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

                                    FORM 10-Q

(Mark one)

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

For the quarterly period ended           March 31, 2000
                              --------------------------------------------------
                                       or

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

For the transition period from        N/A          to            N/A
                              ---------------------  ---------------------------
Commission File Number:                     333-64597
                       ---------------------------------------------------------

                            GOLDEN STATE HOLDINGS INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                         95-4669792
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation           (I.R.S. Employer
 or organization)                                      Identification No.)

  135 Main Street, San Francisco, CA                          94105
--------------------------------------------------------------------------------
(Address of principal executive offices)                   (Zip Code)

                                415-904-1100
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                       N/A
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
 report)


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

     The number of shares  outstanding  of  registrant's  $1.00 par value common
stock, as of the close of business on April 28, 2000: 1,000 shares.



                                     Page 1

<PAGE>

                           GOLDEN STATE HOLDINGS INC.
                     FIRST QUARTER 2000 REPORT ON FORM 10-Q
                                TABLE OF CONTENTS



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

     Item 1.     Consolidated Financial Statements

                 Unaudited Consolidated Balance Sheets
                 March 31, 2000 and December 31, 1999.......................3

                 Unaudited Consolidated Statements of Income
                 Three Months Ended March 31, 2000 and 1999.................4

                 Unaudited Consolidated Statements of Comprehensive Income
                 Three Months Ended March 31, 2000 and 1999.................5

                 Unaudited Consolidated Statements of Stockholder's Equity
                 Three Months Ended March 31, 200...........................6

                 Unaudited Consolidated Statements of Cash Flows
                 Three Months Ended March 31, 2000 and 1999.................7

                 Notes to Unaudited Consolidated Financial Statements.......9

     Item 2.     Management's Discussion and Analysis of
                 Financial Condition and Results of Operations.............15

     Item 3.     Quantitative and Qualitative Disclosures About Market
                 Risk......................................................34


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

     Item 1.     Legal Proceedings.........................................35

     Item 2.     Changes in Securities.....................................35

     Item 3.     Defaults Upon Senior Securities...........................35

     Item 4.     Submission of Matters to a Vote of Security Holders.......35

     Item 5.     Other Information.........................................35

     Item 6.     Exhibits and Reports on Form 8-K..........................36

     Signatures............................................................37



                                     Page 2

<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      MARCH 31, 2000 and DECEMBER 31, 1999
                                   (Unaudited)
                  (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                   March 31,          December 31,
                      ASSETS                                                         2000                 1999
                      ------                                                         ----                 ----
<S>                                                                              <C>                  <C>
Cash and due from banks                                                          $   540,095          $   508,812
Interest-bearing deposits in other banks                                              25,034                    5
Short-term investment securities                                                      76,111               84,061
                                                                                 -----------          -----------
       Cash and cash equivalents                                                     641,240              592,878

Securities available for sale, at fair value                                       1,066,045            1,075,734
Securities held to maturity                                                          164,776              185,357
Mortgage-backed securities available for sale, at fair value                      13,317,692           13,764,565
Mortgage-backed securities held to maturity                                        2,050,733            2,149,696
Loans held for sale, net                                                             687,329              729,062
Loans receivable, net                                                             36,143,680           33,953,461
Investment in Federal Home Loan Bank ("FHLB") System                               1,257,944            1,167,144
Premises and equipment, net                                                          282,790              296,800
Foreclosed real estate, net                                                           36,596               45,091
Accrued interest receivable                                                          332,017              321,596
Intangible assets (net of accumulated amortization of $199,876
       at March 31, 2000 and $183,433 at December 31, 1999)                          760,640              819,561
Mortgage servicing rights                                                          1,350,708            1,272,393
Other assets                                                                         939,634              667,793
                                                                                 -----------          -----------
       Total assets                                                              $59,031,824          $57,041,131
                                                                                 ===========          ===========

       LIABILITIES, MINORITY INTEREST AND STOCKHOLDER'S EQUITY
       -------------------------------------------------------

Deposits                                                                         $23,047,919          $23,040,571
Securities sold under agreements to repurchase                                     5,353,602            5,481,747
Borrowings                                                                        27,397,879           25,668,626
Other liabilities                                                                    845,301              688,870
                                                                                 -----------          -----------
       Total liabilities                                                          56,644,701           54,879,814
                                                                                 ===========          ===========

