UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

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




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 XNo .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. XThe 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 $454,841,461, based
upon the last sales price as quoted on the New York Stock Exchange for June 21,
2002.

The number of shares of common stock outstanding as of
June 21, 2002: 13,260,684Documents 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 18, 2002 are incorporated by
reference in Part III hereof.

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EXPLANATORYNOTE

On August 14, 2002, the Company announced that it would
restate the weighted average shares used to calculate
basic and diluted earnings per share (EPS).
As a result, basic and diluted EPS for the fiscal years ended March 31,
2002, 2001, 2000, 1999, and 1998 and all interim
periods within those fiscal years presented herein have been restated.
These revisions do not reflect any changes to previously reported net
earnings, but rather corrections of computational errors in the determination of
weighted average shares used to calculate EPS.
Information regarding the effect of the restatement on the consolidated
financial statements is included in Note 24 to the consolidated financial
statements. This amendment does not
otherwise attempt to update the information in the originally filed form 10-K to
reflect events after the original filing date

INDEXPART I
    PAGEItem 1.
    Description of Business
    3Item 2.
    Properties
    42Item 3.
    Legal Proceedings
    43Item 4.
    Submission of Matters to a Vote of Security Holders
    43PART IIItem 5.
    Market for Registrant's Common Equity and RelatedStockholders' Matters
    43Item 6.
    Selected Financial Data
    45Item 7.
    Management's Discussion and Analysis of FinancialCondition and Results of Operations
    48Item 7A.
    Quantitative and Qualitative Disclosures About Market Risk
    61Item 8.
    Financial Statements and Supplementary Data
    62Item 9.
    Changes in and Disagreements with Accountantson Accounting and Financial Disclosure
    108PART IIIItem 10.
    Directors and Executive Officers of the Registrant
    108Item 11.
    Executive Compensation
    108Item 12.
    Security Ownership of Certain Beneficial Ownersand Management
    108Item 13.
    Certain Relationships and Related Transactions
    108PART IVItem 14.
    Exhibits, Financial Statement Schedules and Reports
      on Form 8-K
    109


2

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PART I

Forward-Looking StatementsExcept 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 (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.GeneralThe 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 (the "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. At March 31, 2002, on a consolidated basis, the Company had total
assets of $3.04 billion, total deposits of $2.17 billion and total stockholders'
equity of $284.1 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").The Company is operating under a community banking business model. This business
model focuses on the origination of commercial, construction and land (primarily
residential tract construction), commercial real estate and consumer loans
(collectively the "Four-Cs") and to a lesser degree, one-to-four
family residential mortgages. The Bank engages in secondary market activities,
primarily the purchase of one-to-four family residential mortgages to supplement
internal origination activities. To a lesser degree, the Company invests in
mortgage-backed securities ("MBS"), collateralized mortgage
obligations ("CMO") and other investment securities (collectively
"securities"). 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 and
principal and interest payments on loans and investment securities. Scheduled
payments on loans and investment securities are 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 its subsidiary.

3

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Market Area and Competition
The Bank's lending, deposit gathering and trust activities are concentrated in
eastern Los Angeles, San Bernardino, Riverside and northern Orange counties. The
Bank also originates loans on a wholesale basis throughout Southern California
and has expanded its lending to 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.
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 securities and the level of
prepayments on loans and 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 Company acquired the trust operations of another bank for
$3.5 million. As a result of the acquisition, the Company 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 Company and are not included in the balance
sheet of the Company. Trust fee income for the years ended March 31, 2002 and
2001 was $2.1 million and $1.8 million, respectively. See "Notes to
Consolidated Financial Statements - Note 19: Trust Operations." Pursuant to
federal securities laws applicable to its trust activities the Bank operates
with a Registered Investment Advisor ("RIA") designation. During April
2002, as a part of its strategy to increase fee income associated with its
wealth management and advisory services, the Company formed a second RIA,
Glencrest Investment Advisors, Inc. ("Glencrest") as a wholly-owned
subsidiary of the Bancorp. In addition to providing investment advice to
independent third parties, Glencrest will provide investment advisory services
to the Bank for which it will be paid a fee. The Bank will provide fee based
custody services for Glencrest.Management is of the opinion that the positioning of
Glencrest as an entity with an identity separate and distinct from the Bank will
enable Glencrest to more effectively market its advisory services to higher net
worth individuals and institutions.

4

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Lending ActivitiesLoan Portfolio Composition. The Bank's loan portfolio consists
primarily of conventional first mortgage loans secured by one-to-four family
residences. At March 31, 2002, the Bank had total gross loans outstanding of
$2.82 billion, of which $1.40 billion or 50% were one-to-four family residential
mortgage loans. The remainder of the portfolio consisted of $711.6 million of
construction and land loans, or 25% of total gross loans; $309.3 million of
commercial real estate loans, or 11% of total gross loans; consumer loans of
$158.5 million or 6% of total gross loans; commercial business loans of $155.6
million or 5% of total gross loans; and $78.0 million of multi-family mortgage
loans, or 3% of total gross loans. At March 31, 2002, approximately $2.51
billion or 89% of the Bank's total loans had adjustable interest rates of
which approximately $1.18 billion or 47% are indexed to the one year constant
maturity Treasury ("CMT"), approximately $791.2 million or 31% are
indexed to Wall Street Journal Prime ("Prime") and approximately
$429.7 million or 17% are indexed to the 11th FHLB District Cost of Funds Index
("COFI"). The Bank's portfolio of adjustable rate loans includes
approximately $731.8 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 ARMs"). The Bank's hybrid ARMs are
primarily indexed to the 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

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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.

|                                    | At March 31,          
|----------------------------------- | ----------------------
|                                    | 2002                  
|                                    | Amount                
|                                    | (Dollars in thousands)
|                                    |                       
|Real estate: (1)                    |                       
|Residential:                        |                       
|One-to-four family                  | $ 1,402,977           
|Multi-family                        | 77,964                
|Commercial real estate              | 309,335               
|Construction and land               | 711,637               
|Commercial                          | 155,589               
|Consumer                            | 158,475               
|Total loans, gross                  | 2,815,977             
|                                    |                       
|Undisbursed loan funds              | (288,231)             
|Net premiums (discounts) on loans   | (202)                 
|Deferred loan origination fees, net | (1,412)               
|Allowance for loan losses           | (31,359)              
|Total loans, net                    | 2,494,773             
|Less: Loans held for sale           | (106)                 
|Loans receivable, net               | $ 2,494,667           
|(1) Includes loans held for sale.   |                       

6

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Loan Maturity.



|                                    | At March 31, 2002              
|----------------------------------- | -------------------------------
|                                    | One-to-
      Four
      Family
|                                    | (Dollars in thousands)         
|                                    |                                
|Amounts due:                        |                                
|One year or less                    | $ 12,557                       
|After one year:                     |                                
|More than one year to three years   | 662                            
|More than three years to five years | 2,901                          
|More than five years to ten years   | 14,247                         
|More than ten years to twenty years | 148,719                        
|More than twenty years              | 1,223,891                      
|Total due after March 31, 2003      | 1,390,420                      
|Total amount due                    | 1,402,977                      
|Less:                               |                                
|Undisbursed loan funds              | -                              
|Net discounts on loans              | (202)                          
|Deferred loan origination fees, net | 2,633                          
|Allowance for loan losses           | (672)                          
|Total loans, net                    | 1,404,736                      
|Loans held for sale                 | (106)                          
|Loans receivable, net               | $ 1,404,630                    

7

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The following table sets forth at March 31, 2002, the dollar
amount of total gross loans receivable contractually due after March 31, 2003,
and whether such loans have fixed or adjustable interest rates.

|                                  | Due after March 31, 2003
|--------------------------------- | ------------------------
|                                  | Fixed                   
|                                  | (Dollars in thousands)  
|                                  |                         
|Real estate loans: (1)            |                         
|Residential:                      |                         
|One-to-four family                | $ 116,434               
|Multi-family                      | 4,322                   
|Commercial real estate            | 2,069                   
|Construction and land             | 270                     
|Commercial                        | 47,633                  
|Consumer                          | 85,056                  
|Total gross loans receivable      | $ 255,784               
|(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 24
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 first trust deed one-to-four family residential lending in
favor of a greater focus on the Four-Cs, 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 does continue to
originate 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 $1.43 billion for fiscal 2002 compared to $1.05 billion
for fiscal 2001. Originations of the Four-Cs aggregated $1.19 billion or 83% of
total originations for fiscal 2002 compared to $969.3 million or 92% of total
originations for fiscal 2001. Reflecting the dramatically lower interest rate
environment, the weighted average initial contract rate on total originations
was 7.30% for fiscal 2002, compared to 10.07% for fiscal 2001.
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
retains servicing of the loans sold. At March 31, 2002, the Bank was servicing
$189.7 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 ("MSR") 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 MSR and the mortgage loans without the MSR based on
their relative fair values. MSR are included in the financial statements in the
category "other assets." The Bank had $518,000 of MSR as of March 31,
2002, compared to $1.1 million at March 31, 2001. Impairment losses, if any, are
recognized through a valuation allowance, with any associated provision recorded
as a component of loan servicing fees. At March 31, 2002 and 2001, no MSR
valuation allowances were required. At March 31, 2002, there were $106,000 of
mortgage loans categorized as held for sale consisting of fixed-rate one-to-four
family residential mortgage loans.

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|                                                                                                       | For the Years Ended March 31,
|------------------------------------------------------------------------------------------------------ | -----------------------------
|                                                                                                       | 2002                         
|                                                                                                       | (Dollars in thousands)       
|                                                                                                       |                              
|Beginning balance (1)                                                                                  | $ 2,285,890                  
|Loans originated:                                                                                      |                              
|One-to-four family                                                                                     | 234,926                      
|Multi-family                                                                                           | 10,939                       
|Commercial real estate                                                                                 | 125,544                      
|Construction and land                                                                                  | 740,573                      
|Commercial                                                                                             | 192,762                      
|Consumer                                                                                               | 129,077                      
|Total loans originated                                                                                 | 1,433,821                    
|Loans purchased                                                                                        | 415,287                      
|Sub-total                                                                                              | 4,134,998                    
|Less:                                                                                                  |                              
|Principal payments                                                                                     | (1,573,443)                  
|Sales of loans                                                                                         | (10,162)                     
|Transfer to foreclosed real estate owned (REO)                                                         | (2,331)                      
|Change in undisbursed loan
      funds                                                                 | (50,684)                     
|Change in allowance for loan
      losses                                                              | (337)                        
|Other (2)                                                                                              | (3,268)                      
|Total loans                                                                                            | 2,494,773                    
|Loans held for sale, net                                                                               | (106)                        
|Ending balance loans receivable,
      net                                                             | $ 2,494,667                  
|                                                                                                       |                              
|(1) Includes loans held for sale.                                                                     
|(2) Includes net capitalization of fees and amortization of premium or accretion
of discount on loans.

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One-to-Four Family Residential Mortgage Lending

10

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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.
The Bank's multi-family loan portfolio at March 31, 2002 totaled $78.0 million
or 3% of total gross loans. At March 31, 2002, 68% of the Bank's multi-family
loans were adjustable-rate indexed to COFI and 26% were indexed to the one-year
CMT. The Bank's largest multi-family loan at March 31, 2002, had an
outstanding balance of $4.7 million and is secured by a 128 unit apartment
complex.
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.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. Competitive market
factors have also prompted the Bank to originate such loans with fixed rates of
interest. Maturities on commercial real estate loans are generally 10 years with
25 to 30 year amortization, although these loans may be made with maturities up
to 30 years. 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%.
At March 31, 2002, the Bank's commercial real estate loan portfolio was $309.3
million, or 11% of total gross loans. At March 31, 2002, 22% of these loans were
indexed to COFI and 69% were indexed to the one-year CMT. The largest commercial
real estate loan in the Bank's portfolio at March 31, 2002 was $9.0 million
and is secured by a 158,000 square foot multi-tenant light industrial facility.
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 and 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
Company'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.
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. 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.

11

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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,
2002, the Bank had construction loans outstanding for development of residential
properties located in Nevada, Utah and Arizona totaling $30.2 million, $15.5
million of which was disbursed. As of March 31, 2002, the remainder of the Bank's
construction loans were for development of real estate located in California.
The largest credit exposure in the construction loan portfolio as of March 31,
2002 consists of $29.7 million of loans for the development of 296 finished lots
and homes located in northern Los Angeles County (Castaic). The aggregate
disbursed balance of these loans at March 31, 2002 was $21.7 million. The second
largest credit exposure in the Bank's construction loan portfolio at March 31,
2001 had a balance of $21.7 million, for a multi-phase residential development
of 89 homes in Santa Clara County. At March 31, 2002, the Bank's construction
and land loan portfolio was $711.6 million or 25% of total gross loans, $423.4
million of which was disbursed. At March 31, 2002 the aggregate balance of loans
for the construction of properties other than one-to-four family residences was
$81.1 million, $63.2 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 loanConsumer and Other Lending.The Bank
offers both fixed-rate equity loans and adjustable rate equity lines of credit
secured by one-to-four family residences made primarily on properties located in
the Bank's primary market area. Loan originations are generated from the Bank's
loan representatives and approved mortgage brokers. The majority of consumer
loans are underwritten and approved on the basis of the applicant's ability
and apparent willingness to pay (credit history). A security interest on the
property is taken as an abundance of caution.The equity lines of credit offered by they Bank have
introductory terms below the fully indexed rate. At the end of the introductory
period the lines of credit will adjust monthly based on changes in the Prime
rate. These lines of credit provide for overall caps/floors on the
increase/decrease in interest rates over the life of the loan.
The Bank's policy is to originate equity loans and lines of credit up to 100%
of the appraised value of the property securing the loan. Loans secured by a
second lien on property and with higher loan to values are generally considered
to involve a higher degree of credit risk than loans secured by a first lien
position or with a lower loan to value. These loans are priced to compensate for
these higher risks. The Bank also originates a limited number of equity loans
with loan to values up to 125%. These loans are originated for the secondary
market and substantially all of the originations are sold upon funding to an
investor. These loans also have a higher degree of risk and are made with strict
credit guidelines.
At March 31, 2002, the Bank's total consumer loan portfolio was $158.5 million
or 6% of total gross loans, composed primarily of $73.8 million in home equity
lines of credit and $84.4 million in secured and unsecured personal loans and
lines of credit. At March 31, 2002, 54% of these loans were fixed rate, 39% were
indexed to Prime and 3% were indexed to COFI.

12

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Commercial Lending. During the past six years, the Bank expanded its
operations to include commercial business lending to small and medium-sized
businesses. Loan products include working capital lines of credit, capital and
equipment term loans, SBA and other government loan guarantee programs, and
contractor financing for residential housing rehabilitation, all delivered
directly to borrowers in our community through the retail branch network and a
team of highly experienced business financial advisors. The Bank's Commercial
operations also include wholesale lending for business equipment finance and
leasing companies, as well as syndications and participations with local and
national business lenders.
As of March 31, 2002, the Bank's total commercial business loan commitments
were $267.4 million, of which $155.6 million or 6% of total gross loans was
outstanding. At March 31, 2002, of the commercial loans outstanding 48% were
indexed to Prime. At March 31, 2002, the largest amount of loans outstanding to
one borrower was $18.2 million to an equipment leasing company. The loans to
this borrower are secured by the assignment of leases averaging $204,000 per
lease and the underlying leased equipment, as well as inventory and accounts
receivable. The second largest amount of loans to one borrower was $11.0 million
to a manufacturer and lessor of vehicles used in food service and package
delivery. This loan is also secured by the assignment of leases and underlying
equipment. Repayment of loans to both borrowers is expected to come from lessee
payments or, alternatively, from liquidation of equipment and assets of the
borrowers or guarantors.
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-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 and consumer loans in amounts up to $299,999
may be approved by the Bank's staff underwriters; mortgage loans and consumer
loans in excess of $299,999 and up to $599,999 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 and
consumer loans in excess of $599,999 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 $9,999,999, and
commercial business loans in excess of $499,999 and up to $4,999,999 must be
approved by the Management Loan Committee; and mortgage loans of $10.0 million
or more, consumer loans in excess of $999,999 and commercial business loans of
$5.0 million or more require the approval of the LOARC. The LOARC presently
reviews commercial business loans in excess of $4,999,999, 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 and
selected smaller loans. 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, 2002, the Bank's limit on loans-to-one borrower was $43.2 million.

13

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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, 2002, the Bank was servicing $189.7 million of loans
for others. The Bank does not purchase servicing rights related to mortgage
loans originated by other institutions.Delinquencies
and Classified Assets.
The LOARC generally performs a monthly review of all 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. For mortgage loans, 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 received, additional letters and phone calls are generally 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.For commercial business loans, management conducts an ongoing review of
all loans 15 or more days delinquent. The procedures undertaken by the Bank with
respect to delinquencies may vary depending on the nature of the loan, the
period of delinquency, and the quality of collateral or guaranties. The Bank
generally sends the borrower a notice of non-payment within 15 days after the
due date and subsequent notices thereafter. In the event that payment is not
then received, the responsible loan officer contacts the borrower directly and
may notify guarantors and grantors of collateral that the loan is delinquent.
The loan officer may review the loan documentation and secure additional
collateral or sources of repayment. Delinquent loans may be classified as other
than a "pass" credit, in order to provide management visibility,
periodic reporting, and appropriate reserves. Legal recourse is considered and
promptly undertaken if alternate repayment sources cannot be identified. At 90
days past due, the loan will be placed on non-accrual status.Allowance for Loan Losses.The Company maintains a valuation allowance
for losses on loans and real estate to provide for losses inherent in those
portfolios. The adequacy of the allowance is evaluated quarterly by management
to maintain the allowance at levels sufficient to provide for inherent losses. A
key component to the evaluation is the internal asset review process.
The Internal Asset Review Department ("IARD") conducts independent
reviews to evaluate the risk and quality of Bank assets. IARD reports to the
Internal Asset Review Committee ("IARC"). The IARC members include the
IAR Manager/Chair, General Counsel, Accounting Manager, Senior Counsel, Chief
Appraiser, Loan Service Manager, Internal Asset Review Analyst, Internal Asset
Review Officer and Staff Secretary. The President/CEO, Sr. Executive Vice
President/COO, and Chief Lending Officer attend as non-voting members. IARC
meets monthly to review the recommendations from the IARD for asset
classifications and valuation allowances. The IARD reports quarterly to the
Board of Directors regarding overall asset quality, the adequacy of valuation
allowances and adherence to policies and procedures regarding asset
classification and valuation.
IARD adheres to an internal asset review system and loss allowance methodology
designed to provide for timely recognition of problem assets and adequate
valuation allowances to cover asset losses. The Bank's asset monitoring
process includes the use of asset classifications to segregate the assets,
largely loans and real estate, into various risk categories. The Bank uses the
various asset classifications as a means of measuring risk and determining the
adequacy of valuation allowances by using an eight grade system to classify
assets. The current grades are: pass 1; pass 2; pass 3; pass 4; special mention;
substandard; doubtful; and loss. Substandard, doubtful and loss assets are
considered "classified assets" for regulatory purposes. A brief
description of these classifications follows:

- The four pass classification grades represent a level of credit quality, which
ranges from no well-defined deficiency or weakness to some noted weakness, yet
risk of default is expected to be remote.
- A special mention asset does not currently expose the Bank to a sufficient
degree of risk to warrant an adverse classification, but does possess a
correctable deficiency or potential weakness deserving management's close
attention.
- Substandard assets have a well-defined weakness or weaknesses. They are
characterized by the distinct possibility that some loss will be sustained if
the deficiencies are not corrected.
- An asset classified doubtful has all the weaknesses inherent in those classified
substandard with the added characteristic that the weaknesses make collection or
liquidation in full, on the basis of currently existing facts, conditions and
values, highly questionable and improbable. Doubtful is considered to be a
temporary classification until resolution of pending weakness issues enables the
potential for loss to be more clearly defined.
- That portion of an asset classified as loss is considered uncollectible and of
so little value that its continuance as an asset, without establishment of a
specific valuation allowance, is not warranted. A loss classification does not
mean that an asset has no recovery or salvage value. IARD will generally
classify as loss the balance of an asset that is greater than the net fair value
of the asset unless payment can be expected from another source.

The asset classifications from the internal asset review process are used in the
following manner to determine the amount of the allowance for loan losses:

- General valuation allowances ("GVA"): This element relates to assets
with no well-defined deficiency or weakness (i.e. assets classified pass) and
takes into consideration losses that are imbedded within the portfolio but have
not yet been realized. Generally, borrowers are impacted by events well in
advance of a lender's knowledge that may ultimately result in loan default and
eventual loss. Examples of such loss-causing events would be borrower job loss,
divorce or medical crisis in the case of single family residential and consumer
loans, or loss of a major tenant in the case of commercial real estate loans.
General valuation allowances are determined by applying factors that take into
consideration past loss experience, current trends, etc. for each major asset
type.
- Specific valuation allowances ("SVA") : A loan is impaired when, based
on current information and events, it is probable that a creditor will be unable
to collect all amounts due according to the contractual terms of the loan
agreement. When the Bank identifies a high probability that a loss may occur the
Bank establishes an SVA for the loss by subtracting the difference between the
Bank's recorded investment in the loan from the market value. If the loan is
collateral dependent the fair value is applied to determine the SVA.
- Large borrower risk allowance: PFF has a number of borrowers with large loan
balances which may create an additional risk if one or two of these borrowers
were to suddenly default. Therefore an additional allowance for this risk is
analyzed and applied.
- Model risk allowance: The GVA allowance methodology applied above includes both
quantitative and qualitative factors and documentation, however, any methodology
is subject to some uncertainties. Estimating future losses inherent in a loan
portfolio will vary with each method. Therefore, a model risk component for the
GVA is also utilized.

