
acquisitions. The states vary in the extent to which they permit interstate
savings and loan holding company acquisitions.

         Although savings and loan holding companies are not subject to specific
capital requirements or specific restrictions on the payment of dividends or
other capital distributions, HOLA does prescribe such restrictions on subsidiary
savings institutions as described below. The Bank must notify the OTS 30 days
before declaring any dividend to the Bancorp. In addition, the financial impact
of a holding company on its subsidiary institution is a matter that is evaluated
by the OTS and the agency has authority to order cessation of activities or
divestiture of subsidiaries deemed to pose a threat to the safety and soundness
of the institution.

FEDERAL SAVINGS INSTITUTION REGULATION

         BUSINESS ACTIVITIES. The activities of federal savings institutions are
governed by federal law and regulations. These laws and regulations delineate
the nature and extent of the activities in which federal associations may
engage. In particular, many types of lending authority for federal associations
are limited to a specified percentage of the institution's capital or assets.

         CAPITAL REQUIREMENTS. The OTS capital regulations require savings
institutions to meet three minimum capital standards: a 1.5% tangible capital
ratio, a 3% leverage (core) capital ratio and an 8% risk-based capital ratio.
Effective April 1, 1999, however, the minimum leverage ratio increased to 4% for
all institutions except those with the highest rating on the CAMELS financial
institution rating system. In addition, the prompt corrective action standards
discussed below also establish, in effect, a minimum 2% tangible capital
standard, a 4% leverage (core) capital ratio (3% for institutions receiving the
highest rating on the CAMELS financial institution rating system), and, together
with the risk-based capital standard itself, a 4% Tier I risk-based capital
standard. Core capital is defined as common stockholders' equity (including
retained earnings), certain noncumulative perpetual preferred stock and related
surplus, and minority interests in equity accounts of consolidated subsidiaries
less intangibles other than certain mortgage servicing rights and credit card
relationships. The OTS regulations also require that, in meeting the tangible,
leverage (core) and risk-based capital standards, institutions must generally
deduct investments in and loans to subsidiaries engaged in activities as
principal that are not permissible for a national bank.

         The risk-based capital standard for savings institutions requires the
maintenance of Tier I (core) and total capital (which is defined as core capital
and supplementary capital) to risk-weighted assets of at least 4% and 8%,
respectively. In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets, are multiplied by a risk-weight
factor of 0% to 100%, as assigned by the OTS capital regulation based on the
risks OTS believes are inherent in the type of asset. The components of Tier I
(core) capital are equivalent to those discussed earlier. The components of
supplementary capital currently include cumulative preferred stock, long-term
perpetual preferred stock, mandatory convertible securities, subordinated debt
and intermediate preferred stock and the allowance for loan and lease losses
limited to a maximum of 1.25% of risk-weighted assets. Overall, the amount of
supplementary capital included as part of total capital cannot exceed 100% of
core capital.

         The OTS regulatory capital requirements also incorporate an interest
rate risk component. Savings institutions with "above normal" interest rate risk
exposure are subject to a deduction from total capital for

                                       33
<PAGE>

purposes of calculating their risk-based capital requirements. A savings
institution's interest rate risk is measured by the decline in the net portfolio
value of its assets (i.e., the difference between incoming and outgoing
discounted cash flows from assets, liabilities and off-balance sheet contracts)
that would result from a hypothetical 200 basis point increase or decrease in
market interest rates divided by the estimated economic value of the
institution's assets. In calculating its total capital under the risk-based
capital rule, a savings institution whose measured interest rate risk exposure
exceeds 2% must deduct an amount equal to one-half of the difference between the
institution's measured interest rate risk and 2%, multiplied by the estimated
economic value of the institution's assets. The Director of the OTS may waive or
defer a savings institution's interest rate risk component on a case-by-case
basis. A savings institution with assets of less than $300 million and
risk-based capital ratios in excess of 12% is not subject to the interest rate
risk component, unless the OTS determines otherwise. For the present time, the
OTS has deferred implementation of the interest rate risk component. At March
31, 2000, the Bank met each of its capital requirements and it is anticipated
that the Bank would not be subject to the interest rate risk component.

         The following table presents the Bank's capital position at March 31,
2000.

                                                      ACTUAL    REQUIRED
                    ACTUAL    REQUIRED    EXCESS    PERCENTAGE  PERCENTAGE
                  --------------------------------------------------------
                                 (DOLLARS IN THOUSANDS)

Tangible          $204,638     45,368    159,270       6.77%       1.50
Core (Leverage)    204,638    120,981     83,657       6.77        4.00
Risk-based         226,857    164,937     61,920      11.00        8.00


         PROMPT CORRECTIVE REGULATORY ACTION. Under the OTS prompt corrective
action regulations, the OTS is required to take certain supervisory actions
against undercapitalized institutions, the severity of which depends upon the
institution's degree of under capitalization. Generally, a savings institution
is considered "well capitalized" if its ratio of total capital to risk-weighted
assets is at least 10%, its ratio of Tier I (core) capital to risk-weighted
assets is at least 6%, its ratio of core capital to total assets is at least 5%,
and it is not subject to any order or directive by the OTS to meet a specific
capital level. A savings institution generally is considered "adequately
capitalized" if its ratio of total capital to risk-weighted assets is at least
8%, its ratio of Tier I (core) capital to risk-weighted assets is at least 4%,
and its ratio of core capital to total assets is at least 4% (3% if the
institution receives the highest CAMELS rating). A savings institution that has
a ratio of total capital to risk weighted assets of less than 8%, a ratio of
Tier I (core) capital to risk-weighted assets of less than 4% or a ratio of core
capital to total assets of less than 4% (3% or less for institutions with the
highest examination rating) is considered to be "undercapitalized." A savings
institution that has a total risk-based capital ratio less than 6%, a capital
Tier 1 to risk-weighted assets ratio of less than 3% or a Tier 1 capital to
total assets ratio that is less than 3% is considered to be "significantly
undercapitalized" and a savings institution that has a Tier 1 capital to assets
ratio equal to or less than 2% is deemed to be "critically undercapitalized."
Subject to a narrow exception, the banking regulator is required to appoint a
receiver or conservator for an institution that is "critically
undercapitalized." The regulation also provides that a capital restoration plan
must be filed with the OTS within 45 days of the date a savings institution
receives notice that it is "undercapitalized," "significantly undercapitalized"
or "critically undercapitalized." Compliance with the plan must be guaranteed by
any parent holding company. In addition, numerous mandatory supervisory actions
become immediately applicable to an undercapitalized institution, including, but
not limited to, increased monitoring by regulators and restrictions on growth,
capital distributions and expansion. The OTS could also take any one of a number
of discretionary supervisory actions, including the issuance of a capital
directive and the replacement of senior executive officers and directors.

         INSURANCE OF DEPOSIT ACCOUNTS. Deposits of the Bank are presently
insured by the SAIF. The FDIC maintains a risk-based assessment system by which
institutions are assigned to one of three categories based on their
capitalization and one of three subcategories based on examination ratings and
other supervisory information. An institution's assessment rate depends upon the
categories to which it is assigned.

                                       34
<PAGE>

Assessment rates for SAIF member institutions are determined semiannually by the
FDIC and currently range from zero basis points for the healthiest institutions
to 27 basis points for the riskiest.

         In addition to the assessment for deposit insurance, institutions are
required to pay on bonds issued in the late 1980s by the Financing Corporation
to recapitalize the predecessor to the SAIF. During 1999, Financing Corporation
payments for SAIF members approximated 6.00 basis points, while BIF members paid
approximately 1.00 basis points. As of January 1, 2000, the BIF and SAIF have
equal sharing of FICO payments.

         The Bank's assessment rate for fiscal 2000 ranged from 2.1 to 6.1 basis
points and the premium paid for this period was $727,000 all of which was paid
towards the Financing Corporation bonds. The FDIC has authority to increase
insurance assessments. A significant increase in SAIF insurance premiums would
have an adverse effect on the operating expenses and results of operations of
the Bank. Management cannot predict what the insurance assessment rate will be
in the future.

         Under the FDI Act, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe or unsound practices,
is in an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
OTS. The management of the Bank does not know of any practice, condition or
violation that might lead to termination of deposit insurance.

         THRIFT RECHARTERING LEGISLATION. Legislation enacted in 1996 provided
that the BIF and the SAIF were to have merged on January 1, 1999 if there were
no more savings associations as of that date. Various proposals to eliminate the
federal savings association charter, create a uniform financial institutions
charter, abolish the OTS and restrict savings and loan holding company
activities have been introduced in Congress. The Bank is unable to predict
whether any of this legislation will be enacted or the extent to which
legislation might restrict or disrupt its operations.

         LOANS TO ONE BORROWER. Under the HOLA, savings institutions are
generally subject to the limits on loans to one borrower applicable to national
banks. Generally, savings institutions may not make a loan or extend credit to a
single or related group of borrowers in excess of 15% of its unimpaired capital
and surplus. An additional amount may be lent, equal to 10% of unimpaired
capital and surplus, if such loan is secured by readily marketable collateral,
which is defined to include certain financial instruments and bullion. At March
31, 2000, the Bank's limit on loans to one borrower was $34.0 million. At March
31, 2000, the Bank's largest aggregate outstanding balance of loans was $26.8
million to a single family tract developer.

         QTL TEST. The HOLA requires savings institutions to meet a QTL test.
Under the QTL test, a savings and loan association must either qualify as a
"domestic building and loan association" as defined in the Internal Revenue Code
or maintain at least 65% of its "portfolio assets" (total assets less: (i)
specified liquid assets up to 20% of total assets; (ii) intangibles, including
goodwill; and (iii) the value of property used to conduct business) in certain
"qualified thrift investments" (primarily residential mortgages and related
investments, including certain mortgage-backed securities) in at least 9 months
out of each 12 month period.

         A savings institution that fails the QTL test is subject to certain
operating restrictions and may be required to convert to a bank charter. As of
March 31, 2000, the Bank maintained 78.68% of its portfolio assets in qualified
thrift investments and, therefore, met the QTL test. Recent legislation has
expanded the extent to which education loans, credit card loans and small
business loans may be considered "qualified thrift investments."

         LIMITATION ON CAPITAL DISTRIBUTIONS. OTS regulations impose limitations
upon all capital distributions by savings institutions, such as cash dividends,
payments to repurchase or otherwise acquire its shares, payments to shareholders
of another institution in a cash-out merger and other distributions charged
against capital. The rule effective in fiscal 1999 established three tiers of
institutions, which are

                                       35
<PAGE>

based primarily on an institution's capital level. An institution that exceeded
all fully phased-in capital requirements before and after a proposed capital
distribution ("Tier 1 Bank") and had not been advised by the OTS that it was in
need of more than normal supervision, could, after prior notice but without
obtaining approval of the OTS, make capital distributions during a calendar year
equal to the greater of (i) 100% of its net earnings to date during the calendar
year plus the amount that would reduce by one-half its "surplus capital ratio"
(the excess capital over its fully phased-in capital requirements) at the
beginning of the calendar year or (ii) 75% of its net income for the previous
four quarters. Effective April 1, 1999, the OTS's capital distribution
regulation changed. Under the new regulation, an application to and the prior
approval of the OTS is required before any capital distribution if the
institution does not meet the criteria for "expedited treatment" of applications
under OTS regulations, the total capital distributions for the calendar year
exceed net income for that year plus the amount of retained net income for the
preceding two years, the institution would be undercapitalized following the
distribution, or the distribution would otherwise be contrary to a statute,
regulation or agreement with the OTS. If an application is not required,
institutions in a holding company structure must still give advance notice to
the OTS of the capital distribution. If the Bank's capital fell below its
regulatory requirements or if the OTS notified it that it was in need of more
than normal supervision, the Bank's ability to make capital distributions could
be restricted. In addition, the OTS could prohibit a proposed capital
distribution, which would otherwise be permitted by the regulation, if the OTS
determined that the distribution would be an unsafe or unsound practice. At
March 31, 2000, the Bank was a Tier 1 Bank.

         LIQUIDITY. The Bank is required to maintain an average daily balance of
specified liquid assets equal to a monthly average of not less than a specified
percentage of its net withdrawal deposit accounts plus short-term borrowings.
This liquidity requirement was 4% at March 31, 2000, but is subject to change
from time to time by the OTS to any amount within the range of 4% to 10%
depending upon economic conditions and the savings flows of member institutions.
Monetary penalties may be imposed for failure to meet these liquidity
requirements. The Bank's liquidity ratio at March 31, 2000 was 4.42%, which
exceeded the applicable requirement. The Bank has never been subject to monetary
penalties for failure to meet its liquidity requirements.

         ASSESSMENTS. Savings institutions are required to pay assessments to
the OTS to fund the agency's operations. The general assessments, paid on a
semi-annual basis, are computed upon the savings institution's total assets,
including consolidated subsidiaries, as reported in the Bank's latest quarterly
thrift financial report. The assessments paid by the Bank for the fiscal year
ended March 31, 2000 totaled $435,000.

         BRANCHING. OTS regulations permit nationwide branching by federally
chartered savings institutions to the extent allowed by federal statute. This
permits federal savings institutions to establish interstate networks and to
geographically diversify their loan portfolios and lines of business. The OTS
authority preempts any state law purporting to regulate branching by federal
savings institutions.

         TRANSACTIONS WITH RELATED PARTIES. The Bank's authority to engage in
transactions with related parties or "affiliates" (e.g., any company that
controls or is under common control with an institution, including the Bancorp
and its non-savings institution subsidiaries) is limited by Sections 23A and 23B
of the Federal Reserve Act ("FRA"). Section 23A limits the aggregate amount of
covered transactions with any individual affiliate to 10% of the capital and
surplus of the savings institution. The aggregate amount of covered transactions
with all affiliates is limited to 20% of the savings institution's capital and
surplus. Certain transactions with affiliates are required to be secured by
collateral in an amount and of a type described in Section 23A and the purchase
of low quality assets from affiliates is generally prohibited. Section 23B
generally provides that certain transactions with affiliates, including loans
and asset purchases, must be on terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to the
institution as those prevailing at the time for comparable transactions with
non-affiliated companies. In addition, savings institutions are prohibited from
lending to any affiliate that is engaged in activities that are not permissible
for bank holding companies and no savings institution may purchase the
securities of any affiliate other than a subsidiary.

                                       36
<PAGE>

         The Bank's authority to extend credit to executive officers, directors
and 10% shareholders ("insiders"), as well as entities such persons control, is
governed by Sections 22(g) and 22(h) of the FRA and Regulation O thereunder.
Among other things, such loans are required to be made on terms substantially
the same as those offered to unaffiliated individuals and to not involve more
than the normal risk of repayment. Recent legislation created an exception for
loans made pursuant to a benefit or compensation program that is widely
available to all employees of the institution and does not give preference to
insiders over other employees. Regulation O also places individual and aggregate
limits on the amount of loans the Bank may make to insiders based, in part, on
the Bank's capital position and requires certain board approval procedures to be
followed.

         ENFORCEMENT. Under the FDI Act, the OTS has primary enforcement
responsibility over savings institutions and has the authority to bring actions
against the institution and all institution-affiliated parties, including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution. Formal enforcement action may range from the issuance of a
capital directive or cease and desist order to removal of officers and/or
directors to institution of receivership, conservatorship or termination of
deposit insurance. Civil penalties cover a wide range of violations and can
amount to $25,000 per day, or even $1 million per day in especially egregious
cases. Under the FDI Act, the FDIC has the authority to recommend to the
Director of the OTS enforcement action to be taken with respect to a particular
savings institution. If action is not taken by the Director, the FDIC has
authority to take such action under certain circumstances. Federal law also
establishes criminal penalties for certain violations.

         STANDARDS FOR SAFETY AND SOUNDNESS. The federal banking agencies have
adopted Interagency Guidelines Prescribing Standards for Safety and Soundness
("Guidelines") and a final rule to implement safety and soundness standards
required under the FDI Act. The Guidelines set forth the safety and soundness
standards that the federal banking agencies use to identify and address problems
at insured depository institutions before capital becomes impaired. The
standards set forth in the Guidelines address internal controls and information
systems; internal audit system; credit underwriting; loan documentation;
interest rate risk exposure; asset growth; asset quality; earnings; and
compensation, fees and benefits. If the appropriate federal banking agency
determines that an institution fails to meet any standard prescribed by the
Guidelines, the agency may require the institution to submit to the agency an
acceptable plan to achieve compliance with the standard, as required by the FDI
Act. The final rule establishes deadlines for the submission and review of such
safety and soundness compliance plans when such plans are required.

         RECENT DEVELOPMENTS. On November 12, 1999, the Gramm-Leach-Bliley
Financial Modernization Act of 1999 became law. The Modernization Act contains
new financial privacy provisions that will generally prohibit financial
institutions, including the Company and the Bank, from disclosing nonpublic
personal financial information to third parties unless customers have the
opportunity to "opt out" of the disclosure. The Modernization Act also allows,
among other things, for bank holding companies meeting certain management,
capital and CRA standards to engage in a substantially broader range of
nonbanking activities than were previously permissible, including insurance
underwriting and making merchant banking investments in commercial and financial
companies. The Modernization Act further allows insurers and other financial
services companies to acquire banks; removes various restrictions that currently
apply to bank holding company ownership of securities firms and mutual fund
advisory companies; and establishes the overall regulatory structure applicable
to bank holding companies that also engage in insurance and securities
operations.

         Because the Modernization Act permits banks, securities firms and
insurers to combine and to offer a wide variety of financial products and
services, many of these resulting companies will be larger and have more
resources than the Company. Should these companies choose to compete directly
with the Company in its target markets, the Company's results of operations
could be adversely impacted.

FEDERAL RESERVE SYSTEM

         The Federal Reserve Board regulations require savings institutions to
maintain non-interest earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The Federal

                                       37
<PAGE>

Reserve Board regulations generally require that reserves be maintained against
aggregate transaction accounts as follows: for accounts aggregating $44.3
million or less (subject to adjustment by the Federal Reserve Board) the reserve
requirement was 3%; and for accounts aggregating greater than $44.3 million, the
reserve requirement was $1.40 million plus 10% (subject to adjustment by the
Federal Reserve Board between 8% and 14%) against that portion of total
transaction accounts in excess of $44.3 million. The first $4.9 million of
otherwise reservable balances (subject to adjustments by the Federal Reserve
Board) were exempted from the reserve requirements. The Bank maintained
compliance with the foregoing requirements. The balances maintained to meet the
reserve requirements imposed by the Federal Reserve Board may be used to satisfy
liquidity requirements imposed by the OTS.


                           FEDERAL AND STATE TAXATION

FEDERAL TAXATION

         General. The Company reports its income on a fiscal year basis using
         -------
the accrual method of accounting and is subject to federal income taxation in
the same manner as other corporations with some exceptions, including
particularly the Bank's reserve for bad debts discussed below. The Company files
federal income tax returns on a consolidated basis. The Bank has been audited by
the IRS through the 1990 tax year and the California Franchise Tax Board through
the 1985 tax year and for the 1993 tax year. The statute of limitations has
closed for all tax years for both IRS and California Franchise Tax Board
purposes through the 1993 tax year. The following discussion of tax matters is
intended only as a summary and does not purport to be a comprehensive
description of the tax rules applicable to the Company.

         Tax Bad Debt Reserve. Formerly, savings institutions such as the Bank
         --------------------
which met certain definitional tests primarily relating to their assets and the
nature of their business ("qualifying thrifts") were permitted to establish a
reserve for bad debts and to make annual additions , which additions could,
within specified formula limits, be deducted in arriving at taxable income. The
Bank's deduction with respect to "qualifying loans," ( generally loans secured
by certain interests in real property), could be computed using a percentage
based on the Bank's actual loss experience, (the "experience method"), or a
percentage equal to eight percent of the Bank's taxable income before such
deduction (the "percentage of taxable income method"). Each year the Bank
selected the more favorable way to calculate the deduction attributable to an
addition to the bad debt reserve.

         Pursuant to the Small Business Job Protection Act of 1996 (the "Act"),
Congress repealed the reserve method of accounting for bad debts for savings
institutions, effective for taxable years beginning after 1995. The Bank changed
its method of accounting for bad debts from the reserve method formerly
permitted under section 593 of the Internal Revenue Code of 1986, as amended
(the "Code") to the "specific charge-off" method. Under the specific charge-off
method, which is governed by section 166 of the Code and the regulations
thereunder, tax deductions may be taken for bad debts only if loans become
wholly or partially worthless. Although the Act requires that qualifying thrifts
recapture (i.e., include in taxable income) over a six-year period a portion of
their existing bad debt reserves equal to their "applicable excess reserves,"
the Bank does not have applicable excess reserves subject to recapture. However,
the Bank's tax bad debt reserve balance of approximately $25.3 million (as of
March 31, 2000) will, in future years, be subject to recapture in whole or in
part upon the occurrence of certain events, such as a distribution to
shareholders in excess of the Bank's current and accumulated earnings and
profits, a redemption of shares, or upon a partial or complete liquidation of
the Bank. The Bank does not intend to make distributions to shareholders that
would result in recapture of any portion of its bad debt reserves. These
reserves would also be subject to recapture if the Bank fails to qualify as a
"bank" for federal income tax purposes.

         Corporate Alternative Minimum Tax. The Internal Revenue Code of 1986,
         ---------------------------------
as amended (the "Code") imposes a tax on alternative minimum taxable income
("AMTI") at a rate of 20%. The excess of the bad debt reserve deduction using
the percentage of taxable income method over the deduction that would have been
allowable under the experience method is treated as a preference item for
purposes of computing the AMTI. Only 90% of AMTI can be offset by net operating
loss carryovers of which the Company currently has none. AMTI is increased by an
amount equal to 75% of the amount by which the Company's adjusted

                                       38
<PAGE>

current earnings exceeds its AMTI (determined without regard to this preference
and prior to reduction for net operating losses). In addition, for taxable years
beginning after December 31, 1996 and before January 1, 1996, an environmental
tax of .12% of the excess of AMTI (with certain modifications) over $2.0 million
is imposed on corporations, including the Company, whether or not an Alternative
Minimum Tax ("AMT") is paid. The Company does not expect to be subject to the
AMT, but may be subject to the environmental tax liability.

         Dividends Received Deduction and Other Matters. The Company may exclude
         ----------------------------------------------
from its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The corporate dividends received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Company will not file a consolidated tax return, except that if
the Company owns more than 20% of the stock of a corporation distributing a
dividend then 80% of any dividends received may be deducted.

STATE AND LOCAL TAXATION

         State of California. The California franchise tax rate applicable to
         -------------------
the Company equals the franchise tax rate applicable to corporations generally,
plus an "in lieu" rate approximately equal to personal property taxes and
business license taxes paid by such corporations (but not generally paid by
banks or financial corporations such as the Company); however, the total tax
rate cannot exceed 10.84%. Under California regulations, bad debt deductions are
available in computing California franchise taxes using a three or six-year
weighted average loss experience method. The Bancorp and its California
subsidiary file California state franchise tax returns on a combined basis.
Assuming that the holding company form of organization is continued to be
utilized, the Bancorp, as a savings and loan holding company commercially
domiciled in California, will generally be treated as a financial corporation
and subject to the general corporate tax rate plus the "in lieu" rate as
discussed previously.