Commitments and contingencies                                                             --                   --

Minority interest                                                                    500,000              500,000

Stockholder's equity:
   Common stock, $1.00 par value, 1,000 shares authorized,
       issued and outstanding                                                              1                    1
   Additional paid-in capital                                                      1,544,016            1,542,171
   Accumulated other comprehensive loss                                             (297,377)            (276,832)
   Retained earnings (substantially restricted)                                      640,483              395,977
                                                                                 -----------          -----------
       Total stockholder's equity                                                  1,887,123            1,661,317
                                                                                 -----------          -----------
       Total liabilities, minority interest and stockholder's equity             $59,031,824          $57,041,131
                                                                                 ===========          ===========
</TABLE>


See accompanying notes to unaudited consolidated financial statements.


                                     Page 3

<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                   THREE MONTHS ENDED MARCH 31, 2000 and 1999
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                            Three Months Ended March 31,
                                                                                            ----------------------------
                                                                                              2000              1999
                                                                                              ----              ----
<S>                                                                                          <C>             <C>
      Interest income:
           Loans receivable                                                                  $646,193        $567,273
           Mortgage-backed securities available for sale                                      229,062         204,054
           Mortgage-backed securities held to maturity                                         39,379          50,429
           Loans held for sale                                                                 13,318          34,648
           Securities available for sale                                                       19,093          18,378
           Securities held to maturity                                                          2,061           3,460
           Interest-bearing deposits in other banks                                               401           1,039
           Dividends on FHLB stock                                                             17,147          13,556
                                                                                             --------        --------
               Total interest income                                                          966,654         892,837
                                                                                             ========        ========

      Interest expense:
           Deposits                                                                           218,792         221,996
           Securities sold under agreements to repurchase                                      82,906          54,048
           Borrowings                                                                         377,853         308,823
                                                                                             --------        --------
               Total interest expense                                                         679,551         584,867
                                                                                             --------        --------
               Net interest income                                                            287,103         307,970
           Provision for loan losses                                                               --           5,000
                                                                                             --------        --------
               Net interest income after provision for loan losses                            287,103         302,970
                                                                                             --------        --------

      Noninterest income:
           Loan servicing fees, net                                                            44,875          35,968
           Customer banking fees and service charges                                           48,659          44,746
           Gain on sale and settlement of loans, net                                            6,662          15,589
           Gain on sale of assets, net                                                            419             174
           Other income                                                                         9,566           9,606
                                                                                             --------        --------
               Total noninterest income                                                       110,181         106,083
                                                                                             --------        --------

      Noninterest expense:
           Compensation and employee benefits                                                 107,754         102,585
           Occupancy and equipment                                                             37,371          37,955
           Professional fees                                                                    8,756          13,953
           Loan expense                                                                         6,043          12,178
           Foreclosed real estate operations, net                                              (2,233)           (673)
           Amortization of intangible assets                                                   16,443          17,158
           Merger and integration costs                                                            --           6,082
           Other expense                                                                       51,198          64,333
                                                                                             --------        --------
               Total noninterest expense                                                      225,332         253,571
                                                                                             --------        --------

      Income before income taxes, minority interest and extraordinary items                   171,952         155,482
      Income tax (benefit) expense                                                            (82,947)         72,418
      Minority interest                                                                         6,599           9,167
                                                                                             --------        --------
      Income before extraordinary items                                                       248,300          73,897
      Extraordinary items - gain on early extinguishment of debt,
           net of applicable taxes of $879 in 2000                                              1,206              --
                                                                                             --------        --------
           Net income available to common stockholder                                        $249,506        $ 73,897
                                                                                             ========        ========
</TABLE>

      See accompanying notes to unaudited consolidated financial statements.


                                     Page 4

<PAGE>

                  GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                   THREE MONTHS ENDED MARCH 31, 2000 AND 1999
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                            Three Months Ended March 31,
                                                                                            ----------------------------
                                                                                              2000              1999
                                                                                              ----              ----
<S>                                                                                         <C>               <C>
   Net income                                                                               $249,506          $ 73,897

   Other comprehensive loss, net of tax:
       Unrealized holding loss on securities available for sale:
            Unrealized holding loss arising during the period                                (20,545)          (15,979)
            Less: reclassification adjustment for gain
                 included in net income                                                           --              (172)
                                                                                            --------          --------
       Other comprehensive loss                                                              (20,545)          (16,151)
                                                                                            --------          --------
   Comprehensive income                                                                     $228,961          $ 57,746
                                                                                            ========          ========
</TABLE>



   See accompanying notes to unaudited consolidated financial statements.