At March 31, 2002, the Company's allowance for loan losses was $31.4 million
or 1.l1% of gross loans and 697.80% of non-performing loans compared to $31.0
million or 1.22% of gross loans and 270.20% of non-performing loans at March 31,
2001. At March 31, 2002, the Company had non-performing loans of $4.5 million or
0.16% of gross loans compared to $11.5 million or 0.45% of gross loans at March
31, 2001. The Company will continue to monitor and modify its allowance for loan
losses based upon economic conditions, loss experience, changes in portfolio
composition and other factors.

15

---

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

|                                                         | For the Year Ended March 31,
|-------------------------------------------------------- | ----------------------------
|                                                         | 2002                        
|                                                         | (Dollars in thousands)      
|                                                         |                             
|Beginning balance                                        | $ 31,022                    
|Provision for loan losses                                | 5,000                       
|Charge-offs:                                             |                             
|Real estate:                                             |                             
|One-to-four family                                       | (78)                        
|Multi-family                                             | -                           
|Commercial real estate                                   | -                           
|Construction and land                                    | (3,012)                     
|Commercial                                               | (612)                       
|Consumer                                                 | (1,069)                     
|Total                                                    | (4,771)                     
|Recoveries                                               | 108                         
|Ending balance                                           | $ 31,359                    
|Net charge-offs to average gross
      loans outstanding | 0.17%                       

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 specific 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 specific valuation allowance equal to 100% of the
amount of the asset identified as loss or to charge off such amount. The Bank
has adopted a policy of charging off all assets classified as 100% 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 an
acceptable allowance evaluation process that meets the objectives set forth in
the policy statement. 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.
Management 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 personnel are also
utilized for annual property inspections on all income producing real properties
securing 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.

16

---



17

---



|                                                                                                         | At March 31, 2002     
|-------------------------------------------------------------------------------------------------------- | ----------------------
|                                                                                                         | Loans                 
|                                                                                                         | Gross
      Balance   
|                                                                                                         | (Dollars in thousands)
|Real estate:                                                                                             |                       
|Residential:                                                                                             |                       
|One-to-four family                                                                                       | $ 8,592               
|Multi-family                                                                                             | 1,154                 
|Commercial real estate                                                                                   | 2,576                 
|Construction and land                                                                                    | 42,139                
|Sub-total                                                                                                | 54,461                
|Commercial                                                                                               | 19,324                
|Consumer                                                                                                 | 359                   
|Total                                                                                                    | $ 74,144              
|                                                                                                         |                       
|                                                                                                         |                       
|                                                                                                         |                       
|                                                                                                         | At March 31, 2001     
|                                                                                                         | Loans                 
|                                                                                                         | Gross
      Balance   
|                                                                                                         | (Dollars in thousands)
|Real Estate:                                                                                             |                       
|Residential:                                                                                             |                       
|One-to-four family                                                                                       | $ 14,011              
|Multi-family                                                                                             | 1,188                 
|Commercial real estate                                                                                   | 2,951                 
|Construction and land                                                                                    | 41,359                
|Sub-total                                                                                                | 59,509                
|Commercial                                                                                               | 4,830                 
|Consumer                                                                                                 | 374                   
|Total                                                                                                    | $ 64,713              
|                                                                                                         |                       
|(1) Net balances are reduced for specific loss allowances established against
Substandard loans and REO. |                       

18

---

Non-Accrual and Past-Due Loans. The following table sets forth
information regarding non-accrual loans, REO and TDR loans. There were no TDR
loans and six REO properties at March 31, 2002. It is the policy of the Company
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,
2002, 2001, 2000, 1999 and 1998, 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 $330,000, $733,000, $466,000, $1.1
million and $1.7 million, respectively, none of which was recognized.The Company has a total of $21.7 million in loans outstanding on the 296
home residential development project in Castaic with an aggregate commitment of
$29.7 million. The project incurred cost overruns and construction delays which
caused the Bancorp to determine that its one loan in the amount of $3.0 million
was impaired as of December 31, 2000. Accordingly, during the quarter ended
December 31, 2000, the Bancorp placed this loan on non-accrual status and
established an allowance for loss for the full amount of this loan. During the
quarter ended December 31, 2001, the Bancorp charged this loan off against the
previously established allowance. The Company has determined that it is still
probable that it will collect all amounts contractually due on the remaining
$21.7 million of loans outstanding on this project. The Company has taken an
assignment of the borrower's interest on two projects, on which the Company
has no indebtedness from the borrower, to enhance the overall collateral
position of the Company. Management is continuing to closely monitor the status
of these loans. The status of this project as of March 31, 2002 was as follows:
194 of the 296 homes have been sold and closed and 30 homes are in escrow. The
30 homes in escrow are currently under construction. The remaining 69 production
homes are expected to be built and sold during calendar year 2002 or the
beginning of 2003, along with the sale of the three existing models. During the
quarter ended March 31, 2002, 25 homes closed escrow, and an additional 24 homes
entered escrow.
During the years ended March 31, 2002 and 2001, the Company's average
investment in impaired loans was $46.9 million and $24.0 million, respectively.
Interest income recorded during these periods was $1.9 million and $1.8 million,
respectively of which zero and zero, respectively was recorded utilizing the
cash basis method of accounting.

19

---



At March 31,2002
    2001
    2000
    1999
    1998(Dollars in thousands)Non-accrual loans:Residential real estate:One-to-four family
    $ 3,049
    5,420
    4,415
    10,061
    13,834Multi-family
    -
    -
    -
    122
    467Commercial real estate
    285
    -
    -
    -
    2,717Construction and land (3)
    -
    4,572
    -
    647
    131Commercial
    65
    437
    243
    -
    -Consumer
    1,095
    1,052
    769
    182
    40Total
    4,494
    11,481
    5,427
    11,012
    17,189REO, net (1)
    507
    351
    1,466
    5,318
    7,595Non-performing assets
    $ 5,001
    11,832
    6,893
    16,330
    24,784TDR loans (3)
    $ -
    3,012
    1,950
    11,291
    12,505Classified assets, gross
    $ 74,904
    62,102
    37,354
    39,058
    46,758Allowance for loan losses as a
      percent of gross loans receivable
    1.11%
    1.22
    1.09
    1.18
    1.33Allowance for loan losses as a
      percent of total non-performing
      loans (2)
    697.80
    270.20
    512.96
    237.56
    151.27Non-performing loans as a percent
      of gross loans receivable (2)
    0.16
    0.45
    0.21
    0.50
    0.88Non-performing assets as a percent
      of total assets (2)
    0.16
    0.51
    0.23
    0.56
    0.88(1) REO balances are shown net of related loss allowances.(2) 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.(3) At March 31, 2001 the Bancorp's $3.0 million loan for the Castaic development
is included in non-accrual and TDR loans.


20

---

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

|                                                                                                                        | At March 31, 2002      | At March 31, 2001                     
|----------------------------------------------------------------------------------------------------------------------- | ---------------------- | --------------------------------------
|                                                                                                                        | 60-89 Days             | 90 Days or More(1)                    
|                                                                                                                        | Number
      of Loans  | Principal
      Balance
      of Loans
|                                                                                                                        | (Dollars in thousands)
|                                                                                                                        |                        |                                       
|One-to-four family                                                                                                      | 5                      | $ 607                                 
|Multi-family                                                                                                            | -                      | -                                     
|Commercial real estate                                                                                                  | -                      | -                                     
|Construction and land                                                                                                   | -                      | -                                     
|Commercial                                                                                                              | -                      | -                                     
|Consumer                                                                                                                | 1                      | 34                                    
|Total                                                                                                                   | 6                      | $ 641                                 
|                                                                                                                        |                        |                                       
|                                                                                                                        |                        |                                       
|                                                                                                                        | At March 31, 2000      |                                       
|                                                                                                                        | 60-89 Days             | 90 Days or More(1)                    
|                                                                                                                        | Number
      of Loans  | Principal
      Balance
      of Loans
|                                                                                                                        | (Dollars in thousands) |                                       
|                                                                                                                        |                        |                                       
|One-to-four family                                                                                                      | 16                     | $ 1,869                               
|Multi-family                                                                                                            | 1                      | 106                                   
|Commercial real estate                                                                                                  | -                      | -                                     
|Construction and land                                                                                                   | 1                      | 990                                   
|Commercial                                                                                                              | -                      | -                                     
|Consumer                                                                                                                | 8                      | 226                                   
|Total                                                                                                                   | 26                     | $ 3,191                               
|                                                                                                                        |                        |                                       
|(1) Loans 90 days or
      more past due are included in non-accrual loans. See "Non-Accrual and
      Past Due Loans." |                        |                                       

21

---

The following tables set forth the amount of the Company'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.

|                                      | At March 31,          
|------------------------------------- | ----------------------
|                                      | 2002                  
|                                      | Amount                
|                                      | (Dollars in thousands)
|                                      |                       
|One-to-four family                    | $ 672                 
|Multi-family                          | 191                   
|Commercial real estate                | 2,829                 
|Construction and land                 | 19,588                
|Commercial                            | 5,947                 
|Consumer                              | 2,132                 
|Unallocated                           | -                     
|Total allowance for
      loan losses | $ 31,359              
|                                      |                       
|                                      | At March 31,          
|                                      | 1999                  
|                                      | Amount                
|                                      | (Dollars in thousands)
|                                      |                       
|One-to-four family                    | $ 5,721               
|Multi-family                          | 2,026                 
|Commercial real estate                | 2,048                 
|Construction                          | 8,911                 
|Commercial                            | 2,761                 
|Consumer                              | 4,690                 
|Unallocated                           | 3                     
|Total allowance for
      loan losses | $ 26,160              

22

---

Real Estate
At March 31, 2002, the Company had $507,000 of REO, net of allowances, and no
real estate acquired for investment ("REI"). 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 security interest in 26 lots held for
development through the Bank's service corporation. The security interest in
the 26 lots paid in full in February 1999.
The following table sets forth certain information with regard to the Bank's
REO and REI.

At March 31,2002
      2001
      2000
      1999
      1998(Dollars in thousands)REOProperties acquired in
        settlement of loans
      $ 507
      400
      1,466
      5,763
      8,198Allowance for losses
      -
      (49)
      -
      (445)
      (603)Total REO, net
      507
      351
      1,466
      5,318
      7,595REIProperties wholly owned
      -
      -
      558
      558
      731Mezzanine real estate
        financing
      -
      -
      4,370
      5,813
      -Allowance for losses
      -
      -
      -
      -
      -Total REI, net
      -
      -
      4,928
      6,371
      731Total real estate, net
      $ 507
      351
      6,394
      11,689
      8,326






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 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, 2002, the Bank's aggregate
investment in trust preferred securities is $50.2 million which represents 19%
of the Bank's total capital.

23

---

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, 2002, the Bancorp had direct equity
investments of $7.8 million (which includes trading securities of $2.3 million),
investments in equity mutual funds of $4.0 million and investments in corporate
debt obligations (trust preferred debt securities) of $5.1 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 results of the issuer prior to making an
investment. These reviews are updated periodically during the holding periods
for the investments.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, 2002, the Company had $94.5 million in investment securities
consisting primarily of investment grade corporate and U.S. agency securities.
Forty-nine percent of the Company's MBS portfolio is comprised of
adjustable-rate securities tied to the one-year CMT including 31% of the
portfolio comprised by hybrid ARMs. The remainder of the Company's MBS
portfolio is comprised of six-month LIBOR ARMs (1% of the portfolio), seasoned
fixed-rate securities (22% of the portfolio) and five and seven year balloon
securities (28% of the portfolio). At March 31, 2002, the carrying value of the
Company's MBS portfolio totaled $196.6 million. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Comparison of Financial Condition at March 31, 2002 and March 31, 2001."
All of the Company's MBS are 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 premium or accretion of discount relating to
such instruments, thereby changing 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 $62.8 million CMO portfolio consists principally of adjustable
rate securities tied to the one month LIBOR ($14.6 million) or the Prime rate
($47.9 million). The adjustment intervals for these securities are generally
monthly. All of the Company's CMO are backed by mortgages insured by FNMA or
FHLMC. As with MBS, CMO involve a risk that actual levels of prepayments will
require an adjustment to the amortization of premium or accretion of discounts
on the security with an impact on the yield on the security. Additionally, the
structure of many CMO is such that their cash flows exhibit greater sensitivity
to changes in prepayments than do traditional MBS.

24

---

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

|                         | At March 31,          
|------------------------ | ----------------------
|                         | 2002                  
|                         | Carrying
      Value  
|                         | (Dollars in thousands)
|Available-for-sale:      |                       
|GNMA                     | $ 20,450              
|FHLMC                    | 45,717                
|FNMA                     | 130,413               
|Total available-for-sale | $ 196,580             

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

|                                                                                                                     | At March 31,          
|-------------------------------------------------------------------------------------------------------------------- | ----------------------
|                                                                                                                     | 2002                  
|                                                                                                                     | Carrying
      Value  
|                                                                                                                     | (Dollars in thousands)
|                                                                                                                     |                       
|Held-to-maturity:                                                                                                    |                       
|U.S. government and
      federal agency obligations                                                                 | $ 703                 
|Total held-to-maturity                                                                                               | 703                   
|                                                                                                                     |                       
|Available-for-sale:                                                                                                  |                       
|Corporate debt securities                                                                                            | 55,236                
|Equity securities:
      Direct (1)                                                                                  | 5,440                 
|Mutual funds                                                                                                         | 33,144                
|U.S. government and
      federal agency obligations                                                                 | -                     
|Total available-for-sale                                                                                             | 93,820                
|                                                                                                                     |                       
|Total                                                                                                                | $ 94,523              
|                                                                                                                     |                       
|(1) The Bancorp's
      direct equity investments include $2.3 million managed by the Bank's
      trust department.

25

---

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

At March 31,2002
      2001
      2000Carrying
        Value
      Fair
        Value
      Carrying
        Value
      Fair
        Value
      Carrying
        Value
      Fair
        Value(Dollars in thousands)Available-for-sale:Collateralized mortgage
        obligations:FHLMC
      $ 43,928
      43,928
      57,236
      57,236
      58,254
      58,254FNMA
      18,850
      18,850
      25,079
      25,079
      27,399
      27,399Total
      $ 62,778
      62,778
      82,315
      82,315
      85,653
      85,653


26

---

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, 2002. The table presented represents stated
maturities and does not reflect scheduled principal payments.

|                                                                                                                                                                                                                                                                                                                                                          | At March 31, 2002     
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------
|                                                                                                                                                                                                                                                                                                                                                          | One Year or less      
|                                                                                                                                                                                                                                                                                                                                                          | Carrying
      Value  
|                                                                                                                                                                                                                                                                                                                                                          | (Dollars in thousands)
|Mortgage-backed securities:                                                                                                                                                                                                                                                                                                                               |                       
|Available-for-sale:                                                                                                                                                                                                                                                                                                                                       |                       
|GNMA                                                                                                                                                                                                                                                                                                                                                      | $ -                   
|FHLMC                                                                                                                                                                                                                                                                                                                                                     | 4,537                 
|FNMA                                                                                                                                                                                                                                                                                                                                                      | 4,598                 
|Total mortgage-backed securities                                                                                                                                                                                                                                                                                                                          | $ 9,135               
|                                                                                                                                                                                                                                                                                                                                                          |                       
|Investment securities:                                                                                                                                                                                                                                                                                                                                    |                       
|Held-to-maturity:                                                                                                                                                                                                                                                                                                                                         |                       
|U.S. government and Federal agency Obligations                                                                                                                                                                                                                                                                                                            | $ -                   
|Total held-to-maturity                                                                                                                                                                                                                                                                                                                                    | -                     
|Available-for-sale:                                                                                                                                                                                                                                                                                                                                       |                       
|Corporate debt securities                                                                                                                                                                                                                                                                                                                                 | -                     
|Equity securities:                                                                                                                                                                                                                                                                                                                                        |                       
|Direct (1)                                                                                                                                                                                                                                                                                                                                                | -                     
|Mutual funds                                                                                                                                                                                                                                                                                                                                              | -                     
|Total available-for-sale                                                                                                                                                                                                                                                                                                                                  | -                     
|Total investment securities                                                                                                                                                                                                                                                                                                                               | $ -                   
|                                                                                                                                                                                                                                                                                                                                                          |                       
|Collateralized mortgage obligations:                                                                                                                                                                                                                                                                                                                      |                       
|Available-for-sale:                                                                                                                                                                                                                                                                                                                                       |                       
|FHLMC                                                                                                                                                                                                                                                                                                                                                     | $ -                   
|FNMA                                                                                                                                                                                                                                                                                                                                                      | -                     
|Total collateralized mortgage obligations                                                                                                                                                                                                                                                                                                                 | $ -                   
|                                                                                                                                                                                                                                                                                                                                                          |                       
|(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".

27

---

Sources of FundsGeneral. The Bank's funds for lending, investing and other general
purposes are deposits, loan and securities repayments and prepayments, proceeds
from sales of loans, cash flows generated from operations and FHLB advances and
other borrowings.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 (collectively
"core deposits") and certificate accounts. The terms of the fixed-rate
certificate accounts offered by the Bank vary from 90 days to five years.
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 presently offers variable rate certificates whose rates are
indexed to 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, prevailing interest
rates and competition. At March 31, 2002, the Bank had $948.7 million 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.
The following table presents the deposit activity of the Bank for the periods
indicated.

|                                      | For the Year Ended March 31,
|------------------------------------- | ----------------------------
|                                      | 2002                        
|                                      | (Dollars in thousands)      
|Net deposits (withdrawals)            | $ 76,898                    
|Sale of branch deposits               | -                           
|Interest credited on deposit accounts | 70,805                      
|Total increase in deposit accounts    | $ 147,703                   



At March 31, 2002, the Bank had $408.7 million in certificate accounts in
amounts of $100,000 or more maturing as follows:

|Maturity Period               | Amount                 | Weighted
      Average Rate
|----------------------------- | ---------------------- | ---------------------------
|                              | (Dollars in thousands) |                            
|Three months or less          | $ 177,364              | 3.80%                      
|Over three through six months | 105,051                | 4.09                       
|Over six through 12 months    | 71,456                 | 3.49                       
|Over 12 months                | 54,863                 | 5.05                       
|Total                         | $ 408,734              | 3.99                       

28

---

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.

|                                      | For the Year Ended March 31,
|------------------------------------- | ----------------------------
|                                      | 2002                        
|                                      | Average
      Balance       
|                                      | (Dollars in thousands)      
|                                      |                             
|Passbook accounts                     | $ 124,855                   
|Money market savings accounts         | 446,821                     
|NOW accounts                          | 216,269                     
|Non-interest bearing accounts         | 100,894                     
|Total core deposits                   | 888,839                     
|                                      |                             
|Certificate accounts:                 |                             
|Variable-rate certificates of deposit | 18,062                      
|Step-up certificates of deposit       | 49,928                      
|Less than 6 months                    | 109,464                     
|6 through 11 months                   | 215,121                     
|12 though 23 months                   | 603,732                     
|24 months through 47 months           | 119,986                     
|48 months or greater                  | 56,937                      
|Other                                 | 19                          
|Total certificate accounts            | 1,173,249                   
|Total average deposits                | $2,062,088                  

29

---



|              | Period to Maturity from March 31, 2002 | March 31,             
|------------- | -------------------------------------- | ----------------------
|              | Less than
      One Year               | One to
      Two Years
|              | (Dollars in thousands)                
|              |                                        |                       
|0.00 to 4.00% | $ 554,711                              | 19,980                
|4.01 to 5.00% | 281,598                                | 29,496                
|5.01 to 6.00% | 66,920                                 | 8,358                 
|6.01 to 7.00% | 35,012                                 | 7,581                 
|7.01 to 8.00% | 10,477                                 | 481                   
|Total         | $ 948,718                              | 65,896                

30

---

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 securities 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 FHLB.
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.
At March 31, 2002, the Bank had outstanding FHLB advances of $558.0 million at a
weighted average cost of 4.16%. The original terms of the FHLB advances
outstanding at March 31, 2002, range from 19 days to ten years. The Bank has not
utilized reverse repurchase agreements since fiscal 2000 due to the combination
of strong deposit inflows and the availability and pricing of FHLB advances. The
Bank expects to continue to utilize FHLB advances and to a much lesser degree
reverse repurchase agreements as secondary sources of funds to deposit
liabilities. FHLB advances are utilized to balance the differential net cash
flows arising from loan and deposit activities. In the past, FHLB advances and
reverse repurchase agreements were also used as a primary funding vehicle for
the Bank's investment in securities. An increase in deposit inflows coupled
with the Bank's continued de-emphasis on securities activities has
substantially reduced the use of these alternative funding sources.
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 use of putable advances allowed the
Bank to extend the term to maturity and initial "put" dates of its
funding in connection with increased investment in hybrid and balloon MBS
products. The Bank has not initiated any new putable advances since May 1998.
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."

31

---

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

At or for the Years Ended March 31,2002
      2001
      2000(Dollars in thousands)FHLB advances:Average balance outstanding
      $ 597,173
      771,869
      792,778Maximum amount outstanding at any
        Month-end during the year
      655,000
      886,000
      884,000Balance outstanding at end of year (1)
      558,000
      575,000
      884,000Weighted average interest rate during
        the year
      5.01%
      6.25
      5.63Weighted average interest rate end
        of year
      4.16
      5.98
      6.02Reverse repurchase agreements:Average balance outstanding
      $ -
      -
      43,750Maximum amount outstanding at any
        month-end during the year
      -
      -
      50,000Balance outstanding at end of year
      -
      -
      -Weighted average interest rate during
        the year
      -
      -
      5.87Weighted average interest rate end
        of year
      -
      -
      -(1) Included in the balance of
        FHLB advances outstanding at March 31, 2002 are putable borrowings of
        $150.0 million with next put dates ranging from April 23, 2002 to
        February 12, 2003. The weighted average term to maturity for these
        putable borrowings is 18 months and the weighted average term to next
        put date is 3 months.