         Delaware Taxation. As a Delaware holding company not earning income in
         -----------------
Delaware, the Bancorp is exempted from Delaware corporate income tax but is
required to file an annual report with and pay an annual franchise tax to the
State of Delaware.

ITEM 2.  PROPERTIES.
-------------------

         As of March 31, 2000, PFF Bank & Trust was conducting its business
through 23 banking branches, two trust offices (one of which is domiciled in one
of the Bank's branch banking buildings), a regional loan center, a satellite
loan office, a human resources and training center, plus one executive
administrative building and one records center.

         The executive offices for the Bank and the Bancorp are located at 350
South Garey Avenue, Pomona, California.

         Of the 23 banking branches, sixteen of the buildings and the land on
which they are located are owned, one building is owned on leased land, and six
buildings and the land on which they are located are leased. The separate trust
office, the administrative office and land on which they are located are leased.
The regional loan center and the land on which it is located are owned and the
satellite loan office is leased. The human resources and training center and the
records center and land occupied by them are owned.

         As of March 31, 2000, the net book value of owned real estate including
the branch located on leased land totaled $16.9 million. The net book value of
leased offices was $2.5 million. The net book value of furniture, fixtures and
electronic data processing equipment was $5.3 million.

                                       39
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.
--------------------------

         The Bancorp and subsidiaries have been named as defendants in various
lawsuits arising in the normal course of business. The outcome of these lawsuits
cannot be predicted, but the Bancorp intends to vigorously defend the actions
and is of the opinion that the lawsuits will not have a material effect on the
Bancorp.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
------------------------------------------------------------

         None.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
------------------------------------------------------------------------------

         The Common Stock of PFF Bancorp, Inc. is traded over-the-counter on the
NASDAQ National Market under the symbol "PFFB." The stock began trading on March
29, 1996. The table below sets forth for the periods indicated the high, low and
closing sale prices of PFF Bancorp, Inc. common stock. As of March 31, 2000,
there were approximately 5,200 holders of the Common Stock of the Company, which
includes the approximate number of shares held in street name.

                                     HIGH          LOW       CLOSING
                                 -----------------------------------
Year Ended March 31, 2000
    First Quarter                $   19.75        15.38        18.75
    Second Quarter                   21.38        18.81        20.63
    Third Quarter                    23.75        19.25        19.38
    Fourth Quarter                   19.75        13.50        15.50

Year Ended March 31, 1999
    First Quarter                $   21.38        17.75        18.63
    Second Quarter                   19.63        11.50        15.25
    Third Quarter                    16.13        10.75        16.00
    Fourth Quarter                   18.63        15.25        17.50


         The Company initiated a cash dividend program on its Common Stock
during the fiscal year ended March 31, 2000. Dividend activity was as follows:

                                                                        Amount
          Record Date                     Payment Date                per share
       ------------------------------------------------------------------------
       September 15, 1999                 September 30, 1999               $.06
       December 15, 1999                  December 30, 1999                $.06
       March 15, 2000                     March 31, 2000                   $.06


         The Company neither paid nor declared any dividends prior to September
1999.

                                       40
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA.
--------------------------------
          The selected consolidated financial and other data of the Company set
forth below is derived in part from, and should be read in conjunction with the
consolidated financial statements of the Company and notes thereto - See Item 8
- "Financial Statements and Supplementary Data".

<TABLE>
<CAPTION>
                                                                          AT MARCH 31,
                                                 --------------------------------------------------------------
                                                     2000         1999         1998         1997        1996
                                                 --------------------------------------------------------------
                                                                     (DOLLARS IN THOUSANDS)

<S>                                              <C>           <C>          <C>          <C>          <C>
SELECTED BALANCE SHEET DATA:

Total assets                                     $3,034,023    2,935,980    2,812,384    2,535,767    2,008,139
Investment securities held-to-maturity                  701          709          714       15,718       25,652
Investment securities available-for-sale             87,810       82,387       92,908       63,210        4,982
Mortgage-backed securities held-to-maturity            --            556        1,373        5,490        7,134
Mortgage-backed securities available-for-sale       381,277      525,560      481,620      486,009      125,588
Collateralized mortgage obligations
   available-for-sale                                85,653      102,700      223,502       24,437        4,950
Collateralized mortgage obligations
  held-to-maturity                                     --           --           --            472        2,374
Trading securities                                    4,318        4,271         --           --           --
Investment in real estate                             4,928        6,371          731        1,113          911
Loans held for sale                                   7,362        3,531          701          736        6,015
Loans receivable, net(1)                          2,326,702    2,026,081    1,827,614    1,819,209    1,574,935
Deposits                                          1,906,534    1,843,538    1,740,824    1,711,049    1,682,073
FHLB advances and other borrowings                  884,000      814,000      785,886      530,000       19,722
Stockholders' equity, substantially restricted      221,831      242,665      254,278      265,526      289,071
</TABLE>


                            (continued on next page)

                                       41
<PAGE>

<TABLE>
<CAPTION>
                                                            FOR THE YEAR ENDED MARCH 31,
                                           ------------------------------------------------------------
                                              2000         1999         1998        1997         1996
                                           ------------------------------------------------------------
                                                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                        <C>          <C>          <C>         <C>          <C>
SELECTED OPERATING DATA:

Interest income                            $ 215,328      206,955      191,368     168,515      136,173
Interest expense                             126,539      130,356      118,517      99,306       87,556
                                           ---------    ---------    ---------   ---------    ---------
Net interest income                           88,789       76,599       72,851      69,209       48,617
Provision for loan losses                      4,000        4,020        7,099      13,661       10,895
                                           ---------    ---------    ---------   ---------    ---------
Net interest income after provision
  for loan losses                             84,789       72,579       65,752      55,548       37,722
Non-interest income                           17,252       15,548       14,280      10,227        8,139
Non-interest expense:
  General and administrative expense          55,506       54,960       51,560      49,381       40,475
  SAIF recapitalization assessment              --           --           --        10,900         --
  Foreclosed real estate operations, net        (278)         (45)         473        (325)       1,670
                                           ---------    ---------    ---------   ---------    ---------
Total non-interest expense                    55,228       54,915       52,033      59,956       42,145
                                           ---------    ---------    ---------   ---------    ---------
Earnings before income taxes                  46,813       33,212       27,999       5,819        3,716
Income taxes                                  20,215       14,208       12,019       3,087        1,651
                                           ---------    ---------    ---------   ---------    ---------
Net earnings                               $  26,598       19,004       15,980       2,732        2,065
                                           =========    =========    =========   =========    =========
Basic earnings per share (2)               $    2.20         1.37         1.00        0.15          N/A
                                           =========    =========    =========   =========    =========
Diluted earnings per share (2)             $    2.02         1.29         0.95        0.15          N/A
                                           =========    =========    =========   =========    =========
</TABLE>


                            (continued on next page)

                                       42
<PAGE>

<TABLE>
<CAPTION>
                                                                        AT OR FOR THE YEAR ENDED MARCH 31,
                                                      ----------------------------------------------------------------
                                                             2000         1999          1998         1997       1996
                                                      ----------------------------------------------------------------
                                                                              (DOLLARS IN THOUSANDS)
<S>                                                    <C>             <C>            <C>         <C>          <C>
PERFORMANCE RATIOS (3):
  Return on average assets                                   0.90%         0.64         0.60         0.12         0.11
  Return on average equity                                  11.91          7.92         6.07         0.96         1.86
  Average equity to average assets                           7.54          8.08         9.87        12.10         5.88
  Equity to total assets at end of period                    7.31          8.27         9.04        10.47        14.39
  Net interest spread (4)                                    2.83          2.47         2.41         2.52         2.51
  Effective interest spread (5)                              3.10          2.71         2.82         3.05         2.66
  Average interest-earning assets to
    average interest-bearing liabilities                   106.22        105.16       108.98       112.04       103.17
  Efficiency ratio (6)                                      52.34         59.64        59.18        62.16        71.31
  General and administrative expense
    to average assets                                        1.87          1.85         1.93         2.10         2.14
REGULATORY CAPITAL RATIOS (3)(7):
  Tangible capital                                           6.77          6.95         7.10         8.46        10.53
  Core capital                                               6.77          6.95         7.10         8.46        10.53
  Risk-based capital                                        11.00         12.52        14.17        16.54        20.93
ASSET QUALITY RATIOS (3):
  Non-performing loans as a percent of gross loans
    receivable (8)(9)                                        0.21          0.50         0.88         1.24         1.41
  Non-performing assets as a percent
    of total assets (9)                                      0.23          0.56         0.88         1.23         1.48
  Allowance for loan losses as a
    percent of gross loans receivable (8)                    1.09          1.18         1.33         1.47         1.21
  Allowance for loan losses as a
    percent of non-performing loans (9)                    512.96        237.56       151.27       118.72        86.01
  NUMBER OF FULL-SERVICE CUSTOMER FACILITIES                   23            24           23           23           22
  LOAN ORIGINATIONS                                    $1,268,324       987,604      557,428      499,667      265,210
</TABLE>
----------
(1)  The allowances for loan losses at March 31, 2000, 1999, 1998, 1997, and
     1996 were $27.8 million, $26.2 million, $26.0 million, $27.7 million, and
     $19.7 million, respectively.

(2)  Earnings per share have been restated to reflect the adoption of Statement
     of Financial Accounting Standards No. 128, "Earnings Per Share."

(3)  Asset Quality Ratios and Regulatory Capital Ratios are end of period
     ratios. Performance Ratios are based on average daily balances during the
     indicated periods.

(4)  Net interest spread represents the difference between the weighted average
     yield on interest-earning assets and the weighted average cost of
     interest-bearing liabilities.

(5)  Effective interest spread represents net interest income as a percent of
     average interest-earning assets.

(6)  The efficiency ratio represents general and administrative expense as a
     percent of net interest income plus non-interest income.

(7)  For definitions and further information relating to the Bank's regulatory
     capital requirements, see "Regulation - Federal Savings Institution
     Regulation - Capital Requirements."

(8)  Gross loans receivable includes loans receivable held for investment and
     loans held for sale and excludes loans held for accelerated disposition.

(9)  Non-performing assets consist of non-performing loans and REO.
     Non-performing loans consist of all loans 90 days or more past due and all
     other non-accrual loans. It is the Bank's policy to cease accruing interest
     on loans 90 days or more past due. See "Business of the Bank - Non-Accrual
     and Past Due Loans" and "Real Estate."

                                       43
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.
         ---------------------------------------------------------------

ASSET/LIABILITY MANAGEMENT

          The Company's earnings depend primarily on its net interest income.
Net interest income is affected by net interest spread. Changes in net interest
spread ("interest rate risk") are influenced to a significant degree by the
repricing characteristics of assets and liabilities ("timing risk"), the
relationship between various rates ("basis risk"), customer options, and changes
in the shape of the yield curve.

          The Company's Asset/Liability Committee ("ALCO") is responsible for
implementing the interest rate risk policies designed to manage its interest
rate risk exposure. The Board of Directors approves acceptable interest rate
risk levels designed to provide sufficient net interest income and market value
of shareholder equity (NPV) assuming specified changes in interest rates. NPV is
defined as the present value of expected net cash flows from existing assets
minus the present value of expected net cash flows from existing liabilities.

          One measure of the Company's exposure to interest rate risk is shown
in the following table which sets forth the repricing frequency of its major
assets and liabilities as of March 31, 2000. Repricing frequencies of assets are
based upon contractual maturities, repricing opportunities, and the scheduled
principal payments and estimated prepayments. Repricing of liabilities are based
upon the contractual maturities, estimated decay rates for passbook, NOW and
other demand accounts and money market savings accounts ("core deposits"), and
the earliest repricing opportunity for variable and floating rate instruments.
The Company also had $255.0 million of putable borrowings on the balance sheet
as of March 31, 2000 that are assumed to reprice at their contractual final
maturity. The interest rate sensitivity of the Company's assets and liabilities
illustrated in the following table would vary substantially if different
assumptions were used, or if actual experience differed from that assumed.

                                       44
<PAGE>

<TABLE>
<CAPTION>
                                                                             MARCH 31, 2000
                                                  ---------------------------------------------------------------------
                                                                MORE THAN 3     MORE THAN 6   MORE THAN 12   MORE THAN 3
                                                  3 MONTHS      MONTHS TO 6     MONTHS TO 12  MONTHS TO 3    YEARS TO 5
                                                   OR LESS        MONTHS          MONTHS        YEARS          YEARS
                                                  ---------------------------------------------------------------------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                               <C>           <C>            <C>            <C>            <C>
Interest-earning assets:
  Cash, investment securities,
    collateralized mortgage obligations
    and FHLB stock (1)                            $   81,009         1,197          2,333          8,596         44,918
  Loans and mortgage-backed securities: (1)
    Mortgage-backed securities                        42,697        44,832         74,302        145,491         47,314
    Loans receivable, net                          1,247,967       264,433        226,789        297,308        216,275
                                                  ----------    ----------     ----------     ----------     ----------
     Total loans and mortgage-backed securities    1,290,664       309,265        301,091        442,799        263,589
                                                  ----------    ----------     ----------     ----------     ----------
     Total interest-earning assets                 1,371,673       310,462        303,424        451,395        308,507
  Non-interest earning assets                           --            --             --             --             --
                                                  ----------    ----------     ----------     ----------     ----------
     Total assets                                 $1,371,673       310,462        303,424        451,395        308,507
                                                  ==========    ==========     ==========     ==========     ==========

Interest-bearing liabilities:
  Fixed maturity deposits                         $  407,972       344,220        255,038        133,120         26,607
  Core deposits (2)                                   44,853        44,854         89,708        268,982        135,827
                                                  ----------    ----------     ----------     ----------     ----------
     Total deposits                                  452,825       389,074        344,746        402,102        162,434
  Borrowings (3)                                     279,000       130,000        300,000        175,000           --
                                                  ----------    ----------     ----------     ----------     ----------
     Total interest-bearing liabilities              731,825       519,074        644,746        577,102        162,434
  Non-interest bearing liabilities                      --            --             --             --             --
  Equity                                                --            --             --             --             --
                                                  ----------    ----------     ----------     ----------     ----------
     Total liabilities and stockholders' equity   $  731,825       519,074        644,746        577,102        162,434
                                                  ==========    ==========     ==========     ==========     ==========
Interest sensitivity gap                          $  639,848      (208,612)      (341,322)      (125,707)       146,073
Cumulative interest sensitivity gap               $  639,848       431,236         89,914        (35,793)       110,280
Cumulative interest sensitivity gap as a
  percentage of total assets                           21.09%        14.21           2.96          (1.18)          3.63
Cumulative interest-earning assets as a
  percentage of cumulative interest-
  bearing liabilities                                 187.43        134.47         104.74          98.55         104.18
</TABLE>

<TABLE>
<CAPTION>
                                                               MARCH 31, 2000
                                                  --------------------------------------
                                                  MORE THAN 5                    FAIR
                                                     YEARS          TOTAL        VALUE
                                                  --------------------------------------
<S>                                               <C>            <C>          <C>
Interest-earning assets:
  Cash, investment securities,
    collateralized mortgage obligations
    and FHLB stock (1)                               125,038       263,091      256,822
  Loans and mortgage-backed securities: (1)
    Mortgage-backed securities                        26,641       381,277      372,898
    Loans receivable, net                             81,292     2,334,064    2,312,019
                                                  ----------    ----------   ----------
     Total loans and mortgage-backed securities      107,933     2,715,341    2,684,917
                                                  ----------    ----------   ----------
     Total interest-earning assets                   232,971     2,978,432    2,941,739
  Non-interest earning assets                         55,591        55,591       55,591
                                                  ----------    ----------   ----------
     Total assets                                    288,562     3,034,023    2,997,330
                                                  ==========    ==========   ==========

Interest-bearing liabilities:
  Fixed maturity deposits                                382     1,167,339    1,162,400
  Core deposits (2)                                  154,971       739,195      739,195
                                                  ----------    ----------   ----------
     Total deposits                                  155,353     1,906,534    1,901,595
  Borrowings (3)                                        --         884,000      883,055
                                                  ----------    ----------   ----------
     Total interest-bearing liabilities              155,353     2,790,534    2,784,650
  Non-interest bearing liabilities                    21,658        21,658       21,658
  Equity                                             221,831       221,831      221,831
                                                  ----------    ----------   ----------
     Total liabilities and stockholders' equity      398,842     3,034,023    3,028,139
                                                  ==========    ==========   ==========
Interest sensitivity gap                              77,618       187,898
Cumulative interest sensitivity gap                  187,898
Cumulative interest sensitivity gap as a
  percentage of total assets                            6.19
Cumulative interest-earning assets as a
  percentage of cumulative interest-
  bearing liabilities                                 106.73
</TABLE>
----------
(1)  Based upon contractual maturities, repricing date, and forecasted principal
     payments assuming normal amortization and, where applicable prepayments.

(2)  Assumes annual decay rates ranging from 20%-33%.

(3)  Putable borrowings are presented based upon their first put date.

                                       45
<PAGE>

          The Company's one year GAP at March 31, 2000, was 2.96% (i.e., more
interest earning assets reprice within one year than interest-bearing
liabilities); this compares with 14.35% at March 31, 1999. The decrease in the
Company's one-year repricing GAP between March 31, 1999 and 2000 is
attributable, in part, to decreasing prepayment speeds on mortgages, the
origination of hybrid ARM's, the origination of mortgage loans with 40-year
terms to maturity, and a change in the presentation of putable FHLB advances
from the contractual maturity date as of March 31, 1999 to reporting as of the
next put date as of March 31, 2000 due to the increase in interest rates during
fiscal 2000 increasing the probability that the puts will be exercised.

          Although the table indicates the Company is better protected against
rising interest rates, a GAP table is limited to measuring the timing risk and
does not reflect the impact of customer options or basis risk. To better measure
the Company's exposure to these and other components of interest rate risk,
management relies on an internally maintained, externally supported
asset/liability simulation model.

          The Company forecasts its net interest income for the next twelve
months, and its NPV, assuming there are no changes in interest rates or the
balance sheet structure from the current period end. Once this "base case" has
been established, the Company subjects its balance sheet to instantaneous and
sustained rate changes of 100, 200, and 300 basis points to the treasury yield
curve. Prepayment speeds and the responsiveness of the various indices are
estimated for each rate change level. The model then re-forecasts net interest
income and NPV. The table below indicates the results of the Company's internal
modeling of its balance sheet as of March 31, 2000. Once again, it should be
noted that the internal calculation of the Company's sensitivity to interest
rate changes would vary substantially if different assumptions were used, or if
the Company's response to changes in interest rates included changes in the
structure of its balance sheet.

                                                   PERCENTAGE CHANGE
                                             --------------------------------
            CHANGE IN INTEREST RATES         NET INTEREST       NET PORTFOLIO
               (IN BASIS POINTS)              INCOME(1)            VALUE(2)
            -----------------------------------------------------------------
                      200                       (8.4)%             (14.5)%
                      100                       (2.1)               (6.3)
                     (100)                       0.4                 2.7
                     (200)                       0.1                 3.7


(1)  This percentage change represents the impact to net interest income for the
     period from April 1, 2000 through March 31, 2001 assuming the Company does
     not change the structure of its balance sheet.

(2)  This percentage represents the NPV of the Company assuming no changes to
     the balance sheet.

          Although the GAP table indicates the Company's net interest income
should perform better in a rising rate environment, results from the
asset/liability simulation model indicate that yield compression would occur
decreasing net interest income over the next twelve months. These results
reflect the impact rising rates would have in decreasing prepayments, assets
encountering periodic and lifetime caps and other factors that are not included
in the GAP table.

          The OTS produces an analysis of the Bank's interest rate risk using
its own model, based upon data submitted on the Bank's quarterly Thrift
Financial Reports. The results of the OTS model may vary from the Bank's
internal model primarily due to differences between assumptions utilized in the
Bank's internal model and the OTS model, including estimated loan market rates,
prepayment rates, reinvestment rates and deposit decay rates. As of March 31,
2000, the Bank's sensitivity measure, as calculated by the OTS, was a negative
2.77%. This represents an increase in sensitivity of 125 basis points from the
March 31, 1999 results.

                                       46
<PAGE>

AVERAGE BALANCE SHEETS

          The following table sets forth certain information relating to the
Company for the years ended March 31, 2000, 1999, and 1998. The yields and costs
are derived by dividing income or expense by the average balances of assets or
liabilities, respectively, for the periods shown. Average balances are derived
from average daily balances. The yields include fees that are considered
adjustments to yields.