                                     Page 5

<PAGE>

                  GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
                        THREE MONTHS ENDED MARCH 31, 2000
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                          Accumulated         Retained
                                                         Additional          Other            Earnings           Total
                                             Common        Paid-in       Comprehensive      (Substantially    Stockholder's
                                              Stock        Capital            Loss           Restricted)        Equity
                                              -----        -------            ----           -----------        ------
<S>                                            <C>       <C>                <C>               <C>              <C>
Balance at December 31, 1999                   $ 1       $1,542,171         $(276,832)        $395,977         $1,661,317

Net income                                      --               --                --          249,506            249,506
Change in net unrealized holding loss
     on securities available for sale           --               --           (20,545)              --            (20,545)
Dividends to parent                             --               --                --           (5,000)            (5,000)
Impact of Golden State restricted
     common stock                               --            1,845                --               --              1,845
                                               ---       ----------         ---------         --------         ----------
Balance at March 31, 2000                      $ 1       $1,544,016         $(297,377)        $640,483         $1,887,123
                                               ===       ==========         =========         ========         ==========
</TABLE>


See accompanying notes to unaudited consolidated financial statements.


                                     Page 6

<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 2000 AND 1999
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                            Three Months Ended March 31,
                                                                                            ----------------------------
                                                                                              2000               1999
                                                                                              ----               ----
<S>                                                                                       <C>                 <C>
Cash flows from operating activities:
Net Income                                                                                $    249,506        $    73,897
Adjustments to reconcile net income to net cash provided
   by operating activities:
   Amortization of intangible assets                                                           16,443              17,158
   (Accretion) amortization of purchase accounting premiums and discounts, net                   (667)              5,597
   Accretion of discount on borrowings                                                            265                 245
   Amortization of mortgage servicing rights                                                   46,667              51,301
   Provision for loan losses                                                                       --               5,000
   Gain on sale of assets, net                                                                   (419)               (174)
   Gain on sale of foreclosed real estate, net                                                 (4,057)             (2,650)
   Loss on sale and settlement of loans, net                                                   18,926              40,738
   Capitalization of originated mortgage servicing rights                                     (25,588)            (56,328)
   Extraordinary items - gain on early extinguishment of debt, net                             (1,206)                 --
   Depreciation and amortization of premises and equipment                                     11,947               8,506
   Amortization of deferred debt issuance costs                                                 1,837               1,785
   FHLB stock dividends                                                                       (17,147)            (13,556)
   Purchases and originations of loans held for sale                                       (1,037,884)         (2,920,752)
   Net proceeds from the sale of loans held for sale                                        1,047,089           3,134,862
   (Increase) decrease in other assets                                                       (208,943)             30,540
   Increase in accrued interest receivable                                                     (9,183)             (2,853)
   Increase (decrease) in other liabilities                                                   137,490             (98,789)
   Amortization of deferred compensation expense -
      Golden State restricted common stock                                                        560                  --
   Minority interest                                                                            6,599               9,167
                                                                                          -----------         -----------
      Net cash provided by operating activities                                           $   232,235         $   283,694
                                                                                          ===========         ===========
</TABLE>


See accompanying notes to unaudited consolidated financial statements.


                                                                     (Continued)


                                     Page 7

<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                   THREE MONTHS ENDED MARCH 31, 2000 AND 1999
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                            Three Months Ended March 31,
                                                                                            ----------------------------
                                                                                              2000               1999
                                                                                              ----               ----
<S>                                                                                       <C>                 <C>
Cash flows from investing activities:

     Downey Acquisition                                                                   $  (379,314)        $        --
     Purchases of securities available for sale                                                (5,779)           (734,574)
     Proceeds from maturities of securities available for sale                                  8,500             299,280
     Purchases of securities held to maturity                                                    (652)             (1,641)
     Principal payments and proceeds from maturities of securities held to maturity            21,323                 564
     Purchases of mortgage-backed securities available for sale                               (38,850)         (2,553,891)
     Principal payments on mortgage-backed securities available for sale                      455,672           1,223,668
     Proceeds from sales of mortgage-backed securities available for sale                          --             193,055
     Principal payments on mortgage-backed securities held to maturity                         98,975             187,215
     Proceeds from sales of loans                                                               2,746               6,830
     Net increase in loans receivable                                                      (1,370,035)            (22,342)
     Purchases of loans receivable                                                           (457,486)           (458,504)
     Purchases of FHLB stock, net                                                             (74,820)            (83,185)
     Purchases of premises and equipment                                                       (6,840)            (53,736)
     Proceeds from disposal of premises and equipment                                             532              41,746
     Proceeds from sales of foreclosed real estate                                             29,146              37,113
     Purchases of mortgage servicing rights                                                   (99,394)            (76,185)
                                                                                          -----------         -----------
         Net cash used in investing activities                                             (1,816,276)         (1,994,587)
                                                                                          -----------         -----------

Cash flows from financing activities:
     Net increase (decrease) in deposits                                                        7,997            (826,517)
     Proceeds from additional borrowings                                                    8,656,278          10,254,766
     Principal payments on borrowings                                                      (6,892,128)         (8,428,080)
     Net (decrease) increase in securities sold under agreements to repurchase               (128,145)            411,896
     Dividends on common stock                                                                 (5,000)                 --
     Dividends paid to minority stockholders, net of taxes                                     (6,599)             (9,127)
     Tax benefit on exercise of stock options                                                      --                 934
                                                                                          -----------         -----------
         Net cash provided by financing activities                                          1,632,403           1,403,872
                                                                                          -----------         -----------

Net change in cash and cash equivalents                                                        48,362            (307,021)
Cash and cash equivalents at beginning of period                                              592,878             967,950
                                                                                          -----------         -----------
Cash and cash equivalents at end of period                                                $   641,240         $   660,929
                                                                                          ===========         ===========
</TABLE>


See accompanying notes to unaudited consolidated financial statements.


                                     Page 8

<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


(1)    Basis of Presentation
       ---------------------

       The  accompanying   unaudited   consolidated  financial  statements  were
prepared in accordance with generally accepted accounting principles for interim
financial  information and the  requirements  of Regulation S-X,  Article 10 and
therefore  do not include  all  disclosures  necessary  for  complete  financial
statements.  In the opinion of management,  all adjustments  have been made that
are necessary for a fair  presentation of the financial  position and results of
operations  and  cash  flows  as of and  for the  periods  presented.  All  such
adjustments are of a normal recurring nature.  The results of operations for the
three months ended March 31, 2000 are not necessarily  indicative of the results
that may be expected  for the entire  fiscal year or any other  interim  period.
Certain  amounts  for  the  three-month  period  in the  prior  year  have  been
reclassified to conform to the current period's presentation.

         Golden State Holdings Inc. (the "Company" or "GS  Holdings"),  a wholly
owned subsidiary of Golden State Bancorp Inc.  ("Golden  State"),  was formed to
acquire all of the assets of First  Nationwide  Holdings Inc.  ("FN  Holdings"),
including  all of the common and preferred  stock of California  Federal Bank, A
Federal Savings Bank and its subsidiaries  ("California  Federal" or "Bank"), as
part of the Golden  State  Acquisition  (as  defined  herein).  GS Holdings is a
holding company whose only  significant  asset is all of the common stock of the
Bank and therefore, activities for the consolidated entity are primarily carried
out by the Bank and its operating subsidiaries.

       The accompanying  consolidated  financial statements include the accounts
of GS Holdings,  the Bank and the Bank's wholly owned  subsidiaries.  Unless the
context otherwise  indicates,  "GS Holdings" or "Company" refers to Golden State
Holdings Inc. as the surviving entity after the consummation of the Golden State
Acquisition (as defined  herein),  and as the surviving  entity in the GS Escrow
Merger for periods after the GS Escrow Merger.  On September 11, 1998,  Glendale
Federal Bank, Federal Savings Bank ("Glendale Federal") merged with and into the
Bank  pursuant  to the Glen Fed Merger (as defined  herein).  Unless the context
otherwise indicates, "California Federal" or "Bank" refers to California Federal
as the surviving entity after the consummation of the Glen Fed Merger.

       Minority interest represents amounts  attributable to the Preferred Stock
("REIT Preferred Stock") of California Federal Preferred Capital Corporation,  a
wholly owned subsidiary of the Bank, and that portion of stockholder's equity of
Auto  One  Acceptance  Corporation  ("Auto  One"),  a  subsidiary  of the  Bank,
attributable  to 20% of its  common  stock.  In  1999,  minority  interest  also
included the Bank Preferred Stock that had not yet been acquired by GS Holdings.