Subsidiary ActivitiesGlencrest Investment Advisors, Inc.("Glencrest"),
incorporated in Delaware on January 25, 2002, and commenced operations in April
2002 as a wholly owned subsidiary of the Bancorp. Glencrest will function as a
Registered Investment Advisor. It will be engaged in offering investment and
asset management services to individuals and institutions such as foundations
and endowments, pension plans and charitable organizations.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, 2002, PFS had net earnings of
$104,000.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, 2002, PFFFS had net earnings of
$262,000.

32

---

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, 2002, DSI had minimal activity and a nominal loss.PersonnelAs of March 31, 2002, the Bank had 508 full-time employees and 116
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

The Bancorp is regulated as a savings and loan
holding company by the OTS under the Home Owners' Loan Act, as amended (the
"HOLA"). The Bank, as a federally chartered savings institution, is
also subject to federal regulation and oversight by the OTS extending to all
aspects of its operations. In addition, the Bank is subject to regulation and
examination by the FDIC, which insures the deposits of the Bank to the maximum
extent permitted by law. The Bancorp is also required to file reports with, and
otherwise comply with the rules and regulations of the Securities and Exchange
Commission (the "SEC") under the federal securities laws.

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 laws and regulations, whether
by the OTS, the FDIC, the Federal Reserve Board (the "FRB"), the SEC
or through legislation, could have a material adverse impact on the Bancorp, the
Bank and their operations and stockholders.

On November 12, 1999, President Clinton signed
into law landmark financial services legislation, titled the Gramm-Leach-Bliley
Act ("GLB Act"). The GLB Act repeals depression-era laws restricting
affiliations among banks, securities firms, insurance companies and other
financial services providers. The impact of the GLB Act on the Bancorp and the
Bank where relevant, is discussed throughout the regulation section below.

The following discussion is intended to be a
summary of the material statutes and regulations applicable to savings banks and
their holding companies, and it does not purport to be a comprehensive
description of all such statutes and regulations, and does not purport to be a
complete description of their effects on the Bank and the Bancorp.

33

---

Holding Company RegulationThe Bancorp is a non-diversified unitary savings and loan holding company
within the meaning of the HOLA. As such, the Bancorp is required to register
with and be subject to OTS examination and supervision as well as certain
reporting requirements. In addition, the OTS has enforcement authority over the
Bancorp and any of its non-savings institution subsidiaries. Among other things,
this authority permits the OTS to restrict or prohibit activities that are
determined to be a serious risk to the financial safety, soundness or stability
of a subsidiary savings bank. Unlike bank holding companies, a savings and loan
holding company is not subject to any regulatory capital requirements or to
supervision by the Federal Reserve System.
"Grandfathered" Savings and Loan Holding Company Status.
Because the Bancorp acquired the Bank prior to May 4, 1999, the Bancorp is a
"grandfathered" unitary savings and loan holding company under the GLB
Act. As such, the Bancorp has no restrictions on its business activities,
provided the Bank continues to be a qualified thrift lender ("QTL").
See "Federal Savings Institution Regulation -- QTL Test." If, however,
the Bancorp is acquired by a non-financial company, the Bancorp will terminate
its "grandfathered" unitary savings and loan holding company status,
and become subject to certain limitations on the types of business activities in
which it could engage.
The Bancorp would also terminate its "grandfathered" status 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. Upon such acquisition, 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. In addition, no multiple savings and loan holding company may
acquire more than 5% of the voting stock of a company engaged in impermissible
activities.
The OTS is also 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.Restrictions Applicable to All Savings and Loan Holding Companies.
Federal law prohibits a savings and loan holding company, including the Bancorp,
directly or indirectly, from acquiring:

> control (as defined
>   under the HOLA) of another savings institution (or a holding company parent)
>   without prior OTS approval;
> through merger,
> consolidation, or purchase of assets, another savings institution or a holding
> company thereof, or acquiring all or substantially all of the assets of such
> institution (or a holding company) without prior OTS approval; or
> control of any depository
> institution not insured by the FDIC (except through a merger with and into the
> holding company's savings institution subsidiary that is approved by the OTS).

A savings and loan holding company may not
acquire as a separate subsidiary an insured institution that has a principal
office outside of the state where the principal office of its subsidiary
institution is located, except:

> in
>   the case of certain emergency acquisitions approved by the FDIC;
>   34
>   if such holding company
>   controls a savings institution subsidiary that operated a home or branch
>   office in such additional state as of March 5, 1987; or
>   if the laws of the state
>   in which the savings institution to be acquired is located specifically
>   authorize a savings institution chartered by that state to be acquired by a
>   savings institution chartered by the state where the acquiring savings
>   institution or savings and loan holding company is located or by a holding
>   company that controls such a state chartered association.

In addition, if the Bank fails the QTL test,
the Bancorp must register with the FRB as a bank holding company under the Bank
Holding Company Act within one year of the Bank's failure to so qualify.Federal Savings Institution RegulationBusiness Activities. The activities of federal savings banks 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.Lending and Investment Powers. The Bank derives its lending and
investment powers from the HOLA, and the regulations and policies of the OTS.
Under these laws, regulations and policies, the Bank may invest in mortgage
loans secured by residential and commercial real estate; commercial, community
development, small business and consumer loans; certain types of
government-related debt securities; and certain other assets. The Bank may also
establish service corporations that may engage in activities not otherwise
permissible for the Bank, including certain real estate equity investments and
securities and insurance brokerage. The Bank's authority to invest in certain
types of loans or other investments is limited by federal law. The Bank may also
establish operating subsidiaries that may engage in activities or investments
permissible for federal savings banks.

All lending activities are subject to general
safety and soundness limits against over-concentration of investments in
particular types of assets.

Loans-to-One-Borrower Limitations.
Under HOLA, the Bank is generally subject to the same limits on loans-to-one
borrower as a national bank. With specified exceptions, the Bank's total loans
or extensions of credit to a single borrower cannot exceed 15% of the Bank's
unimpaired capital and surplus which does not include accumulated other
comprehensive income. The Bank may lend additional amounts up to 10% of its
unimpaired capital and surplus, if the loans or extensions of credit are
fully-secured by readily-marketable collateral. The Bank currently complies with
applicable loans-to-one-borrower limitations.

QTL Test. Under the HOLA, the Bank must
comply with the qualified thrift lender, or "QTL" test. Under the QTL
test, the Bank is required to maintain at least 65% of its "portfolio
assets" in certain "qualified thrift investments" (primarily
residential mortgages and related investments, including certain mortgage-backed
securities) in at least nine months of the most recent 12-month period. Recent
legislation has expanded the extent to which education loans, credit card loans
and small business loans may be considered "qualified thrift
investments." For purposes of the QTL test, "portfolio assets"
means, in general, the Bank's total assets less the sum of:

> specified
>   liquid assets up to 20% of total assets;
>   goodwill and other
>   intangible assets; and
>   the value of property used
>   to conduct the Bank's business.

The Bank may also satisfy the QTL test by
qualifying as a "domestic building and loan association" as defined in
the Internal Revenue Code of 1986. At March 31, 2002, the Bank met the QTL test,
and in each of the prior 12 months, and, therefore, qualifies as a thrift
lender. If the Bank fails the QTL test, it must either operate under certain
restrictions on its activities or convert to a bank charter.

35

---

Capital Requirements. OTS regulations
require the Bank to meet three minimum capital standards:

> (1) a tangible capital ratio requirement of
>   1.5% of total assets, as adjusted under the OTS regulations;
>   (2) a leverage ratio requirement of 3% of
>   core capital to such adjusted total assets, if a savings bank has been
>   assigned the highest composite rating of 1 under the Uniform Financial
>   Institutions Ratings System; or if a savings bank does not have the highest
>   composite rating of 1, a leverage ratio requirement of 4% of core capital to
>   the adjusted total assets; and
>   (3) a risk-based capital ratio requirement
>   of 8% of core and supplementary capital to total risk-weighted assets.

The minimum leverage capital ratio for any
other depository institution that does not have a composite rating of 1 will be
4%, unless a higher leverage capital ratio is warranted by the particular
circumstances or risk profile of the depository institution. In determining
compliance with the risk based capital requirement, the Bank must compute its
risk-weighted assets by multiplying its assets and certain off-balance sheet
items by risk-weights, which range from 0% for cash and obligations issued by
the United States Government or its agencies to 100% for consumer and commercial
loans, as assigned by the OTS capital regulation based on the risks that the OTS
believes are inherent in the type of asset.

Tangible capital is defined, generally, as
common stockholders' equity (including retained earnings), certain
non-cumulative perpetual preferred stock and related earnings and minority
interests in equity accounts of fully consolidated subsidiaries, less
intangibles (other than certain mortgage servicing rights) and investments in
and loans to subsidiaries engaged in activities not permissible for a national
bank. Core capital is defined similarly to tangible capital, but core capital
also includes certain qualifying supervisory goodwill and certain purchased
credit card relationships. Supplementary capital currently includes cumulative
and other perpetual preferred stock, mandatory convertible securities,
subordinated debt and intermediate preferred stock and the allowance for loan
and lease losses. In addition, up to 45% of unrealized gains on
available-for-sale equity securities with a readily determinable fair value may
be included in supplementary capital. The allowance for loan and lease losses
includable in supplementary capital is limited to a maximum of 1.25% of
risk-weighted assets, and the amount of supplementary capital that may be
included as total capital cannot exceed the amount of core capital.

The following table presents the Bank's
capital position at March 31, 2002.

Actual
      Required
      Excess
      Actual
        Percentage
      Required
        Percentage(Dollars in thousands)Tangible
      $ 260,771
      45,343
      215,428
      8.63%
      1.50Core (Leverage)
      260,771
      120,914
      139,857
      8.63
      4.00Risk-based
      288,757
      179,514
      109,243
      12.87
      8.00


As the foregoing table indicates, at March 31, 2002, the Bank met each of its
capital requirements.

Community Reinvestment Act. Under the Community Reinvestment Act
("CRA"), as implemented by OTS regulations, the Bank has a continuing
and affirmative obligation to help meet the credit needs of its entire
community, including low and moderate income neighborhoods. The CRA does not
establish specific lending requirements or programs for the Bank nor does it
limit its discretion to develop the types of products and services that it
believes are best suited to its particular community, consistent with the CRA.
The CRA requires the OTS, in connection with its examination of the Bank, to
assess the Bank's record of meeting the credit needs of its community and to
take the record into account in its evaluation of certain applications by the
Bank. The CRA also requires all institutions to make public disclosure of their
CRA ratings. The Bank received a "satisfactory" CRA rating in its most
recent examination.

36

---

CRA regulations rate an institution based on its actual performance in
meeting community needs. In particular, the system focuses on three tests:

> 

an investment test, to evaluate the institution's record of investing in
community development projects, affordable housing, and programs benefiting low
or moderate income individuals and businesses; and

a service test, to evaluate the institution's delivery of services through its
branches, ATMs and other offices.

Transactions
with Related Parties.The Bank's authority to engage in transactions with its "affiliates"
is limited by OTS regulations and by Sections 23A and 23B of the Federal Reserve
Act (the "FRA"). In general, these transactions must be on terms which
are as favorable to the Bank as comparable transactions with non-affiliates. In
addition, certain types of these transactions are restricted to an aggregate
percentage of the Bank's capital. Collateral in specified amounts must usually
be provided by affiliates in order to receive loans from the Bank. In addition,
the OTS regulations prohibit a savings bank from lending to any of its
affiliates that are engaged in activities that are not permissible for bank
holding companies and from purchasing the securities of any affiliate, other
than a subsidiary.

The Bank's
authority to extend credit to directors, executive officers and 10% shareholders
of the Bank and the Bancorp, as well as to entities controlled by such persons,
is currently governed by the requirements of Sections 22(g) and 22(h) of the FRA
and Regulation O of the Federal Reserve Board. Among other things, these
provisions require that extensions of credit to insiders (a) be made on terms
that are substantially the same as, and follow credit underwriting procedures
that are not less stringent than, those prevailing for comparable transactions
with unaffiliated persons and that do not involve more than the normal risk of
repayment or present other unfavorable features and (b) not exceed certain
limitations on the amount of credit extended to such persons, individually and
in the aggregate, which limits are based, in part, on the amount of the Bank's
capital. In addition, extensions of credit in excess of certain limits must be
approved by the Bank's Board of Directors.

Enforcement.
The OTS has primary enforcement responsibility over savings banks, including the
Bank. This enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease and desist orders and to remove
directors and officers. In general, these enforcement actions may be initiated
in response to violations of laws and regulations and to unsafe or unsound
practices. The FDIC also has the authority to recommend to the OTS that
enforcement action be taken with respect to a particular savings institution. If
action is not taken by the OTS, the FDIC may take action under certain
circumstances.

Standards For
Safety And Soundness. Under federal law, the OTS has adopted, a set of
guidelines prescribing safety and soundness standards. These guidelines
establish general standards relating to internal controls and information
systems, internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth, asset quality, earnings standards, and
compensation, fees and benefits. In general, the guidelines require appropriate
systems and practices to identify and manage the risks and exposures specified
in the guidelines.

In addition, the
OTS adopted regulations that authorize, but do not require, the OTS to order an
institution that has been given notice that it is not satisfying these safety
and soundness standards to submit a compliance plan. If, after being notified,
an institution fails to submit an acceptable plan or fails in any material
respect to implement an accepted plan, the OTS must issue an order directing
action to correct the deficiency and may issue an order directing other actions
of the types to which an undercapitalized association is subject under the
"prompt corrective action" provisions of federal law. If an
institution fails to comply with such an order, the OTS may seek to enforce such
order in judicial proceedings and to impose civil money penalties.

37

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Limitation on
Capital Distributions. The OTS imposes various restrictions or requirements
on the Bank's ability to make capital distributions, including cash dividends.
A savings institution that is the subsidiary of a savings and loan holding
company must file an application or a notice with the OTS at least 30 days
before making a capital distribution. The Bank must file an application for
prior approval if the total amount of its capital distributions, including the
proposed distribution, for the applicable calendar year would exceed an amount
equal to the Bank's net income for that year plus the Bank's retained net
income for the previous two years. However, a savings bank subsidiary of a
savings and loan holding company, such as the Bank, will continue to have to
file a notice, unless the specific capital distribution requires an application.

The OTS may
disapprove of a notice or application if:

> the Bank would be
>   undercapitalized following the distribution;
>   the proposed capital distribution raises safety and soundness concerns; or
>   the capital distribution would violate a prohibition contained in any statute,
>   regulation or agreement between the Bank and the OTS or the FDIC, or a
>   condition imposed on the Bank in an OTS-approved application or notice.

Liquidity.The Bank is required to maintain a sufficient amount of liquid assets to ensure
its safe and sound operation.

Prompt
Corrective Action Regulations. Under the OTS prompt corrective action
regulations, the OTS is required to take certain, and is authorized to take
other, supervisory actions against undercapitalized savings banks. For this
purpose, a savings bank would be placed in one of the following four categories
based on the association's capital:

> well capitalized;
>   adequately capitalized;
>   undercapitalized; and
>   critically undercapitalized.

At March 31, 2002,
the Bank met the criteria for being considered "well-capitalized."

When appropriate,
the OTS can require corrective action by a savings bank under the "prompt
corrective action" provisions of federal law.

Insurance of
Deposit Accounts. The Bank is a member of the SAIF and the Bank pays its
deposit insurance assessments to the SAIF. The FDIC also maintains another
insurance fund, the Bank Insurance Fund, which primarily insures the deposits of
banks and state chartered savings banks.

Under federal law,
the FDIC established a risk based assessment system for determining the deposit
insurance assessments to be paid by insured depository institutions. Under the
assessment system, the FDIC assigns an institution to one of three capital
categories based on the institution's financial information as of the quarter
ending three months before the beginning of the assessment period. An
institution's assessment rate depends on the capital category and supervisory
category to which it is assigned. Under the regulation, there are nine
assessment risk classifications (i.e., combinations of capital groups and
supervisory subgroups) to which different assessment rates are applied.
Assessment rates currently range from 0.0% of deposits for an institution in the
highest category (i.e., well-capitalized and financially sound, with no more
than a few minor weaknesses) to 0.27% of deposits for an institution in the
lowest category (i.e., undercapitalized and substantial supervisory concern).
The FDIC is authorized to raise the assessment rates as necessary to maintain
the required reserve ratio of 1.25%.

38

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In addition, all
FDIC insured institutions are required to pay assessments to the FDIC at an
annual rate of approximately .0212% of insured deposits to fund interest payment
on bonds issued by the Financing Corporation, an agency of the federal
government established to recapitalize the predecessor to the SAIF. These
assessments will continue until the Financing Corporation bonds mature in 2017.
The Bank's assessment rate for fiscal 2002 ranged from 1.8 to 1.9 basis points
and the premium paid for this period was $368,000 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 federal law, 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.Federal Home Loan Bank System. The Bank is a member of the Federal Home
Loan Bank (the "FHLB") of San Francisco, which is one of the regional
FHLBs making up the FHLB System. Each FHLB provides a central credit facility
primarily for its member institutions. The Bank is required to acquire and hold
shares of capital stock in the FHLB of San Francisco in an amount equal to the
greater of 1% of the aggregate principal amount of its unpaid residential
mortgage loans, home-purchase contracts and similar obligations, but not less
than $500 or 5% of outstanding advances. The Bank was in compliance with this
requirement with an investment in the capital stock of the FHLB of San Francisco
at March 31, 2002, of $35.1 million. Any advances from a FHLB must be secured by
specified types of collateral, and all long term advances may be obtained only
for the purpose of providing funds for residential housing finance.

FHLBs are required
to provide funds for the resolution of insolvent thrifts and to contribute funds
for affordable housing programs. These requirements could reduce the amount of
earnings that the FHLBs can pay as dividends to their members and could also
result in the FHLBs imposing a higher rate of interest on advances to their
members. If dividends were reduced, or interest on future FHLB advances
increased, the Bank's net interest income would be affected.

Under the GLB Act,
membership in the FHLB System is now voluntary for all federally-chartered
savings bank, such as the Bank. The GLB Act also replaces the existing
redeemable stock structure of the FHLB System with a capital structure that
requires each FHLB to meet a leverage limit and a risk-based permanent capital
requirement.

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,
2002 totaled $458,000.

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.

39

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Prohibitions
Against Tying Arrangements. Federal savings banks are subject to the
prohibitions of 12 U.S.C. sec. 1972 on certain tying arrangements. A depository
institution is prohibited, subject to some exceptions, from extending credit to
or offering any other service, or fixing or varying the consideration for such
extension of credit or service, on the condition that the customer obtain some
additional service from the institution or its affiliates or not obtain services
of a competitor of the institution.

Privacy
Standards. Effective July 1, 2001, financial institutions, including the
Bancorp and the Bank, became subject to FDIC regulations implementing the
privacy protection provisions of the GLB Act. These regulations require
financial institutions to disclose their privacy policy, including identifying
with whom they share "non-public personal information," to customers
at the time of establishing the customer relationship and annually thereafter.

Trust
Activities Regulation. The Bank derives its trust activity powers from
Section 5 of the HOLA and the regulations and policies of the OTS. Under these
laws, regulations and policies, the trust activities of federal savings banks
are governed by both federal laws and state laws. Generally, the scope of trust
activities that the Bank can provide will be governed by the laws of the states
in which the Bank is "located" (as such term is defined under the
regulations of the OTS), while the operations of the Bank are governed by
federal laws and regulations. If the trust activities of a federal savings bank
are located in more than one state, however, then the scope of fiduciary
services the federal savings bank can provide will vary depending on the law of
each state.

The Bank through
its trust department acts as trustee, executor, administrator, guardian,
custodian, record keeper, agent, registrar, advisor and manager for various
accounts. As of March 31, 2002, the trust department of the Bank maintained
approximately $251.6 million in assets under management.

Federal Reserve
SystemUnder
regulations of the FRB, the Bank is required to maintain non-interest-earning
reserves against its transaction accounts. FRB regulations generally require
that reserves of 3% must be maintained against aggregate transaction accounts of
$42.8 million or less, subject to adjustment by FRB, and an initial reserve of
$1.3 million plus 10%, subject to adjustment by FRB between 8% and 14%, against
that portion of total transaction accounts in excess of $42.8 million. The first
$5.5 million of otherwise reservable balances, subject to adjustments by FRB,
are exempted from the reserve requirements. The Bank is in compliance with these
requirements. Because required reserves must be maintained in the form of either
vault cash, a non-interest-bearing account at an Federal Reserve bank or a
pass-through account as defined by FRB, the effect of this reserve requirement
is to reduce the Bank's interest-earning assets, to the extent the requirement
exceeds vault cash.

Federal
Securities LawThe
Bancorp's common stock is registered with the SEC under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Bancorp is subject to information, proxy solicitation, insider trading
restrictions, and other requirements under the Exchange Act.