<TABLE>
<CAPTION>
                                                                                       YEAR ENDED MARCH 31,
                                                           -------------------------------------------------------------------------
                                                                             2000                               1999
                                                           -------------------------------------------------------------------------
                                                                                       AVERAGE                           AVERAGE
                                                            AVERAGE                    YIELD/   AVERAGE                  YIELD/
                                                            BALANCE       INTEREST      COST    BALANCE     INTEREST      COST
                                                           ---------------------------------------------------------------------
                                                                                      (DOLLARS IN THOUSANDS)
<S>                                                        <C>           <C>           <C>      <C>         <C>          <C>
ASSETS:

  Interest-earning assets:
    Interest-earning deposits and short-term investments   $   35,688    $   1,656      4.64%   $   40,037  $   1,921     4.80%
    Investment securities, net                                 92,208        5,935      6.44       102,626      6,633     6.46
    Mortgage-backed securities, net                           437,549       27,910      6.38       596,185     37,471     6.29
    Collateralized mortgage obligations, net                   92,637        5,893      6.36       167,538     10,209     6.09
    Loans receivable, net                                   2,162,492      171,618      7.94     1,872,869    148,013     7.90
    FHLB stock                                                 43,752        2,316      5.29        47,778      2,708     5.67
                                                           ----------    ---------              ----------   --------
        Total interest-earning assets                       2,864,326      215,328      7.52     2,827,033    206,955     7.32
    Non-interest-earning assets                                98,750                              139,799
                                                                                                ----------
        Total assets                                       $2,963,076                           $2,966,832
                                                           ==========                           ==========

LIABILITIES AND STOCKHOLDERS' EQUITY:
  Interest-bearing liabilities:
    Passbook accounts                                      $  141,103        3,156      2.24    $  147,702      3,405     2.31
    Money market savings accounts                             401,394       17,649      4.40       290,917     13,131     4.51
    NOW and other demand deposit accounts                     212,752        1,366      0.64       188,130      1,293     0.69
    Certificate accounts                                    1,101,254       57,149      5.19     1,153,199     61,705     5.35
                                                           ----------    ---------              ----------  ---------
        Total                                               1,856,503       79,320      4.27     1,779,948     79,534     4.47
    FHLB advances and other borrowings                        836,528       47,195      5.64       905,197     50,711     5.60
    Other                                                       3,563           24      0.67         3,101        111     3.58
                                                           ----------    ---------              ----------  ---------
        Total interest-bearing liabilities                  2,696,594      126,539      4.69     2,688,246    130,356     4.85
                                                                         ---------                          ---------
    Non-interest-bearing liabilities                           43,157                               38,729
                                                           ----------                           ----------
        Total liabilities                                   2,739,751                            2,726,975
  Stockholders' equity                                        223,325                              239,857
                                                           ----------                           ----------

        Total liabilities and stockholders' equity         $2,963,076                           $2,966,832
                                                           ==========                           ==========

Net interest income                                                      $  88,789                             76,599
                                                                         =========                          =========

Net interest spread                                                                     2.83                              2.47
Effective interest spread                                                               3.10                              2.71
Ratio of interest-earning assets to interest-
  bearing liabilities                                          106.22%                              105.16%
</TABLE>

<TABLE>
<CAPTION>                                                  ------------------------------------
                                                                            1998
                                                           ------------------------------------
                                                                                       AVERAGE
                                                           AVERAGE                      YIELD/
                                                           BALANCE       INTEREST      COST
                                                           ------------------------------------
<S>                                                        <C>          <C>            <C>
ASSETS:

  Interest-earning assets:
    Interest-earning deposits and short-term investments   $   30,158   $   1,590        5.27%
    Investment securities, net                                 52,971       3,594        6.78
    Mortgage-backed securities, net                           489,562      33,167        6.77
    Collateralized mortgage obligations, net                  126,924       8,337        6.57
    Loans receivable, net                                   1,853,686     142,815        7.70
    FHLB stock                                                 30,911       1,865        6.03
                                                           ----------   ---------      ------
        Total interest-earning assets                       2,584,212     191,368        7.41
    Non-interest-earning assets                                85,842
                                                           ----------
        Total assets                                       $2,670,054
                                                           ==========

LIABILITIES AND STOCKHOLDERS' EQUITY:
  Interest-bearing liabilities:
    Passbook accounts                                      $  162,874       4,205        2.58
    Money market savings accounts                             193,146       7,981        4.13
    NOW and other demand deposit accounts                     159,298       1,214        0.76
    Certificate accounts                                    1,201,989      66,755        5.55
                                                           ----------   ---------
        Total                                               1,717,307      80,155        4.67
    FHLB advances and other borrowings                        651,078      38,233        5.87
    Other                                                       2,910         129        4.43
                                                           ----------   ---------
        Total interest-bearing liabilities                  2,371,295     118,517        5.00
                                                                        ---------
    Non-interest-bearing liabilities                           35,318
                                                           ----------
        Total liabilities                                   2,406,613
  Stockholders' equity                                        263,441
                                                           ----------
        Total liabilities and stockholders' equity         $2,670,054
                                                           ==========
Net interest income                                                     $  72,851
                                                                        =========
Net interest spread                                                                      2.41
Effective interest spread                                                                2.82
Ratio of interest-earning assets to interest-
  bearing liabilities                                          108.98%
</TABLE>

                                       47
<PAGE>

RATE/VOLUME ANALYSIS

          The following table presents the extent to which changes in interest
rates and changes in the volume of interest-earning assets and interest-bearing
liabilities have affected the Company's interest income and interest expense
during the periods indicated. Information is provided in each category with
respect to: (i) changes attributable to changes in volume (changes in volume
multiplied by prior rate); (ii) changes attributable to changes in rate (changes
in rate multiplied by prior volume); (iii) changes attributable to changes in
rate volume (change in rate multiplied by change in volume); and (iv) the net
change.
<TABLE>
<CAPTION>
                                                                          YEAR ENDED MARCH 31, 2000
                                                                                 COMPARED TO
                                                                          YEAR ENDED MARCH 31, 1999
                                                         --------------------------------------------------------
                                                                             INCREASE (DECREASE)
                                                                                   DUE TO
                                                         ----------------------------------------------------
                                                                                  RATE/
                                                          VOLUME      RATE       VOLUME      NET      VOLUME
                                                         ----------------------------------------------------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                                      <C>          <C>        <C>        <C>       <C>
INTEREST-EARNING ASSETS:
  Interest-earning deposits and short-term investments   $  (209)        (63)         7       (265)       521
  Investment securities, net                                (673)        (27)         2       (698)     3,369
  Mortgage-backed securities, net                         (9,970)        558       (149)    (9,561)     7,224
  Collateralized mortgage obligations, net                (4,564)        449       (201)    (4,316)     2,668
  Loans receivable, net                                   22,889         620         96     23,605      1,478
  FHLB stock                                                (228)       (179)        15       (392)     1,018
                                                         -------      ------      -----     ------     ------
      Total interest-earning assets                        7,245       1,358       (230)     8,373     16,278
                                                         -------      ------      -----     ------     ------

INTEREST-BEARING LIABILITIES:
  Passbook accounts                                         (152)       (101)         4       (249)      (392)
  Money market savings accounts                            4,987        (340)      (129)     4,518      4,040
  NOW and other demand deposit accounts                      169         (85)       (11)        73        220
  Certificate accounts                                    (2,779)     (1,860)        83     (4,556)    (2,710)
  FHLB advances and other borrowings                      (3,847)        358        (27)    (3,516)    14,923
  Other                                                       17         (90)       (14)       (87)         8
                                                         -------      ------      -----     ------     ------
      Total interest-bearing liabilities                  (1,605)     (2,118)       (94)    (3,817)    16,089
                                                         -------      ------      -----     ------     ------
      Change in net interest income                      $ 8,850       3,476       (136)    12,190        189
                                                         =======      ======      =====     ======     ======
</TABLE>

<TABLE>
<CAPTION>
                                                             YEAR ENDED MARCH 31, 1999
                                                                    COMPARED TO
                                                             YEAR ENDED MARCH 31, 1998
                                                         ---------------------------------
                                                             INCREASE (DECREASE) DUE TO
                                                         ---------------------------------
                                                                         RATE/
                                                           RATE        VOLUME        NET
                                                         ---------------------------------
<S>                                                      <C>         <C>         <C>
INTEREST-EARNING ASSETS:
  Interest-earning deposits and short-term investments       (143)        (47)        331
  Investment securities, net                                 (170)       (160)      3,039
  Mortgage-backed securities, net                          (2,397)       (523)      4,304
  Collateralized mortgage obligations, net                   (603)       (193)      1,872
  Loans receivable, net                                     3,682          38       5,198
  FHLB stock                                                 (113)        (62)        843
                                                         --------    --------    --------
      Total interest-earning assets                           256        (947)     15,587
                                                         --------    --------    --------

INTEREST-BEARING LIABILITIES:
  Passbook accounts                                          (450)         42        (800)
  Money market savings accounts                               737         373       5,150
  NOW and other demand deposit accounts                      (119)        (22)         79
  Certificate accounts                                     (2,439)         99      (5,050)
  FHLB advances and other borrowings                       (1,758)       (687)     12,478
  Other                                                       (25)         (1)        (18)
                                                         --------    --------    --------
      Total interest-bearing liabilities                   (4,054)       (196)     11,839
                                                         --------    --------    --------
      Change in net interest income                         4,310        (751)      3,748
                                                         ========    ========    ========
</TABLE>

                                       48
<PAGE>

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 2000 AND
MARCH 31, 1999
--------------------------------------------------------------------------------

GENERAL
-------

          The Company reported net earnings of $26.6 million for fiscal 2000
compared to net earnings of $19.0 million for fiscal 1999. The improvement in
operating results between fiscal 2000 and fiscal 1999 was attributable
principally to an increase in net interest income from $76.6 million for fiscal
1999 to $88.8 million for fiscal 2000 attributable to expansion of net interest
rate spread coupled with growth in average interest-earning assets and an
increase in non-interest income from $15.5 million for fiscal 1999 to $17.3
million for fiscal 2000 driven principally by a $1.5 million gain on branch sale
during fiscal 2000.

INTEREST INCOME
---------------

          Interest income for fiscal 2000 was $215.3 million compared to $207.0
million for fiscal 1999, an increase of $8.4 million or 4%. The increase in
interest income between fiscal 1999 and fiscal 2000 was attributable to a $37.3
million increase in average interest-earning assets from $2.83 billion for
fiscal 1999 to $2.86 billion for fiscal 2000 and a 20 basis point increase in
the yield on average interest-earning assets from 7.32% for fiscal 1999 to 7.52%
for fiscal 2000.

          The increase in average interest-earning assets between fiscal 1999
and fiscal 2000 was comprised principally of a $289.6 million increase in the
average balance of loans receivable, net from $1.87 billion for fiscal 1999 to
$2.16 billion for fiscal 2000 partially offset by a $244.0 million decrease in
the aggregate average balance of investment securities, MBS and CMOs from $866.3
million for fiscal 1999 to $622.4 million for fiscal 2000.

          During mid-fiscal 1999, the Company undertook a strategy of reducing
its wholesale leverage (investment securities, MBS and CMOs funded with FHLB
advances and other borrowings). This strategy was undertaken in connection with
an increased focus by the Company on enhancing its net interest spread and
achieving an earnings stream and balance sheet comprised to a greater extent by
the Four-C's on the asset side and core deposits on the liability side. Strong
loan origination volumes of the Four-C's have provided an investment alternative
for the Company which is preferential to investment securities, MBS and CMOs and
is consistent with its long term strategic objectives. The average yield on
loans receivable, net increased 4 basis points from 7.90% for fiscal 1999 to
7.94% for fiscal 2000 reflecting the Bank's increased emphasis on the
origination of the Four-C's. The disbursed balance of the Four-C's averaged
$628.2 million or 29% of average total loans receivable, net during fiscal 2000
compared to $370.0 million or 20% for fiscal 1999.

          The level of prepayments of higher yielding residential mortgage loans
declined in Fiscal 2000. This decline resulted in a decrease in the amortization
of premiums paid on loans purchased. This premium amortization, net of discount
accretion, amounted to $501,000 or a 2 basis point reduction in yield on loans
receivable, net for fiscal 2000 compared to $2.3 million or a 13 basis point
reduction in yield for fiscal 1999. At March 31, 2000, the Bank's weighted
average carrying value of loans purchased from others as a percentage of
outstanding principal balance was 101.6%.

          The average yield on investment securities was 6.44% for fiscal 2000
compared to 6.46% for fiscal 1999. The slight decrease in the yield on
investment securities between fiscal 1999 and fiscal 2000 was attributable in
part to the maturation of older, higher yielding securities. Consistent with the
Company's strategy of reducing wholesale leverage, maturing securities were not
replaced. Discount accretion net of premium amortization on investment
securities of $93,000 for fiscal 2000 and $46,000 for fiscal 1999 increased the
yield on investment securities by 10 basis points and 4 basis points for fiscal
2000 and 1999, respectively. The average yield on MBS increased from 6.29% for
fiscal 1999 to 6.38% for fiscal 2000. This increase in yield on MBS was
attributable in part to an increase in the general level of interest rates
during fiscal 2000, particularly the one year CMT index to which 45% of the
Company's MBS portfolio is tied. The CMT index increased from 4.72% at March 31,
1999 to 6.30% at March 31, 2000. Premium amortization net of discount accretion
on MBS of $1.3 million for fiscal 2000 and $3.1 million for fiscal

                                       49
<PAGE>

1999 decreased the yield on MBS by 26 basis points and 52 basis points for
fiscal 2000 and 1999, respectively. The average yield on CMOs increased from
6.09% for fiscal 1999 to 6.36% for fiscal 2000. The increase in yield on CMOs
was attributable to an increase in one month LIBOR, to which 33% of the
Company's CMO portfolio is tied, from 4.93% at March 31, 1999 to 6.13% at March
31, 2000. Premium amortization on CMOs of $139,000 for fiscal 2000 and $708,000
for fiscal 1999 decreased the yield on CMOs by 15 basis points and 43 basis
points for fiscal 2000 and 1999, respectively. The weighted average cost basis
of the investment securities, MBS and CMOs held by the Company at March 31, 2000
was 99.18 percent of par value.

INTEREST EXPENSE
----------------

         Interest expense for fiscal 2000 was $126.5 million compared to $130.4
million for fiscal 1999, a decrease of $3.8 million or 3%. The decrease in
interest expense between fiscal 1999 and fiscal 2000, was due to a 16 basis
point decrease in the average cost of interest-bearing liabilities from 4.85%
for fiscal 1999 to 4.69% for fiscal 2000 partially offset by an $8.3 million
increase in average interest-bearing liabilities from $2.69 billion for fiscal
1999 to $2.70 billion for fiscal 2000. The increase in the average balance of
interest-bearing liabilities was comprised of a $76.6 million increase in the
average balance of deposits from $1.78 billion for fiscal 1999 to $1.86 billion
for fiscal 2000 partially offset by a $68.7 million decrease in the average
balance of FHLB advances and other borrowings from $905.2 million for fiscal
1999 to $836.5 million for fiscal 2000. The $76.6 million increase in the
average balance of deposits during fiscal 2000 is net of $45.9 million of
deposits sold during the fiscal year. The average cost of deposits decreased
from 4.47% for fiscal 1999 to 4.27% for fiscal 2000. Contributing to the
decrease in the average cost of deposits was a $128.5 million increase in the
average balance of core deposits from $626.7 million for fiscal 1999 to $755.2
million for fiscal 2000. The average cost of FHLB advances and other borrowings
was 5.64% for fiscal 2000 compared to 5.60% for fiscal 1999.

PROVISION FOR LOAN LOSSES
-------------------------

          Provision for loan losses was $4.0 million for both fiscal 1999 and
2000. The consistency in provision for loan losses between fiscal 1999 and 2000
reflects the relationship between two factors. The Bank is experiencing
improvement in its overall level of asset quality and has assessed an
improvement in general economic conditions and property valuations in its market
area. At the same time, the Bank's emphasis on the Four-C's is resulting in a
change in the overall risk profile of the Bank's loan portfolio. Non-performing
loans were $5.4 million or 0.21% of gross loans receivable at March 31, 2000
compared to $11.0 million or 0.50% of gross loans receivable at March 31, 1999.
The allowance for loan losses was $27.8 million or 1.09% of gross loans
receivable at March 31, 2000 compared to $26.2 million or 1.18% of gross loans
receivable at March 31, 1999.

NON-INTEREST INCOME
-------------------

          Non-interest income was $17.3 million for fiscal 2000 compared to
$15.5 million for fiscal 1999, an increase of $1.7 million or 11%. The increase
between fiscal 1999 and fiscal 2000 was attributable principally to a $1.5
million gain on branch sale during fiscal 2000. Deposit and related fees were
$9.1 million for fiscal 2000 compared to $8.6 million for fiscal 1999. Trust
fees were $2.1 million for fiscal 2000 compared to $1.9 million for fiscal 1999.
Gain (loss) on sales of assets was $(1.0) million for fiscal 2000 compared to
$698,000 for fiscal 1999. The $1.0 million loss for fiscal 2000 includes a
$995,000 writedown of a marketable equity security deemed to be other than
temporarily impaired. The increase in loan and servicing fees from $2.8 million
for fiscal 1999 to $3.5 million for fiscal 2000 is attributable, in part, to a
$445,000 prepayment fee received on a commercial loan during fiscal 2000. The
net gain from trading activity was $1.7 million for fiscal 2000 compared to
$569,000 for fiscal 1999.

NON-INTEREST EXPENSE
--------------------
         Non-interest expense was $55.2 million for fiscal 2000 compared to
$54.9 million for fiscal 1999, an increase of $313,000 or 1%.

                                       50
<PAGE>

         General and administrative expense was $55.5 million or 1.87% of
average assets for fiscal 2000 compared to $55.0 million or 1.85% of average
assets for fiscal 1999. Compensation and benefits expense increased $1.5 million
from $28.0 million for fiscal 1999 to $29.5 million for fiscal 2000. Included in
compensation and benefits expense are non-cash charges of $3.1 million and $2.1
million associated with the Bank's ESOP and 1996 Incentive Plan. Occupancy and
equipment expense was $11.7 million for fiscal 2000 compared to $12.1 million
for fiscal 1999. The $408,000 decrease in occupancy and equipment expense
between fiscal 1999 and fiscal 2000 was attributable principally to a reduction
in expenditures and reduced depreciation. The $930,000 decrease in other
non-interest expense from $10.2 million for fiscal 1999 to $9.2 million for
fiscal 2000 was due primarily to a $433,000 reduction in office supplies and
expense resulting from renegotiation and consolidation of telecommunications
services.

INCOME TAXES
------------

         Income taxes were $20.2 million for fiscal 2000 compared to $14.2
million for fiscal 1999. The effective income tax rate for fiscal 2000 was 43.2%
compared to an effective rate of 42.8% for fiscal 1999.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2000 AND MARCH 31, 1999
----------------------------------------------------------------------

         Total assets at March 31, 2000 were $3.03 billion compared to $2.94
billion at March 31, 1999 an increase of $98.0 million or 3%. Loans receivable,
net increased $300.6 million from $2.03 billion at March 31, 1999 to $2.33
billion at March 31, 2000. Loan originations were $1.27 billion for fiscal 2000
compared to $987.6 million for fiscal 1999. The increase in originations between
fiscal 1999 and 2000 is due to an increase in the origination of the Four-C's
from $577.8 million for fiscal 1999 to $833.0 million for fiscal 2000,
reflecting the Bank's emphasis on these areas of lending. The weighted average
initial contract rate for total loan originations was 8.25% for fiscal 2000,
compared to 8.58% for fiscal 1999. Investment securities available-for-sale
increased $5.4 million from $82.4 million at March 31, 1999 to $87.8 million at
March 31, 2000. MBS available-for-sale decreased $144.3 million from $525.6
million at March 31, 1999 to $381.3 million at March 31, 2000. CMOs
available-for-sale decreased $17.0 million from $102.7 million at March 31, 1999
to $85.7 million at March 31, 2000. The decrease in FHLB stock from $50.3
million at March 31, 1999 to $44.6 million at March 31, 2000 reflects a $10.2
million redemption of shares partially offset by $4.4 million in stock
dividends.

         Total liabilities at March 31, 2000 were $2.81 billion compared to
$2.69 billion at March 31, 1999, an increase of $118.9 million or 4%. Total
deposits of the Bank were $1.91 billion at March 31, 2000 compared to $1.84
billion at March 31, 1999. The $63.0 million increase in total deposits during
fiscal 2000 is net of the $45.9 million of deposits sold. FHLB advances and
other borrowings were $884.0 million at March 31, 2000 compared to $814.0
million at March 31, 1999.

         Total stockholders' equity decreased $20.8 million from $242.7 million
at March 31, 1999 to $221.8 million at March 31, 2000. The $20.8 million
decrease is comprised principally of a $19.2 million decrease in additional
paid-in-capital partially offset by a $3.9 million decrease in unearned
stock-based compensation and a $8.8 million decrease in accumulated other
comprehensive earnings (loss) on securities available-for-sale. The $19.2
million decrease in additional paid-in-capital was attributable principally to
the Company's repurchase during fiscal 2000 of 2.2 million shares of its
outstanding common stock, at a weighted average price of $19.53 per share. The
$3.4 million increase in retained earnings from $110.2 million at March 31, 1999
to $113.5 million at March 31, 2000 reflects $21.0 million attributable to the
amount paid by the Company to repurchase its common stock in excess of the
issuance price of the stock, partially offset by the Company's net earnings of
$26.6 million for fiscal 2000. The $3.9 million decrease in unearned stock-based
compensation was attributable to the amortization of shares under the Company's
ESOP and 1996 Incentive Plan.

                                       51
<PAGE>

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 1999 AND MARCH 31,
--------------------------------------------------------------------------------
1998
----

GENERAL
-------

         The Company reported net earnings of $19.0 million for fiscal 1999
compared to net earnings of $16.0 million for fiscal 1998. The improvement in
operating results between fiscal 1999 and fiscal 1998 was attributable to three
factors: (i) an increase in net interest income from $72.9 million for fiscal
1998 to $76.6 million for fiscal 1999 attributable to growth in average
interest-earning assets; (ii) a decrease in the provision for loan losses from
$7.1 million for fiscal 1998 to $4.0 million for fiscal 1999 arising from an
improvement in asset quality; and (iii) an increase in non-interest income from
$14.3 million for fiscal 1998 to $15.5 million for fiscal 1999 driven
principally by increases in deposit and related fees from $8.2 million for
fiscal 1998 to $8.6 million for fiscal 1999 and the gain on trading securities
of $569,000 for fiscal 1999 compared to zero for fiscal 1998.

INTEREST INCOME
---------------

         Interest income for fiscal 1999 was $207.0 million compared to $191.4
million for fiscal 1998, an increase of $15.6 million or 8%. The increase in
interest income between fiscal 1998 and fiscal 1999 was attributable to a $242.8
million increase in average interest-earning assets from $2.58 billion for
fiscal 1998 to $2.83 billion for fiscal 1999. The yield on average
interest-earning assets was 7.32% for fiscal 1999 compared to 7.41% for fiscal
1998.

         The increase in average interest-earning assets between fiscal 1998 and
fiscal 1999 was comprised principally of a $49.7 million increase in the average
balance of investment securities from $53.0 million for fiscal 1998 to $102.6
million for fiscal 1999, a $40.6 million increase in the average balance of CMOs
from $126.9 million for fiscal 1998 to $167.5 million for fiscal 1999, a $19.2
million increase in the average balance of loans receivable, net from $1.85
billion for fiscal 1998 to $1.87 billion for fiscal 1999 and a $106.6 million
increase in the average balance of MBS from $489.6 million for fiscal 1998 to
$596.2 million for fiscal 1999.

         The average yield on loans receivable, net increased 20 basis points
from 7.70% for fiscal 1998 to 7.90% for fiscal 1999 reflecting the Bank's
increased emphasis on the origination of the Four-C's. The disbursed balance of
the Four-C's averaged $370.0 million or 20% of average total loans receivable,
net during fiscal 1999 compared to $259.2 million or 14% for fiscal 1998. Also
contributing to the increase in average yield on loans receivable, net was an
increase in the proportion of the loan portfolio comprised by hybrid ARMs.
During fiscal 1999, the Bank's portfolio of hybrid ARM loans averaged $418.0
million at an average yield of 7.08% compared to $318.9 million at an average
yield of 7.22% during fiscal 1998. Unlike the typical adjustable-rate loans
originated by the Bank, these hybrid ARM loans are not originated with lower
introductory rates.

         The increase in yield on loans receivable, net attributable to the
change in the composition of the loan portfolio was partially offset by a
decrease in the general level of interest rates and an increase in the level of
prepayments of higher yielding residential mortgage loans. These prepayments
also resulted in an increase in the amortization of premiums paid on loans
purchased. This premium amortization amounted to $2.3 million or a 13 basis
point reduction in yield on loans receivable, net for fiscal 1999 compared to
$745,000 or a 4 basis point reduction in yield for fiscal 1998. At March 31,
1999, the Bank's weighted average carrying value of loans purchased from others
as a percentage of outstanding principal balance was 101.6%.