       All  significant   intercompany   balances  and  transactions  have  been
eliminated  in  consolidation.  These  financial  statements  should  be read in
conjunction with the consolidated  financial  statements of GS Holdings included
in the  Company's  Annual  Report on Form 10-K for the year ended  December  31,
1999. All terms used but not defined  elsewhere herein have meanings ascribed to
them in the Company's Annual Report on Form 10-K.

       As GS Holdings'  common stock is wholly owned by Golden  State,  earnings
per share data is not presented.

(2)    Acquisitions and Divestitures
       -----------------------------

       GOLDEN STATE ACQUISITION

       On September 11, 1998, First Nationwide  (Parent)  Holdings Inc. ("Parent
Holdings") and Hunter's  Glen/Ford Ltd.  ("Hunter's  Glen") completed the merger
with Golden State, the publicly traded parent company of Glendale Federal,  in a
tax-free exchange of shares (the "Golden State Merger"), accounted for under the
purchase  method of accounting.  Pursuant to the Golden State Merger  agreement,
(a) FN Holdings contributed all of its assets (including all of the common stock
of California  Federal) to GS Holdings (the "FN Holdings Asset  Transfer"),  (b)
Parent  Holdings,  which then owned all of the common  stock of FN Holdings as a
result of the extinguishment of the Hunter's Glen minority interest, merged with
and into  Golden  State,  which  indirectly  owned  all of the  common  stock of
Glendale  Federal,  (c) FN Holdings  merged with and into Golden State Financial
Corporation,  which owned all of the common  stock of Glendale  Federal (the "FN
Holdings  Merger,"  and  together  with the Golden  State

                                     Page 9

<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Merger, the "Holding Company  Mergers"),  and (d) Glendale  Federal  merged with
and  into  California  Federal  (the "Glen Fed Merger").  The FN Holdings  Asset
Transfer, the Holding Company  Mergers  and the Glen Fed Merger are  referred to
collectively  as the "Golden State Acquisition."

       At September 11, 1998, Glendale Federal had total assets of approximately
$18.9  billion and  deposits of $11.3  billion and  operated 181 branches and 26
loan offices in California.

       The Golden State  Acquisition  was  accounted for as a purchase of Golden
State by Parent Holdings and,  accordingly,  the purchase price was allocated to
the  assets  acquired  and  liabilities  assumed  in the  transaction  based  on
estimates of fair value at the date of purchase. Since the date of purchase, the
results of operations  related to such assets and liabilities have been included
in the Company's consolidated statements of income.

       Merger and integration costs associated with the Golden State Acquisition
totalled  $6.1  million for the three  months  ended March 31,  1999,  including
severance for terminated  California Federal employees,  expenses for California
Federal branch  closures,  and conversion and  consolidation  costs,  as well as
transition  expenses for duplicate  personnel,  facilities and computer  systems
during the integration  period.  No such expenses were incurred during the first
quarter of 2000.

       OTHER ACQUISITIONS AND DIVESTITURES

       On February 29, 2000, Auto One acquired Downey Auto Finance  Corporation,
a subsidiary of Downey Savings and Loan Association, F.A., with prime auto loans
of approximately $370 million (the "Downey  Acquisition").  Intangible assets of
$7.6 million were recorded in connection with this acquisition.

       On April 16, 1999, the Bank acquired  twelve retail  branches  located in
Nevada with deposits of approximately  $543 million from Norwest Bank, Nevada, a
subsidiary  of Norwest  Corporation,  and Wells Fargo Bank,  N.A.  (the  "Nevada
Purchase").  Intangible assets of $50.7 million were recorded in connection with
this  acquisition,  principally  representing  the deposit  premium  paid in the
transaction.

       During April 1999, First Nationwide  Mortgage  Corporation  ("FNMC") sold
servicing rights for approximately 49,000 loans with an unpaid principal balance
of approximately $2.0 billion,  recognizing a pre-tax gain of $16.3 million (the
"Servicing Sale").