Other Federal
Regulation

In response to the
events of September 11th, President George W. Bush signed into law
the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act, on October
26, 2001. The USA PATRIOT Act gives the federal government new powers to address
terrorist threats through enhanced domestic security measures, expanded
surveillance powers, increased information sharing, and broadened anti-money
laundering requirements. By way of amendments to the Bank Secrecy Act, Title III
of the USA PATRIOT Act takes measures intended to encourage information sharing
among bank regulatory agencies and law enforcement bodies. Further, certain
provisions of Title III impose affirmative obligations on a broad range of
financial institutions, including banks, thrifts, brokers, dealers, credit
unions, money transfer agents and parties registered under the Commodity
Exchange Act.

40

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Among other
requirements, Title III of the USA PATRIOT Act imposes the following
requirements with respect to financial institutions:

- Pursuant to
    Section 352, all financial institutions must establish anti-money
    laundering programs that include, at minimum: (i) internal policies,
    procedures, and controls, (ii) specific designation of an anti-money
    laundering compliance officer, (iii) ongoing employee training programs, and
    (iv) an independent audit function to test the anti-money laundering
    program.
- Section 326 of
    the Act authorizes the Secretary of the Department of Treasury, in
    conjunction with other bank regulators, to issue regulations by October 26,
    2002 that provide for minimum standards with respect to customer
    identification at the time new accounts are opened.
- Section 312 of
    the Act requires financial institutions that establish, maintain,
    administer, or manage private banking accounts or correspondent accounts in
    the United States for non-United States persons or their representatives
    (including foreign individuals visiting the United States) to establish
    appropriate, specific, and, where necessary, enhanced due diligence
    policies, procedures, and controls designed to detect and report money
    laundering.
- Effective
    December 25, 2001, financial institutions are prohibited from establishing,
    maintaining, administering or managing correspondent accounts for foreign
    shell banks (foreign banks that do not have a physical presence in any
    country), and will be subject to certain recordkeeping obligations with
    respect to correspondent accounts of foreign banks.
- Bank regulators
    are directed to consider a holding company's effectiveness in combating
    money laundering when ruling on Federal Reserve Act and Bank Merger Act
    applications.

FEDERAL AND STATE TAXATION

Federal TaxationGeneral. 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 1998 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, 2002) 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.

41

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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 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 TaxationState 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, 2002, PFF Bank & Trust was conducting its business through
24 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.

42

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Of the 24 banking branches, 17 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, 2002, the net book value of owned real estate including the
branch located on leased land totaled $15.5 million. The net book value of
leased offices was $1.9 million. The net book value of furniture, fixtures and
electronic data processing equipment was $4.1 million.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 on the New York Stock Exchange
under the symbol "PFB." 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, 2002, there were
approximately 4,427 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, 2002 |         |       |        
|First Quarter             | $ 25.13 | 19.25 | 25.00  
|Second Quarter            | 28.85   | 22.90 | 27.50  
|Third Quarter             | 28.00   | 22.50 | 27.70  
|Fourth Quarter            | 31.64   | 25.65 | 31.20  
|                          |         |       |        
|Year Ended March 31, 2001 |         |       |        
|First Quarter             | $ 18.25 | 12.25 | 18.25  
|Second Quarter            | 22.50   | 16.63 | 21.75  
|Third Quarter             | 23.75   | 15.75 | 20.88  
|Fourth Quarter            | 25.00   | 19.25 | 22.94  

43

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The Company initiated a cash dividend program on its common stock during the
fiscal year ended March 31, 2000. Dividend activity during the fiscal year ended
March 31, 2002 was as follows:

|                   |                    | Amount   
|------------------ | ------------------ | ---------
|Record Date        | Payment Date       | Per share
|June 15, 2001      | June 29, 2001      | $.06     
|September 15, 2001 | September 27, 2001 | $.06     
|December 14, 2001  | December 28, 2001  | $.08     
|March 15, 2002     | March 29, 2002     | $.08     

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

44

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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."



|                                                       | At March 31,          
|------------------------------------------------------ | ----------------------
|                                                       | 2002                  
|                                                       | (Dollars in thousands)
|                                                       |                       
|Selected Balance Sheet Data:                           |                       
|                                                       |                       
|Total assets                                           | $3,042,932            
|Investment securities held-to-
    maturity            | 703                   
|Investment securities available-for-sale               | 93,820                
|Mortgage-backed securities held-to-maturity            | -                     
|Mortgage-backed securities
    available-for-sale      | 196,580               
|Collateralized mortgage obligations available-for-sale | 62,778                
|Trading securities                                     | 2,334                 
|Investment in real estate                              | -                     
|Loans held for sale                                    | 106                   
|Loans receivable, net(1)                               | 2,494,667             
|Deposits                                               | 2,168,964             
|FHLB advances and other
    borrowings                 | 558,000               
|Stockholders' equity, substantially restricted         | 284,077               
|                                                       |                       
|                                                       |                       

45

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For the Year Ended March 31,2002
      2001
      2000
      1999
      1998(Dollars in thousands, except per share amounts)Selected Operating Data:Interest income
      $ 215,731
      239,949
      214,952
      206,579
      191,284Interest expense
      104,624
      143,471
      126,539
      130,356
      118,517Net interest income
      111,107
      96,478
      88,413
      76,223
      72,767Provision for loan losses
      5,000
      5,004
      4,000
      4,020
      7,099Net interest income after
      provision for loan losses
    106,107
    91,474
    84,413
    72,203
    65,668Non-interest income
      17,043
      14,319
      17,628
      15,924
      14,364Non-interest expense:General and administrative
        expense
      62,127
      57,066
      55,506
      54,960
      51,560Foreclosed real estate operations, net
    (102)
    (324)
    (278)
    (45)
    473Total non-interest expense
      62,025
      56,742
      55,228
      54,915
      52,033Earnings before income taxes
      61,125
      49,051
      46,813
      33,212
      27,999Income taxes
      25,761
      20,791
      20,215
      14,208
      12,019Net earnings
      $ 35,364
      28,260
      26,598
      19,004
      15,980Basic earnings per share (as restated) (8)
    $ 2.84
    2.32
    2.13
    1.35
    1.00Diluted earnings per share (as restated) (8)
    $ 2.74
    2.24
    2.05
    1.30
    0.95(continued
        on next page)


46

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At or for the Year Ended March 31,2002
      2001
      2000
      1999
      1998(Dollars in thousands)Performance Ratios (2):Return on average assets
      1.19%
      0.95
      0.90
      0.64
      0.60Return on average equity
      12.80
      11.81
      11.91
      7.92
      6.07Average equity to average assets
      9.28
      8.04
      7.54
      8.08
      9.87Equity to total assets at end of period
    9.34
    8.94
    7.31
    8.27
    9.04Net interest spread (3)
      3.51
      2.93
      2.81
      2.46
      2.40Effective interest spread (4)
      3.83
      3.31
      3.09
      2.70
      2.82Average interest-earning assets to average
      interest-bearing liabilities
    108.91
    107.72
    106.22
    105.16
    108.98Efficiency ratio (5)
      48.48
      51.51
      52.34
      59.64
      59.18General and administrative expense to average assets
    2.09
    1.92
    1.87
    1.85
    1.93Regulatory Capital Ratios (2)(6):Tangible capital
      8.63
      8.28
      6.77
      6.95
      7.10Core capital
      8.63
      8.28
      6.77
      6.95
      7.10Risk-based capital
      12.87
      12.72
      11.00
      12.52
      14.17Asset Quality Ratios (2):Non-performing loans as a percent of gross loans
      receivable (7)
    0.16
    0.45
    0.21
    0.50
    0.88Non-performing assets as a percent of total assets (7)
    0.16
    0.41
    0.23
    0.56
    0.88Allowance for loan losses as a
      percent of gross loans receivable
    1.11
    1.22
    1.09
    1.18
    1.33Allowance for loan losses as a
      percent of non-performing loans (7)
    697.80
    270.20
    512.96
    237.56
    151.27Number of full-service customer facilities
    24
    24
    23
    24
    23Loan originations
      $1,433,821
      1,049,535
      1,268,324
      987,604
      557,428(1) The allowances
        for loan losses at March 31, 2002, 2001, 2000, 1999, and 1998 were $31.4
        million $31.0 million, $27.8 million, $26.2 million, and $26.0 million,
        respectively.(2) Asset Quality
        Ratios and Regulatory Capital Ratios are end of period ratios.
        Performance Ratios are based on average daily balances during the
        indicated periods.(3) Net interest
        spread represents the difference between the weighted average yield on
        interest-earning assets and the weighted average cost of
        interest-bearing liabilities.(4) Effective
        interest spread represents net interest income as a percent of average
        interest-earning assets.(5) Efficiency
        ratio represents general and administrative expense as a percent of net
        interest income plus non-interest income.(6) For
        definitions and further information relating to the Bank's regulatory
        capital requirements, see "Regulation - Federal Savings Institution
        Regulation - Capital Requirements."(7) 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."(8) See Note 24 of
        accompanying Notes to Consolidated Financial Statements regarding the
        restatement of the earnings per share data.


47

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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

- Allowance for losses on loans and real estate. For further
    information, see "Item 1 - Lending Activities - Allowance for Loan
    Losses" and "Note 5 to the Consolidated Financial
    Statements."

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 net present
value of shareholders' 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, 2002. 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 core deposits, and the
earliest repricing opportunity for variable and floating rate instruments. The
Company also had $150.0 million of putable FHLB advances on the balance sheet as
of March 31, 2002 that are assumed to reprice at 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.

48

---



|                                                                                                                                                                    | March 31, 2002        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------
|                                                                                                                                                                    | 3 Months
      or Less
|                                                                                                                                                                    | (Dollars in thousands)
|Interest-earning assets:                                                                                                                                            |                       
|Cash, investment securities, collateralized mortgage obligations and
      FHLB stock (1)                                                                           | $ 211,224             
|Loans and mortgage-backed
      securities: (1)                                                                                                                     |                       
|Mortgage-backed securities                                                                                                                                          | 29,011                
|Loans receivable, net                                                                                                                                               | 1,179,865             
|Total loans and mortgage-backed
      securities                                                                                                                    | 1,208,876             
|Total interest-earning assets                                                                                                                                       | 1,420,100             
|Non-interest earning assets                                                                                                                                         | -                     
|Total assets                                                                                                                                                        | $ 1,420,100           
|                                                                                                                                                                    |                       
|Interest-bearing liabilities:                                                                                                                                       |                       
|Fixed maturity deposits                                                                                                                                             | $ 495,485             
|Core deposits (2)                                                                                                                                                   | 271,401               
|Total deposits                                                                                                                                                      | 766,886               
|Borrowings (3)                                                                                                                                                      | 200,000               
|Total interest-bearing liabilities                                                                                                                                  | 966,886               
|Non-interest bearing liabilities                                                                                                                                    | -                     
|Equity                                                                                                                                                              | -                     
|Total liabilities and stockholders' equity                                                                                                                          | $ 966,886             
|Interest sensitivity gap                                                                                                                                            | $ 453,214             
|Cumulative interest sensitivity gap                                                                                                                                 | 453,214               
|Cumulative interest sensitivity gap as a percentage of total assets                                                                                                 | 14.89%                
|Cumulative interest-earning assets as a percentage of cumulative
      interest-bearing liabilities                                                                 | 146.87                
|                                                                                                                                                                    |                       
|(1) Based upon
      contractual maturities, repricing date and forecasted principal payments
      assuming normal amortization and, where applicable prepayments.
|(2) Assumes 100% of
      rate paying core deposits are subject to repricing in year one.                                                                          
|(3) Putable
      borrowings are presented based upon their contractual maturity date.                                                                             

49

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The Company's one year GAP at March 31, 2002, was negative 9.95% (i.e.,
more interest bearing liabilities reprice within one year than interest-earning
assets); this compares with negative 10.08% at March 31, 2001.
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.



|March 31, 2002                                                                                                                                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                           
|Change in Interest Rates
      (in basis points)                                                                                                                                                                           
|200                                                                                                                                                                                                                        
|100                                                                                                                                                                                                                        
|(100)                                                                                                                                                                                                                      
|                                                                                                                                                                                                                           
|(1) This percentage
      change represents the impact to net interest income for the period from
      April 1, 2002 through March 31, 2003 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.                                                                                                                



The results from the asset/liability simulation model
indicate that the Company's net interest income would remain relatively stable
under modest rate shocks in either direction.
The substantial reductions in the indices, particularly Prime, to which many of
the Company's adjustable rate loans are tied, has resulted in many of the
Company's most rate sensitive assets falling below rate floors. For yields on
these assets to benefit from rate movements, rates would need to increase by
more than 100 basis points. The rate reductions during fiscal 2002 also
accelerated ARM loan prepayments throughout the year. The Company replenished
its one-to-four family residential mortgage portfolio primarily with new
originations and purchases of 3/1 and 5/1 hybrid loans that are not expected to
experience significant prepayment activity or rate adjustments during the next
twelve months.
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,
2002, the Bank's sensitivity measure, as calculated by the OTS, was a negative
1.39%. This represents a decrease in sensitivity of 41 basis points from the
March 31, 2001 results.

50

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Average Balance SheetsThe following table sets forth certain information
relating to the Company for the years ended March 31, 2002, 2001 and 2000. 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.



|                                                                              | Year Ended March 31,  
|----------------------------------------------------------------------------- | ----------------------
|                                                                              | 2002                  
|                                                                              | Average
      Balance 
|                                                                              | (Dollars in thousands)
|                                                                              |                       
|Assets:                                                                       |                       
|                                                                              |                       
|Interest-earning assets:                                                      |                       
|Interest-earning deposits and short-term
      investments                    | $ 55,504              
|Investment securities, net                                                    | 94,802                
|Mortgage-backed securities, net                                               | 246,814               
|Collateralized mortgage obligations, net                                      | 72,486                
|Loans receivable, net                                                         | 2,393,264             
|FHLB stock                                                                    | 36,039                
|Total interest-earning assets                                                 | 2,898,909             
|Non-interest-earning assets                                                   | 77,542                
|Total assets                                                                  | $2,976,451            
|                                                                              |                       
|Liabilities and Stockholders' Equity:                                         |                       
|Interest-bearing liabilities:                                                 |                       
|Passbook accounts                                                             | $ 124,855             
|Money market savings accounts                                                 | 446,821               
|NOW and other demand deposit accounts                                         | 317,163               
|Certificate accounts                                                          | 1,173,249             
|Total                                                                         | 2,062,088             
|FHLB advances and other borrowings                                            | 599,749               
|Total interest-bearing liabilities                                            | 2,661,837             
|Non-interest-bearing liabilities                                              | 38,275                
|Total liabilities                                                             | 2,700,112             
|Stockholders' equity                                                          | 276,339               
|Total liabilities and stockholders'
      equity                              | $2,976,451            
|Net interest income                                                           |                       
|Net interest spread                                                           |                       
|Effective interest spread                                                     |                       
|Ratio of interest-earning assets to
      interest-
      bearing liabilities | 108.91%               

51

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Rate/Volume AnalysisThe 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.

|                                                     | Year Ended March 31, 2002
      Compared to
      Year Ended March 31, 2001 | Year Ended March 31, 2001
      Compared to
      Year Ended March 31, 2000
|---------------------------------------------------- | --------------------------------------------------------------------------- | ---------------------------------------------------------------------------
|                                                     | Increase (Decrease)
      Due to                                            | Increase (Decrease)
      Due to                                           
|                                                     | Volume                                                                      | Rate                                                                       
|                                                     | (Dollars in thousands)                                                     
|                                                     |                                                                             |                                                                            
|Interest-earning assets:                             |                                                                             |                                                                            
|Interest-earning deposits and short-term investments | $ 1,374                                                                     | (1,189)                                                                    
|Investment securities, net                           | 471                                                                         | (1,502)                                                                    
|Mortgage-backed securities, net                      | (6,054)                                                                     | (832)                                                                      
|Collateralized mortgage obligations, net             | (1,021)                                                                     | (2,567)                                                                    
|Loans receivable, net                                | 5,957                                                                       | (16,945)                                                                   
|FHLB stock                                           | (736)                                                                       | (624)                                                                      
|Total interest-earning assets                        | (9)                                                                         | (23,659)                                                                   
|                                                     |                                                                             |                                                                            
|Interest-bearing liabilities:                        |                                                                             |                                                                            
|Passbook accounts                                    | (88)                                                                        | (1,060)                                                                    
|Money market savings accounts                        | 2,945                                                                       | (6,641)                                                                    
|NOW and other demand deposit accounts                | 640                                                                         | 226                                                                        
|Certificate accounts                                 | (332)                                                                       | (13,749)                                                                   
|FHLB advances and other borrowings                   | (10,955)                                                                    | (11,543)                                                                   
|Total interest-bearing liabilities                   | (7,790)                                                                     | (32,767)                                                                   
|Change in net interest income                        | $ 7,781                                                                     | 9,108                                                                      

52

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Comparison of Operating Results for the Years Ended March 31,
2002 and March 31, 2001



53

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Interest
Expense
Interest expense decreased $38.8 million from $143.5 million for fiscal 2001 to
$104.6 million for fiscal 2002. The decrease was attributable principally to a
137 basis point decrease in the average cost of interest-bearing liabilities
from 5.30% for fiscal 2001 to 3.93% for fiscal 2002.
The average cost of deposits decreased 122 basis points from 4.91% for fiscal
2001 to 3.69% for fiscal 2002. The average cost of CDs decreased 117 basis
points from 6.07% for fiscal 2001 to 4.90% for fiscal 2002 and the average cost
of core deposits decreased 102 basis points from 3.10% for fiscal 2001 to 2.08%
for fiscal 2002. Contributing to the decrease in the average cost of deposits
was an increase in the proportion of the portfolio comprised by core deposits.
The average balance of core deposits grew by $134.8 million from $754.0 million
for fiscal 2001 to $888.8 million for fiscal 2002. At March 31, 2002, core
deposits totaled $1.08 billion or 50 percent of total deposits compared to
$803.9 million or 40 percent of total deposits one year earlier. The average
cost of FHLB advances and other borrowings decreased from 6.26% for fiscal 2001
to 4.77% for fiscal 2002.
Average interest-bearing liabilities decreased $45.6 million from $2.71 billion
for fiscal 2001 to $2.66 billion for fiscal 2002. The decrease in average
interest-bearing liabilities was attributable to a $175.0 million decrease in
the average balance of FHLB advances and other borrowings from $774.8 million
for fiscal 2001 to $599.7 million for fiscal 2002. The average balance of total
deposits increased $129.4 million from $1.93 billion for fiscal 2001 to $2.06
billion for fiscal 2002.Provision for Loan Losses
Provision for loan losses was $5.0 million for fiscal 2001 and 2002. Non-accrual
loans were $4.5 million or 0.16% of gross loans receivable at March 31, 2002
compared to $11.5 million or 0.45% of gross loans receivable at March 31, 2001.
Non-accrual loans at March 31, 2001 included a $3.0 million loan on the 296
residential home development in Castaic, California. During fiscal 2001, this
$3.0 million loan was determined to be impaired and an allowance for loss was
established for the full amount of the loan. During fiscal 2002, this loan was
charged off, reducing total non-accrual loans and the total allowance for loan
losses by $3.0 million. As a result, the allowance for loan losses was little
changed between March 31, 2001 ($31.0 million) and March 31, 2002 ($31.4
million).
Growth in the loan portfolio reduced the ratio of allowance for loan losses to
gross loans receivable from 1.22% at March 31, 2001 to 1.11% at March 31, 2002.
Had the $3.0 million Castaic loan been charged off at March 31, 2001, it would
have reduced the ratio of allowance for loan losses to gross loans at that time
to 1.10%, a level that would have been very comparable to the March 31, 2002
ratio of 1.11%.
In determining the adequacy of the allowance for loan losses, consideration is
given to levels and trends in the following factors: 1) the volume and
composition of non-accrual loans; 2) the volume, severity and composition of
classified assets; 3) changes in the composition of the loan portfolio by type
and by collateral. Each of these factors is discussed more fully below.
Between March 31, 2001 and 2002, the volume of non-accrual loans decreased by
$7.0 million (including the $3.0 million reduction attributable to the charging
off of the Castaic loan). The $4.5 million of non-accrual loans at March 31,
2002 includes $3.0 million of loans secured by one-to-four family residential
mortgages and $1.4 million of Four-Cs loans.