         The average yield on investment securities decreased from 6.78% for
fiscal 1998 to 6.46% for fiscal 1999. The decrease in the yield on investment
securities between fiscal 1998 and fiscal 1999 was attributable in part to a
decrease in the general level of interest rates during fiscal 1999. Discount
accretion net of premium amortization on investment securities of $46,000
increased the yield on investment securities by 4 basis points for fiscal 1999.
Premium amortization net of discount accretion of $71,000 for fiscal 1998

                                       52
<PAGE>

decreased the yield on investment securities by 14 basis points for fiscal 1998.
The average yield on MBS decreased from 6.77% for fiscal 1998 to 6.29% for
fiscal 1999. This decrease in the yield on MBS was attributable in part to a
decrease in the general level of interest rates during fiscal 1999, particularly
the one year CMT index to which 43% of the Company's MBS portfolio is tied. The
CMT index decreased from 5.41% at March 31, 1998 to 3.86% on October 16, 1998
before increasing to 4.72% at March 31, 1999. Premium amortization on MBS of
$3.3 million for fiscal 1999 and $2.0 million for fiscal 1998 decreased the
yield on MBS by 55 basis points and 41 basis points for fiscal 1999 and 1998,
respectively. The average yield on CMOs decreased from 6.57% for fiscal 1998 to
6.09% for fiscal 1999 as lower-yielding adjustable rate CMOs indexed primarily
to one-month LIBOR were added to the portfolio during the first half of fiscal
1999 prior to the Company's decision during mid-fiscal year to begin
de-emphasizing wholesale leverage. One month LIBOR decreased from 5.63% at March
31, 1998 to 4.93% at March 31, 1999. Premium amortization on CMOs of $708,000
for fiscal 1999 and $60,000 for fiscal 1998 decreased the yield on CMOs by 43
basis points and 5 basis points for fiscal 1999 and 1998, respectively. The
weighted average cost basis of the MBS, CMOs and other investment securities
held by the Company at March 31, 1999 was 100.9 percent of par value.

INTEREST EXPENSE
----------------

         Interest expense for fiscal 1999 was $130.4 million compared to $118.5
million for fiscal 1998, an increase of $11.8 million or 10%. The increase in
interest expense between fiscal 1998 and fiscal 1999, was due to a $317.0
million increase in average interest-bearing liabilities from $2.37 billion for
fiscal 1998 to $2.69 billion for fiscal 1999 partially offset by a decrease in
the average cost of interest-bearing liabilities from 5.00% for fiscal 1998 to
4.85% for fiscal 1999. The increase in the average balance of interest-bearing
liabilities was attributable principally to a $254.1 million increase in the
average balance of FHLB advances and other borrowings from $651.1 million for
fiscal 1998 to $905.2 million for fiscal 1999. The average balance of deposits
increased $62.6 million from $1.72 billion for fiscal 1998 to $1.78 billion for
fiscal 1999. During fiscal 1999, the Bank utilized FHLB advances and other
borrowings as its primary funding source for its investments in MBS, CMOs and
other investment securities and as a means of managing the difference in cash
flows between retail loan and deposit activity in a manner complementary to the
overall interest rate risk and profitability objectives of the Bank. The average
cost of deposits decreased from 4.67% for fiscal 1998 to 4.47% for fiscal 1999.
Contributing to the decrease in the average cost of deposits was a $111.4
million increase in the average balance of core deposits from $515.3 million for
fiscal 1998 to $626.7 million for fiscal 1999. The average cost of FHLB advances
and other borrowings decreased from 5.87% for fiscal 1998 to 5.60% for fiscal
1999. This decrease reflects the decrease in the general level of interest rates
during fiscal 1999.

PROVISION FOR LOAN LOSSES
-------------------------

         Provision for loan losses was $4.0 million for fiscal 1999 compared to
$7.1 million for fiscal 1998. The decrease in provision for losses between
fiscal 1998 and 1999 reflects an improvement in the Bank's overall level of
asset quality as well as an assessment by the Bank of an improvement in general
economic conditions and property valuations in its market area. Non-performing
loans were $11.0 million or 0.50%, of gross loans receivable at March 31, 1999
compared to $17.2 million or 0.88% of gross loans receivable at March 31, 1998.
The allowance for loan losses was $26.2 million or 1.18% of gross loans
receivable at March 31, 1999 compared to $26.0 million or 1.33% of gross loans
receivable at March 31, 1998.

NON-INTEREST INCOME
-------------------

         Non-interest income was $15.5 million for fiscal 1999 compared to $14.3
million for fiscal 1998, an increase of $1.3 million or 9%. The increase between
fiscal 1998 and fiscal 1999 was attributable principally to an increase in
deposit and related fees from $8.2 million for fiscal 1998 to $8.6 million for
fiscal 1999 due to a combination of higher volumes of core deposit activity and
an increased emphasis on the assessment and collection of fees. The income from
the sale of non-deposit investments decreased from $1.6 million for fiscal 1998
to $1.1 million for fiscal 1999. Trust fees were $1.9 million for fiscal 1998
and 1999. Gain on sales of loans and securities was $698,000 for fiscal 1999
compared to $1.6 million for fiscal 1998. The $698,000 for fiscal 1999 is
comprised of gains on sales of loans of $672,000 and gain on sales

                                       53
<PAGE>

of securities of $26,000. During fiscal 1999, the Bancorp established a trading
portfolio comprised principally by readily marketable equity securities. This
portfolio is managed by the Bank's Trust Department with the objective of
enhancing the overall returns to the Bancorp. The net gain from trading activity
was $569,000 for fiscal 1999.

NON-INTEREST EXPENSE
--------------------

         Non-interest expense was $54.9 million for fiscal 1999 compared to
$52.0 million for fiscal 1998, a increase of $2.9 million or 6%. The $1.5
million increase in marketing and professional services expense between fiscal
1999 and fiscal 1998 is attributable principally to the costs associated with
the Bank's image branding campaign which carries the theme, "As big as you need,
as small as you like."

         General and administrative expense was $55.0 million or 1.85% of
average assets for fiscal 1999 compared to $51.6 million or 1.93% of average
assets for fiscal 1998, an increase of $3.4 million or 7%. Compensation and
benefits expense increased $1.2 million from $26.8 million for fiscal 1998 to
$28.0 million for fiscal 1999. Included in compensation and benefits expense are
non-cash charges of $2.7 million and $1.9 million associated with the Bank's
ESOP and 1996 Incentive Plan. Occupancy and equipment expense was $12.1 million
for fiscal 1999 compared to $11.6 million for fiscal 1998. The $519,000 increase
in occupancy and equipment expense between fiscal 1998 and fiscal 1999 is
attributable principally to depreciation on computer equipment related to
upgrades to the Bank's wide area networked personal computers and service bureau
charges. Foreclosed real estate operations, net generated income of $45,000 for
fiscal 1999 compared to expense of $473,000 for fiscal 1998 reflecting an
improved regional economy and real estate market.

INCOME TAXES
------------

         Income taxes were $14.2 million for fiscal 1999 compared to $12.0
million for fiscal 1998. The effective income tax rate for fiscal 1999 was 42.8%
compared to an effective rate of 42.9% for fiscal 1998.

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

         The Company's primary sources of funds are deposits, principal and
interest payments on loans and securities, FHLB advances and other borrowings,
proceeds from the maturation of securities and, to a lesser extent, proceeds
from the sale of loans. While maturities and scheduled amortization of loans and
securities are predictable sources of funds, deposit flows and mortgage and
security prepayments are greatly influenced by the general level of interest
rates, economic conditions and competition. The Bank has maintained the required
minimum levels of liquid assets as defined by OTS regulations. This requirement,
which may be varied at the direction of the OTS depending upon economic
conditions and deposit flows, is based upon a percentage of deposits and
short-term borrowings. Effective with the quarter ended December 31, 1997 the
required ratio is 4%. Prior to that the requirement was 5%. The Bank's average
liquidity ratios were 5.04%, 4.85%, and 4.90% for the years ended March 31,
2000, 1999 and 1998, respectively. Management attempts to maintain a liquidity
ratio no higher than 1% above the regulatory requirement. This reflects
management's strategy to invest excess liquidity in higher yielding
interest-earning assets, such as loans or other investments, depending on market
conditions. The Bank has invested in corporate securities when the yields
thereon have been more attractive than U.S. government and federal agency
securities of similar maturity. While corporate securities are not backed by any
government agency, the maturity structure and credit quality of all corporate
securities owned by the Bank meet the minimum standards set forth by the OTS for
regulatory liquidity-qualifying investments. The Bank invests in callable debt
issued by Federal agencies of the U.S. government when the yields thereon to
call date(s) and maturity exceed the yields on comparable term and credit
quality non-callable investments by amounts which management deems sufficient to
compensate the Bank for the call options inherent in the securities.

         The Company's cash flows are comprised of three primary
classifications: cash flows from operating activities, investing activities and
financing activities. Cash flows provided by operating activities were $23.7
million, $55.3 million, and $152.1 million, for the years ended March 31, 2000,
1999 and 1998,

                                       54
<PAGE>

respectively. Net cash used in investing activities consisted primarily of
disbursements for loan originations and purchases of mortgage-backed and other
investment securities and collateralized mortgage obligations, offset by
principal collections on loans and proceeds from maturation of investments and
paydowns on mortgage-backed securities and collateralized mortgage obligations.
Principal payments on loans were $902.9 million, $831.5 million, and $471.5
million for the years ended March 31, 2000, 1999 and 1998, respectively.
Disbursements on loans originated and purchased, excluding loans originated for
sale, were $1.24 billion, $1.11 billion, and $716.6 million for the years ended
March 31, 2000, 1999 and 1998, respectively. Disbursements for purchases of
mortgage-backed and other investment securities and collateralized mortgage
obligations were $30.0 million, $416.3 million, and $480.8 million for the years
ended March 31, 2000, 1999 and 1998, respectively. Proceeds from the maturation
of investment securities and paydowns of mortgage-backed securities and
collateralized mortgage obligations were $162.6 million, $419.8 million and
$207.4 million for the years ended March 31, 2000, 1999 and 1998, respectively.
Net cash provided by (used in) financing activities consisted primarily of net
activity in deposit accounts and FHLB advances and other borrowings. The net
increases in deposits were $63.0 million, $102.7 million, and $29.8 million for
the years ended March 31, 2000, 1999 and 1998, respectively. The net increases
in FHLB advances and other borrowings were $70.0 million, $28.1 million, and
$255.9 million for the years ended March 31, 2000, 1999 and 1998, respectively.

         At March 31, 2000, the Bank exceeded all of its regulatory capital
requirements with a tangible capital level of $204.6 million, or 6.77% of
adjusted total assets, which is above the required level of $45.4 million, or
1.50%; core capital of $204.6 million, or 6.77 % of adjusted total assets, which
is above the required level of $121.0 million, or 4.00%, and total risk-based
capital of $226.9 million, or 11.00% of risk-weighted assets, which is above the
required level of $164.9 million, or 8.00%. See "Item 1 - Description of
Business - Regulation and Supervision - Federal Savings Institution Regulation."

         The Company's most liquid assets are cash and short-term investments.
The levels of these assets are dependent on the Company's operating, financing,
lending and investing activities during any given period. At March 31, 2000 cash
and short-term investments totaled $35.1 million. The Company has other sources
of liquidity if a need for additional funds arises, including the utilization of
reverse repurchase agreements and FHLB advances. At March 31, 2000, the Bank has
$884.0 million of FHLB advances outstanding. Other sources of liquidity include
investment securities maturing within one year.

         The Company currently has no material contractual obligations or
commitments for capital expenditures. See "Item 1 - Description of Business -
General." At March 31, 2000, the Bank had outstanding commitments to originate
and purchase loans of $87.9 million and zero, respectively, compared to $28.8
million and zero, respectively, at March 31, 1999. At March 31, 2000, and 1999
the Company had no outstanding commitments to purchase mortgage-backed
securities, collateralized mortgage obligations and other investment securities.
The Company anticipates that it will have sufficient funds available to meet
these commitments. See "Item 1 - Description of Business - General." Certificate
accounts that are scheduled to mature in less than one year from March 31, 2000
totaled $1.01 billion. The Bank expects that a substantial portion of the
maturing certificate accounts will be retained by the Bank at maturity.

IMPACT OF INFLATION
-------------------

         The Consolidated Financial Statements and Notes thereto presented
herein have been prepared in accordance with GAAP, which require the measurement
of financial position and operating results in terms of historical dollar
amounts or market value without considering the changes in the relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of the Company's operations. Unlike industrial
companies, nearly all of the assets and liabilities of the Company are monetary
in nature. As a result, interest rates have a greater impact on the Company's
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the price
of goods and services.

                                       55
<PAGE>

SEGMENT REPORTING
-----------------

         The Company, through the branch network of the Bank, provides a broad
range of financial services to individuals and companies located primarily in
Southern California. These services include demand, time, and savings deposits;
real estate, business and consumer lending; ATM processing; cash management; and
trust services. While the Company's chief decision makers monitor the revenue
streams of the various Company products and services, operations are managed and
financial performance is evaluated on a Company-wide basis. Accordingly, all of
the Company's banking operations are considered by management to be aggregated
in one reportable operating segment.

YEAR 2000
---------

YEAR 2000 READINESS DISCLOSURE
------------------------------

         The company undertook actions intended to permit its computer systems
and other equipment to properly process and function on and after January 1,
2000. As of March 31, 2000, neither the Company nor its major suppliers have
experienced any material Year 2000 systems or equipment failures. However, Year
2000 compliance has many elements and potential consequences, some of which may
not be foreseeable or may be realized in future periods. Therefore, there can be
no assurance that unforeseen circumstances may not arise, or that in the future
equipment or systems which are not Year 2000 compliant may not become apparent.

         The company expended approximately $3.0 million in connection with its
Year 2000 compliance efforts. Of this $3.0 million, approximately $2.1 million
was for capital expenditures and approximately $900,000 was charged to expense.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------

         Disclosure related to market risk is included in "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Asset/Liability Management" contained at Item 7 of this Form 10-K.

                                       56
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------


<TABLE>
<CAPTION>

                       Index to Financial Statements                                                   PAGE
                                                                                                       ----

<S>                                                                                                     <C>
Consolidated Balance Sheets - March 31, 2000 and 1999...................................................58

Consolidated Statements of Earnings - Years ended March 31, 2000,
       1999 and 1998....................................................................................59

Consolidated Statements of Comprehensive Earnings - Years ended March 31, 2000,
       1999 and 1998....................................................................................60

Consolidated Statements of Stockholders' Equity - Years ended March 31, 2000,
      1999 and 1998 ....................................................................................61

Consolidated Statements of Cash Flows - Years ended March 31, 2000, 1999
      and 1998..........................................................................................62

Notes to Consolidated Financial Statements .............................................................64

Independent Auditors' Report............................................................................97
</TABLE>

                                       57
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDIARY
                           Consolidated Balance Sheets
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                               MARCH 31,
                                                                        ----------------------
                                                                           2000        1999
                                                                        ----------   ---------
                                  ASSETS
<S>                                                                     <C>          <C>
Cash and equivalents                                                    $   35,131      63,790
Loans held for sale (note 20)                                                7,362       3,531
Investment securities held-to-maturity (estimated fair value
  of $719 and $716 at March 31, 2000 and 1999)
  (notes 2, 10 and 12)                                                         701         709
Investment securities available-for-sale, at fair value
  (notes 2, 10 and 12)                                                      87,810      82,387
Mortgage-backed securities held-to-maturity (estimated fair
  value of $560 at March 31, 1999) (notes 3, 10, 11 and 12)                     --         556
Mortgage-backed securities available-for-sale, at fair value
  (notes 3, 10, 11 and 12)                                                 381,277     525,560
Collateralized mortgage obligations available-for-sale, at fair value
(notes 4, 10 and 12)                                                        85,653     102,700
Trading securities, at fair value                                            4,318       4,271
Investment in real estate (note 6)                                           4,928       6,371
Loans receivable, net (notes 5, 7, 10 and 12)                            2,326,702   2,026,081
Federal Home Loan Bank (FHLB) stock, at cost (note 12)                      44,550      50,323
Accrued interest receivable (note 8)                                        18,584      17,118
Real estate acquired through foreclosure, net (notes 6 and 7)                1,466       5,318
Property and equipment, net (note 9)                                        22,374      23,925
Prepaid expenses and other assets (notes 13 and 19)                         13,167      23,340
                                                                        ----------   ---------
          Total assets                                                  $3,034,023   2,935,980
                                                                        ==========   =========


                   LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Deposits (note 10)                                                    $1,906,534   1,843,538
  FHLB advances and other borrowings (notes 11 and 12)                     884,000     814,000
  Deferred income taxes payable (note 14)                                      663       5,921
  Accrued expenses and other liabilities (notes 10 and 13)                  20,995      29,856
                                                                        ----------   ---------
          Total liabilities                                              2,812,192   2,693,315
Commitments and contingencies (notes 13, 17, 18, 19 and 20)                     --          --
Stockholders' equity (notes 13, 14, 15, 22 and 23):
  Preferred stock, $.01 par value.  Authorized 2,000,000
  shares; none issued                                                           --          --
  Common stock, $.01 par value.  Authorized 59,000,000
  shares; issued 20,012,972 and 19,943,948; outstanding
  13,314,505 and 15,445,481 at March 31, 2000 and 1999,
  respectively                                                                 200         199
  Additional paid-in capital                                               131,370     150,612
  Retained earnings, substantially restricted                              113,521     110,163
  Unearned stock-based compensation                                        (13,303)    (17,169)
  Treasury stock (6,698,467 and 4,498,467 in 2000 and 1999,
  respectively)                                                                (67)        (45)
  Accumulated other comprehensive loss                                      (9,890)     (1,095)
                                                                        ----------   ---------
          Total stockholders' equity                                       221,831     242,665
                                                                        ----------   ---------
          Total liabilities and stockholders' equity                    $3,034,023   2,935,980
                                                                        ==========   =========
</TABLE>
See accompanying notes to consolidated financial statements.


                                       58
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDIARY
                       Consolidated Statements of Earnings
                  (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>

                                                                     YEAR ENDED MARCH 31,
                                                             ----------------------------------
                                                                 2000         1999         1998
                                                             -----------   ---------    ---------
<S>                                                          <C>           <C>          <C>
Interest income:
 Mortgage loans                                             $   148,720       133,972      138,480
  Non-mortgage loans                                             22,898        14,041        4,335
  Mortgage-backed securities                                     27,910        37,471       33,167
  Collateralized mortgage obligations                             5,893        10,209        8,337
  Investment securities and deposits                              9,907        11,262        7,049
                                                             ----------     ---------    ---------
      Total interest income                                     215,328       206,955      191,368
                                                             ----------     ---------    ---------
Interest on deposits (note 10)                                   79,320        79,534       80,155
Interest on borrowings (note 11)                                 47,219        50,822       38,362
                                                             ----------     ---------    ---------
      Total interest expense                                    126,539       130,356      118,517
                                                             ----------     ---------    ---------
Net interest income                                              88,789        76,599       72,851
Provision for loan losses (note 7)                                4,000         4,020        7,099
                                                             ----------     ---------    ---------
Net interest income after provision for loan losses              84,789        72,579       65,752
                                                             ----------     ---------    ---------
Non-interest income:
  Deposit and related fees                                        9,136         8,637        8,220
  Trust fees                                                      2,098         1,891        1,852
  Loan and servicing fees (note 20)                               3,471         2,780        2,494
  Gain (loss) on sale of assets, net (note 20)                   (1,017)          698        1,615
  Gain on trading securities, net                                 1,677           569         --
  Gain on sale of branch                                          1,468          --           --
  Other non-interest income                                         419           973           99
                                                             ----------     ---------    ---------
      Total non-interest income                                  17,252        15,548       14,280
                                                             ----------     ---------    ---------
Non-interest expense:
  General and administrative:
    Compensation and benefits (note 13)                          29,475        27,997       26,803
    Occupancy and equipment                                      11,690        12,098       11,579
    Marketing and professional services                           5,114         4,708        3,248
    Other non-interest expense (note 16)                          9,227        10,157        9,930
                                                             ----------     ---------    ---------
      Total general and administrative                           55,506        54,960       51,560
  Foreclosed real estate operations, net (note 6)                  (278)          (45)         473
                                                             ----------     ---------    ---------
      Total non-interest expense                                 55,228        54,915       52,033
                                                             ----------     ---------    ---------
Earnings before income taxes                                     46,813        33,212       27,999
  Income taxes (note 14)                                         20,215        14,208       12,019
                                                             ----------     ---------    ---------
Net earnings                                                 $   26,598        19,004       15,980
                                                             ==========     =========    =========

Basic earnings per share                                     $     2.20          1.37         1.00
                                                             ==========     =========    =========
Weighted average shares outstanding for basic
  earnings per share                                          12,111,323   13,876,440   16,055,127
                                                             ===========   ==========   ==========
Diluted earnings per share                                   $      2.02         1.29         0.95
                                                             ===========   ==========   ==========
Weighted average shares outstanding for diluted
  earnings per share                                          13,184,030   14,716,682   16,795,096
                                                             ===========   ==========   ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       59
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDIARY
                Consolidated Statements of Comprehensive Earnings
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                  FOR THE YEAR ENDED
                                                                       MARCH 31,
                                                          --------------------------------
                                                            2000         1999       1998
                                                          --------    --------   ---------
<S>                                                       <C>         <C>        <C>
Net earnings                                              $ 26,598      19,004      15,980
                                                          --------    --------   ---------

Other comprehensive earnings (losses), net
  of income taxes:
  Unrealized gains (losses) on securities
    available-for-sale:
    U.S. Treasury and agency securities and other
      investment securities available-for-sale, at fair
      value                                                 (1,899)     (2,454)        787
    Collateralized mortgage obligations
      available-for-sale, at fair value                       (588)         --          --
    Mortgage-backed securities available-for-sale,
      at fair value                                         (5,947)       (802)      2,120
    Reclassification of realized (gains)losses included
      in earnings                                              221        (312)         57
                                                          --------    --------    --------
                                                            (8,213)     (3,568)      2,964
  Minimum pension liability adjustment                        (582)         --          --
                                                          --------    --------    --------
Other comprehensive losses                                  (8,795)     (3,568)      2,964
                                                          --------    --------    --------
Comprehensive earnings                                    $ 17,803      15,436      18,944
                                                          ========    ========    ========

</TABLE>

See accompanying notes to consolidated financial statements.