(3)    Cash, Cash Equivalents, and Statements of Cash Flows
       ----------------------------------------------------

       Cash paid for interest on deposits and other interest-bearing liabilities
during the three  months  ended March 31,  2000 and 1999 was $754.6  million and
$560.4  million,  respectively.  Net cash  received  for income taxes during the
three months  ended March 31, 2000 and 1999 was $0.1  million and $2.1  million,
respectively.

       During the three months ended March 31, 2000,  noncash activity consisted
of transfers of $21.0 million from loans  receivable to foreclosed  real estate,
transfers of $13.6 million from loans held for sale (at lower of cost or market)
to loans  receivable and $3.5 million of loans made to facilitate  sales of real
estate owned.

       Noncash  activity  during  the three  months  ended  March 31,  2000 also
included a $211.7 million reduction of the valuation  allowance of the Company's
deferred tax asset representing pre-merger tax benefits, of which $161.7 million
was  retained  by the  previous  owners of FN  Holdings  and an increase of $1.8
million in additional paid-in capital reflecting the impact of 220,327 shares of
Golden State restricted common stock issued during the quarter under an employee
incentive plan.

       During the three months ended March 31, 1999,  noncash activity consisted
of transfers of $25.5 million from loans  receivable  to foreclosed  real estate
and $.9 million of loans made to facilitate sales of real estate owned.


                                    Page 10

<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


(4)    Segment Reporting
       -----------------

       Since the Company  derives a  significant  portion of its  revenues  from
interest  income,  and interest  expense is the most  significant  expense,  the
segments are reported below using net interest income.  Because the Company also
evaluates performance based on noninterest income and noninterest expense goals,
these measures of segment profit and loss are also  presented.  The Company does
not allocate income taxes to the segments.
<TABLE>
<CAPTION>
                                                         Three Months Ended March 31,
                                              ----------------------------------------------------
                                               Community            Mortgage
                                                Banking              Banking               Total
                                                -------              -------               -----
<S>                                             <C>                 <C>                   <C>
      Net interest income: (1)
      2000                                      $331,419            $(21,968)             $309,451
      1999                                       349,215             (11,595)              337,620

      Noninterest income: (2)
      2000                                      $ 60,276            $ 62,061              $122,337
      1999                                        59,655              58,147               117,802

      Noninterest expense: (3)
      2000                                      $185,682            $ 40,810              $226,492
      1999                                       205,353              49,378               254,731
</TABLE>
------------
(1)  Includes  $22.3 million and $29.7 million for 2000 and 1999,  respectively,
     in earnings  credit  provided to FNMC by the Bank,  primarily for custodial
     bank account  balances  generated by FNMC.  Also includes $53.3 million and
     $61.4  million  for 2000 and 1999,  respectively,  in  interest  income and
     expense on intercompany loans.

(2)  Includes  $12.2 million and  $11.7 million for 2000 and 1999, respectively,
     in intercompany servicing fees.

(3)  Includes  $1.2 million for each of the years 2000 and 1999  in intercompany
     noninterest expense.


                                    Page 11

<PAGE>

                  GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


       The  following  reconciles  the above table to the  amounts  shown on the
consolidated  financial statements for the three months ended March 31, 2000 and
1999 (in thousands):
<TABLE>
<CAPTION>
                                                                              2000                1999
                                                                              ----                ----
<S>                                                                         <C>                 <C>
       Net interest income:
       Total net interest income for reportable segments                    $309,451            $337,620
       Elimination of intersegment net interest income                       (22,348)            (29,650)
                                                                            --------            --------
            Total                                                           $287,103            $307,970
                                                                            ========            ========

       Noninterest income:
       Total noninterest income for reportable segments                     $122,337            $117,802
       Elimination of intersegment servicing fees                            (12,156)            (11,719)
                                                                            --------            --------
            Total                                                           $110,181            $106,083
                                                                            ========            ========

       Noninterest expense:
       Total noninterest expense for reportable segments                    $226,492            $254,731
       Elimination of intersegment expense                                    (1,160)             (1,160)
                                                                            --------            --------
            Total                                                           $225,332            $253,571
                                                                            ========            ========
</TABLE>

(5)    Accrued Termination and Facilities Costs
       ----------------------------------------