54

---

Total
classified assets increased from $62.1 million at March 31, 2001 to $74.9
million at March 31, 2002. The March 31, 2002 balance includes a loan in the
amount of $18.2 million to a business equipment leasing company. This loan was
discussed more fully under "Lending Activities-Delinquencies and Classified
Assets." Total classified assets at March 31, 2001 and 2002 also include
loans on the Castaic project aggregating $39.0 million and $29.7 million,
respectively.
Between March 31, 2001 and 2002, the disbursed balance of the Four-Cs increased
by $158.8 million. This increased the proportion of loans receivable, net
comprised by the Four-Cs from 39 percent to 42 percent. It also contributed to
an increase in the Company's average loan size from $130,000 at March 31, 2001
to $155,000 at March 31, 2002. For a discussion of the larger credits under each
loan type, see "Lending Activities."
While the level of non-accrual loans decreased between March 31, 2001 and 2002,
the allowance for loan losses was maintained at its current level based upon the
following: 1) the increase in the level and individual credit exposure of
classified assets; 2) the shift in the composition of the loan portfolio away
from one to four family residential mortgages to the Four-Cs.Non-Interest Income
Non-interest income increased from $14.3 million for fiscal 2001 to $17.0
million for fiscal 2002. Deposit and related fees were $9.4 million for fiscal
2002 compared to $9.0 million for fiscal 2001. The increase in deposit and
related fees reflects the additional fee opportunities associated with the
growth in core deposits. Trust fees were $2.1 million for fiscal 2002 compared
to $1.8 million for fiscal 2001. Assets under management or custody increased
from $239.3 million at March 31, 2001 to $251.6 million at March 31, 2002. Trust
fees for fiscal 2001 are net of a $291,000 non-recurring downward adjustment of
fees. Loan and servicing fees increased from $3.9 million for fiscal 2001 to
$5.0 million for fiscal 2002 due principally to the much higher volume of loan
payoff activity noted earlier. The net loss from trading activity was $107,000
for fiscal 2002 compared to $1.5 million for fiscal 2001. The reduction in net
loss from trading activities between fiscal 2001 and 2002 was due, in part, to
the direction and magnitude of changes in the equity markets. The better
performance during fiscal 2002 was also attributable to a change in personnel
and portfolio management philosophy.Non-Interest Expense
Non-interest expense increased from $56.7 million for fiscal 2001 to $62.0
million for fiscal 2002. General and administrative expense increased $5.1
million from $57.1 million or 1.92% of average assets for fiscal 2001 to $62.1
million or 2.09% of average assets for fiscal 2002. Compensation and benefits
accounted for $4.0 million of the increase in general and administrative
expense. A portion of the increase in compensation and benefits expense from
$30.3 million for fiscal 2001 to $34.3 million for fiscal 2002 reflects the
hiring of experienced personnel to generate and support the higher volumes of
Four-Cs and core deposits. The improvement in the efficiency ratio from 51.51%
for fiscal 2001 to 48.48% for fiscal 2002 reflects the positive relationships
being achieved between revenue growth and the costs associated with properly
supporting that growth. Included in compensation and benefits expense for fiscal
2002 and fiscal 2001, respectively are non-cash charges of $5.7 million and $5.8
million associated with the Bank's ESOP and 1996 Incentive Plan. The stock
awarded under the 1996 Incentive Plan vested over a five-year period ending
October 2001. Accordingly, the non-cash charge to expense associated with the
1996 Incentive Plan will decrease from the $1.4 million that was recorded during
fiscal 2002 to zero for fiscal 2003. The allocation of shares under the Bank's
ESOP will continue in generally equal installments through fiscal 2006. The
amount charged to expense under the ESOP will move upward or downward with
changes in the market price of the Company's common stock. ESOP expense for
fiscal 2002 was $4.3 million.

55

---

Also
contributing to the increase in compensation and benefits expense was a decrease
in pension income from $979,000 for fiscal 2001 to $317,000 for fiscal 2002
applicable to the Bank's frozen defined benefit pension plan (the
"Plan"). The decrease in pension income reflects a significant
reduction in the value of Plan assets, the majority of which had been invested
in equity securities. As of March 31, 2002, the market value of Plan assets was
$19.5 million, compared to $23.8 million at March 31, 2001. As of March 31,
2002, the projected Plan benefit obligation was $21.2 million compared to $19.9
million at March 31, 2001. As a result, included in accumulated other
comprehensive loss as of March 31, 2002 is $5.1 million applicable to the March
31, 2002 shortfall between Plan assets and liabilities. The Company has moved a
substantial portion of Plan assets into fixed income investments under an
investment immunization program. This strategy is expected to significantly
reduce the future earnings and asset/liability value mismatch volatility arising
from the Plan.
The increase in marketing and professional services expense from $6.3 million
for fiscal 2001 to $7.0 million for fiscal 2002 was attributable, in part, to an
increase in expenditures associated with increased marketing efforts directed
toward the Hispanic segments of the communities served by the Bank. Hispanic
marketing expenditures for fiscal 2002 and 2001 were $906,000 and $707,000,
respectively.
Approximately $599,000 of the increase in general and administrative expense
between fiscal 2001 and 2002 was attributable to the Bank's opening of its
twenty-fourth full service branch in La Quinta, California in February 2001. The
Bank expects to continue to expand its retail delivery network through de novo
branching with at least two new branches expected to be opened during fiscal
2003.Income Taxes
Income Taxes were $25.8 million for fiscal 2002 compared to $20.8 million for
fiscal 2001. The effective income tax rate was 42.1% for fiscal 2002 compared to
42.4% for fiscal 2001.Comparison of Financial Condition at March 31, 2002 and March 31, 2001
Total assets increased $156.5 million from $2.89 billion at March 31, 2001 to
$3.04 billion at March 31, 2002. Reflecting the Company's strategy of
increasing the loan orientation of its asset base, loans receivable, net
increased $209.4 million from $2.29 billion at March 31, 2001 to $2.49 billion
at March 31, 2002, while securities decreased $91.2 million from $445.1 million
at March 31, 2001 to $353.9 million at March 2002. Cash and cash equivalents
increased $54.4 million from $51.5 million at March 31, 2001 to $106.0 million
at March 31, 2002 as a result of very strong deposit inflows during fiscal 2002,
particularly during the quarter ended March 31, 2002.
Total liabilities increased $130.4 million from $2.63 billion March 31, 2001 to
$2.76 billion at March 31, 2002. Total deposits increased $147.7 million from
$2.02 billion at March 31, 2001 to $2.17 billion at March 31, 2002. The Bank's
emphasis on growing the lower cost, more stable segments of its deposit
portfolio is reflected in a core deposit increase of $280.5 million from $803.9
million or 40 percent of total deposits at March 31, 2001 to $1.08 billion or 50
percent of total deposits at March 31, 2002. FHLB advances decreased $17.0
million from $575.0 million at March 31, 2001 to $558.0 million at March 31,
2002.
Total stockholders' equity increased $26.1 million from $258.0 million at
March 31, 2001 to $284.1 million at March 31, 2002. The $26.1 million increase
is comprised principally of a $23.4 million increase in retained earnings,
substantially restricted, a $3.6 million increase in additional paid-in-capital,
a $3.2 million decrease in unearned stock-based compensation and a $4.2 million
increase in accumulated other comprehensive loss.
The $23.4 million increase in retained earnings, substantially restricted
reflects net earnings of $35.4 million for fiscal 2002 partially offset by: 1)
$8.4 million attributable to the amount paid to repurchase 510,100 shares of
common stock in excess of the original issuance price of the stock. The 510,100
shares of common stock were repurchased at a weighted average price of $26.53
per share; and 2) $3.5 million of cash dividends declared during fiscal 2002.
Cash dividends of $.06 per share were declared and paid during the first two
quarters of fiscal 2002. The cash dividend was increased to $.08 per share for
the last two quarters of the fiscal year.

56

---

The
$3.6 million increase in additional paid-in-capital was attributable to: 1) a
$6.2 million increase representing the amounts paid by directors and officers to
exercise stock options granted to them under the 1996 Incentive Plan along with
the tax benefit to the Company arising therefrom. During fiscal 2002 options to
purchase 374,547 shares of the Company's common stock were exercised at a
weighted average exercise price of $26.52 per share; 2) a $2.5 million increase
attributable to amortization of shares under the 1996 Incentive Plan; and 3) a
$5.1 million reduction representing the removal from additional paid in capital
of the March 1996 original purchase price of the shares that were repurchased
during fiscal 2002.
The $3.2 million decrease in unearned stock-based compensation was attributable
to the amortization of shares under the Company's ESOP ($1.8 million) and 1996
Incentive Plan ($1.4 million).
The $4.2 million increase in other comprehensive loss was comprised principally
of a $5.1 million minimum pension liability adjustment arising from the
shortfall of $1.7 million between frozen defined benefit pension plan assets and
liabilities as of March 31, 2002 compared to a surplus of $3.9 million as of
March 31, 2001. The unrealized loss, net of tax on the Company's portfolio of
securities available for sale decreased from $2.2 million at March 31, 2001 to
$1.3 million at March31,
2002.Comparison of Operating Results for the Years Ended March 31, 2001 and March 31,
2000GeneralNet earnings
increased from $26.6 million for fiscal 2000 to $28.3 million for fiscal 2001.
Fiscal 2000 earnings include a $1.5 million pre-tax gain on sale of a branch and
a $995,000 impairment writedown of a marketable equity security. Additionally,
gain (loss) on trading securities, net went from a $1.7 million gain for fiscal
2000 to a $1.5 million loss for fiscal 2001. Excluding the gain on branch sale,
impairment writedown and trading activities, net earnings would have increased
from $25.4 million for fiscal 2000 to $29.1 million for fiscal 2001. The
improvement in operating results between fiscal 2000 and fiscal 2001 was
attributable to an increase in net interest income from $88.4 million for fiscal
2000 to $96.5 million for fiscal 2001 arising from expansion of effective
interest spread coupled with growth in average interest-earning assets.Interest
IncomeInterest income increased $25.0 million or 12% from $215.0 million for fiscal
2000 to $239.9 million for fiscal 2001. The increase was attributable
principally to a 73 basis point increase in yield on average interest-earning
assets from 7.50% for fiscal 2000 to 8.23% for fiscal 2001. Average
interest-earning assets increased $52.2 million from $2.86 billion for fiscal
2000 to $2.92 billion for fiscal 2001.
The average yield on loans receivable, net increased 67 basis points from 7.92%
for fiscal 2000 to 8.59% for fiscal 2001. The increase in average yield on loans
receivable, net reflects the Bank's continuing emphasis on the Four-Cs as well
as the impact of a generally higher interest rate environment during fiscal
2001. The Four-Cs increased $151.5 million during fiscal 2001 to $888.0 million
or 39 percent of loans receivable, net at March 31, 2001 from $736.5 million or
32 percent of loans receivable, net at March 31, 2000. Originations of the
Four-Cs totaled $969.3 million or 92 percent of total originations for fiscal
2001 compared to $833.0 million or 66 percent of total originations for fiscal
2000.
The average yield on securities, increased from 6.39% for fiscal 2000 to 6.82%
for fiscal 2001. The increase in average yield on securities was attributable
primarily to the increase in the general level of interest rates. The one-year
CMT index averaged 5.71% during fiscal 2001 compared to 5.45% during fiscal
2000. One month LIBOR averaged 6.28% during fiscal 2001 compared to 5.47% during
fiscal 2000.

57

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The increase
in average interest-earnings assets between fiscal 2000 and fiscal 2001 was
comprised principally of a $161.4 million increase in the average balance of
loans receivable, net from $2.16 billion to $2.32 billion partially offset by a
$108.9 million decrease in the average balance of securities from $622.4 million
to $513.5 million reflecting the Company's continuing strategy of reducing
wholesale leverage.Interest ExpenseInterest
expense increased $16.9 million or 13% from $126.5 million for fiscal 2000 to
$143.5 million for fiscal 2001. The increase was attributable primarily to a 61
basis point increase in the average cost of interest-bearing liabilities from
4.69% for fiscal 2000 to 5.30% for fiscal 2001. The average cost of deposits
increased from 4.27% for fiscal 2000 to 4.91% for fiscal 2001. The average cost
of CDs increased 88 basis points from 5.19% for fiscal 2000 to 6.07% for fiscal
2001 and the average cost of core deposits increased 16 basis points from 2.94%
for fiscal 2000 to 3.10% for fiscal 2001. The average cost of FHLB advances and
other borrowings was 6.26% for fiscal 2001 compared to 5.62% for fiscal 2000.
The increases in funding costs for deposits and FHLB advances and other
borrowings reflect the increase in the general level of interest rates between
fiscal 2000 and fiscal 2001.
Average interest-bearing liabilities increased $10.9 million from $2.70 billion
for fiscal 2000 to $2.71 billion for fiscal 2001. The increase in average
interest-bearing liabilities was comprised of a $76.2 million increase in the
average balance of total deposits from $1.86 billion for fiscal 2000 to $1.93
billion for fiscal 2001 partially offset by a $65.3 million decrease in the
average balance of FHLB advances and other borrowings from $840.1 million for
fiscal 2000 to $774.8 million for fiscal 2001.Provision for Loan Losses
Provision for loan losses was $5.0 million for fiscal 2001 compared to $4.0
million for fiscal 2000. The increase in the provision for loan losses between
fiscal 2001 and fiscal 2000 was attributable in part, to an increase in the
level of non-accrual loans. The Bank's emphasis on the Four-Cs has also
resulted in a change in the overall risk profile of the Bank's loan portfolio.
Non-accrual loans were $11.5 million or 0.45% of gross loans receivable at March
31, 2001 compared to $5.4 million or 0.21% of gross loans receivable at March
31, 2000. The allowance for loan losses was $31.0 million or 1.22% of gross
loans receivable at March 31, 2001 compared to $27.8 million or 1.09% of gross
loans receivable at March 31, 2000.Non-Interest Income
Non-interest income was $14.3 million for fiscal 2001 compared to $17.6 million
for fiscal 2000. Non-interest income excluding trading securities portfolio
activity, the fiscal 2000 gain on branch sale and fiscal 2000 marketable equity
security impairment writedown increased $331,000 or 2% between fiscal 2000 and
fiscal 2001 to $15.8 million. Deposit and related fees were $9.0 million for
fiscal 2001 compared to $9.1 million for fiscal 2000. The $167,000 decrease in
deposit and related fees was attributable to a $356,000 decrease in commissions
earned from sales of non-deposit investment (NDI) products from $1.4 million for
fiscal 2000 to $1.0 million for fiscal 2001. NDI products consist primarily of
third-party annuities and mutual funds. Trust fees were $1.8 million for fiscal
2001 compared to $2.1 million for fiscal 2000. Trust fees for fiscal 2001
include a $291,000 non-recurring downward adjustment of fees. Gain (loss) on
sales of assets was $557,000 for fiscal 2001 compared to ($1.0 million) for
fiscal 2000. The $1.0 million loss for fiscal 2000 includes the $995,000
writedown of a marketable equity security deemed to be other than temporarily
impaired. Loan and servicing fees of $3.8 million were comparable between fiscal
2000 and 2001. Higher volumes of loan payoffs during fiscal 2001 increased loan
fee income in an amount comparable to the $445,000 prepayment fee received on a
commercial loan during fiscal 2000. The net loss from trading activity was $1.5
million for fiscal 2001 compared to a net gain of $1.7 million for fiscal 2000
reflecting the dramatic change in the direction of the equity markets between
the two periods.

58

---

Non-Interest
Expense
Non-interest expense increased from $55.2 million for fiscal 2000 to $56.7
million for fiscal 2001. General and administrative expense increased $1.6
million or 3% from $55.5 million or 1.87% of average assets for fiscal 2000 to
$57.1 million or 1.92% of average assets for fiscal 2001. Compensation and
benefits expense increased $857,000 from $29.5 million for fiscal 2000 to $30.3
million for fiscal 2001. Included in compensation and benefits expense for
fiscal 2001 and fiscal 2000, respectively are non-cash charges of $5.8 million
and $6.0 million associated with the Bank's ESOP and 1996 Incentive Plan. The
increase in marketing and professional services expense from $5.1 million for
fiscal 2000 to $6.3 million for fiscal 2001 was attributable, in part, to fiscal
2001 expenditures of $707,000 associated with increased marketing efforts
directed toward the Hispanic segments of the communities served by the Bank.
Hispanic marketing expenditures for fiscal 2002 are expected to equal or exceed
the fiscal 2001 level. The $595,000 decrease in other non-interest expense from
$9.2 million for fiscal 2000 to $8.6 million for fiscal 2001 was due primarily
to office supplies expense.Income Taxes
Income Taxes were $20.8 million for fiscal 2001 compared to $20.2 million for
fiscal 2000. The effective income tax rate was 42.4% for fiscal 2001 compared to
43.2% for fiscal 2000.Liquidity and Capital ResourcesThe 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. Effective July 11, 2001 the OTS
adopted a rule eliminating the statutory liquidity requirement. In its place,
the OTS adopted a policy, consistent with that of the other Federal banking
regulatory agencies, that liquidity be maintained at a level which provides for
safe and sound banking practices and financial flexibility. The Bank's average
regulatory liquidity ratios were 5.05%, 5.09% and 5.04% for the years ended
March 31, 2002, 2001 and 2000, respectively. Management's strategy is 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 has invested in callable debt issued
by Federal agencies of the U.S. government when the yields thereon to call
date(s) and maturity exceeded 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 $50.9 million, $54.0 million
and $23.7 million for the years ended March 31, 2002, 2001 and 2000,
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 $1.57 billion, $1.05 billion and $902.9 million
for the years ended March 31, 2002, 2001 and 2000, respectively. Disbursements
on loans originated and purchased, excluding loans originated for sale, were
$1.85 billion, $1.07 billion and $1.27 billion for the years ended March 31,
2002, 2001 and 2000, respectively. Disbursements for purchases of
mortgage-backed and other investment securities and collateralized mortgage
obligations were $108.6 million, $5.0 million and $30.0 million for the years
ended March 31, 2002, 2001 and 2000, respectively. Proceeds from the maturation
of investment securities and paydowns of MBS and CMO were $187.9 million, $122.9
million and $162.6 million for the years ended March 31, 2002, 2001 and 2000,
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 $147.7 million, $114.7 million
and $63.0 million for the years ended March 31, 2002, 2001 and 2000,
respectively. The net increases (decreases) in FHLB advances and other
borrowings were ($17.0 million), ($309.0 million) and $70.0 million for the
years ended March 31, 2002, 2001 and 2000, respectively.

59

---

At March 31, 2002, the Bank exceeded all of its
regulatory capital requirements with a tangible capital level of $260.8 million,
or 8.63% of adjusted total assets, which is above the required level of $45.3
million, or 1.50%; core capital of $260.8 million, or 8.63% of adjusted total
assets, which is above the required level of $120.9 million, or 4.00% and total
risk-based capital of $288.8 million, or 12.87% of risk-weighted assets, which
is above the required level of $179.5 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, 2002,
cash and short-term investments totaled $106.0 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,
2002, the Bank had $558.0 million of FHLB advances outstanding. Based upon
pledged collateral in place, the Company had available borrowing capacity of
$283.9 million as of March 31, 2002. No collateral was pledged under reverse
repurchase agreements at March 31, 2002. Other sources of liquidity include
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, 2002 the Bank had outstanding commitments to
originate and purchase loans of $61.0 million and zero, respectively, compared
to $124.6 million and zero, respectively, at March 31, 2001. The Company
anticipates that it will have sufficient funds available to meet these
commitments. At March 31, 2002 and 2001 the Company had no outstanding
commitments to purchase MBS, CMO or other investment securities.. See "Item
1 - Description of Business - General." Certificate accounts that are
scheduled to mature in less than one year from March 31, 2002 totaled $948.7
million. 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.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.

60

---

Item 7A. Quantitative and Qualitative Disclosures About Market
Risk

61

---

Item 8. Financial Statements and Supplementary Data



Index to Financial Statements
      PAGEConsolidated Balance Sheets - March 31, 2002
      and 2001
    63Consolidated Statements of Earnings - Years
      ended March 31, 2002, 2001 and 2000
    64Consolidated Statements of Comprehensive
      Earnings - Years ended March 31, 2002, 2001 and 2000
    65Consolidated Statements of Stockholders'
      Equity - Years ended March 31, 2002, 2001 and 2000
    66Consolidated Statements of Cash Flows - Years
      ended March 31, 2002, 2001 and 2000
    67Notes to Consolidated Financial Statements
    69Independent Auditors' Report
    107


62

---

PFF BANCORP, INC. AND SUBSIDIARYConsolidated Balance Sheets
(Dollars in thousands, except per share data)

March 31,2002
      2001AssetsCash and equivalents
      $ 105,965
      51,526Loans held-for-sale
      106
      583Investment securities held-to-maturity (estimated fair value of $703
        and $772 at March 31, 2002 and 2001)
      703
      702Investment securities available-for-sale, at fair value
      93,820
      59,137Mortgage-backed securities available-for-sale, at fair value
      196,580
      302,964Collateralized mortgage obligations available-for-sale, at fair value
      62,778
      82,315Trading securities, at fair value
      2,334
      2,375Loans receivable, net
      2,494,667
      2,285,307Federal Home Loan Bank (FHLB) stock, at cost
      35,133
      46,121Accrued interest receivable
      15,653
      18,466Real estate acquired through foreclosure, net
      507
      351Property and equipment, net
      21,575
      22,946Prepaid expenses and other assets
      13,111
      13,638Total assets
      $ 3,042,932
      2,886,431Liabilities and Stockholders' EquityLiabilities:Deposits
      $ 2,168,964
      2,021,261FHLB advances and other borrowings
      558,000
      575,000Deferred income taxes payable
      6,849
      7,849Accrued expenses and other liabilities
      25,042
      24,323Total liabilities
      2,758,855
      2,628,433Commitments and contingencies
      -
      -Stockholders' equity :Preferred stock, $.01 par value. Authorized 2,000,000 shares; none
        issued
      -
      -Common stock, $.01 par value. Authorized 59,000,000 shares; issued
        20,412,351 and 20,082,094; outstanding 13,058,784 and 13,238,627 at
        March 31, 2002 and 2001, respectively
      203
      200Additional paid-in capital
      135,540
      131,919Retained earnings, substantially restricted
      161,123
      137,703Unearned stock-based compensation
      (5,750)
      (8,953)Treasury stock (7,353,567 and 6,843,467 at March 31, 2002 and 2001,
        respectively)
      (73)
      (68)Accumulated other comprehensive losses
      (6,966)
      (2,803)Total stockholders' equity
      284,077
      257,998Total liabilities and stockholders' equity
      $ 3,042,932
      2,886,431See accompanying
        notes to consolidated financial statements.