                                       60
<PAGE>


                       PFF BANCORP, INC. AND SUBSIDIARY
                Consolidated Statements of Stockholders' Equity
                            (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                                                    Retained
                                                                                    Additional      Earnings          Unearned
                                                       Number of        Common       Paid-in      Substantially     Stock-based
                                                        Shares          Stock        Capital       Restricted       Compensation
                                                    -------------------------------------------------------------------------------
<S>                                                 <C>              <C>           <C>           <C>              <C>
Balance at March 31, 1997                                18,845,625         $ 198     $ 182,519        $ 108,021         $ (24,711)
Net earnings                                                      -             -             -           15,980                 -
Purchase of treasury stock                               (1,842,448)            -       (18,406)         (17,384)                -
Amortization of shares under stock-based
  compensation plans                                              -             -         1,118                -             3,816
Stock options exercised                                      63,922             1           681                -                 -
Changes in unrealized losses on
  securities available for sale, net                              -             -             -                -                 -
                                                    ------------------------------------------------------------------------------

Balance at March 31, 1998                                17,067,099           199       165,912          106,617           (20,895)

Net earnings                                                      -             -             -           19,004                 -
Purchase of treasury stock                               (1,664,144)            -       (16,624)         (15,458)                -
Change in minimum pension liability                               -             -          (313)               -               229
Amortization of shares under stock-based
  compensation plans                                              -             -         1,106                -             3,497
Stock options exercised                                      42,526             -           531                -                 -
Changes in unrealized gains on
  securities available for sale, net                              -             -             -                -                 -
                                                    ------------------------------------------------------------------------------

Balance at March 31, 1999                                15,445,481           199       150,612          110,163           (17,169)

Net earnings                                                      -             -             -           26,598                 -
Purchase of treasury stock                               (2,200,000)            -       (21,978)         (20,968)                -
Change in minimum pension liability                               -             -             -                -                 -
Amortization of shares under stock-based
  compensation plans                                              -             -         2,163                -             3,866
Stock options exercised                                      69,024             1           573                -                 -
Dividends                                                         -             -             -           (2,272)                -
Changes in unrealized gains on
  securities available for sale, net                              -             -             -                -                 -
                                                    -------------------------------------------------------------------------------

Balance at March 31, 2000                                13,314,505         $ 200     $ 131,370        $ 113,521        $  (13,303)
                                                    ===============================================================================
</TABLE>

<TABLE>
<CAPTION>


                                                              Accumulated Other
                                                  Treasury      Comprehensive
                                                   Stock       Earnings (Loss)    Total
                                                ------------------------------------------
<S>                                                     <C>                 <C>
Balance at March 31, 1997                        $  (10)             $ (491)    $265,526
Net earnings                                          -                           15,980
Purchase of treasury stock                          (18)                  -      (35,808)
Amortization of shares under stock-based
  compensation plans                                  -                   -        4,934
Stock options exercised                               -                   -          682
Changes in unrealized losses on
  securities available for sale, net                  -               2,964        2,964
                                                -----------------------------------------

Balance at March 31, 1998                           (28)              2,473      254,278

Net earnings                                          -                   -       19,004
Purchase of treasury stock                          (17)                  -      (32,099)
Change in minimum pension liability                   -                   -          (84)
Amortization of shares under stock-based
  compensation plans                                  -                   -        4,603
Stock options exercised                               -                   -          531
Changes in unrealized gains on
  securities available for sale, net                  -              (3,568)      (3,568)
                                                -----------------------------------------

Balance at March 31, 1999                           (45)             (1,095)     242,665

Net earnings                                          -                   -       26,598
Purchase of treasury stock                          (22)                  -      (42,968)
Change in minimum pension liability                   -                (582)        (582)
Amortization of shares under stock-based
  compensation plans                                  -                   -        6,029
Stock options exercised                               -                   -          574
Dividends                                             -                   -       (2,272)
Changes in unrealized gains on
  securities available for sale, net                  -              (8,213)      (8,213)
                                                -----------------------------------------

Balance at March 31, 2000                        $  (67)           $ (9,890)    $221,831
                                                =========================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                      61

<PAGE>

                       PFF BANCORP, INC. AND SUBSIDIARY
                     Consolidated Statements of Cash Flows
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                            Year Ended March 31,
                                                      ------------------------------------------------------------
                                                                      2000                1999                1998
                                                      ------------------------------------------------------------
<S>                                                      <C>                  <C>                 <C>
Cash flows from operating activities
  Net earnings                                                 $    26,598              19,004              15,980
  Adjustments to reconcile net earnings to net cash
    provided by operating activities:
      Amortization of premiums net of discount
        accretion on loans and securities                            2,089               4,560               1,415
      Amortization of deferred loan origination fees                   190                (460)               (261)
      Loan fees collected                                           (2,219)             (2,400)             (3,487)
      Dividends on FHLB stock                                       (2,441)             (2,587)             (1,716)
      Provisions for losses on:
        Loans                                                        4,000               4,020               7,099
        Real estate                                                      -                  41                 416
      Gains on sales of loans, mortgage-backed
       securities available-for-sale, real estate and
       property and equipment                                       (1,679)             (1,777)             (1,792)

      Proceeds from sale of trading securities                       1,700               1,500                   -
      Gains on trading securities                                   (1,677)               (569)                  -
      Depreciation and amortization of property and
        equipment                                                    3,608               3,855               5,051
      Loans originated for sale                                    (32,799)            (42,360)             (3,893)
      Proceeds from sale of loans held-for-sale                     25,673              39,407             166,989
      Amortization of unearned stock-based
        compensation                                                 6,029               4,603               4,934
      Increase (decrease) in accrued expenses and
         other liabilities                                         (14,119)              4,381                 561
      (Increase) decrease in:
        Accrued interest receivable                                 (1,466)                202              (1,441)
        Prepaid expenses and other assets                           10,173              23,874             (37,751)
                                                      ------------------------------------------------------------
          Net cash provided by operating activities                 23,660              55,294             152,104
                                                      ------------------------------------------------------------

Cash flows from investing activities:
  Loans originated for investment                               (1,235,525)           (945,244)           (553,535)
  Increase in construction loans in process                         31,614              71,585              56,972
  Purchases of loans held for investment                            (1,560)           (168,395)           (163,045)
  Principal payments on loans                                      902,923             831,468             471,544
  Principal payments on mortgage-backed securities
    held-to-maturity                                                   552                 804               3,325
  Principal payments on mortgage-backed securities
    available-for-sale                                             137,246             272,546             144,920
  Principal payments on collateralized mortgage
    obligations available-for-sale                                  15,895             118,466              20,709
  Purchases of investment securities                               (28,066)            (90,111)            (60,248)
   available-for-sale
  Purchases of collateralized mortgage obligations
    available-for-sale                                                   -                   -            (219,514)
  Purchases of FHLB stock                                           (1,974)             (8,232)            (10,518)
</TABLE>

                                       62
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDIARY
                Consolidated Statements of Cash Flows, continued
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                            Year Ended March 31,
                                                      -------------------------------------------------------------
                                                                      2000                1999                 1998
                                                      -------------------------------------------------------------
<S>                                                      <C>                  <C>                 <C>
  Redemption of FHLB stock                                       $  10,188                   -                    -
  Purchases of mortgage-backed securities available-
    for-sale                                                             -            (317,988)            (190,539)
  Proceeds from maturities of investment securities
    held-to-maturity                                                     -                   -               15,475
  Proceeds from maturities of investment securities
    available-for-sale                                               8,886              27,983               22,978
  Proceeds from maturities of mortgage-backed
    securities available-for-sale                                        -                   -                  793
  Proceeds from sale of investment securities
   available-for-sale                                               10,626              64,668                8,934
  Proceeds from sale of mortgage-backed securities
    available-for-sale                                                   -                   -               52,789
  Principal payments on real estate held for                             -                   -                  599
   investment
  Proceeds from sale of real estate                                  8,515              13,611               14,214
  Investment in or proceeds from real estate
    held for investment                                              1,443              (5,704)                   -
  Purchases of property and equipment                               (2,345)             (2,247)              (4,172)
  Proceeds from sale of property and equipment                         933                   5                   69
                                                      -------------------------------------------------------------
          Net cash used in investing activities                   (140,649)           (136,785)            (388,250)
                                                      -------------------------------------------------------------
Cash flows from financing activities:
  Proceeds from FHLB advances and other borrowings                 884,600             804,876            1,342,886
  Repayment of FHLB advances and other borrowings                 (814,600)           (776,762)          (1,087,000)
  Net change in deposits                                            62,996             102,714               29,775
  Proceeds from exercise of stock options                              574                 531                  682
  Cash dividends                                                    (2,272)                  -                    -
  Purchase of treasury stock                                       (42,968)            (32,099)             (35,808)
                                                      -------------------------------------------------------------
          Net cash provided by financing activities                 88,330              99,260              250,535
                                                      -------------------------------------------------------------
          Net increase (decrease) in cash and cash
           equivalents                                             (28,659)             17,769               14,389

Cash and cash equivalents, beginning of year                        63,790              46,021               31,632
                                                      -------------------------------------------------------------
Cash and cash equivalents, end of year                           $  35,131              63,790               46,021
                                                      =============================================================
Supplemental information:
  Interest paid, including interest credited                     $ 128,402             136,165          $   116,991
  Income taxes paid                                                 17,000              10,700               16,608
Non-cash investing and financing activities:
  Change in unrealized gain (loss) on securities
    available-for-sale                                             (14,161)             (6,185)               5,145
  Net transfers from loans receivable to real estate
    acquired through foreclosure                                     5,793              14,038               12,563
  Net transfers from available-for-sale securities
    to trading securities                                                -               5,419                    -
</TABLE>

See accompanying notes to consolidated financial statements.

                                       63
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                             (Dollars in thousands)

(1)  Summary of Significant Accounting Policies

Effective March 28, 1996, pursuant to a plan of conversion, Pomona First Federal
Savings and Loan Association (the "Association") reorganized from a federally
chartered mutual savings and loan association to PFF Bank & Trust (the "Bank"),
a federally chartered stock savings bank.  PFF Bancorp, Inc. (the "Bancorp") was
incorporated under Delaware law in March 1996 for the purpose of acquiring and
holding all of the outstanding capital stock of the Bank as part of the Bank's
conversion.  Any references to financial information for periods before March
28, 1996, refer to the Association prior to the conversion (see note 22 for
further discussion).

The following accounting policies, together with those disclosed elsewhere in
the consolidated financial statements, represent the significant accounting
policies used in presenting the accompanying consolidated financial statements.

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of PFF
Bancorp, Inc. and its subsidiary, PFF Bank & Trust (collectively, the
"Company"). The Company's business is conducted primarily through PFF Bank &
Trust and its subsidiary, Pomona Financial Services, Inc. The accounts of
Diversified Services, Inc. and PFF Financial Services, Inc. are included in
Pomona Financial Services, Inc. All material intercompany balances and
transactions have been eliminated in consolidation. Certain reclassifications
have been made to the prior years' consolidated financial statements to conform
to the current year's presentation.

The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles.  In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets, liabilities and contingent
liabilities as of the dates of the consolidated balance sheets, and revenues and
expenses reflected in the consolidated statements of earnings.  Actual results
could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and in banks of $35,060 and
$38,419 and short-term deposits in banks of $71 and $25,371 at March 31, 2000
and 1999, respectively.  The Company considers all highly liquid debt
instruments with maturities at the date of acquisition of three months or less
to be cash equivalents.

Investment and Mortgage-Backed Securities and Collateralized Mortgage
Obligations

At the time of purchase of an investment security, a mortgage-backed security or
a collateralized mortgage obligation, the Company designates the security as
either held-to-maturity, available-for-sale or trading based on the Company's
investment objectives, operational needs and intent.  The Company then monitors
its investment activities to ensure that those activities are consistent with
the established guidelines and objectives.

                                       64
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                             (Dollars in thousands)



Held-to-Maturity

Investment securities held-to-maturity are carried at cost, or in the case of
mortgage-backed securities and collateralized mortgage obligations at unpaid
principal balance, adjusted for amortization of premiums and accretion of
discounts which are recognized in interest income using the interest method,
adjusted for anticipated prepayments where applicable.  It is the intent of the
Company and the Company has the ability, to hold these securities until maturity
as part of its portfolio of long-term interest earning assets. If the security
is determined to be other than temporarily impaired, the amount of the
impairment is charged to operations.

Available-for-Sale

Investment securities, mortgage-backed securities and collateralized mortgage
obligations available-for-sale are carried at fair value.  Amortization of
premiums and accretion of discounts are recognized in interest income using the
interest method, adjusted for anticipated prepayments where applicable.
Unrealized holding gains and losses are excluded from earnings and reported as a
separate component of stockholders' equity, net of income taxes, unless the
security is deemed to be other than temporarily impaired.  If the security is
determined to be other than temporarily impaired, the amount of the impairment
is charged to operations.

Realized gains and losses on the sale of securities available-for-sale are
determined using the specific identification method and recorded in earnings.

Trading

Trading securities are comprised principally of equity securities which are
carried at fair value, based upon the quoted market prices of those investments.
Accordingly, the net realized gains and losses on trading securities are
included in net earnings.

Loans Held for Sale

Loans designated as held for sale in the secondary market are carried at the
lower of cost or market value in the aggregate, as determined by outstanding
commitments from investors or current investor requirements. Loan fees and costs
are deferred and recognized as a component of gain or loss on sale of loans when
the loans are sold.  Net unrealized losses are recognized through a valuation
allowance established by charges to operations.

Gains or Losses on Sales of Loans

Gains or losses on sales of loans are recognized at the time of sale and are
determined by the difference between the net sales proceeds and the allocated
basis of the loans sold. The Company capitalizes mortgage servicing rights
("MSRs") through the sale of mortgage loans which are sold with servicing rights
retained. At the time of sale the total cost of the mortgage loans is allocated
to the MSRs and the mortgage loans without the MSRs based upon their relative
fair values.  The MSRs are included in other assets and as a component of the
gain on the sale of loans.  The MSRs are amortized in proportion to and over the
estimated period of the net servicing income.  This amortization is reflected as
a component of loan servicing fees.

The MSRs are periodically reviewed for impairment based upon their fair value.
The fair value of the MSRs, for the purposes of impairment, is measured using a
discounted cash flow analysis using market prepayment rates, the Company's net
servicing income and market-adjusted discount rates.  Impairment losses are
recognized through a valuation allowance, with any associated provision recorded
as a component of loan servicing fees.

                                       65
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                             (Dollars in thousands)


Loans Receivable

Loans receivable are stated at unpaid principal balances less the undisbursed
portion of construction loans, unearned discounts, net deferred loan origination
fees and allowances for losses.  Premiums/discounts are amortized/accreted using
the interest method over the remaining term to maturity.

Uncollected interest on loans contractually delinquent more than ninety days or
on loans for which collection of interest appears doubtful is excluded from
interest income and accrued interest receivable.  Payments received on
nonaccrual receivables are recorded as a reduction of principal or as interest
income depending on management's assessment of the ultimate collectibility of
the loan principal.  Such loans are restored to an accrual status only if the
loan is brought contractually current and the borrower has demonstrated the
ability to make future payments of principal and interest.

Loan Origination, Commitment Fees and Related Costs

Loan fees and certain direct loan origination costs are deferred, with the net
fee or cost being accreted or amortized to interest income over the remaining
term to maturity of the related loan using the interest method. Accretion or
amortization is discontinued in the event the loan becomes contractually
delinquent by more than ninety days.  Accretion or amortization resumes in the
period all delinquent interest and principal is paid.  When a loan is paid in
full, any unamortized net loan origination fee or cost is recognized in interest
income. When a loan is sold any net loan origination fee or cost is recognized
in the calculation of the gain (loss) on sale of loans.  Commitment fees and
costs related to commitments where the likelihood of exercise is remote are
recognized over the commitment period on a straight-line basis.  If the
commitment is subsequently exercised during the commitment period, the remaining
net unamortized commitment fees at the time of exercise are recognized over the
life of the loan using the interest method.

Valuation Allowances for Loans Receivable and Real Estate

Valuation allowances for loan losses are provided on both a specific and non-
specific basis.  Specific allowances are provided when an identified significant
decline in the value of the underlying collateral occurs or an identified
adverse situation occurs that may affect the borrower's ability to repay.  Non-
specific allowances are provided based on a number of factors, including the
Company's past loan loss experience, current and prospective economic conditions
and management's ongoing evaluation of the credit risk inherent in the
portfolio.

Valuation allowances for losses on real estate are established when a decline in
value reduces the fair value less estimated disposal costs to less than the
carrying value.

Management believes that allowances for loan losses and real estate are
adequate.  While management uses available information to recognize losses on
loans and real estate, future additions to the allowances may be necessary based
on changes in economic conditions.  In addition, various regulatory agencies, as
an integral part of their examination process, periodically review the Company's
allowances for loan and real estate losses. Such agencies may require the
Company to recognize additions to the allowances based on their judgments of the
information available to them at the time of their examinations.

Management considers loans with a principal balance of $500 or more, including
loans to one borrower that exceed $500, as non-homogeneous for purposes of
evaluation for impairment.  A loan is considered impaired if it is probable that
the creditor will be unable to collect all contractual amounts due (principal
and interest) as scheduled in the loan agreement. Impaired loans are measured
based on either an estimate of the present value of expected future cash flows
discounted at the loan's effective interest rate or the loan's market value or
the fair value of collateral if the loan is collateral dependent.  The amount by
which the recorded investment in the loan exceeds the measure of the impaired
loan is recognized by recording a valuation

                                       66
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                             (Dollars in thousands)


allowance with a corresponding charge to operations. The Company will charge-off
a portion of an impaired loan against the valuation allowance when it is
probable that there is no possibility of recovering the full amount of the
impaired loan.

All non-homogeneous loans designated by the Company as impaired are either
placed on nonaccrual status or are designated as restructured loans.  Only non-
accrual loans and restructured loans not performing in accordance with their
restructured terms are included in non-performing loans.  Loans are generally
placed on nonaccrual status when the payment of interest is 90 days or more
delinquent, or if the loan is in the process of foreclosure, or earlier if the
timely collection of interest and/or principal appears doubtful.  The Company's
policy allows for loans to be designated as impaired and placed on nonaccrual
status even though the loan may be current as to the principal and interest
payments and may continue to perform in accordance with its contractual terms.

Payments received on impaired loans are recorded as a reduction of principal or
as interest income depending on management's assessment of the ultimate
collectibility of the loan principal.  The amount of interest income recognized
is limited to the amount of interest that would have accrued at the loan's
contractual rate applied to the recorded loan balance, with any difference
recorded as a loan loss recovery.  Generally, interest income on an impaired
loan is recorded on a cash basis when the outstanding principal is brought
current.

Real Estate Acquired Through Foreclosure

Real estate properties acquired through loan foreclosure are initially recorded
at fair value at the date of foreclosure.  Once real estate properties are
acquired, evaluations are periodically performed by management and an allowance
for losses is established by a charge to operations if the carrying value of a
property exceeds its fair value.  Real estate properties held for sale or
development are carried at the lower of cost, including cost of improvements and
amenities incurred subsequent to acquisition, or net realizable value.  Costs
related to development and improvement of properties are capitalized, whereas
costs relating to holding the properties are expensed.  During the development
period, the portion of interest costs related to development of real estate are
capitalized.

Property and Equipment

Land is carried at cost.  Buildings and improvements, furniture, fixtures and
equipment, and leasehold improvements are carried at cost, less accumulated
depreciation or amortization.  Depreciation and amortization are recorded using
the straight-line method over the estimated useful lives of the assets or the
terms of the related leases, if shorter.

The Company capitalizes interest on all construction in progress based on the
cost of funds in effect during the construction period.

Intangibles

In January 1995, the Company acquired the trust operations of another bank for
$3,470.  The excess cost over net assets acquired was capitalized and is being
amortized on a straight-line basis over the estimated average life of the trust
relationships acquired of 11 years.

On a periodic basis, the Company reviews its intangible assets for events or
changes in circumstances that may indicate the carrying amounts of the assets
may not be recoverable.  Recoverability of an asset to be held and used is
measured by a comparison of the carrying amount of the asset to future net cash
flows expected to be generated by the asset.  If such asset is considered to be
impaired, the impairment is measured by the amount by which the carrying amount
exceeds the fair value of the asset.

                                       67
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                             (Dollars in thousands)


Reverse Repurchase Agreements

The Company enters into sales of securities under agreements to repurchase the
same securities.  Reverse repurchase agreements are accounted for as financing
arrangements, with the obligation to repurchase securities sold reflected as a
liability in the consolidated balance sheets.  The dollar amount of securities
underlying the agreements remains in the respective asset account.

Interest on Deposits

Accrued interest is either paid to the depositor or added to the deposit account
on a periodic basis.  On term accounts, the forfeiture of interest (because of
withdrawal prior to maturity) is offset as of the date of withdrawal against
interest expense in the consolidated statements of operations.

Income Taxes

The Company files consolidated Federal income and combined state franchise tax
returns.

Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.  Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.  The effect on deferred taxes of a change in tax rates
is recognized in income in the period that includes the enactment date.

Employee Stock Ownership Plan

The Company accounted for the original issuance of the Employee Stock Ownership
Plan ("ESOP") as a component of equity recorded in a contra-equity account. When
the issuance occurs, compensation expense is recognized over the allocation
period based upon the fair value of the shares committed to be released to
employees. This may result in fluctuations in compensation expense as a result
of changes in the fair value of the Company's common stock. However, any such
compensation expense fluctuations result in an equal and offsetting adjustment
to additional paid-in capital.

Stock Option Plan

On October 23, 1996, the Company granted stock options and adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which permits entities to recognize as expense
over the vesting period the fair value of all stock-based compensation on the
date of grant.  Alternatively, SFAS No. 123 allows entities to apply the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"), and related interpretations, and provide pro
forma net earnings and pro forma earnings per share disclosures for employee
stock option grants made in 1996 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. As such, compensation expense
would be recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. The Company has elected to apply
the provisions of APB 25 and provide the pro forma disclosure provisions of SFAS
No. 123.

Segment Reporting

The Company, through the branch network of the Bank, provides a broad range of
financial services to individuals and companies located primarily in Southern
California.  These services include demand, time, and savings deposits; real
estate, business and consumer lending; ATM processing; cash management; and
trust services.  While the Company's chief decision makers monitor the revenue
streams of the various

                                       68
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                             (Dollars in thousands)


Company products and services, operations are managed and financial performance
is evaluated on a Company-wide basis. Accordingly, all of the Company's banking
operations are considered by management to be aggregated in one reportable
operating segment.

New Accounting Pronouncements

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

Under SFAS No. 133, an entity that elects to apply hedge accounting is required
to establish at the inception of the hedge the method it will use for assessing
the effectiveness of the hedging derivative and the measurement approach of
determining the ineffective aspect of the hedge.  Those methods must be
consistent with the entity's approach to managing risk.

This statement, as amended, is effective for all quarters of fiscal years
beginning after June 15, 2000.  Management is in the process of determining the
impact of SFAS No. 133 on the Company's financial position and results of
operations.

(2) Investment Securities

The amortized cost and estimated fair values of investment securities are
summarized as follows:

<TABLE>
<CAPTION>
                                                                                       March 31, 2000
                                                          ---------------------------------------------------------------------
                                                                                  Gross             Gross          Estimated
                                                               Amortized        Unrealized       Unrealized           Fair
                                                                  Cost            Gains            Losses            Value
                                                          ---------------------------------------------------------------------
<S>                                                          <C>              <C>              <C>               <C>
Held-to-maturity:
  Bonds, notes and debentures at amortized cost:
    U.S. Government and federal agency obligations               $   701            18                -               719
                                                          ---------------------------------------------------------------------
          Total                                                  $   701            18                -               719
                                                          =====================================================================
Available-for-sale:
    U.S. Government and federal agency
     obligations                                                 $35,000             -             (938)           34,062
    Corporate debt securities                                     51,086             -           (2,771)           48,315
    Equity securities                                              6,708             -           (1,275)            5,433
                                                          ---------------------------------------------------------------------
          Total                                                  $92,794             -           (4,984)           87,810
                                                          =====================================================================
</TABLE>

                                       69
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                             (Dollars in thousands)

During the years ended March 31, 2000, 1999 and 1998, the Company realized net
gains(losses) on sales of investment securities available-for-sale of $(279),
$(53) and $114, respectively.

<TABLE>
<CAPTION>
                                                                                       March 31, 1999
                                                          ---------------------------------------------------------------------
                                                                                  Gross             Gross          Estimated
                                                               Amortized        Unrealized       Unrealized           Fair
                                                                  Cost            Gains            Losses            Value
                                                          ---------------------------------------------------------------------
<S>                                                          <C>              <C>              <C>               <C>
Held-to-maturity:
  Bonds, notes and debentures at amortized cost:
    U.S. Government and federal agency obligations                  $   709                7                -               716
                                                          ---------------------------------------------------------------------

          Total                                                     $   709                7                -               716
                                                          =====================================================================
Available-for-sale:
    U.S. Government and federal agency obligations                  $17,491               12              (31)           17,472
    Corporate debt securities                                        58,879              224           (1,338)           57,765
    Equity securities                                                 8,108                -             (958)            7,150
                                                          ---------------------------------------------------------------------

          Total                                                     $84,478              236           (2,327)           82,387
                                                          =====================================================================
</TABLE>

Maturities of investment securities at March 31, 2000 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                      Available-
                                                           Held-to-maturity            for-sale
                                                  ------------------------------------------------
                                                                       Estimated       Estimated
                                                       Amortized         Fair            Fair
                     Maturity                            Cost            Value           Value
             -------------------------------------------------------------------------------------
              <S>                                    <C>             <C>             <C>
              Within one year                             $701             719               -
              After one to five years                        -               -          34,062
              After five to ten years                        -               -               -
              After ten years                                -               -          53,748
                                                  ------------------------------------------------
                                                          $701             719          87,810
                                                  ================================================
</TABLE>

(3) Mortgage-Backed Securities

The amortized cost and estimated fair values of mortgage-backed securities are
summarized as follows:

<TABLE>
<CAPTION>
                                                                      March 31, 2000
                                     -----------------------------------------------------------------------------
                                                                Gross               Gross            Estimated
                                           Amortized          Unrealized         Unrealized             Fair
                                              Cost              Gains              Losses              Value
                                     -----------------------------------------------------------------------------
<S>                                     <C>                <C>                <C>                 <C>
Available-for-sale
    GNMA                                    $ 14,820                112                (53)             14,879
    FHLMC                                    114,534                100             (2,804)            111,830
    FNMA                                     260,336                189             (5,957)            254,568
                                     -----------------------------------------------------------------------------
          Total                             $389,690                401             (8,814)            381,277
                                     =============================================================================
</TABLE>

                                       70
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)

During the years ended March 31, 2000, 1999 and 1998, the Company realized net
gains on sales of mortgage-backed securities available-for-sale of zero, $79 and
$416, respectively.

<TABLE>
<CAPTION>
                                                                      March 31, 1999
                                     -----------------------------------------------------------------------------
                                                                Gross               Gross            Estimated
                                           Amortized          Unrealized         Unrealized             Fair
                                              Cost              Gains              Losses              Value
                                     -----------------------------------------------------------------------------
<S>                                   <C>                     <C>                 <C>                  <C>
Held-to-maturity
    FHLMC                                 $    556                  4                  -                 560
                                     =============================================================================

Available-for-sale
    GNMA                                  $ 19,334                316                  -              19,650
    FHLMC                                  158,494                538               (557)            158,475
    FNMA                                   345,892              2,516               (973)            347,435
                                     -----------------------------------------------------------------------------
          Total                           $523,720              3,370             (1,530)            525,560
                                     =============================================================================
</TABLE>

The mortgage-backed securities have original maturities of up to 30 years.

(4) Collateralized Mortgage Obligations

The amortized cost and estimated fair values of collaterized mortgage
obligations are summarized as follows:


<TABLE>
<CAPTION>
                                                                             March 31, 2000
                                                ---------------------------------------------------------------------
                                                                        Gross             Gross          Estimated
                                                     Amortized        Unrealized       Unrealized           Fair
                                                        Cost            Gains            Losses            Value
                                                ---------------------------------------------------------------------
<S>                                                <C>              <C>              <C>               <C>
Available-for-sale:
    FHLMC                                               $60,005               -           (1,751)           58,254
    FNMA                                                 28,300               -             (901)           27,399
                                                ---------------------------------------------------------------------
          Total                                         $88,305               -           (2,652)           85,653
                                                =====================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                             March 31, 1999
                                                ---------------------------------------------------------------------
                                                                        Gross             Gross          Estimated
                                                     Amortized        Unrealized       Unrealized           Fair
                                                        Cost            Gains            Losses            Value
                                                ---------------------------------------------------------------------
<S>                                                <C>              <C>              <C>               <C>
Available-for-sale:
    FHLMC                                                $ 71,560               37           (1,238)           70,359
    FNMA                                                   32,778               88             (525)           32,341
                                                ---------------------------------------------------------------------
          Total                                          $104,338              125           (1,763)          102,700
                                                =====================================================================
</TABLE>

                                       71
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)

(5)  Loans Receivable

Loans receivable are summarized as follows:

<TABLE>
<CAPTION>
                                                                             March 31,
                                                             -------------------------------------
                                                                        2000               1999
                                                             -------------------------------------
<S>                                                             <C>                <C>
Mortgage loans:
  Residential:
    One-to-four family                                               $1,529,871          1,479,308
    Multi-family                                                         85,169             87,856
  Commercial real estate                                                169,010            156,474
  Construction and land                                                 517,659            349,119
                                                             -------------------------------------
      Total mortgage loans                                            2,301,709          2,072,757

Commercial                                                              122,095             74,451
Consumer                                                                126,424             70,686
                                                             -------------------------------------
                                                                      2,550,228          2,217,894
  Less:
  Undisbursed portion of construction loans                            (198,656)          (167,042)
  Net premium on loans                                                    1,215              1,665
  Net deferred loan origination fees                                      1,753               (276)
  Allowance for loan losses (note 7)                                    (27,838)           (26,160)
                                                             -------------------------------------
                                                                     $2,326,702          2,026,081
                                                             =====================================
  Weighted average yield                                                   7.94%              7.90%
                                                             =====================================
</TABLE>

Loans receivable from officers and directors of the Company were as follows:

<TABLE>
<CAPTION>
                                                                             March 31,
                                                             -------------------------------------
                                                                           2000               1999
                                                             -------------------------------------
<S>                                                             <C>                <C>
Beginning balance                                                        $2,445              2,070
Additions                                                                   228              1,346
Repayments                                                                 (463)              (971)
                                                             -------------------------------------

Ending balance                                                           $2,210              2,445
                                                             =====================================
</TABLE>


The following table provides information with respect to the Company's
nonaccrual loans and troubled debt restructured ("TDR") loans at the dates
indicated.

<TABLE>
<CAPTION>
                                                                              March 31,
                                                      ------------------------------------------------------
                                                                    2000              1999              1998
                                                      ------------------------------------------------------
<S>                                                      <C>               <C>               <C>
Non-accrual loans                                                 $5,427            11,012            17,189
TDR loans                                                          1,950            11,291            12,505
                                                      ------------------------------------------------------
      Total non-accrual and TDR loans                             $7,377            22,303            29,694
                                                      ======================================================
</TABLE>


                                       72
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)

The following table identifies the Company's total recorded investment in
impaired loans with a recorded investment greater than $500 by type, at the
dates indicated.

<TABLE>
<CAPTION>
                                                                      March 31,
                                   ----------------------------------------------------------------------------
                                                         2000                                  1999
                                   ----------------------------------------------------------------------------
                                             Recorded           Specific           Recorded           Specific
                                            Investment         Allowances         Investment         Allowances
                                   ----------------------------------------------------------------------------
<S>                                         <C>                <C>                <C>                <C>
Non accrual loans:
  Residential:
    One-to-four family                         $     -                  -                547                 33
    Multi-family                                 1,798                252              1,252                195
  Commercial real estate                         1,795                 45              3,142                  -
  Commercial                                     1,887                  -                  -                  -
  Construction and land                         20,178                  -                  -                  -
TDR loans                                        1,950                406             11,291              1,694
                                   ----------------------------------------------------------------------------
      Total                                    $27,608                703             16,232              1,922
                                   ============================================================================
</TABLE>

During the year ended March 31, 2000, 1999 and 1998, the Company's average
investment in impaired loans was $13,810, $17,941 and $20,988, respectively and
interest income recorded during these periods was $381, $916 and $776,
respectively of which $369, $887 and $845, respectively was recorded utilizing
the cash basis method of accounting.

The effect of nonaccrual and TDR loans on interest income is presented below.

<TABLE>
<CAPTION>
                                                                Year Ended March 31,
                                         ---------------------------------------------------------------
                                                          2000                 1999                 1998
                                         ---------------------------------------------------------------
<S>                                                     <C>                  <C>                  <C>
Contractual interest due:
  Nonaccrual loans                                       $ 466                1,144                1,749
  TDR loans                                                499                1,032                1,186
                                         ---------------------------------------------------------------
                                                           965                2,176                2,935
  Interest income recognized on
    TDR loans on a cash basis                              369                  887                  779
                                         ---------------------------------------------------------------
  Interest income not recognized                         $ 596                1,289                2,156
                                         ===============================================================
</TABLE>


(6) Real Estate

Real estate acquired through foreclosure is summarized as follows:

<TABLE>
<CAPTION>
                                                                       March 31,
                                                       --------------------------------------
                                                           2000                   1999
                                                       --------------------------------------
<S>                                                     <C>                     <C>
         Properties acquired in settlement of loans      $1,466                  5,763
         Allowance for losses (note 6)                        -                   (445)
                                                       --------------------------------------
              Total                                      $1,466                  5,318
                                                       ======================================
</TABLE>

                                       73
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)


(Gain) loss from foreclosed real estate operations, net is summarized as
follows:

<TABLE>
<CAPTION>
                                                                             Year Ended March 31,
                                                               -----------------------------------------------
                                                                        2000           1999           1998
                                                               -----------------------------------------------
<S>                                                                 <C>             <C>             <C>
      (Gain)loss on sale of foreclosed real estate, net                 $(870)         (1,356)         (1,692)
      Real estate expense                                                 592           1,270           1,749
      Provision for (recoveries of) losses on real estate                   -              41             416
                                                               ----------------------------------------------
           Total                                                        $(278)            (45)            473
                                                               ==============================================
</TABLE>

Real estate held for sale or development is summarized as follows:

<TABLE>
<CAPTION>
                                                                              March 31,
                                                                ------------------------------------
                                                                       2000              1999
                                                                ------------------------------------
<S>                                                                <C>                 <C>
                          Properties wholly owned                   $  558                558
                          Mezzanine equity investments in
                           real estate                               4,370              5,813
                                                                ------------------------------------
                                 Total                              $4,928              6,371
                                                                ====================================
</TABLE>

During the years ended March 31, 2000, 1999, and 1998, the Company recognized
net gains of zero, $36 and zero, respectively from the sale of properties wholly
owned by the Company and profit of zero, $246 and zero respectively from equity
investments in real estate developments.

(7) Allowances for Losses on Loans Receivable and Real Estate

Activity in the allowances for losses on loans and real estate is summarized as
follows:

<TABLE>
<CAPTION>
                                                                   Year Ended March 31,
                                               --------------------------------------------------------
                                                             2000               1999               1998
                                               --------------------------------------------------------
<S>                                                    <C>                <C>                <C>
      Loans receivable:
        Beginning balance                                $26,160             26,002             27,721
          Provision                                        4,000              4,020              7,099
          Charge-offs                                     (2,390)            (3,879)            (9,110)
          Recoveries                                          68                 17                292
                                               --------------------------------------------------------
        Ending balance                                    27,838             26,160             26,002
                                               --------------------------------------------------------

      Foreclosed real estate:
        Beginning balance                                    445                603                329
          Provision (recoveries)                               -                 41                416
          Charge-offs                                       (445)              (199)              (142)
                                              ---------------------------------------------------------
        Ending balance                                         -                445                603
                                              ---------------------------------------------------------
      Total loans receivable and real estate:
        Beginning balance                                 26,605             26,605             28,050
         Provision                                         4,000              4,061              7,515
         Charge-offs                                      (2,835)            (4,078)            (9,252)
         Recoveries                                           68                 17                292
                                              --------------------------------------------------------
        Ending balance                                   $27,838            $26,605             26,605
                                              ========================================================
</TABLE>

                                       74
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)


(8) Accrued Interest Receivable

Accrued interest receivable is summarized as follows:

<TABLE>
<CAPTION>
                                                                       March 31,
                                                       --------------------------------------
                                                               2000               1999
                                                       --------------------------------------
<S>                                                       <C>                <C>
             Investment securities                            $ 1,420              1,249
             Mortgage-backed securities                         2,545              3,421
             Collateralized mortgage obligations                  516                534
             Loans receivable                                  14,103             11,914
                                                       --------------------------------------
                         Total                                $18,584             17,118
                                                       ======================================
</TABLE>

(9)  Property and Equipment, net

Property and equipment, net is summarized as follows:

<TABLE>
<CAPTION>
                                                                       March 31,
                                             --------------------------------------------------------
                                                                                        Estimated
                                                     2000               1999               Life
                                             --------------------------------------------------------
<S>                                             <C>                <C>                <C>
           Land                                    $  5,215              5,254                  -
           Buildings and improvements                21,209             21,688                 40
           Leasehold improvements                     2,192              2,040                 10
           Furniture, fixtures and equipment         25,920             24,285                  7
           Automobiles                                  156                156                  3
           Construction in progress                     168                 23                  -
                                             -------------------------------------
                                                     54,860             53,446
           Accumulated depreciation and
             amortization                           (32,486)           (29,521)
                                             -------------------------------------
                Total                              $ 22,374             23,925
                                             =====================================
</TABLE>

(10)  Deposits

Deposits and their respective weighted average interest rates are summarized as
follows:

<TABLE>
<CAPTION>
                                                             March 31,
                             ----------------------------------------------------------------------
                                            2000                               1999
                             ----------------------------------------------------------------------
                                   Weighted                           Weighted
                                   Average                            Average
                                     Rate             Amount            Rate             Amount
                             ----------------------------------------------------------------------
<S>                             <C>                <C>              <C>               <C>
       Regular passbook               2.21%           $  134,700         2.27%           $  143,827
       NOW and other demand
           deposit accounts           0.63               229,603         0.67               197,936
       Fixed and variable-rate
           certificate accounts       5.63             1,167,339         5.10             1,100,224
       Money market checking
           and savings                4.82               374,892         4.44               401,551
                                                      ----------                         ----------
            Total                     4.63%           $1,906,534         4.26%           $1,843,538
                                                      ==========                         ===========
</TABLE>

                                       75
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)


  Certificate accounts maturing subsequent to March 31, 2000 are summarized as
follows:

<TABLE>
<CAPTION>
                          Year Ending March 31,            Amount
                          -------------------------------------------
                               <S>                        <C>
                                2001                       $1,005,643
                                2002                           95,215
                                2003                           39,494
                                2004                            9,347
                                2005                           17,259
                                thereafter                        381
                                                         ------------
                                                           $1,167,339
                                                         ============
</TABLE>

Interest expense on deposits is summarized as follows:

<TABLE>
<CAPTION>
                                                                 Year Ended March 31,
                                             ---------------------------------------------------------
                                                     2000               1999               1998
                                             ---------------------------------------------------------
<S>                                             <C>                <C>                <C>
         Regular passbook                          $ 3,156              3,405              4,205
         NOW and other demand deposit
          accounts                                   1,366              1,291              1,214
         Money market checking and savings          17,649             13,133              7,981
         Certificates of deposit                    57,149             61,705             66,755
                                             ---------------------------------------------------------
               Total                               $79,320             79,534             80,155
                                             =========================================================
</TABLE>

At March 31, 2000 and 1999, the Company had accrued interest payable on deposits
of $1,563 and $1,389, respectively, which is included in other liabilities in
the accompanying consolidated balance sheets.

At March 31, 2000 and 1999, $23,800 and $6,988 of public funds on deposit were
secured by loans receivable, mortgage-backed securities, investment securities
and collateralized mortgage obligations with aggregate carrying values of
$36,448 and $19,346, respectively.

Accounts which are greater than $100 at March 31, 2000 and 1999 total $361,155
and $247,853, respectively.  Deposit accounts greater than $100 are not
federally insured.

(11) FHLB Advances and Other Borrowings

The Company utilizes FHLB advances and reverse repurchase agreements as sources
of funds.  The advances and repurchase agreements are collateralized by
mortgage-backed securities, investment securities, collateralized mortgage
obligations and/or loans.  The Company only transacts business with the FHLB or
brokerage firms that are recognized as primary dealers in U.S. government
securities. FHLB advances and reverse repurchase agreements were $884,000 and
zero and $764,000 and $50,000 at March 31, 2000 and March 31, 1999,
respectively.  (See Note 12.)

                                       76
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                                   March 31,
                                                        -------------------------------------------------------------
                                                                        2000                 1999                1998
                                                        -------------------------------------------------------------
<S>                                                        <C>                  <C>                 <C>
FHLB advances:
  Average amount outstanding during the year                        $792,778              855,197             601,078
  Maximum amount outstanding at any month end                        884,000              949,000             790,086
  Amount outstanding at year end (1)                                 884,000              764,000             735,886
  Average interest rate:
    For the year                                                        5.63%                5.57                5.87
    At year end                                                         6.02                 5.37                5.70

Reverse repurchase agreements:
  Average amount outstanding during the year                        $ 43,750               50,000              50,000
  Maximum amount outstanding at any month end                         50,000               50,000              50,000
  Amount outstanding at year end (1)                                       -               50,000              50,000
  Average interest rate:
    For the year                                                        5.87%                5.87                5.87
    At year end                                                            -                 5.87                5.87
</TABLE>

----------------------------
(1)  Included in the balance of FHLB advances outstanding at March 31, 2000 are
putable borrowings of $255,000 with original terms to maturity of 36 to 120
months with final maturity dates ranging from May 2001 to February 2008 and
initial put dates ranging from May 2000 to February 2003.

FHLB advances have the following final maturities at March 31, 2000.

<TABLE>
<CAPTION>
                                                   Amount
                                                ------------
                        <S>                        <C>
                           2001                     $524,000
                           2002                      140,000
                           2003                      115,000
                           2004                       90,000
                           thereafter                 15,000
                                                ------------
                                                    $884,000
                                                ============
</TABLE>

Included in the table above are putable advances with first put dates as
follows:

<TABLE>
<CAPTION>
                                                    Amount
                                                ------------
                          <S>                      <C>
                           2001                     $170,000
                           2002                       70,000
                           2003                       15,000
                                                ------------
                               Total                $255,000
                                                ============
</TABLE>

                                       77
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)


Interest expense on borrowings is summarized as follows:

<TABLE>
<CAPTION>
                                                            Year ended March 31,
                                                  -------------------------------------------------
                                                       2000                1999                1998
                                                  -------------------------------------------------
<S>                                                <C>                 <C>                 <C>
FHLB advances                                       $44,435              47,735              35,273
Reverse repurchase agreements                         2,760               2,976               2,959
Other interest expense                                   24                 111                 130
                                                  -------------------------------------------------
          Total                                     $47,219              50,822              38,362
                                                  =================================================
</TABLE>

(12) Lines of Credit

At March 31, 2000 and 1999, the Company had maximum borrowing capacity from the
FHLB of San Francisco in the approximate amount of $1,200,143 and $724,696,
respectively.  Based upon pledged collateral in place, the Company had available
borrowing capacity of $316,143 and $278,613 as of March 31, 2000 and 1999,
respectively.  Pledged collateral consists of certain loans receivable,
mortgage-backed securities, investment securities and collateralized mortgage
obligations aggregating $1,325,391 and $1,136,876 as of March 31, 2000 and 1999,
respectively and the Company's required investment in one hundred dollar par
value capital stock of the FHLB of San Francisco.  At March 31, 2000 and 1999,
the cost of this FHLB capital stock was $44,550 and $50,323, respectively.

(13) Employee Benefit Plans

The Company maintains a defined benefit Pension Plan ("Pension Plan") covering
substantially all of its employees.  The benefits are based on each employee's
years of service and final average earnings determined over the five-year period
prior to the benefit determination date.   Employees become fully vested upon
completion of five years of qualifying service.  The Company also maintains a
Retirement Plan for all directors and a Supplemental Plan for all senior
officers of the Company. Effective December 31, 1995, the Company elected to
freeze the Pension Plan, Directors' Retirement and Supplemental Plan.
Accordingly, no new accruals for future years of service have occurred since
December 31, 1995.

                                       78
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)


The following table sets forth the plans' change in benefit obligation and
change in plan assets at the plans' most recent measurement dates of December
31, 1999 and 1998.


<TABLE>
<CAPTION>
                                                        1999                                       1998
                                   -------------------------------------------------------------------------------------
                                                               Directors'                                 Directors'
                                                             Retirement and                             Retirement and
                                           Pension            Supplemental            Pension            Supplemental
                                            Plan                 Plans                 Plan                 Plans
                                   -------------------------------------------------------------------------------------
<S>                                   <C>                 <C>                    <C>                 <C>
Change in benefit obligation
Projected benefit obligation,
  beginning of year                            $21,770                  2,703              20,792                  2,536
Interest cost                                    1,568                    167               1,411                    171
Benefits paid                                   (1,299)                  (210)             (1,362)                  (210)
Actuarial loss (gain)                           (3,916)                    25                 929                    206
                                   -------------------------------------------------------------------------------------
Projected benefit obligation,
  end of year                                  $18,123                  2,685              21,770                  2,703
                                   -------------------------------------------------------------------------------------


Change in plan assets
Plan assets, beginning of year                 $23,653                      -              21,964                      -
Actual return on plan assets                     4,956                      -               3,051                      -
Employer contribution                                -                    210                   -                    210
Benefits paid                                   (1,299)                  (210)             (1,362)                  (210)
                                   -------------------------------------------------------------------------------------
Plan assets, end of year                       $27,310                      -              23,653                      -
                                   -------------------------------------------------------------------------------------

Funded status                                  $ 9,187                 (2,685)              1,883                 (2,703)
Unrecognized transition obligation                   -                     66                   -                     99
Unrecognized prior service cost                     82                      -                 152                      -
Unrecognized (gain)/loss                        (7,173)                   582                 (62)                   594
                                   -------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost                 $ 2,096                 (2,037)              1,973                 (2,010)
                                   =====================================================================================
</TABLE>

Net periodic pension costs for 1999, 1998 and 1997 included the following
components:

<TABLE>
<CAPTION>
                                                                       December 31,
                                  ----------------------------------------------------------------------------------
                                               1999                       1998                        1997
                                  ----------------------------------------------------------------------------------
                                                  Directors'                  Directors'                  Directors'
                                                 Retirement                  Retirement                  Retirement
                                     Pension     and Supple-    Pension     and Supple-     Pension     and Supple-
                                       Plan     mental Plans      Plan     mental Plans       Plan      mental Plans
                                  ----------------------------------------------------------------------------------
<S>                                  <C>        <C>             <C>        <C>              <C>        <C>
Components of net periodic
 benefit cost
Interest cost                        $ 1,568              167     1,411              171      1,360              187
Expected return on plan assets        (1,761)               -    (1,546)               -     (3,061)               -
Amortization of unrecognized
  transition obligation                    -               33         -               33          -               33
Amortization of unrecognized
  prior service cost                      70                -        70              (11)     1,856              (11)
Amortization of unrecognized
  (gain)/loss                              -               37         -               29          -               36
                                  ----------------------------------------------------------------------------------
Net periodic pension (income)
  expense                            $  (123)             237       (65)             222        155              245
                                  ==================================================================================
</TABLE>

                                       79
<PAGE>

                        PFF BANCORP, INC. AND SUBSIDARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)

The assumptions used in determining the actuarial present value of the
accumulated benefit obligation and the expected return on plan assets for 1999
and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                       December 31,
                                     -----------------------------------------------------------------------------
                                                        1999                                  1998
                                     -----------------------------------------------------------------------------
                                                               Directors'                            Directors'
                                                               Retirement                            Retirement
                                             Pension          and Supple-          Pension          and Supple-
                                              Plan            mental Plans           Plan           mental Plans
                                     -----------------------------------------------------------------------------
<S>                                     <C>                 <C>                <C>                <C>
Weighted-average assumptions
  Discount rate                                     7.75%               7.75               6.25               6.25
  Expected long-term rate of return
   on plan assets                                   7.25                   -               7.25                  -

</TABLE>

In 1985, the Company established a capital accumulation plan (401(k) Plan) which
is available to all full-time employees over 21 years of age with more than six
months of service.  Under the 401(k) Plan, the Company contributes funds in an
amount equal to a percentage of employee contributions.  In 2000, 1999 and 1998,
the total 401(k) Plan expense was $514, $393, and $348, respectively.