63

---

PFF BANCORP, INC. AND SUBSIDIARYConsolidated Statements of Earnings
(Dollars in thousands, except per share data)

Year Ended March 31,2002
      2001
      2000Interest income:Mortgage loans
      $ 162,392
      171,187
      148,345Non-mortgage loans
      25,739
      28,324
      22,897Mortgage-backed securities
      15,610
      22,274
      27,910Collateralized mortgage obligations
      3,214
      6,393
      5,893Investment securities and deposits
      8,776
      11,771
      9,907Total interest income
      215,731
      239,949
      214,952Interest on deposits
      76,015
      94,989
      79,320Interest on borrowings
      28,609
      48,482
      47,219Total interest expense
      104,624
      143,471
      126,539Net interest income
      111,107
      96,478
      88,413Provision for loan losses
      5,000
      5,004
      4,000Net interest income after provision for loan losses
      106,107
      91,474
      84,413Non-interest income:Deposit and related fees
      9,427
      8,969
      9,136Trust fees
      2,086
      1,846
      2,098Loan and servicing fees
      4,972
      3,854
      3,847Gain (loss) on sale of assets, net
      384
      557
      (1,017)Gain (loss) on trading securities, net
      (107)
      (1,490)
      1,677Gain on sale of branch
      -
      -
      1,468Other non-interest income
      281
      583
      419Total non-interest income
      17,043
      14,319
      17,628Non-interest expense:General and administrative:Compensation and benefits
      34,319
      30,332
      29,475Occupancy and equipment
      11,905
      11,792
      11,690Marketing and professional services
      6,969
      6,310
      5,114Other non-interest expense
      8,934
      8,632
      9,227Total general and administrative
      62,127
      57,066
      55,506Foreclosed real estate operations, net
      (102)
      (324)
      (278)Total non-interest expense
      62,025
      56,742
      55,228Earnings before income taxes
      61,125
      49,051
      46,813Income taxes
      25,761
      20,791
      20,215Net earnings
      $ 35,364
      28,260
      26,598Basic earnings per share (as restated) (Note 24)
      $ 2.84
      2.32
      2.13Weighted average shares outstanding for basic
        earnings per share (as restated) (Note 24)
      12,455,711
      12,182,855
      12,492,643Diluted earnings per share (as restated) (Note 24)
      $ 2.74
      2.24
      2.05Weighted average shares outstanding for diluted
        earnings per share (as restated) (Note 24)
      12,919,745
      12,640,281
      13,002,791See accompanying
        notes to consolidated financial statements.


64

---

PFF BANCORP, INC. AND SUBSIDIARY

|                                                                      | For the Year Ended
      March 31,
|--------------------------------------------------------------------- | ----------------------------------
|                                                                      | 2002                              
|                                                                      |                                   
|Net earnings                                                          | $ 35,364                          
|                                                                      |                                   
|Other comprehensive earnings (losses), net of income taxes:           |                                   
|Unrealized gains (losses) on securities available-for-sale:           |                                   
|Investment securities available-for-sale, at fair value               | (261)                             
|Collateralized mortgage obligations available-for-sale, at fair value | 989                               
|Mortgage-backed securities available-for-sale, at fair value          | 459                               
|Reclassification of realized gains (losses) included in earnings      | (271)                             
|                                                                      | 916                               
|Minimum pension liability adjustment                                  | (5,079)                           
|Other comprehensive gains (losses)                                    | (4,163)                           
|Comprehensive earnings                                                | $ 31,201                          
|                                                                      |                                   
|See
      accompanying notes to consolidated financial statements.   

65

---

PFF BANCORP, INC. AND SUBSIDIARYConsolidated Statements of Stockholders' Equity
(Dollars in thousands, except per share data)

|                                                                        | Number of
      Shares | Common
      Stock | Additional
      Paid-in
      Capital | Retained Earnings Substantially Restricted | Unearned
      Stock-based
      Compensation | Treasury
      Stock | Accumulated Other Comprehensive Losses | Total   
|----------------------------------------------------------------------- | ---------------------- | ------------------ | -------------------------------------- | ------------------------------------------ | --------------------------------------------- | -------------------- | -------------------------------------- | --------
|Balance at March 31, 1999                                               | 15,445,481             | $ 199              | $ 150,612                              | $ 110,163                                  | $ (17,169)                                    | $ (45)               | $ (1,095)                              | $242,665
|                                                                        |                        |                    |                                        |                                            |                                               |                      |                                        |         
|Net earnings                                                            | -                      | -                  | -                                      | 26,598                                     | -                                             | -                    | -                                      | 26,598  
|Purchase of treasury stock                                              | (2,200,000)            | -                  | (21,978)                               | (20,968)                                   | -                                             | (22)                 | -                                      | (42,968)
|Change in minimum pension liability                                     | -                      | -                  | -                                      | -                                          | -                                             | -                    | (582)                                  | (582)   
|Amortization of shares under stock-based
      compensation plans       | -                      | -                  | 2,163                                  | -                                          | 3,866                                         | -                    | -                                      | 6,029   
|Stock options exercised                                                 | 69,024                 | 1                  | 573                                    | -                                          | -                                             | -                    | -                                      | 574     
|Dividends ($0.24 per share for 2000)                                    | -                      | -                  | -                                      | (2,272)                                    | -                                             | -                    | -                                      | (2,272) 
|Changes in unrealized gains on
      securities available-for-sale, net | -                      | -                  | -                                      | -                                          | -                                             | -                    | (8,213)                                | (8,213) 
|Balance at March 31, 2000                                               | 13,314,505             | 200                | 131,370                                | 113,521                                    | (13,303)                                      | (67)                 | (9,890)                                | 221,831 
|                                                                        |                        |                    |                                        |                                            |                                               |                      |                                        |         
|Net earnings                                                            | -                      | -                  | -                                      | 28,260                                     | -                                             | -                    | -                                      | 28,260  
|Purchase of treasury stock                                              | (145,000)              | -                  | (1,449)                                | (1,117)                                    | -                                             | (1)                  | -                                      | (2,567) 
|Amortization of shares under stock-based
      compensation plans       | -                      | -                  | 1,403                                  | -                                          | 4,350                                         | -                    | -                                      | 5,753   
|Stock options exercised                                                 | 69,122                 | -                  | 595                                    | -                                          | -                                             | -                    | -                                      | 595     
|Dividends ($0.24 per share for 2001)                                    | -                      | -                  | -                                      | (2,961)                                    | -                                             | -                    | -                                      | (2,961) 
|Changes in unrealized gains on
      securities available-for-sale, net | -                      | -                  | -                                      | -                                          | -                                             | -                    | 7,087                                  | 7,087   
|Balance at March 31, 2001                                               | 13,238,627             | 200                | 131,919                                | 137,703                                    | (8,953)                                       | (68)                 | (2,803)                                | 257,998 
|                                                                        |                        |                    |                                        |                                            |                                               |                      |                                        |         
|Net earnings                                                            | -                      | -                  | -                                      | 35,364                                     | -                                             | -                    | -                                      | 35,364  
|Purchase of treasury stock                                              | (510,100)              | -                  | (5,096)                                | (8,431)                                    | -                                             | (5)                  | -                                      | (13,532)
|Change in minimum pension liability                                     | -                      | -                  | -                                      | -                                          | -                                             | -                    | (5,079)                                | (5,079) 
|Amortization of shares under stock-based
      compensation plans       | -                      | -                  | 2,456                                  | -                                          | 3,203                                         | -                    | -                                      | 5,659   
|Stock options exercised                                                 | 330,257                | 3                  | 3,777                                  | -                                          | -                                             | -                    | -                                      | 3,780   
|Dividends ($0.28 per share for 2002)                                    | -                      | -                  | -                                      | (3,513)                                    | -                                             | -                    | -                                      | (3,513) 
|Changes in unrealized gains on
      securities available-for-sale, net | -                      | -                  | -                                      | -                                          | -                                             | -                    | 916                                    | 916     
|Tax benefit from stock options                                          | -                      | -                  | 2,484                                  | -                                          | -                                             | -                    | -                                      | 2,484   
|Balance at March 31, 2002                                               | 13,058,784             | $ 203              | $ 135,540                              | $ 161,123                                  | $ (5,750)                                     | $ (73)               | $ (6,966)                              | $284,077
|                                                                        |                        |                    |                                        |                                            |                                               |                      |                                        |         
|See accompanying notes to consolidated financial
      statements.      |                        |                    |                                       

66

---

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

Year Ended March 31,2002
      2001
      2000Cash flows from operating activities:Net earnings
      $ 35,364
      28,260
      26,598Adjustments to reconcile net earnings to net cash provided by
        operating activities:Amortization of premiums net of discount accretion on loans and
        securities
      824
      1,192
      2,089Amortization of deferred loan origination fees
      2,955
      (276)
      190Loan fees collected
      343
      237
      (2,219)Dividends on FHLB stock
      (2,358)
      (3,284)
      (2,441)Provisions for losses on:Loans
      5,000
      5,004
      4,000Real estate
      -
      49
      -Gains on sales of loans, mortgage-backed securities
        available-for-sale, real estate and property and equipment
      (625)
      (646)
      (1,679)Proceeds from sale of trading securities
      -
      466
      1,700(Gains) losses on trading securities
      107
      1,490
      (1,677)Depreciation and amortization of property and equipment
      3,006
      3,396
      3,608Loans originated for sale
      (9,685)
      (16,341)
      (32,799)Proceeds from sale of loans held-for-sale
      10,497
      23,439
      25,673Amortization of unearned stock-based compensation
      5,659
      5,753
      6,029Increase (decrease) in accrued expenses and other liabilities
      (3,565)
      5,640
      (14,119)(Increase) decrease in:Accrued interest receivable
      2,813
      118
      (1,466)Prepaid expenses and other assets
      527
      (471)
      10,173Net cash provided by operating activities
      50,862
      54,026
      23,660Cash flows from investing activities:Loans originated for investment
      (1,424,136)
      (1,033,194)
      (1,235,525)Increase in construction loans in process
      50,684
      38,891
      31,614Purchases of loans held-for-investment
      (415,287)
      (18,892)
      (1,560)Principal payments on loans
      1,573,443
      1,049,029
      902,923Principal payments on mortgage-backed securities held-to-maturity
      -
      -
      552Principal payments on mortgage-backed securities available-for-sale
      127,387
      83,794
      137,246Principal payments on collateralized mortgage obligations
        available-for-sale
      20,601
      4,103
      15,895Purchases of investment securities available-for-sale
      (83,395)
      (5,000)
      (28,066)Purchases of FHLB stock
      -
      -
      (1,974)


67

---

PFF BANCORP, INC. AND SUBSIDIARYConsolidated Statements of Cash Flows, Continued
(Dollars in thousands)

Year Ended March 31,2002
      2001
      2000Redemption of FHLB stock
      $ 13,346
      1,713
      10,188Purchases of mortgage-backed securities available-for-sale
      (25,236)
      -
      -Proceeds from maturities of investment securities available-for-sale
      39,881
      35,000
      8,886Proceeds from sale of investment securities available-for-sale
      8,525
      1,951
      10,626Proceeds from sale of real estate
      1,977
      2,993
      8,515Investment in or proceeds from real estate held for investment
      -
      5,155
      1,443Purchases of property and equipment
      (1,651)
      (3,968)
      (2,345)Proceeds from sale of property and equipment
      -
      -
      933Net cash provided by (used in) investing activities
      (113,861)
      161,575
      (140,649)Cash flows from financing activities:Proceeds from FHLB advances and other borrowings
      561,400
      494,800
      884,600Repayment of FHLB advances and other borrowings
      (578,400)
      (803,800)
      (814,600)Net change in deposits
      147,703
      114,727
      62,996Proceeds from exercise of stock options
      3,780
      595
      574Cash dividends
      (3,513)
      (2,961)
      (2,272)Purchase of treasury stock
      (13,532)
      (2,567)
      (42,968)Net cash provided by (used in) financing activities
      117,438
      (199,206)
      88,330Net increase (decrease) in cash and cash equivalents
      54,439
      16,395
      (28,659)Cash and cash equivalents, beginning of year
      51,526
      35,131
      63,790Cash and cash equivalents, end of year
      $ 105,965
      51,526
      35,131Supplemental information:Interest paid, including interest credited
      $ 107,111
      142,689
      128,402Income taxes paid
      25,078
      19,200
      17,000Loans to facilitate
      256
      -
      -Non-cash investing and financing activities:Net transfers from loans receivable to real estate acquired through
        foreclosure
      2,331
      2,011
      5,793See accompanying
        notes to consolidated financial statements.


68

---

PFF BANCORP, INC. AND SUBSIDIARYNotes 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
accounting principles generally accepted in the United States of America. 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 $37,638 and
$37,886 and short-term deposits in banks of $68,327 and $13,640 at March 31,
2002 and 2001, 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.

69

---

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

Held-to-MaturityInvestment 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-SaleInvestment 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.TradingTrading 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 gains and losses on trading securities are included in
earnings.Loans Held for SaleLoans 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 LoansGains 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
("MSR") 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 MSR and the mortgage loans without the MSR based upon
their relative fair values. The MSR are included in other assets and as a
component of the gain on the sale of loans. The MSR 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.

70

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

The MSR are periodically reviewed for
impairment based upon their fair value. The fair value of the MSR, 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.Loans ReceivableLoans receivable are stated at unpaid principal balances less the
undisbursed portion of construction loans and allowances for loan losses, net of
deferred loan origination fees and discount/premium on loans. 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 CostsLoan 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 EstateValuation 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 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.

71

---

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

Management considers loans with a principal
balance of $500 or more, including loans to one borrower that exceed $1,000 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. Substantially all loans measured for
impairment are measured using the fair value of the collateral. The amount by
which the recorded investment in the loan exceeds the measure of the impaired
loan is recognized by recording a valuation 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 have a specific
loan loss allowance or are either placed on non-accrual status or 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 non-accrual 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 non-accrual 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 ForeclosureReal 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 or fair value less estimated
cost to sell. 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 EquipmentLand 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.

72

---

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

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

73

---

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

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.

74

---

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

In
August, 2001 the FASB issued Statement of Financial Accounting Standards No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets" which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. This Statement supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," and the accounting and reporting provisions of APB Opinion No. 30,
"Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of a business. This
Statement also eliminates the exception to consolidation for a subsidiary for
which control is likely to be temporary. The provisions of this Statement are
effective for financial statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years. The provisions
of this Statement generally are to be applied prospectively. It is anticipated
that the financial impact of this Statement will not have a material effect on
the Company.

75

---

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

(2) Investment Securities

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

March 31, 2002Amortized
        Cost
      Gross
        Unrealized
        Gains
      Gross
        Unrealized
        Losses
      Estimated
        Fair
        ValueHeld-to-maturity:Bonds, notes and debentures at amortized cost:U.S. Government and federal agency obligations
      $ 703
      -
      -
      703Total
      $ 703
      -
      -
      703Available-for-sale:Corporate debt securities
      $ 61,301
      44
      (6,109)
      55,236Equity securities:Direct
      2,600
      2,840
      -
      5,440Mutual funds
      32,015
      1,134
      (5)
      33,144Total Equity securities
      34,615
      3,974
      (5)
      38,584Total
      $ 95,916
      4,018
      (6,114)
      93,820


During the years ended March 31, 2002, 2001 and 2000, the
Company realized net gains (losses) on sales of investment securities
available-for-sale of $25, ($156) and ($279), respectively.

|                                               | March 31, 2001      
|---------------------------------------------- | --------------------
|                                               | Amortized
      Cost
|Held-to-maturity:                              |                     
|Bonds, notes and debentures at amortized cost: |                     
|U.S. Government and federal agency obligations | $ 702               
|Total                                          | $ 702               
|Available-for-sale:                            |                     
|Corporate debt securities                      | $ 56,194            
|Equity securities:                             |                     
|Direct                                         | 2,600               
|Mutual funds                                   | 2,000               
|Total Equity securities                        | 4,600               
|Total                                          | $ 60,794            

76

---

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

|                        | Held-to-maturity     | Available-
      for-sale       
|----------------------- | -------------------- | --------------------------------
|Maturity                | Amortized
      Cost | Estimated
      Fair
      Value
|                        |                      |                                 
|Within one year         | $ -                  | -                               
|After one to five years | -                    | -                               
|After five to ten years | 703                  | 703                             
|After ten years         | -                    | -                               
|Total                   | $ 703                | 703                             

(3) Mortgage-Backed Securities

March 31, 2002Amortized
        Cost
      Gross
        Unrealized
        Gains
      Gross
        Unrealized
        Losses
      Estimated
        Fair
        ValueAvailable-for-sale:GNMA
      $ 21,676
      140
      (1,366)
      20,450FHLMC
      45,505
      427
      (215)
      45,717FNMA
      128,936
      1,777
      (300)
      130,413Total
      $ 196,117
      2,344
      (1,881)
      196,580




March 31, 2001Amortized
        Cost
      Gross
        Unrealized
        Gains
      Gross
        Unrealized
        Losses
      Estimated
        Fair
        ValueAvailable-for-sale:GNMA
      $ 12,104
      117
      -
      12,221FHLMC
      84,222
      170
      (541)
      83,851FNMA
      206,973
      979
      (1,060)
      206,892Total
      $ 303,299
      1,266
      (1,601)
      302,964


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

77

---

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

(4) Collateralized Mortgage Obligations

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

March 31, 2002Amortized
        Cost
      Gross
        Unrealized
        Gains
      Gross
        Unrealized
        Losses
      Estimated
        Fair
        ValueAvailable-for-sale:FHLMC
      $ 44,239
      193
      (504)
      43,928FNMA
      19,121
      -
      (271)
      18,850Total
      $ 63,360
      193
      (775)
      62,778






|                    | March 31, 2001      
|------------------- | --------------------
|                    | Amortized
      Cost
|Available-for-sale: |                     
|FHLMC               | $ 58,430            
|FNMA                | 25,701              
|Total               | $ 84,131            

(5)

|                                           | March 31,  
|------------------------------------------ | -----------
|                                           | 2002       
|                                           |            
|Mortgage loans:                            |            
|Residential:                               |            
|One-to-four family                         | $ 1,402,871
|Multi-family                               | 77,964     
|Commercial real estate                     | 309,335    
|Construction and land                      | 711,637    
|Total mortgage loans                       | 2,501,807  
|                                           |            
|Commercial                                 | 155,589    
|Consumer                                   | 158,475    
|Total loans                                | 2,815,871  
|Less:                                      |            
|Undisbursed portion of construction loans  | (288,231)  
|Net (discount) premium on loans            | (202)      
|Net deferred loan origination fees (costs) | (1,412)    
|Allowance for loan losses (note 7)         | (31,359)   
|Total loans receivable, net                | $ 2,494,667
|Weighted average yield                     | 7.86%      

78

---

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

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

|                  | March 31,
|----------------- | ---------
|                  | 2002     
|                  |          
|Beginning balance | $ 2,249  
|Additions         | 12       
|Repayments        | (58)     
|Ending balance    | $ 2,203  

The following table presents impaired loans with specific allowances and the
amount of such allowances and impaired loans without specific allowances.

|                   | March 31, 2002                
|------------------ | ------------------------------
|                   | Loans with Specific Allowances
|Net carrying value | $ 36,569                      
|Specific allowance | 2,935                         
|Net balance        | $ 33,634                      
|                   |                               
|                   | March 31, 2001                
|                   | Loans with Specific Allowances
|Net carrying value | $ 14,761                      
|Specific allowance | 4,792                         
|Net balance        | $ 9,969                       

The average recorded investment in impaired loans totaled
$46,892 in 2002 and $23,950 in 2001. During 2002, total interest recognized on
the impaired loan portfolio was $1,855, compared to $1,818 in 2001 and $290 in
2000. Income recorded utilizing the cash basis method of accounting was zero for
fiscal 2002, 2001 and 2000.
The aggregate amount of non-accrual loans receivable that are contractually past
due 90 days or more as to principal or interest, in the foreclosure process,
restructured, or upon which interest collection is doubtful were $4,494 and
$11,481 at March 31, 2002 and 2001, respectively. At March 31, 2002 the Company
had no troubled debt restructurings.
Interest due on non-accrual loans, but excluded from interest income, was
approximately $330 for 2002, $733 for 2001 and $466 for 2000.