The Company provides a non-qualified Directors' Deferred Compensation Plan and a
non-qualified Employees' Deferred Compensation Plan that offer directors and
senior officers of the Company, respectively, the opportunity to defer
compensation through a reduction in salary and then receipt of a benefit upon
retirement.  The benefit from the Directors' Deferred Compensation Plan is
payable upon the occurrence of the first Board of Directors' meeting held in the
fiscal year following the participant attaining age 73.  The benefit from the
Employees' Deferred Compensation Plan is payable at normal retirement (age 65)
or actual retirement but no later than age 70, or alternatively upon termination
if termination occurs earlier due to disability.  The primary form of benefit is
120 monthly installment payments of the account balance.  Such balance shall
equal the amount of the deferrals and interest thereon.  Other actuarially
equivalent payout schedules, including a lump sum payout, are available with
certain restrictions.  Deferrals are currently credited with an interest rate
equal to the highest interest rate paid on a designated date to depositors of
the Company or, at the Participants' election, investment earnings or losses
equivalent to that of the Company's common stock.  At March 31, 2000, the
liability for these plans is included in accrued expenses and other liabilities.

The Company currently provides post retirement medical coverage to eligible
employees.  At March 31, 2000 and 1999, the expected cost associated with this
coverage was $17 and is included in accrued expenses and other liabilities.

As part of the reorganization to the stock form of ownership, the ESOP purchased
1,587,000 shares of the Company's common stock at $10 per share, or $15,870,
which was funded by a loan from the Company. The loan will be repaid from the
Company's or the Bank's discretionary contributions over a period of 10 years.
The loan is secured by the common stock owned by the ESOP.  Shares purchased
with the loan proceeds are held in a suspense account for allocation among
participants as the loan is repaid.  ESOP shares are allocated to the eligible
participants based on compensation as described in the ESOP plan.  For the years
ended March 31, 2000 and 1999, 171,621 and 158,700 ESOP shares were allocated to
the participants.  At March 31, 2000 and 1999, the unearned balance of the ESOP
shares is included in unearned stock-based compensation as a reduction of total
stockholders' equity in the accompanying consolidated financial statements.  The
value of ESOP shares committed to be released is included in compensation
expense based upon the fair value of the shares on the dates they were
committed.  At March 31, 2000, the fair value of the unearned ESOP shares is
$14,559.  Compensation expense associated with the ESOP was $3,152, $2,694 and
$2,921 for the years ended March 31, 2000, 1999 and 1998.

                                       80
<PAGE>
                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)

During October, 1996, the stockholders of the Company approved the PFF Bancorp,
Inc. 1996 Incentive Plan (the "1996 Plan"). The 1996 Plan authorizes the
granting of options to purchase the Company's common stock, option related
awards, and grants of common stock (collectively "Awards").  Concurrent with the
approval of the 1996 Plan, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation", which permits a company to account for stock options
granted under either the fair-value-based or the intrinsic-value-based (as
described in APB No. 25) method of accounting. If the Company elects to account
for options granted under the intrinsic-value-based method, it must make certain
disclosures with respect thereto.  The Company has elected to account for stock
options granted under the intrinsic-value-based method of accounting.

The maximum number of shares reserved for Awards under the 1996 Plan is
2,777,250 shares, with 1,983,750 shares reserved for purchase pursuant to
options and option-related awards and 793,500 shares reserved for grants of the
Company's common stock. The exercise price of all options and option-related
awards must be 100% of the fair value of the Company's common stock at the time
of grant and the term of the options may not exceed 10 years.  Of the 793,500
shares reserved for stock grants, 770,545 shares with a fair value of $9,890
were granted to directors and executive officers during the year ended March 31,
1997.  532,500 of the 770,545 shares represented grants to employees with the
remaining shares granted to directors of the Company.  An additional 15,000
shares with a fair value of $214 at the time of grant, were granted to an
executive officer of the Company during the year ended March 31, 1998.  All
shares granted are eligible to vest in five equal annual installments.  With
respect to shares of the Company's common stock granted to executive officers,
the 1996 Plan provides that the vesting of 75% of the third, fourth and fifth
annual installments is subject to the attainment of certain performance goals.
Compensation expense, associated with the stock grants recognized based upon the
market price of the common stock at the time of grant, was $2,094, $1,910 and
$1,904 for the years ended March 31, 2000, 1999 and 1998.  The unamortized
balance of the grants is included in unearned stock-based compensation in the
accompanying consolidated financial statements.  At March 31, 2000 and 1999, the
unamortized balance of the stock awards was $4,000 and $6,100, respectively.

                                       81
<PAGE>
                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                 (Dollars in thousands, except per share data)

The following table contains certain information with respect to the stock
options granted under the 1996 Plan.

<TABLE>
<CAPTION>
                                          Assumptions Used in Determining Options' Values
--------------------------------------------------------------------------------------------------------------------
                                                                                              Calculated
                                              Expected                                         Value of
                          Number   Exercise   Term in    Risk-free    Expected     Dividend      Each
Grant Date               Granted    Price      Years      Rate(1)    Volatility     Yield       Option
--------------------------------------------------------------------------------------------------------------------
<S>                      <C>        <C>          <C>       <C>         <C>          <C>        <C>
Options Granted During the Year Ended March 31,  2000
May 26, 1999              4,182     $18.13       8.00      6.20%       39.48%       1.28%       $ 8.78
November 23, 1999         2,612      21.88       8.00      6.20        39.48        1.28         10.59
March 22, 2000           17,876      14.50       8.00      6.20        39.48        1.28          7.02
Options Granted During the Year Ended March 31, 1999
April 22, 1998            1,328     $20.50       8.00      5.20%       38.44%        N/A        $10.97
September 23, 1998       15,214      14.50       8.00      5.20        38.44         N/A          7.76
October 28, 1998          1,427      14.31       8.00      5.20        38.44         N/A          7.66
March 24, 1999            7,273      17.94       8.00      5.20        38.44         N/A          9.60
Options Granted During the Year Ended March 31, 1998
April 23, 1997            1,660     $14.25       8.00      5.70%       30.00%        N/A        $ 6.93
May 7, 1997               1,229      14.50       8.00      5.70        30.00         N/A          7.05
October 22, 1997          6,154      20.63       8.00      5.70        30.00         N/A         10.03
February 25, 1998         2,626      18.75       8.00      5.70        30.00         N/A          9.12
</TABLE>

(1)  The risk-free rate is the market rate for U.S. Government securities with
the same maturities as the options, as of March 31, 2000.

The Company applies APB No. 25 in accounting for its Plan and, accordingly, no
compensation cost has been recognized for its stock options in the consolidated
financial statements.  Had the Company determined compensation cost based on the
fair value at the grant date for its stock options exercisable under SFAS No.
123, the Company's results of operations would have been adjusted to the pro
forma amounts indicated below:

<TABLE>

                                 2000             1999              1998
                           ---------------------------------------------------
<S>                           <C>                 <C>               <C>
Net earnings:
    As reported                    $26,598           19,004             15,980
    Pro forma                       25,051           17,533             14,463
Earnings per share - Basic
    As reported                       2.20             1.37               1.00
    Pro forma                         2.07             1.26               0.90
Earnings per share - Diluted
    As reported                       2.02             1.29               0.95
    Pro forma                         1.90             1.19               0.86
</TABLE>

                                       82
<PAGE>
                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                 (Dollars in thousands, except per share data)

The table below reflects, for the periods indicated, the activity in the
Company's stock options issued under the 1996 Plan.

<TABLE>
<CAPTION>
                                                    For the Year Ended March 31,
                                                      2000         1999         1998
                                             ---------------------------------------
<S>                                             <C>           <C>          <C>
Balance at beginning of period                   1,839,423    1,876,471    1,960,069
Granted                                             24,670       25,242       11,669
Canceled or expired                                 (3,567)     (19,764)     (31,345)
Exercised                                         (110,576)     (42,526)     (63,922)
                                            ----------------------------------------
Balance at end of period                         1,749,950    1,839,423    1,876,471
                                            ========================================
Options exercisable                                969,324      707,762      381,083
Options available for grant                          1,593       29,969       26,813

Weighted average option price per share:
  Under option                                      $13.16        13.10        13.05
  Exercisable                                        13.11        13.07        13.06
  Exercised                                          20.86        18.83        19.26
</TABLE>

The following table summarizes information with respect to the Company's stock
options outstanding as of March 31, 2000.

<TABLE>
<CAPTION>
                                Options Outstanding                            Options Exercisable
            ----------------------------------------------------------------------------------------------
                                   Weighted-average
  Range of          Number             Remaining         Weighted-           Number           Weighted-
  Exercise        Outstanding      Contractual Life       average          Outstanding         average
   Prices      at March 31, 2000        (Years)        Exercise Price   at March 31, 2000   Exercise Price
----------------------------------------------------------------------------------------------------------
<S>            <C>                 <C>                 <C>              <C>                 <C>
$ 12 to 14             1,536,666                6.5            $12.75             864,009           $12.75
  14 to 16                95,596                7.2             15.13              43,411            15.42
  16 to 18               100,786                6.8             16.35              58,129            16.28
  18 to 20                 6,808                8.7             18.37               1,050            18.75
  20 to 22                10,094                8.2             20.93               2,725            20.61
</TABLE>

                                       83
<PAGE>
                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)

(14) Income Taxes

Income taxes (benefit) is summarized as follows:

<TABLE>
<CAPTION>
                                     Current          Deferred         Total
                                ----------------------------------------------
<S>                                    <C>               <C>            <C>
Year Ended March 31, 2000
  Federal                               $13,008          1,356          14,364
  State                                   4,484            920           5,404
  Taxes charged to
    stockholders equity                     447              -             447
                                ----------------------------------------------
       Total                            $17,939          2,276          20,215
                                ==============================================
Year Ended March 31, 1999
  Federal                               $ 7,987          2,641          10,628
  State                                   2,695            885           3,580
                                ----------------------------------------------
       Total                            $10,682          3,526          14,208
                                ==============================================
Year Ended March 31, 1998
  Federal                               $14,448         (4,399)         10,049
  State                                   2,508           (538)          1,970
                                ----------------------------------------------
       Total                            $16,956         (4,937)         12,019
                                ==============================================
</TABLE>

A reconciliation of total income taxes and the amount computed by applying the
applicable Federal income tax rate to earnings before income taxes follows:

<TABLE>
<CAPTION>
                                                                  Year Ended March 31,
                                 ---------------------------------------------------------------------------------------
                                         2000                           1999                      1998
                                 ---------------------------------------------------------------------------------------
                                    Amount      Percent          Amount     Percent        Amount      Percent
                                 ---------------------------------------------------------------------------------------
<S>                                 <C>             <C>         <C>              <C>           <C>          <C>
Computed "expected" taxes           $16,385          35%        $11,624          35%      $ 9,800           35%
Increase (reduction) in
 taxes resulting from:
  California franchise tax,
   net of Federal tax benefit         3,513           7           2,327           7         1,281            7
  Other items                           317           1             257           1           938            1
                                 ---------------------------------------------------------------------------------------
          Total                     $20,215          43%        $14,208          43%      $12,019           43%
                                 =======================================================================================
</TABLE>

                                       84
<PAGE>
                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities and the related income
taxes (benefits) are presented below:

<TABLE>
<CAPTION>
                                            March 31,         Taxes         March 31,        Taxes         March 31,
                                              2000          (Benefit)         1999         (Benefit)         1998
                                        ------------------------------------------------------------------------------
<S>                                         <C>               <C>           <C>            <C>             <C>
Deferred tax assets:
  Allowance for real estate
    loan losses                              $(10,811)          (774)       (10,037)        (2,487)        (7,550)
  California franchise tax                     (2,746)          (950)        (1,796)           (98)        (1,698)
  Accrued expenses                               (798)           681         (1,479)           776         (2,255)
  Core deposit intangibles
    amortization                                 (202)           (21)          (181)           196           (377)
  Nonaccrual interest                            (121)           363           (484)          (337)          (147)
  Unrealized gains (loss) on
    securities available-for-sale, net         (6,741)        (7,534)           793         (1,001)         1,794
  Other                                        (2,074)          (189)        (1,885)          (364)        (1,521)
                                        ------------------------------------------------------------------------------
                                              (23,493)        (8,424)       (15,069)        (3,315)       (11,754)
                                        ------------------------------------------------------------------------------
Deferred tax liabilities:
  Deferred loan origination fees               16,267          2,651         13,616          5,000          8,616
  Unredeemed FHLB stock
    dividends                                   7,138          1,061          6,077          1,241          4,836
  Pension plan liability                          773            584            189           (137)           326
  Accumulated depreciation                       (340)          (183)          (157)          (337)           180
  Customer early withdrawal
    penalty depreciation                           95            (38)           133            (41)           174
  Accrued interest on pre-
    1985 loans                                     80             11             69            104            (35)
  Excess servicing rights
    amortization                                   80              -             80             10             70
  Other                                            63           (920)           983              -            983
                                        ------------------------------------------------------------------------------
                                               24,156          3,166         20,990          5,840         15,150
                                        ------------------------------------------------------------------------------
Net deferred tax liability                   $    663         (5,258)         5,921          2,525          3,396
                                        ==============================================================================
</TABLE>

In determining the possible future realization of deferred tax assets, the
future taxable income from the following sources is taken into account:  (a) the
reversal of taxable temporary differences, (b) future operations exclusive of
reversing temporary differences and (c) tax planning strategies that, if
necessary, would be implemented to accelerate taxable income into years in which
net operating losses might otherwise expire. Deferred tax assets as of March 31,
2000 and 1999 have been recognized to the extent of the expected reversal of
taxable temporary differences.

Based on the Company's current and historical pretax earnings, adjusted for
significant items, management believes it is more likely than not that the
Company will realize the benefit of the deferred tax asset at March 31, 2000.
Management believes the existing net deductible temporary differences will
reverse during periods in which the Company generates net taxable income.
However, there can be no assurance that the Company will generate any earnings
or any specific level of continuing earnings in future years.

On August 20, 1996, the President signed the Small Business Job Protection Act
(the Act) into law.  The Act repealed the reserve method of accounting for bad
debts for savings institutions effective for taxable years beginning after 1995.
The Company, therefore, is required to use the specific charge-off method on its
1996 and subsequent Federal income tax returns.  Prior to 1996, savings
institutions that met certain definitional tests and other conditions prescribed
by the Internal Revenue Code were allowed to deduct, within

                                       85
<PAGE>
                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)

limitations, a bad debt deduction. The deduction percentage was 8% for the years
ended March 31, 1996 and 1995. Alternately, a qualified savings institution
could compute its bad debt deduction based upon actual loan loss experience (the
experience method). Retained earnings at March 31, 2000 and 1999 includes
approximately $25,300 for which no deferred income tax liability has been
recognized.

(15) Regulatory Capital

Savings institutions are subject to the provisions of the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), which was signed into
law on December 19, 1991.  Regulations implementing the prompt corrective action
provisions of FDICIA became effective on December 19, 1992.  In addition to the
prompt corrective action requirements, FDICIA includes significant changes to
the legal and regulatory environment for insured depository institutions,
including reductions in insurance coverage for certain kinds of deposits,
increased supervision by the federal regulatory agencies, increased reporting
requirements for insured institutions, and new regulations concerning internal
controls, accounting and operations.

To be considered "well capitalized," a savings institution must generally have a
core capital of at least 5%, a Tier 1 risk-based capital ratio of at least 6%
and a total risk-based capital of at least 10%.  An institution is deemed to be
"critically undercapitalized" if it has a tangible equity ratio of 2% or less.
Management believes that at March 31, 2000, the Bank met the definition of "well
capitalized."

The following is a reconciliation of the Bank's GAAP capital to regulatory
capital as of March 31, 2000:

<TABLE>
<CAPTION>
                                                                      PFF Bank & Trust's
                                                                Regulatory Capital Requirement
                                             -----------------------------------------------------------------
                                                     Tangible                Core               Risk-based
                                                      Capital               Capital               Capital
                                             -----------------------------------------------------------------
<S>                                             <C>                   <C>                   <C>
Capital of the Bank presented on a GAAP
  Basis                                                   $198,843               198,843               198,843
Adjustments to GAAP capital to arrive
  at regulatory capital:
  Unrealized loss on securities
    available-for-sale, net                                  8,123                 8,123                 8,123
  Investments in and advances to
    non-includable consolidated subsidiaries                  (261)                 (261)                 (261)
  Goodwill and other intangible assets                      (2,067)               (2,067)               (2,067)
  General loan valuation allowance (1)                           -                     -                25,782
  Equity investments and other assets
    required to be deducted                                      -                     -                (3,563)
                                             -----------------------------------------------------------------
Regulatory capital                                         204,638               204,638               226,857
Regulatory capital requirement                              45,368               120,981               164,937
                                             -----------------------------------------------------------------
  Amount by which regulatory capital
    exceeds requirement                                   $159,270                83,657                61,920
                                             =================================================================
</TABLE>

(1) Limited to 1.25% of risk-weighted assets.

                                       86
<PAGE>
                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)

The following table summarizes the Bank's actual capital and required capital
under prompt corrective action provisions of FDICIA as of March 31, 2000 and
1999.

<TABLE>
<CAPTION>


                                                                                   For Capital
                                                Actual                          Adequacy Purposes
                                   ------------------------------------------------------------------------------
          March 31, 2000                 Amount         Ratio          Amount           Ratio
-----------------------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>           <C>                  <C>
Total capital (to risk-weighted           $226,857        11.00%      $164,937           *8.00%
 assets)
Core (Tier 1) capital (to total            204,638         6.77        120,981           *4.00%
 assets)
Tier 1 capital (to risk-weighted           201,075         9.75              -            - (1)
 assets)
Tangible capital (to total assets)         204,638         6.77         45,368           *1.50%

<CAPTION>
                                                    To be Well
                                                 Capitalized Under
                                                 Prompt Corrective
                                                 Action Provisions
                                   ------------------------------------
          March 31, 2000                  Amount               Ratio
-----------------------------------------------------------------------
<S>                                    <C>                 <C>
Total capital (to risk-weighted          $206,171           *10.00%
 assets)
Core (Tier 1) capital (to total           151,226           * 5.00
 assets)
Tier 1 capital (to risk-weighted          123,702           * 6.00
 assets)
Tangible capital (to total assets)              -             - (1)
</TABLE>

* greater than or equal to

<TABLE>
<CAPTION>


                                                                                For Capital
                                                Actual                       Adequacy Purposes
                                   ---------------------------------------------------------------
          March 31, 1999                 Amount         Ratio        Amount           Ratio
--------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>           <C>                  <C>
Total capital (to risk-weighted           $222,915        12.52%      $142,403          *8.00%
 assets)
Core (Tier 1) capital (to total            201,210         6.95         86,859          *3.00%
 assets)
Tier 1 capital (to risk-weighted           201,210        11.30              -             (1)
 assets)
Tangible capital (to total assets)         201,210         6.95         46,429          *1.50%

<CAPTION>

                                                       To be Well
                                                    Capitalized Under
                                                    Prompt Corrective
                                                    Action Provisions
                                   -----------------------------------
          March 31, 1999                   Amount           Ratio
----------------------------------------------------------------------
<S>                                       <C>               <C>
Total capital (to risk-weighted           $178,004          *10.00%
 assets)
Core (Tier 1) capital (to total            144,765          * 5.00
 assets)
Tier 1 capital (to risk-weighted           173,718          * 6.00
 assets)
Tangible capital (to total assets)               -              (1)
</TABLE>
* greater than or equal to

(1)  Ratio is not specified under capital regulations.

At periodic intervals, both the OTS and the FDIC routinely examine the Bank's
financial statements as part of their legally prescribed oversight of the thrift
industry.  Based on these examinations, the regulators can direct that the
Bank's financial statements be adjusted in accordance with their findings.

(16) Other Non-Interest Expense

Other non-interest expense amounts are summarized as follows:

<TABLE>
<CAPTION>
                                                  Year Ended March 31,
                                     ------------------------------------------------
                                          2000             1999             1998
                                     ------------------------------------------------
<S>                                     <C>             <C>                <C>
SAIF insurance premiums                 $1,326            1,573            1,470
Office supplies and expense              2,859            3,406            2,883
Savings and NOW account expenses         1,146            1,134            1,382
Loan expenses                              479              581              438
Other                                    3,417            3,463            3,757
                                     ------------------------------------------------
                                        $9,227           10,157            9,930
                                     ================================================
</TABLE>

                                       87
<PAGE>
                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)

(17) Commitments and Contingencies

The Company and subsidiaries have various outstanding commitments and contingent
liabilities in the ordinary course of business that are not reflected in the
accompanying consolidated financial statements as follows:

Litigation

The Company and subsidiaries have been named as defendants in various lawsuits
arising in the normal course of business.  The outcome of these lawsuits cannot
be predicted, but the Company intends to vigorously defend the actions and is of
the opinion that the lawsuits will not have a material effect on the Company.

Leases

The Company leases various office facilities under noncancellable operating
leases that expire through the year 2044.  Net rent expense under operating
leases included in occupancy and equipment expense for the years ended March 31,
2000, 1999 and 1998, was $723, $743, and $590, respectively.  A summary of
future minimum lease payments under these agreements at March 31, 2000 follows.

<TABLE>
<CAPTION>
                                Amount
                              ------------
<S>                                 <C>
Year ending March 31,
2001                                $  740
2002                                   674
2003                                   541
2004                                   476
2005                                   393
thereafter                             391
                              ------------
     Total                          $3,215
                              ============
</TABLE>

(18) Off-Balance Sheet Risk

Concentrations of Operations and Assets

The Company's operations are located within Southern California.  At both March
31, 2000 and 1999, approximately 93.3% of the Company's mortgage loans were
secured by real estate in Southern California. In addition, substantially all of
the Company's real estate is located in Southern California.

Off-Balance-Sheet Credit Risk/Interest-Rate Risk

In the normal course of meeting the financing needs of its customers and
reducing exposure to fluctuating interest rates, the Company is a party to
financial instruments with off-balance sheet risk.  These financial instruments
(commitments to originate loans and commitments to purchase loans) include
elements of credit risk in excess of the amount recognized in the accompanying
consolidated financial statements.  The contractual amounts of those instruments
reflect the extent of the Company's involvement in these particular classes of
financial instruments.

                                       88
<PAGE>
                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)

The Company's exposure to off-balance sheet credit risk (i.e., losses resulting
from the other party's nonperformance of financial guarantees) and interest rate
risk (for fixed-rate mortgage loans) in excess of the amount recognized in the
accompanying consolidated financial statements is represented by the following
contractual amounts.