79

---

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

(6) Real Estate

Real estate acquired through foreclosure is summarized as
follows:

|                                           | March 31,
|------------------------------------------ | ---------
|                                           | 2002     
|                                           |          
|Properties acquired in settlement of loans | $ 507    
|Allowance for losses (note 7)              | -        
|Total                                      | $ 507    

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

|                                                   | Year Ended March 31,
|-------------------------------------------------- | --------------------
|                                                   | 2002                
|                                                   |                     
|(Gain) loss on sale of foreclosed real estate, net | $ (280)             
|Real estate (income) expense                       | 178                 
|Provision for losses on real estate                | -                   
|Total                                              | $ (102)             

80

---

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

(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:

|                                        | Year Ended March 31,
|--------------------------------------- | --------------------
|                                        | 2002                
|                                        |                     
|Loans receivable:                       |                     
|Beginning balance                       | $ 31,022            
|Provision                               | 5,000               
|Charge-offs                             | (4,771)             
|Recoveries                              | 108                 
|Ending balance                          | 31,359              
|                                        |                     
|Foreclosed real estate:                 |                     
|Beginning balance                       | 49                  
|Provision                               | -                   
|Charge-offs                             | (49)                
|Ending balance                          | -                   
|                                        |                     
|Total loans receivable and real estate: |                     
|Beginning balance                       | 31,071              
|Provision                               | 5,000               
|Charge-offs                             | (4,820)             
|Recoveries                              | 108                 
|Ending balance                          | $ 31,359            

(8) Accrued Interest Receivable

Accrued interest receivable is summarized as follows:

|                                    | March 31,
|----------------------------------- | ---------
|                                    | 2002     
|                                    |          
|Investment securities               | $ 456    
|Mortgage-backed securities          | 1,235    
|Collateralized mortgage obligations | 175      
|Loans receivable                    | 13,787   
|Total                               | $ 15,653 

81

---

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

(9) Property and Equipment, net

Property and equipment, net is summarized as follows:

|                                                | March 31, |         
|----------------------------------------------- | --------- | --------
|                                                | 2002      | 2001    
|                                                |           |         
|Land                                            | $ 5,945   | 5,945   
|Buildings and improvements                      | 22,541    | 21,815  
|Leasehold improvements                          | 2,277     | 2,121   
|Furniture, fixtures and equipment               | 28,389    | 26,939  
|Automobiles                                     | 156       | 156     
|Construction in progress                        | 129       | 1,004   
|                                                | 59,437    | 57,980  
|Accumulated depreciation and
      amortization | (37,862)  | (35,034)
|Total                                           | $ 21,575  | 22,946  

(10) Deposits

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

|                                             | March 31,                        
|-------------------------------------------- | ---------------------------------
|                                             | 2002                             
|                                             | Weighted
      Average
      Rate
|                                             |                                  
|Regular passbook                             | 0.85%                            
|NOW and other demand deposit accounts        | 1.61                             
|Fixed and variable-rate certificate accounts | 3.82                             
|Money market checking and savings            | 2.59                             
|Total                                        | 2.87%                            

Certificate accounts maturing subsequent to March 31, 2002
are summarized as follows:

|Year Ending March 31, | Amount     
|--------------------- | -----------
|                      |            
|2003                  | $ 948,718  
|2004                  | 65,896     
|2005                  | 20,962     
|2006                  | 14,318     
|2007                  | 34,290     
|thereafter            | 351        
|Total                 | $ 1,084,535

82

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

Interest expense on deposits is summarized as follows:

|                                            | Year Ended March 31,
|------------------------------------------- | --------------------
|                                            | 2002                
|                                            |                     
|Regular passbook                            | $ 1,647             
|NOW and other demand deposit
      accounts | 2,900               
|Money market checking and savings           | 13,938              
|Certificates of deposit                     | 57,530              
|Total                                       | $ 76,015            

At March 31, 2002 and 2001, the Company had accrued interest payable on deposits
of $1,498 and $1,767, respectively, which is included in other liabilities in
the accompanying consolidated balance sheets.
At March 31, 2002 and 2001, $34,014 and $23,296 of public funds on deposit were
secured by loans receivable, mortgage-backed securities, investment securities
and collateralized mortgage obligations with aggregate carrying values of
$46,326 and $33,401, respectively.
Accounts which are greater than $100 at March 31, 2002 and 2001 total $756,025
and $593,707, respectively. For deposit accounts with balances in excess of
$100, that portion in excess of $100 may not be federally insured.

83

---

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

(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 collateralizedby
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 $558,000 and
zero and $575,000 and zero at March 31, 2002 and March 31, 2001, respectively.
(See "Note 12.")

|                                                                                                                                                                                                                                                                                                                                                         | March 31,
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------
|                                                                                                                                                                                                                                                                                                                                                         | 2002     
|                                                                                                                                                                                                                                                                                                                                                         |          
|FHLB advances:                                                                                                                                                                                                                                                                                                                                           |          
|Average amount outstanding during the year                                                                                                                                                                                                                                                                                                               | $ 597,173
|Maximum amount outstanding at any month end                                                                                                                                                                                                                                                                                                              | 655,000  
|Amount outstanding at year end (1)                                                                                                                                                                                                                                                                                                                       | 558,000  
|Average interest rate:                                                                                                                                                                                                                                                                                                                                   |          
|For the year                                                                                                                                                                                                                                                                                                                                             | 5.01%    
|At year end                                                                                                                                                                                                                                                                                                                                              | 4.16     
|                                                                                                                                                                                                                                                                                                                                                         |          
|Reverse repurchase agreements:                                                                                                                                                                                                                                                                                                                           |          
|Average amount outstanding during the year                                                                                                                                                                                                                                                                                                               | $ -      
|Maximum amount outstanding at any month end                                                                                                                                                                                                                                                                                                              | -        
|Amount outstanding at year end                                                                                                                                                                                                                                                                                                                           | -        
|Average interest rate:                                                                                                                                                                                                                                                                                                                                   |          
|For the year                                                                                                                                                                                                                                                                                                                                             | -        
|At year end                                                                                                                                                                                                                                                                                                                                              | -        
|                                                                                                                                                                                                                                                                                                                                                         |          
|(1) Included in the
      balance of FHLB advances outstanding at March 31, 2002 are putable
      borrowings of $150.0 million with original terms to maturity of 60 to 120
      months with final maturity dates ranging from December 23, 2002 to
      February 12, 2008 and next put dates ranging from April 23, 2002 to
      February 12, 2003.



FHLB advances have the following final maturities at March
31, 2002.

|           | Amount   
|---------- | ---------
|           |          
|2003       | $ 285,000
|2004       | 218,000  
|2005       | 40,000   
|thereafter | 15,000   
|Total      | $ 558,000

Included in the table above are putable advances of $150,000
with next put dates during fiscal 2003.

84

---

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

Interest expense on borrowings is summarized as follows:

Year ended March 31,2002
      2001
      2000FHLB advances
      $ 29,907
      48,434
      44,435Reverse repurchase agreements
      -
      -
      2,760Other interest expense (1)
      (1,298)
      48
      24Total
      $ 28,609
      48,482
      47,219(1) At March 31, 2002, includes $1,258 recovery of interest expense
        resulting from favorable determination of a disputed state income tax
        matter.


(12) Lines of Credit

85

---

PFF BANCORP, INC. AND SUBSIDIARYNotes 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, 2001 and 2000.

2001
      2000Pension
        Plan
      Directors'Retirement andSupplemental
        Plans
      Pension
        Plan
      Directors'Retirement andSupplemental
        PlansChange in benefit obligationProjected benefit obligation, beginning of year
      $ 19,946
      2,716
      18,123
      2,685Interest cost
      1,350
      183
      1,354
      200Benefits paid
      (1,315)
      (198)
      (1,390)
      (210)Actuarial loss (gain)
      1,215
      (26)
      1,859
      41Projected benefit obligation, end of year
      $ 21,196
      2,675
      19,946
      2,716Change in plan assetsPlan assets, beginning of year
      $ 23,808
      -
      27,310
      -Actual return on plan assets
      (2,966)
      -
      (2,111)
      -Employer contribution
      -
      198
      -
      210Benefits paid
      (1,315)
      (198)
      (1,391)
      (210)Plan assets, end of year
      $ 19,527
      -
      23,808
      -Funded status
      $ (1,669)
      (2,675)
      3,862
      (2,716)Unrecognized transition obligation
      -
      -
      -
      33Unrecognized prior service cost
      -
      -
      11
      -Unrecognized (gain)/loss
      5,060
      526
      (799)
      590Prepaid (accrued) benefit cost
      $ 3,391
      (2,149)
      3,074
      (2,093)


Net periodic pension costs for 2001, 2000 and 1999 included
the following components:

December 31,2001
      2000
      1999Pension
        Plan
      Directors'
        Retirement
        and Supple-
        mental Plans
      Pension
        Plan
      Directors'
        Retirement
        and Supple-
        mental Plans
      Pension
        Plan
      Directors'
        Retirement
        and Supple-
        mental PlansComponents of net periodic benefit costInterest cost
    $ 1,350
    183
    1,354
    200
    1,568
    167Expected return on plan assets
    (1,678)
    -
    (1,933)
    -
    (1,761)
    -Amortization of unrecognized transition
      obligation
    -
    33
    -
    33
    -
    33Amortization of unrecognized prior service
      cost
    11
    -
    70
    -
    70
    -Amortization of unrecognized (gain)/loss
    -
    38
    (470)
    33
    -
    37Net periodic pension (income) expense
    $ (317)
    254
    (979)
    266
    (123)
    237


86

---

PFF BANCORP, INC. AND SUBSIDIARYNotes 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 2001 and 2000 are as follows:

December 31,2001
      2000Pension
        Plan
      Directors'
        Retirement
        and Supple-
        mental Plans
      Pension
        Plan
      Directors'
        Retirement
        and Supple-
        mental PlansWeighted-average assumptionsDiscount rate
      6.50%
      6.50
      7.00
      7.00Expected long-term rate of return on plan assets
      6.75
      -
      7.25
      -


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 2002, 2001 and 2000,
the total 401(k) Plan expense was $575, $449 and $514, 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, 2002, 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, 2002 and 2001, the expected cost associated with this
coverage was $11 and $15, respectively, 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 ten dollars 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, 2002 and 2001, 176,910 and 181,281 ESOP shares,
respectively were allocated to the participants. At March 31, 2002 and 2001, 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, 2002, the fair value of
the unearned ESOP shares is $18,139. Compensation expense associated with the
ESOP was $4,265, $3,230 and $3,152 for the years ended March 31, 2002, 2001 and
2000, respectively.

87

---

PFF BANCORP, INC. AND SUBSIDIARYNotes 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"). During September, 1999,
the stockholders of the Company approved the PFF Bancorp, Inc. 1999 Incentive
Plan (the "1999 Plan"). The 1996 Plan authorized the granting of
options to purchase the Company's common stock, option related awards, and
grants of common stock (collectively "Awards"). The 1999 Plan
authorized the granting of options to purchase the Company's common stock.
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 maximum number of shares reserved under the 1999
Plan is 625,000 all of which are reserved for purchase pursuant to options and
option related awards. The exercise price of all options and option-related
awards under both Plans 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. Those goals have been met. Compensation expense, associated
with the stock grants recognized based upon the market price of the common stock
at the time of grant, was $1,429, $2,538, and $2,094 for the years ended March
31, 2002, 2001 and 2000, respectively. The unamortized balance of the grants is
included in unearned stock-based compensation in the accompanying consolidated
financial statements. At March 31, 2002 and 2001, the unamortized balance of the
stock awards was zero and $1,429, respectively.

88

---

PFF BANCORP, INC. AND SUBSIDIARYNotes 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 and 1999 Plans.

|Assumptions Used in Determining
      Options' Values                                                                        
|-----------------------------------------------------------------------------------------------------------------------------
|Grant Date                                                                                                                   
|Options Granted During the Year Ended March 31, 2002                                                                         
|June 27, 2001                                                                                                                
|October 24, 2001                                                                                                             
|November 28, 2001                                                                                                            
|February 27, 2002                                                                                                            
|Options Granted During the Year Ended March 31, 2001                                                                         
|May 24, 2000                                                                                                                 
|May 24, 2000                                                                                                                 
|June 28, 2000                                                                                                                
|November 22, 2000                                                                                                            
|Options Granted During the Year Ended March 31, 2000                                                                         
|May 26, 1999                                                                                                                 
|November 23, 1999                                                                                                            
|March 22, 2000                                                                                                               
|                                                                                                                             
|(1)
      The risk-free rate is the market rate for U.S. Government securities with
      the same maturities as the options.

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:

|                                                | 2002   | 2001   | 2000  
|----------------------------------------------- | ------ | ------ | ------
|                                                |        |        |       
|Net earnings:                                   |        |        |       
|As reported                                     | 35,364 | 28,260 | 26,598
|Pro forma                                       | 33,469 | 26,584 | 25,051
|Earnings per share - Basic (as restated) (2)    |        |        |       
|As reported                                     | 2.84   | 2.32   | 2.13  
|Pro forma                                       | 2.69   | 2.18   | 2.01  
|Earnings per share - Diluted (as restated) (2)  |        |        |       
|As reported                                     | 2.74   | 2.24   | 2.05  
|Pro forma                                       | 2.59   | 2.10   | 1.93  
|                                                |        |        |       
|(2) See Note 24
      regarding the restatement

89

---

PFF BANCORP, INC. AND SUBSIDIARYNotes 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 and 1999 Plans.

|                                         | For the Year Ended March 31,
|---------------------------------------- | ----------------------------
|                                         | 2002                        
|                                         |                             
|Balance at beginning of period           | 1,668,346                   
|Granted                                  | 554,760                     
|Canceled or expired                      | (1,427)                     
|Exercised                                | (374,547)                   
|Balance at end of period                 | 1,847,132                   
|Options exercisable                      | 1,261,102                   
|Options available for grant              | 52,161                      
|                                         |                             
|Weighted average option price per share: |                             
|Under option                             | $ 17.21                     
|Exercisable                              | 13.13                       
|Exercised                                | 26.52                       

The following table summarizes information with respect to
the Company's stock options outstanding as of March 31, 2002.

Options Outstanding
      Options ExercisableRange of
        Exercise
        Prices
      Number
        Outstanding
        at March 31, 2002
      Weighted-average
        Remaining
        Contractual Life
        (Years)
      Weighted-
        average
        Exercise Price
      Number
        Outstanding
        at March 31, 2002
      Weighted-
        average
        Exercise Price$12 to 14
      1,107,674
      4.6
      $12.75
      1,107,674
      $12.7514 to 16
      101,411
      6.3
      15.07
      78,837
      15.1316 to 18
      69,864
      5.1
      16.34
      67,311
      16.3018 to 20
      6,238
      6.6
      18.39
      3,201
      18.5420 to 22
      7,185
      6.4
      21.07
      4,079
      20.9422 to 24
      732
      9.2
      24.00
      -
      -24 to 26
      26,129
      9.6
      24.50
      -
      -26 to 28
      524,686
      9.7
      26.65
      -
      -28 to 30
      3,213
      9.9
      29.01
      -
      -


90

---

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

(14) Income Taxes

Income taxes (benefit) is summarized as follows:

|                          | Current  | Deferred | Total 
|------------------------- | -------- | -------- | ------
|                          |          |          |       
|Year Ended March 31, 2002 |          |          |       
|Federal                   | $ 20,888 | (1,215)  | 19,673
|State                     | 6,548    | (460)    | 6,088 
|Total                     | $ 27,436 | (1,675)  | 25,761
|                          |          |          |       
|Year Ended March 31, 2001 |          |          |       
|Federal                   | $ 13,586 | 2,008    | 15,594
|State                     | 5,174    | 23       | 5,197 
|Total                     | $ 18,760 | 2,031    | 20,791
|                          |          |          |       
|Year Ended March 31, 2000 |          |          |       
|Federal                   | $ 13,455 | 1,356    | 14,811
|State                     | 4,484    | 920      | 5,404 
|Total                     | $ 17,939 | 2,276    | 20,215

For the years ended March 31, 2002, 2001, and 2000, $1,665, $644 and $447 of
current federal taxes, respectively was due to exercise of stock options that
are deductible for tax purposes but not for GAAP.
A reconciliation of total income taxes and the amount computed by applying the
applicable Federal income tax rate to earnings before income taxes follows:

Year Ended March 31,2002
      2001
      2000Amount
      Percent
      Amount
      Percent
      Amount
      PercentComputed "expected" taxes
      $ 21,394
      35%
      $ 17,168
      35%
      $ 16,385
      35%Increase (reduction) in taxes resulting from:California franchise tax, net of Federal tax benefit
      3,956
      6
      3,378
      7
      3,513
      7Other items
      411
      1
      245
      1
      317
      1Total
      $ 25,761
      42%
      $ 20,791
      43%
      $ 20,215
      43%


91

---

PFF BANCORP, INC. AND SUBSIDIARYNotes 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:

March 31,
        2002
      Taxes
        (Benefit)
      March 31,
        2001
      Taxes
        (Benefit)
      March 31,
        2000Deferred tax assets:Allowance for real estate loan losses
    $ (12,324)
    (1,943)
    (10,381)
    430
    (10,811)California franchise tax
      (3,156)
      (369)
      (2,787)
      (41)
      (2,746)Accrued expenses
      (570)
      180
      (750)
      48
      (798)Core deposit intangibles amortization
    (243)
    (20)
    (223)
    (21)
    (202)Non-accrual interest
      (348)
      (85)
      (263)
      (142)
      (121)Unrealized gains (loss) on securities available-for-sale,
      net
    (911)
    675
    (1,586)
    5,155
    (6,741)Other
      (1,127)
      1,270
      (2,397)
      (323)
      (2,074)(18,679)
      (292)
      (18,387)
      5,106
      (23,493)Deferred tax liabilities:Deferred loan origination fees
    18,918
    1,399
    17,519
    1,252
    16,267Unredeemed FHLB stock dividends
    6,416
    (1,357)
    7,773
    635
    7,138Pension plan liability
    828
    (298)
    1,126
    353
    773Accumulated depreciation
    (700)
    (156)
    (544)
    (204)
    (340)Customer early withdrawal Penalty depreciation
    23
    (35)
    58
    (37)
    95Accrued interest on pre-1985 loans
    77
    5
    72
    (8)
    80Excess servicing rights Amortization
    73
    (6)
    79
    (1)
    80Other
      (107)
      (260)
      153
      90
      6325,528
      (708)
      26,236
      2,080
      24,156Net deferred tax liability
      $ 6,849
      (1,000)
      7,849
      7,186
      663


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.
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, 2002.
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 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, 2002 and 2001 includes approximately
$25,300 for which no deferred income tax liability has been recognized.

92

---

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

(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, 2002, 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, 2002:

PFF Bank & Trust's
        Regulatory Capital RequirementTangible
        Capital
      Core
        Capital
      Risk-based
        CapitalCapital of the Bank presented on a GAAP Basis
      $ 259,588
      259,588
      259,588Adjustments to GAAP capital to arrive at regulatory
        capital:Unrealized loss on securities available-for-sale, net
      3,206
      3,206
      3,206Investments in and advances to non-includable
        consolidated subsidiaries
      (681)
      (681)
      (681)Goodwill and other intangible assets
      (1,342)
      (1,342)
      (1,342)General loan valuation allowance (1)
      -
      
      28,050Equity investments and other assets required to be
        deducted
      -
      -
      (64)Regulatory capital
      260,771
      260,771
      288,757Regulatory capital requirement
      45,343
      120,914
      179,514Amount by which regulatory capital exceeds
        requirement
      $ 215,428
      139,857
      109,243(1) Limited to
        1.25% of risk-weighted assets.


93

---

PFF BANCORP, INC. AND SUBSIDIARYNotes 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, 2002 and 2001.

Actual
      For Capital
        Adequacy Purposes
      To be Well
        Capitalized Under
        Prompt Corrective
        Action ProvisionsMarch 31, 2002
      Amount
      Ratio
      Amount
      Ratio
      Amount
      RatioTotal capital (to risk-weighted assets)
    $288,757
    12.87%
    $179,514
    >8.00%
    $224,392
    >10.00%Tier 1 (Core) capital (to adjusted total assets)
    260,771
    8.63
    120,914
    >4.00
    151,142
    >5.00Tier 1 (Core) capital (to risk-weighted assets)
    260,771
    11.62
    -
    - (1)
    134,635
    >6.00Tangible capital (to tangible assets)
    260,771
    8.63
    45,343
    >1.50
    -
    - (1)




Actual
      For Capital
        Adequacy Purposes
      To be Well
        Capitalized Under
        Prompt Corrective
        Action ProvisionsMarch 31, 2001
      Amount
      Ratio
      Amount
      Ratio
      Amount
      RatioTotal capital (to risk-weighted assets)
    $262,994
    12.72%
    $165,449
    >8.00%
    $206,811
    >10.00%Tier 1 (Core) capital (to adjusted total assets)
    237,838
    8.28
    114,869
    >4.00
    143,586
    >5.00Tier 1(Core) capital (to risk-weighted assets)
    237,838
    11.50
    -
    - (1)
    124,087
    >6.00Tangible capital (to tangible assets)
    237,838
    8.28
    43,076
    >1.50
    -
    - (1)(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:

|                                 | Year Ended March 31,
|-------------------------------- | --------------------
|                                 | 2002                
|                                 |                     
|SAIF insurance premiums          | $ 825               
|Office supplies and expense      | 2,705               
|Savings and NOW account expenses | 1,461               
|Loan expenses                    | 669                 
|Other                            | 3,274               
|Total                            | $ 8,934             

94

---

PFF BANCORP, INC. AND SUBSIDIARYNotes 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.

The Company leases various office facilities
under noncancellable operating leases that expire through the year 2008. Net
rent expense under operating leases included in occupancy and equipment expense
for the years ended March 31, 2002, 2001 and 2000, was $759, $750, and $723,
respectively. A summary of future minimum lease payments under these agreements
at March 31, 2002 follows.



|                      | Amount 
|--------------------- | -------
|Year ending March 31, |        
|2003                  | $ 683  
|2004                  | 602    
|2005                  | 518    
|2006                  | 273    
|2007                  | 185    
|thereafter            | 114    
|Total                 | $ 2,375

(18) Off-Balance Sheet RiskConcentrations of Operations and Assets
The Company's operations are located within Southern California. At March 31,
2002 and 2001, approximately 86.7% and 92.6% respectively, 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.

95

---

PFF BANCORP, INC. AND SUBSIDIARYNotes 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.

March 31,2002
      2001Commitments to originate loans:Variable-rate
    $ 58,263
    121,529Fixed-rate
    2,760
    3,039Total
      $ 61,023
      124,568Interest rate range for fixed-rate loans
      6.37%-9.51%
      6.75%-9.64%


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.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. At March 31, 2002 and
2001, the Bank had standby letters of credit of $1,421 and $2,300, respectively.
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 $1,267 and $1,590 at March 31, 2002 and 2001, respectively.
Amortization of trust acquisition cost was $323 for the years ended March 31,
2002, 2001 and 2000.
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, 2002 and 2001.