<TABLE>
<CAPTION>
                                                                       March 31,
                                                        ------------------------------------
                                                                 2000               1999
                                                        ------------------------------------
<S>                                                         <C>                 <C>
Commitments to originate loans:
    Variable-rate                                            $     86,342             24,287
    Fixed-rate                                                      1,587              4,523
                                                        ------------------------------------
          Total                                              $     87,929             28,810
                                                        ====================================
    Interest rate range for fixed-rate loans                  7.63%-13.79%       6.25%-15.75%
</TABLE>

Commitments to originate fixed and variable-rate loans represent commitments to
lend to a customer, provided there are no violations of conditions specified in
the agreement.  Commitments to purchase variable-rate loans represent
commitments to purchase loans originated by other financial institutions.  These
commitments generally have fixed expiration dates or other termination clauses
and may require the payment of a fee.  Since some of the commitments may expire
without being drawn upon, the total commitment amounts above do not necessarily
represent future cash requirements.  The Company uses the same credit policies
in making commitments to originate and purchase loans as it does for on-balance
sheet instruments. The Company controls credit risk by evaluating each
customer's creditworthiness on a case-by-case basis and by using systems of
credit approval, loan limitation, and various underwriting and monitoring
procedures.

The Company does not require collateral or other security to support off-balance
sheet financial instruments with credit risk.  However, when the commitment is
funded, the Company receives collateral to the extent collateral is deemed
necessary, with the most significant category of collateral being real property
underlying mortgage loans.


(19) Trust Operations

Included in prepaid expenses and other assets is the net unamortized trust
acquisition cost of $1,914 and $2,263 at March 31, 2000 and 1999, respectively.

As a result of the acquisition, the Company now has certain additional fiduciary
responsibilities which include acting as trustee, executor, administrator,
guardian, custodian, record keeper, agent, registrar, advisor and manager.  In
addition, the Company's Trust department holds assets for the benefit of others.
These assets are not the assets of the Company and are not included in the
consolidated balance sheets of the Company at March 31, 2000 and 1999.

                                       89
<PAGE>
                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)


(20) Loan Servicing and Sale Activities

Loan servicing and sale activities are summarized as follows:

<TABLE>
<CAPTION>
                                                              As of and for the Year Ended March 31,
                                               ----------------------------------------------------------------
                                                                2000                 1999                  1998
                                               ----------------------------------------------------------------
<S>                                               <C>                  <C>                   <C>
Balance sheet information:
  Loans held for sale                                        $ 7,362                3,531                   701
                                               ================================================================
Statement of earnings information:
  Loan servicing fees                                        $   878                  850                   887
  Amortization of servicing asset                                  -                 (109)                  (42)
                                               ----------------------------------------------------------------
  Loan servicing fees, net                                   $   878                  741                   845
                                               ================================================================
  Gain on sale of loans                                      $   452                  661                   992
                                               ================================================================
Statement of cash flows information:
  Loans originated for sale                                  $32,799               42,360                 3,893
                                               ================================================================
  Proceeds from sale of loans                                $25,673               39,407               166,989
                                               ================================================================
</TABLE>

The Company originates mortgage loans which, depending upon whether the loans
meet the Company's investment objectives, may be sold in the secondary market or
to other private investors.  The servicing of these loans may or may not be
retained by the Company.  Indirect non-deferrable costs associated with
origination, servicing and sale activities cannot be presented as these
operations are integrated with and not separable from the origination and
servicing of portfolio loans, and as a result, cannot be accurately estimated.

At March 31, 2000, 1999 and 1998, the Company was servicing loans and
participations in loans owned by others of $282,924, $325,730 and $390,159,
respectively.

(21) Fair Value of Financial Instruments

The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments"
("SFAS 107"). The estimated fair value amounts have been determined using
available market information and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that could be realized in a
current market exchange. The use of different market assumptions or estimation
methodologies may have a material impact on the estimated fair value amounts.

                                       90
<PAGE>

                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)


The estimated fair values of the Company's financial instruments are as follows:

<TABLE>
<CAPTION>
                                                   March 31, 2000                        March 31, 1999
                                     -----------------------------------------------------------------------------
                                            Carrying              Fair             Carrying             Fair
                                              Value              Value              Value              Value
                                     -----------------------------------------------------------------------------
<S>                                     <C>                 <C>                <C>                <C>
Financial assets:
  Cash and cash equivalents and
    certificates of deposit              $   35,131              35,131            63,790             63,790
  Investment securities                      88,511              88,529            83,096             83,103
  Mortgage-backed securities                381,277             381,277           526,116            526,120
  Collateralized mortgage obligations        85,653              85,653           102,700            102,700
  Loans held for sale                         7,362               7,362             3,531              3,531
  Loans receivable, net                   2,326,702           2,304,657         2,026,081          2,031,065

Financial liabilities:
  Deposits                                1,906,534           1,901,595         1,843,538          1,847,383
  FHLB advances and other borrowings        884,000             883,055           814,000            737,083
</TABLE>

The following methods and assumptions were used in estimating the Company's fair
value disclosures for financial instruments.

Cash, Cash Equivalents and Certificates of Deposit: The fair values of cash and
cash equivalents, and certificates of deposit approximate the carrying values
reported in the consolidated balance sheet.

Investment Securities, Mortgage-Backed Securities and Collateralized Mortgage
Obligations: The fair values of these investments are based on quoted market
prices or dealer quotations obtained from market sources.

Loans Receivable: For purposes of calculating the fair value of loans
receivable, loans were segregated by payment type, such as those with fixed
interest rates and those with adjustable interest rates as well as by prepayment
and repricing frequency.  For all mortgage loans, fair value is estimated using
discounted cash flow analysis.  Discount rates are based on the forward rates on
the treasury yield curve.  The fair values of significant non-performing loans
are based on recent appraisals, or if not available, on estimated cash flows,
discounted using a rate commensurate with the risk associated with the specific
properties.

Deposits:  The fair values of passbook accounts, demand deposits and certain
money market deposits are assumed to be the carrying values at the reporting
date.  The fair value of term accounts is based on projected contractual cash
flows discounted using the secondary market CD curve at March 31, 2000.

FHLB Advances and Other Borrowings: The fair value of FHLB advances and other
borrowings is based on discounted cash flows using the secondary market CD curve
at March 31, 2000.

Off-Balance Sheet Financial Instruments:  Commitments to originate loans had a
notional amount of $87,929 at March 31, 2000.  The carrying value of the
commitments is zero as all are cancelable and not readily marketable.

                                       91
<PAGE>

                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)


(22) Conversion to Capital Stock Form of Ownership

The Bancorp was incorporated under Delaware law in March 1996 for the purpose of
acquiring and holding all of the outstanding capital stock of the Bank as part
of the Bank's conversion from a federally chartered mutual savings and loan
association to a federal stock savings bank.  On March 28, 1996, the Bank became
a wholly owned subsidiary of the Bancorp.   In connection with the conversion,
the Bancorp issued and sold to the public 19,837,500 shares of its common stock
(par value $.01 per share) at a price of $10 per share. The proceeds, net of
$4,500 in conversion costs, received by the Bancorp from the conversion (before
deduction of $15,870 to fund the Employee Stock Ownership Plan) amounted to
$193,875.  The Bancorp used $105,000 of the net proceeds to purchase the capital
stock of the Bank.

At the time of the conversion, the Bank established a liquidation account in the
amount of $109,347, which is equal to its total retained earnings as of
September 30, 1995.  The liquidation account will be maintained for the benefit
of eligible account holders who continue to maintain their accounts at the Bank
after the conversion.  The liquidation account will be reduced annually to the
extent that eligible account holders have reduced their qualifying deposits.
Subsequent increases will not restore an eligible account holder's interest in
the liquidation account.  In the event of a complete liquidation, each eligible
account holder will be entitled to receive a distribution from the liquidation
account in an amount proportionate to the current adjusted qualifying balances
for accounts then held.  The balance in the liquidation account at March 31,
2000 is $31,986.

The Company may not declare or pay cash dividends on or repurchase any of its
shares of common stock, if the effect would cause stockholders' equity to be
reduced below applicable regulatory capital maintenance requirements or if such
declaration and payment would otherwise violate regulatory requirements.

                                       92
<PAGE>

                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)


(23) Parent Company Condensed Financial Information

This information should be read in conjunction with the other notes to the
consolidated financial statements. Following are the condensed parent company
only financial statements for PFF Bancorp, Inc.

                            Condensed Balance Sheets
                            ------------------------

<TABLE>
<CAPTION>
                                                                   March 31,
                                                           -------------------------
                                                              2000           1999
                                                           -------------------------
<S>                                                        <C>            <C>

                    Assets

Cash and cash equivalents                                   $  1,361         4,757
Equity securities available-for-sale                           5,433         7,879
Trust preferred securities available-for-sale                  4,833        13,303
Trading securities, at fair value                              4,318         4,271
Construction Loan                                                663             -
Investment in real estate                                      4,370         5,813
Investment in Bank subsidiary                                198,843       204,956
Other assets                                                   2,137         2,306
                                                            ----------------------
     Total assets                                           $221,958       243,285
                                                            ======================

      Liabilities and Stockholders' Equity

Other liabilities                                           $    127           620
Stockholders' equity                                         221,831       242,665
                                                            ----------------------
     Total liabilities and stockholders' equity             $221,958       243,285
                                                            ======================
</TABLE>

                       Condensed Statements of Earnings
                       --------------------------------

<TABLE>
<CAPTION>
                                                                     Year ended March 31,
                                                           ----------------------------------------
                                                              2000           1999           1998
                                                           ----------------------------------------
<S>                                                        <C>            <C>            <C>
Interest and other income                                   $ 2,596         3,916          4,474
General and administrative expense                            3,032         2,798          2,653
                                                            ------------------------------------
     Earnings before equity in undistributed earnings
       of subsidiary before income taxes                       (436)        1,118          1,821
Dividend from Bank subsidiary                                27,000        15,000         30,000
Equity in earnings (loss) of subsidiary before income
 taxes                                                       20,249        17,094         (3,822)
                                                            ------------------------------------
     Earnings before income taxes                            46,813        33,212         27,999
Income taxes                                                 20,215        14,208         12,019
                                                            ------------------------------------
     Net earnings                                           $26,598        19,004         15,980
                                                            ====================================
</TABLE>

                                       93
<PAGE>

                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                            (Dollars in thousands)


                       Condensed Statements of Cash Flows
                       ----------------------------------

<TABLE>
<CAPTION>
                                                                          Year Ended March 31,
                                                                ----------------------------------------
                                                                   2000           1999           1998
                                                                ----------------------------------------
<S>                                                             <C>            <C>            <C>

Cash flows from operating activities:
  Net earnings                                                   $ 26,598        19,004         15,980
Adjustments to reconcile net earnings to cash used by
  operating activities:
  Amortization of premiums on investments and
   mortgage-backed securities                                          14            29            262
  Gain on trading securities                                       (1,676)         (569)             -
  Increase in trading securities                                    1,985        (3,924)             -
  Amortization of unearned stock-based compensation                 4,258         3,531          3,491
  (Gains) losses on sale of mortgage-backed securities and
     investments available-for-sale                                   290           191           (438)
  Undistributed earnings of subsidiary                                 53        (3,474)        14,968
  (Increase) decrease in other assets                                 170         3,418         (1,307)
  Increase (decrease) in other liabilities                           (493)          (86)          (696)
                                                                 -------------------------------------
     Net cash provided by operating activities                     31,199        18,120         32,260
                                                                 -------------------------------------

Cash flow from investing activities:
  (Increase) decrease in real estate held for investment              780        (5,813)             -
  Increase in investment securities available-for-sale                  -             -        (25,568)
  Decrease in mortgage-backed securities
   available-for-sale                                                   -        11,110         27,707
  Decrease in equity securities available-for-sale                  1,400         5,004              -
  Decrease in trust preferred securities                            7,891         3,782              -
                                                                 -------------------------------------
     Net cash provided by investing activities                     10,071        14,083          2,139
                                                                 -------------------------------------

Cash flows from financing activities:
  Proceeds from exercise of stock options                             574           531            682
  Purchase of treasury stock                                      (42,968)      (32,099)       (35,808)
  Cash dividends                                                   (2,272)            -              -
                                                                 -------------------------------------
     Net cash used in financing activities                        (44,666)      (31,568)       (35,126)
                                                                 -------------------------------------
     Net (decrease) increase in cash during the year               (3,396)          635           (727)

Cash and cash equivalents, beginning of year                        4,757         4,122          4,849
                                                                 -------------------------------------

Cash and cash equivalents, end of year                           $  1,361         4,757          4,122
                                                                 =====================================
</TABLE>

                                       94
<PAGE>

                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                 (Dollars in thousands, except per share data)

(24) Earnings Per Share

A reconciliation of the components used to derive basic and diluted earnings per
share for March 31, 2000, 1999 and 1998 follows:

<TABLE>
<CAPTION>
                                                         Net          Weighted Average        Per Share
                                                       Earnings      Shares Outstanding        Amount
                                                      --------------------------------------------------
<S>                                                   <C>            <C>                      <C>
2000 (1)
  Basic earnings per share                             $26,598        12,111,323                $2.20
  Effect of dilutive stock options and awards                -         1,072,707                  .18
                                                       ----------------------------------------------
     Diluted earnings per share                        $26,598        13,184,030                $2.02
                                                       ==============================================
1999 (2)
  Basic earnings per share                             $19,004        13,876,440                $1.37
  Effect of dilutive stock options and awards                -           840,242                  .08
                                                       ----------------------------------------------
     Diluted earnings per share                        $19,004        14,716,682                $1.29
                                                       ==============================================
1998 (3)
  Basic earnings per share                             $15,980        16,055,127                $1.00
  Effect of dilutive stock options and awards                -           739,969                 0.05
                                                       ----------------------------------------------
     Diluted earnings per share                        $15,980        16,795,096                $0.95
                                                       ==============================================
</TABLE>

(1)  Options to purchase 10,094 shares of common stock at a weighted average
     price of $20.93 per share were outstanding during the fiscal year ended
     March 31, 2000 but were not included in the computation of diluted EPS
     because the options' exercise prices were greater than the average market
     price of the common shares.  The options, which expire between October 22,
     2002 and November 23, 2004, were still outstanding at March 31, 2000.

(2)  Options to purchase 17,381 shares of common stock at a weighted average
     price of $19.21 per share were outstanding during the fiscal year ended
     March 31, 1999 but were not included in the computation of diluted EPS
     because the options' exercise prices were greater than the average market
     price of the common shares.  The options, which expire between October 22,
     2002 and March 24, 2004, were still outstanding at March 31, 1999.

(3)  Options to purchase 8,780 shares of common stock at a weighted average
     price of $20.06 per share were outstanding during the fiscal year ended
     March 31, 1998 but were not included in the computation of diluted EPS
     because the options' exercise prices were greater than the average market
     price of the common shares.  The options, which expire between October 22,
     2002 and February 25, 2003, were still outstanding at March 31, 1998.

                                       95
<PAGE>

                       PFF BANCORP, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued
                 (Dollars in thousands, except per share data)


(25) Quarterly Results of Operations (Unaudited)

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                  -----------------------------------------------------------------------
                                   June 30,           September 30,       December 31,        March 31,      Total
                                     1999                 1999                1999              2000         2000
                                  ------------------------------------------------------------------------------------
<S>                               <C>                 <C>                 <C>                 <C>            <C>
Net interest income                $ 21,227             22,247              22,574              22,741         88,789
Provision for loan losses            (1,000)            (1,000)             (1,000)             (1,000)        (4,000)
Other income                          4,251              3,552               6,022               3,427         17,252
Other expenses                      (13,214)           (13,643)            (13,872)            (14,499)       (55,228)
                                   ----------------------------------------------------------------------------------
  Earnings before income
   taxes                             11,264             11,156              13,724              10,669         46,813
Income taxes                          4,860              4,840               5,880               4,635         20,215
                                   ----------------------------------------------------------------------------------
  Net earnings                     $  6,404              6,316               7,844               6,034         26,598
                                   ==================================================================================
Basic earnings per share           $   0.51               0.52                0.65                0.52           2.20
                                   ==================================================================================
Diluted earnings per share         $   0.47               0.47                0.59                0.48           2.02
                                   ==================================================================================

                                                           Three Months Ended
                                  ---------------------------------------------------------------------
                                   June 30,           September 30,       December 31,        March 31,           Total
                                     1998                 1998               1998               1999              1999
                                  ---------------------------------------------------------------------------------------
<S>                               <C>                 <C>                 <C>                 <C>                 <C>
Net interest income                $ 17,959             18,298              19,576              20,766              76,599
Provision for loan losses            (1,020)            (1,000)             (1,000)             (1,000)             (4,020)
Other income                          3,891              3,051               4,378               4,228              15,548
Other expenses                      (13,284)           (13,573)            (13,888)            (14,170)            (54,915)
                                   ---------------------------------------------------------------------------------------
  Earnings before income
   taxes                              7,546              6,776               9,066               9,824              33,212
Income taxes                          3,219              2,932               3,850               4,207              14,208
                                   ---------------------------------------------------------------------------------------
  Net earnings                     $  4,327              3,844               5,216               5,617              19,004
                                   =======================================================================================
Basic earnings per share           $   0.29               0.27                0.38                0.43                1.37
                                   =======================================================================================
Diluted earnings per share         $   0.28               0.26                0.37                0.38                1.29
                                   =======================================================================================
</TABLE>

                                       96
<PAGE>

                         INDEPENDENT AUDITORS' REPORT



The Board of Directors
PFF Bancorp, Inc.:

We have audited the accompanying consolidated balance sheets of PFF Bancorp,
Inc. and subsidiary (the Company) as of March 31, 2000 and 1999 and the related
consolidated statements of earnings, comprehensive earnings, stockholders'
equity and cash flows for each of the years in the three-year period ended March
31, 2000.  These consolidated financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of PFF Bancorp, Inc.
and subsidiary as of March 31, 2000 and 1999 and the results of their operations
and their cash flows for each of the years in the three-year period ended March
31, 2000 in conformity with generally accepted accounting principles.

                                 KPMG LLP


April 19, 2000

                                       97
<PAGE>

Item 9.  Change in and Disagreements with Accountants on Accounting and
-----------------------------------------------------------------------
Financial Disclosure.
--------------------

     None.

                                   PART III

Item 10.  Directors and Executive Officers of the Registrant.
------------------------------------------------------------

     The information appearing in the definitive Proxy Statement to be filed
with the Securities and Exchange Commission pursuant to Regulation 14 A in
connection with PFF Bancorp, Inc.'s Annual Meeting of Stockholders to be held on
September 27, 2000 (the "Proxy Statement") under the captions "Election of
Directors" and "Executive Officers Who Are Not Directors" is incorporated herein
by reference.

Item 11.  Executive Compensation.
--------------------------------

     The information appearing in the Proxy Statement under the caption
"Executive Compensation" is incorporated herein by reference, excluding the
Stock Performance Graph and Compensation Committee Report.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.
------------------------------------------------------------------------

     The information relating to security ownership of certain beneficial owners
and management is incorporated herein by reference to the Proxy Statement.

Item 13.  Certain Relationships and Related Transactions.
--------------------------------------------------------

     The information relating to certain relationships and related transactions
is incorporated herein by reference to the Proxy Statement.

                                       98
<PAGE>

                                    PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.
-------------------------------------------------------------------------

(a)(3)    Exhibits

          (a)    The following exhibits are filed as part of this report:

          3.1    Certificate of Incorporation of PFF Bancorp, Inc. (1)
          3.2    Bylaws of PFF Bancorp, Inc. (1)
          4.0    Stock Certificate of PFF Bancorp, Inc. (1)
          10.1   Form of Employment Agreement between PFF Bank & Trust and PFF
                  Bancorp, Inc. and certain executive officers (1)
          10.2   Form of Change in Control Agreement between PFF Bank & Trust
                  and PFF Bancorp, Inc. and certain executive officers (1)
          10.3   Form of PFF Bank & Trust Employee Severance Compensation Plan
                  (1)
          10.4   Capital Accumulation Plan for Employees of Pomona First Federal
                  Savings and Loan Association (1)
          10.5   PFF Bancorp, Inc. 1996 Incentive Plan (2)
          10.6   Form of Non-Statutory Stock Option Agreement for officer and
                  employees of PFF Bancorp, Inc. (3)
          10.7   Form of Incentive Stock Option Agreement for officers and
                  employees of PFF Bancorp, Inc. (3)
          10.8   Form of Stock Award Agreement for officers and employees of PFF
                  Bancorp, Inc. (3)
          10.9   Form of Stock Award and Stock Option Agreement for Outside
                  Directors of PFF Bancorp, Inc. (3)
          10.10  The Pomona First Federal Bank & Trust Restated Supplemental
                  Executive Retirement Plan (3)
          10.11  The Pomona First Federal Bank & Trust Directors' Deferred
                  Compensation Plan (3)
          21     Subsidiary information is incorporated herein by reference to
                  "Part I- Subsidiary Activities."
          23     Consent of KPMG LLP
          27     Financial Data Schedule
          99.1   Annual Report on Form 11-K for Capital Accumulation Plan for
                  employees of PFF Bank & Trust
            (b)  Report on Form 8-K
                  None

     The Registrant did not file any reports on Form 8-K during the last quarter
     of the fiscal year ended March 31, 2000.

------------------------------------
(1)  Incorporated herein by reference from the Exhibits to the Registration
     Statement on Form S-1, as amended, filed on December 8, 1995, Registration
     No. 33-80259.
(2)  Incorporated herein by reference from the Proxy Statement for the 1996
     Annual Meeting of Stockholders dated September 16, 1996.
(3)  Incorporated herein by reference from the Form 10-K filed on June 20, 1997.

                                       99
<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of Section 13 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.

                                       PFF BANCORP, INC.



                                       BY:  /s/ LARRY M. RINEHART
                                          --------------------------------------
                                           Larry M. Rinehart
DATED: June 22, 2000                       President, Chief Executive Officer
                                           and Director

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.

<TABLE>
<CAPTION>
              Name                                Title                                  Date
------------------------------------------------------------------------------------------------------------
<S>                                 <C>                                   <C>

/s/ LARRY M. RINEHART                                                               June 22, 2000
---------------------------------
Larry M. Rinehart                   President, Chief Executive
                                    Officer and Director
                                    (Principal Executive Officer)

/s/ GREGORY C. TALBOTT                                                              June 22, 2000
---------------------------------
Gregory C. Talbott                  Executive Vice President, Chief
                                    Financial Officer and Treasurer
                                    (Principal Financial and
                                    Accounting Officer)

/s/ DONALD R. DESCOMBES                                                             June 22, 2000
---------------------------------
Donald R. DesCombes                 Director

/s/ ROBERT W. BURWELL                                                               June 22, 2000
---------------------------------
Robert W. Burwell                   Director

/s/ WILLIAM T. DINGLE                                                               June 22, 2000
---------------------------------
William T. Dingle                   Director

/s/ CURTIS W. MORRIS                                                                June 22, 2000
---------------------------------
Curtis W. Morris                    Director

/s/ ROBERT D. NICHOLS                                                               June 22, 2000
---------------------------------
Robert D. Nichols                   Director

/s/ JIL H. STARK                                                                    June 22, 2000
---------------------------------
Jil H. Stark                        Director
</TABLE>

                                      100