96

---

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

(20) Loan Servicing and Sale Activities

Loan servicing and sale activities are summarized as
follows:

As of and for the Year Ended March 31,2002
      2001
      2000Balance sheet information:Loans held for sale
      $ 106
      583
      7,362Statement of earnings information:Loan servicing fees
      $ 280
      761
      878Amortization of servicing asset
      95
      17
      -Loan servicing fees, net
      $ 375
      778
      878Gain on sale of loans
      $ 359
      390
      452Statement of cash flows information:Loans originated for sale
      $ 9,685
      16,341
      32,799Proceeds from sale of loans
      $ 10,497
      23,439
      25,673


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, 2002, 2001 and 2000, the Company was servicing loans and
participations in loans owned by others of $189,656, $256,478 and $282,924,
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.

97

---

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

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

March 31, 2002
      March 31, 2001Carrying
        Value
      Fair
        Value
      Carrying
        Value
      Fair
        ValueFinancial assets:Cash & cash equivalents
      $ 105,965
      105,965
      51,526
      51,526Loans held for sale
      106
      106
      583
      583Investment securities held-to-maturity
      703
      703
      702
      772Investment securities available-for-sale
      93,820
      93,820
      59,137
      59,137Mortgage-backed securities available- for-sale
      196,580
      196,580
      302,964
      302,964Collateralized mortgage obligations available-for-sale
      62,778
      62,778
      82,315
      82,315Trading securities
      2,334
      2,334
      2,375
      2,375Loans receivable, net
      2,494,667
      2,495,737
      2,285,307
      2,296,585Federal Home Loan Bank stock
      35,133
      35,133
      46,121
      46,121Financial liabilities:Deposits
      2,168,964
      2,177,608
      2,021,261
      2,031,984FHLB advances
      558,000
      563,527
      575,000
      575,465


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 held-to-maturity: Fair values were based on quoted market
prices. If a quoted market price was not available, fair value was estimated
using market prices for similar securities, as well as internal analysis.
Investment securities, MBS and CMO available-for-sale: Fair values were based on
quoted market prices. If a quoted market price was not available, fair value was
estimated using market prices for similar securities, as well as internal
analysis.
Trading securities: Fair values were based on quoted market prices.
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.

98

---

PFF BANCORP, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements, Continued
(Dollars in thousands, except for share data)

Federal Home Loan Bank stock: The carrying amount
approximates fair value.
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 rates currently offered on alternative funding sources
with similar maturities.
FHLB Advances: The fair value of FHLB advances and other borrowings is based on
discounted cash flows using rates currently offered on alternative funding
sources with similar maturities.
Off-Balance Sheet Financial Instruments: Commitments to originate loans had a
notional amount of $61,023 at March 31, 2002. The carrying value of the
commitments is zero as all are cancelable and not readily marketable. Standby
letters of credit had a notional amount of $1,421 at March 31, 2002.(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, 2002
is $24,150.
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.

99

---

PFF BANCORP, INC. AND SUBSIDIARYNotes 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.



March 31,2002
      2001AssetsCash and cash equivalents
      $ 6,286
      4,002Equity securities available-for-sale
      9,464
      7,329Trust preferred securities available-for-sale
      5,052
      4,952Trading securities, at fair value
      2,334
      2,375Residential loans
      237
      241Construction loans
      -
      478Investment in Bank subsidiary
      259,588
      236,586Other assets
      5,240
      3,034Total assets
      $ 288,201
      258,997Liabilities and Stockholders' EquityOther liabilities
      $ 4,124
      999Stockholders' equity
      284,077
      257,998Total liabilities and stockholders' equity
      $ 288,201
      258,997


Condensed Statements of Earnings



|                                                                                         | Year ended March 31,
|---------------------------------------------------------------------------------------- | --------------------
|                                                                                         | 2002                
|                                                                                         |                     
|Interest and other income                                                                | $ 1,949             
|Provision for loan losses                                                                | -                   
|General and administrative expense                                                       | 3,416               
|Earnings before equity in undistributed earnings
      of subsidiary before income taxes | (1,467)             
|Dividend from Bank subsidiary                                                            | 4,150               
|Equity in earnings (loss) of subsidiary before income taxes                              | 58,442              
|Earnings before income taxes                                                             | 61,125              
|Income taxes                                                                             | 25,761              
|Net earnings                                                                             | $ 35,364            

100

---

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

Condensed Statements of Cash Flows

Year Ended March 31,2002
      2001
      2000Cash flows from operating activities:Net earnings
      $ 35,364
      28,260
      26,598Adjustments to reconcile net earnings to cash used by
        operating activities:Amortization of premiums on investments and mortgage-backed
        securities
      6
      5
      14(Gains) losses on trading securities
      107
      1,490
      (1,676)Provision for loan losses
      -
      3,012
      -(Increase) decrease in trading securities
      (66)
      76
      1,985Amortization of unearned stock-based compensation
      3,013
      4,125
      4,258Losses on sale of mortgage-backed securities and
        investments available-for-sale
      -
      156
      290Undistributed (earnings) loss of subsidiary
      (22,671)
      (31,409)
      53(Increase) decrease in other assets
      (2,206)
      (897)
      170Increase (decrease) in other liabilities
      2,606
      (877)
      (493)Net cash provided by operating activities
      16,153
      3,941
      31,199Cash flow from investing activities:Increase in real estate held for investment
      -
      460
      780(Increase) decrease in residential loans
      4
      (241)Decrease in construction loans
      478
      1,303
      -(Increase) decrease in equity securities available-for-sale
      (1,085)
      2,111
      1,400Decrease in trust preferred securities
      -
      -
      7,891Net cash provided by (used in) investing activities
      (603)
      3,633
      10,071Cash flows from financing activities:Proceeds from exercise of stock options
      3,780
      595
      574Purchase of treasury stock
      (13,532)
      (2,567)
      (42,968)Cash dividends
      (3,513)
      (2,961)
      (2,272)Net cash used in financing activities
      (13,265)
      (4,933)
      (44,666)Net (decrease) increase in cash during the year
      2,285
      2,641
      (3,396)Cash and cash equivalents, beginning of year
      4,002
      1,361
      4,757Cash and cash equivalents, end of year
      $ 6,287
      4,002
      1,361


101

---

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

(24) Earnings Per Share

Effect of Restatement

On August 14, 2002, the Company announced that it would
restate the weighted average shares used to calculate basic and diluted earnings
per share (EPS). This restatement does not reflect any change to previously
reported net earnings, but rather corrections of computational errors in the
determination of weighted average shares used to calculate earnings per share.
The increase to diluted EPS results from the appropriate inclusion of the tax
benefits associated with non-qualified stock options in the computation of
diluted weighted average shares under the treasury stock method. The impact of
these tax benefits was erroneously excluded from the previous computations of
diluted weighted average shares. The adjustments to basic weighted average
shares relate to the vesting of stock awards over a five-year period following
the March 1996 IPO. These shares were correctly included in the calculation of
diluted EPS, but were erroneously excluded from the calculation of basic EPS.

Diluted and basic EPS as previously reported and
restated are as follows:

Fiscal Year Ended
      Diluted EPS
      Basic EPSMarch 31,
      As Previously Reported
      As Restated
      As Previously Reported
      As Restated1998
      $0.95
      $0.96
      $1.00
      $0.991999
      $1.29
      $1.30
      $1.37
      $1.352000
      $2.02
      $2.05
      $2.20
      $2.132001
      $2.20
      $2.24
      $2.42
      $2.322002
      $2.69
      $2.74
      $3.01
      $2.84




Fiscal Year Ended
      Weighted average shares outstanding
        for diluted EPS
      Weighted average shares outstanding
        for basic EPSMarch 31,
      As Previously Reported
      As Restated
      As Previously Reported
      As Restated1998
      16,795,096
      16,617,211
      16,055,127
      16,126,1141999
      14,716,682
      14,575,721
      13,876,440
      14,124,5092000
      13,184,030
      13,002,791
      12,111,323
      12,492,6432001
      12,821,559
      12,640,281
      11,656,482
      12,182,8552002
      13,153,166
      12,919,745
      11,756,653
      12,455,711




Fiscal Year Ended
      Effect of dilutive stock options and awards- weighted
        average shares outstanding
      Effect of dilutive stock options and awards - per share amountMarch 31,
      As Previously Reported
      As Restated
      As Previously Reported
      As Restated1998
      739,969
      491,097
      $0.05
      $0.031999
      840,242
      451,212
      $0.08
      $0.052000
      1,072,707
      510,148
      $0.18
      $0.082001
      1,165,077
      457,426
      $0.22
      $0.082002
      1,396,513
      464,034
      $0.32
      $0.10


102

---

Annual Disclosure

A reconciliation of the components used to derive basic and
diluted earnings per share for the years ended March 31, 2002, 2001 and 2000
follows:

Net
        Earnings
      Weighted Average
        Shares Outstanding
      Per Share
        Amount(as restated)
      (as restated)2002 (1)Basic earnings per share
      $ 35,364
      12,455,711
      $ 2.84Effect of dilutive stock options and awards
      -
      464,034
      .10Diluted earnings per share
      $ 35,364
      12,919,745
      $ 2.742001 (2)Basic earnings per share
      $ 28,260
      12,182,855
      $ 2.32Effect of dilutive stock options and awards
      -
      457,426
      .08Diluted earnings per share
      $ 28,260
      12,640,281
      $ 2.242000 (3)Basic earnings per share
      $ 26,598
      12,492,643
      $ 2.13Effect of dilutive stock options and awards
      -
      510,148
      .08Diluted earnings per share
      $ 26,598
      13,002,791
      $ 2.05(1) Options to
        purchase 527,899 shares of common stock at a weighted average price of
        $26.66 per share were outstanding during the fiscal year ended March 31,
        2002 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 November 28, 2006
        and February 27, 2007, were still outstanding at March 31, 2002.(2) Options to
        purchase 8,433 shares of common stock at a weighted average price of
        $21.00 per share were outstanding during the fiscal year ended March 31,
        2001 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, 2001.(3) 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.


103

---

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

(25) Quarterly Results of Operations (Unaudited)

Effect of Restatement

As discussed in Note 24, on August 14, 2002, the Company
announced that it would restate the weighted average shares used to calculate
basic and diluted earnings per share (EPS). This restatement does not reflect
any change to previously reported net earnings, but rather corrections of
computational errors in the determination of weighted average shares used to
calculate earnings per share. The increase to diluted EPS results from the
appropriate inclusion of the tax benefits associated with non-qualified stock
options in the computation of diluted weighted average shares under the treasury
stock method. The impact of these tax benefits was erroneously excluded from the
previous computations of diluted weighted average shares. The adjustments to
basic weighted average shares relate to the vesting of stock awards over a
five-year period following the March 1996 IPO. These shares were correctly
included in the calculation of diluted EPS, but were erroneously excluded from
the calculation of basic EPS.

Diluted and basic EPS as previously reported and
restated are as follows:

For the Quarter Ended
      Diluted EPS
      Basic EPSAs Previously Reported
      As Restated
      As Previously Reported
      As RestatedJune 30, 2000
      $0.59
      $0.60
      $0.63
      $0.61September 30, 2000
      $0.55
      $0.56
      $0.61
      $0.58December 31, 2000
      $0.52
      $0.53
      $0.57
      $0.55March 31, 2001
      $0.54
      $0.55
      $0.61
      $0.58June 30, 2001
      $0.60
      $0.61
      $0.68
      $0.64September 30, 2001
      $0.68
      $0.69
      $0.77
      $0.73December 31, 2001
      $0.72
      $0.73
      $0.81
      $0.76March 31, 2002
      $0.67
      $0.68
      $0.75
      $0.70




For the Quarter Ended
      Weighted average shares outstanding
        for diluted EPS
      Weighted average shares outstanding
        for basic EPSAs Previously Reported
      As Restated
      As Previously Reported
      As RestatedJune 30, 2000
      12,409,259
      12,335,619
      11,609,116
      12,054,513September 30, 2000
      12,877,091
      12,683,311
      11,665,742
      12,111,139December 31, 2000
      12,909,442
      12,721,315
      11,692,108
      12,276,826March 31, 2001
      13,053,863
      12,810,687
      11,658,491
      12,289,876June 30, 2001
      13,122,552
      12,886,555
      11,721,986
      12,357,224September 30, 2001
      13,325,351
      13,054,814
      11,799,607
      12,434,845December 31, 2001
      13,266,564
      12,999,788
      11,762,865
      12,507,774March 31, 2002
      13,257,616
      12,984,955
      11,741,445
      12,523,402


104

---

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

The effect of dilutive stock options and awards on weighted
average shares outstanding and per share amounts as previously reported and
restated is as follows:

For the Quarter Ended
      Effect of dilutive stock options and awards- weighted
        average shares outstanding
      Effect of dilutive stock options and awards - per share amountAs Previously Reported
      As Restated
      As Previously
        Reported
      As RestatedJune 30, 2000
      800,143
      281,106
      $0.04
      $0.01September 30, 2000
      1,211,349
      572,172
      $0.06
      $0.02December 31, 2000
      1,217,334
      444,489
      $0.05
      $0.02March 31, 2001
      1,395,372
      520,811
      $0.07
      $0.03June 30, 2001
      1,400,566
      529,331
      $0.08
      $0.03September 30, 2001
      1,525,744
      619,969
      $0.09
      $0.04December 31, 2001
      1,503,699
      492,014
      $0.09
      $0.03March 31, 2002
      1,516,171
      461,553
      $0.08
      $0.02




The tables below show basic and diluted earnings per share
computed on a quarterly basis for the years ended March 31, 2002 and 2001. 
The sum of the computation of earnings per share on a quarterly basis will not
necessarily equal the computation on an annual basis.

Three Months EndedJune 30,
        2001
      September 30,
        2001
      December 31,
        2001
      March 31,
        2002
      Total
        2002Net interest income
      $ 25,138
      27,877
      29,344
      28,748
      111,107Provision for loan losses
      1,250
      1,250
      1,250
      1,250
      5,000Other income
      4,304
      3,711
      4,652
      4,376
      17,043Other expenses
      14,508
      14,695
      16,270
      16,552
      62,025Earnings before income taxes
      13,684
      15,643
      16,476
      15,322
      61,125Income taxes
      5,760
      6,575
      6,923
      6,503
      25,761Net earnings
      $ 7,924
      9,068
      9,553
      8,819
      35,364Basic earnings per share (as restated) (1)
      $ 0.64
      0.73
      0.76
      0.70
      2.84Diluted earnings per share (as restated) (1)
      $ 0.61
      0.69
      0.73
      0.68
      2.74Three Months EndedJune 30,
        2000
      September 30,
        2000
      December 31,
        2000
      March 31,
        2001
      Total
        2001Net interest income
      $ 24,044
      23,085
      24,563
      24,786
      96,478Provision for loan losses
      1,251
      1,251
      1,251
      1,251
      5,004Other income
      3,696
      4,208
      2,688
      3,727
      14,319Other expenses
      13,483
      13,877
      14,373
      15,009
      56,742Earnings before income taxes
      13,006
      12,165
      11,627
      12,253
      49,051Income taxes
      5,639
      5,088
      4,908
      5,156
      20,791Net earnings
      $ 7,367
      7,077
      6,719
      7,097
      28,260Basic earnings per share (as restated) (1)
      $ 0.61
      0.58
      0.55
      0.58
      2.32Diluted earnings per share (as restated) (1)
      $ 0.60
      0.56
      0.53
      0.55
      2.24(1) See Note 24
        regarding this restatement.


105

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

(26) Incorporation of New SubsidiaryOn January 25, 2002 Glencrest Investment Advisors, Inc.
("Glencrest") was incorporated in the State of Delaware. Glencrest is
a wholly owned subsidiary of the Company. Glencrest will function as a
Registered Investment Advisor. It will be engaged in offering portfolio
management services to individuals and institutions such as foundations and
endowments, pension plans and charitable organizations.

104

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Independent Auditors' Report

The Board of Directors and Stockholders
PFF Bancorp, Inc.:
We have audited the accompanying consolidated balance sheets of PFF Bancorp,
Inc. and subsidiary as of March 31, 2002 and 2001, 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, 2002. 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 auditing standards generally accepted
in the United States of America. 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, 2002 and 2001, and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 2002, in conformity with accounting principles generally
accepted in the United States of America.
As discussed in Note 24 to the consolidated financial statements, the earnings
per share data for each of the years in the three-year period ended March 31,
2002 have been restated
                                                                                   
/s/KPMG LLP
Orange County, California
April 18, 2002, except for Note 24,
Earnings Per Share, as to which
the date is August 14, 2002



107

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Item 9. Change in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.



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 18, 2002 (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.

108

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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
      or are incorporated herein by reference:                           
|----- | ---------------------------------------------------------------------------------------------------------------------------------
|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
      officers 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)                                            
|10.12 | PFF Bancorp, Inc. 1999 Incentive Plan (4)                                                                                        
|21    | Subsidiary information is incorporated herein by
      reference to "Part I- Subsidiary
      Activities."                       
|23    | Consent of KPMG LLP                                                                                                              
|99.1  | Annual Report on Form 11-K for Capital Accumulation
      Plan for employees of
      PFF Bank & Trust (5)                       
|99.2  | Certification of Chief Executive Officer pursuant to
      Section 906 of Sarbanes-Oxley Act of 2002.                            
|99.3  | Certification of Chief Financial Officer pursuant to
      Section 906 of Sarbanes-Oxley Act of 2002.                            
|(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, 2002.



|(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.                                                                                          
|(4) Incorporated herein by reference from
      the Proxy Statement for the 1999 Annual Meeting of Stockholders dated
      September 22, 1999.                                
|(5) Incorporated herein by reference from
      the Form 10-K filed on June 27, 2002.                                                                                          

109

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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: August 16, 2002 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.
|                                                                                                                                                                                        |                                                                                                                                |                                                                                                                              
|Name                                                                                                                                                                                    | Title                                                                                                                          |                                                                                                                              
|                                                                                                                                                                                        |                                                                                                                                |                                                                                                                              
|/s/ LARRY M. RINEHART                                                                                                                                                                   |                                                                                                                                |                                                                                                                              
|Larry M. Rinehart                                                                                                                                                                       | President, Chief Executive
      Officer and Director
      (Principal Executive Officer)                                      |                                                                                                                              
|                                                                                                                                                                                        |                                                                                                                                |                                                                                                                              
|/s/ GREGORY C. TALBOTT                                                                                                                                                                  |                                                                                                                                |                                                                                                                              
|Gregory C. Talbott                                                                                                                                                                      | Executive Vice President, Chief
      Financial Officer and Treasurer
      (Principal Financial and
      Accounting Officer) |                                                                                                                              
|                                                                                                                                                                                        |                                                                                                                                |                                                                                                                              
|/s/ DONALD R. DESCOMBES                                                                                                                                                                 |                                                                                                                                |                                                                                                                              
|Donald R. DesCombes                                                                                                                                                                     | Director                                                                                                                       |                                                                                                                              
|                                                                                                                                                                                        |                                                                                                                                |                                                                                                                              
|/s/ ROBERT W. BURWELL                                                                                                                                                                   |                                                                                                                                |                                                                                                                              
|Robert W. Burwell                                                                                                                                                                       | Director                                                                                                                       |                                                                                                                              
|                                                                                                                                                                                        |                                                                                                                                |                                                                                                                              
|/s/                                                                                                                                                                                     |                                                                                                                                |                                                                                                                              
|William T. Dingle                                                                                                                                                                       | Director                                                                                                                       |                                                                                                                              
|                                                                                                                                                                                        |                                                                                                                                |                                                                                                                              
|/s/ CURTIS W. MORRIS                                                                                                                                                                    |                                                                                                                                |                                                                                                                              
|Curtis W. Morris                                                                                                                                                                        | Director                                                                                                                       |                                                                                                                              
|                                                                                                                                                                                        |                                                                                                                                |                                                                                                                              
|/s/                                                                                                                                                                                     |                                                                                                                                |                                                                                                                              
|Jil H. Stark                                                                                                                                                                            | Director                                                                                                                       |                                                                                                                              
|                                                                                                                                                                                        |                                                                                                                                |                                                                                                                              
|/s/ STEPHEN C. MORGAN                                                                                                                                                                   |                                                                                                                                |                                                                                                                              
|Stephen C. Morgan                                                                                                                                                                       | Director                                                                                                                       |                                                                                                                              

110

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CERTIFICATION



I, Larry M. Rinehart, certify that:

> 1. I have reviewed this annual report on Form 10-K of PFF Bancorp, Inc.;
>     2. Based on my knowledge, this annual report does not contain any untrue
>     statement of a material fact or omit to state a material fact necessary to
>     make the statements made, in light of the circumstances under which such
>     statements were made, not misleading with respect to the period covered by
>     this annual report; and
>     3. Based on my knowledge, the financial statements, and other financial
>     information included in this annual report, fairly present in all material
>     respects the financial condition, results of operations and cash flows of
>     the registrant as of, and for, the periods presented in this annual report.
>     Date:
>             September 4, 2002
>           /s/
>             Larry M. RinehartLarry
>             M. RinehartPresident,
>             Chief Executive Officer and Director

111

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> 

CERTIFICATION



I, Gregory C. Talbott, certify that:

> 1. I have reviewed this annual report on Form 10-K of PFF Bancorp, Inc.;
>     2. Based on my knowledge, this annual report does not contain any untrue
>     statement of a material fact or omit to state a material fact necessary to
>     make the statements made, in light of the circumstances under which such
>     statements were made, not misleading with respect to the period covered by
>     this annual report; and
>     3. Based on my knowledge, the financial statements, and other financial
>     information included in this annual report, fairly present in all material
>     respects the financial condition, results of operations and cash flows of
>     the registrant as of, and for, the periods presented in this annual report.
>     Date:
>             September 4, 2002
>           /s/
>             Gregory C. TalbottGregory
>             C. TalbottExecutive
>             Vice President, Chief Financial Officer and Treasurer



112