       In connection  with the Golden State  Acquisition,  the Company  recorded
liabilities   resulting  from  (a)  branch   consolidations   due  to  duplicate
facilities;  (b) employee  severance and  termination  benefits due to a planned
reduction in force; and (c) expenses incurred under a contractual  obligation to
terminate services provided by outside service providers  (principally  relating
to data processing  expenses).  The merger and integration  plan relative to the
Golden State  Acquisition  was in place on September 11, 1998.  Certain of these
costs  were  included  in the  allocation  of  purchase  price and  others  were
recognized in net income.  The table below reflects a summary of the activity in
the  liability  for the costs  related to such plan since  December 31, 1999 (in
thousands):
<TABLE>
<CAPTION>
                                                 Branch            Severance and           Contract
                                             Consolidations     Termination Benefits     Termination        Total
                                             --------------     --------------------     -----------        -----
<S>                                             <C>                    <C>                   <C>           <C>
Balance at December 31, 1999                    $24,051                $12,770               $25           $36,846
       Additional liabilities recorded            2,504                     --                --             2,504
       Charges to liability account              (6,591)                  (204)               --            (6,795)
                                                -------                -------               ---           -------
Balance at March 31, 2000                       $19,964                $12,566               $25           $32,555
                                                =======                =======               ===           =======
</TABLE>

(6)    Income Taxes
       ------------

       During the three months ended March 31, 2000, GS Holdings  recorded a net
income tax  benefit of $82.9  million,  which  included a tax  benefit of $161.7
million.  Based on  favorable  resolutions  of federal  income tax audits of Old
California  Federal and  Glendale  Federal,  and based on the current  status of
Mafco's,  including  the  Company's,  audits  for the years 1991  through  1995,
management  changed  its  judgment  about  the  realizability  of the  Company's
deferred tax asset and reduced its valuation  allowance by $211.7 million during
the  three-month  period  ended  March 31,  2000.  As a result of  reducing  the
valuation  allowance,  income tax  expense  was  reduced by $161.7  million  and
goodwill was reduced by $50.0 million.


                                    Page 12

<PAGE>

                  GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


(7)    Stockholder's Equity
       --------------------

       COMMON STOCK

       At March 31, 2000,  there were 1,000  shares of GS Holdings  common stock
issued and outstanding.

       Dividends  on common  stock  during the three months ended March 31, 2000
totalled $5.0 million.  There were no dividends on common stock during the three
months ended March 31, 1999.

(8)    Executive and Stock Compensation
       --------------------------------

       In   connection   with  the  Golden  State   Acquisition,   the  Bank  is
administering  stock option  plans that  provided for the granting of options of
Golden State Common Stock to employees and directors.  Upon the  consummation of
the merger on September 11, 1998,  substantially all options  outstanding became
exercisable.  All pre-merger  stock option plans have expired as to the granting
of additional options.

       In the first  quarter of 2000,  Golden  State  granted  to its  employees
non-qualified  stock options equivalent to 1,333,850 shares of common stock at a
weighted  average  price of $13.99 per share under the Golden State Bancorp Inc.
Omnibus Stock Plan (the "Stock  Plan").  These shares  generally vest over three
years in one-third  increments on the anniversary of the grant date. The options
generally  expire 10 years  from the date of  grant.  No  compensation  cost was
recognized by the Company for these stock options  during the three months ended
March 31, 2000, in accordance  with the intrinsic value  accounting  methodology
prescribed in Accounting  Principles Board Opinion No. 25,  ACCOUNTING FOR STOCK
ISSUED TO  EMPLOYEES,  whereby  compensation  expense to employees is determined
based upon the excess,  if any,  of the market  price of Golden  State's  common
stock at the measurement date over the exercise price of the award.

       During the three  months  ended  March 31,  2000,  no Golden  State stock
options were  exercised and 19,250 Golden State stock options were  cancelled or
expired under all plans.  During the three months ended March 31, 1999,  222,533
Golden State stock options were  exercised and 86,000 were  cancelled or expired
under all  plans.  At March 31,  2000,  options  to  acquire  an  equivalent  of
3,875,682 Golden State shares and 1,216,082 LTW(TM)s remained  outstanding under
all plans.

       On January 24,  2000,  Golden State  awarded to certain of its  employees
220,327 shares of restricted stock under the Golden State Bancorp Inc. Executive
Compensation  Plan.  The  market  value on the date of the award was  $14.00 per
share. These shares generally vest over two years in one-half  increments on the
anniversary of the grant date, based upon the continued service of the employee.
At March 31, 2000, a total of 277,235  restricted  shares was  outstanding.  The
compensation  expense  related to these awards are recognized on a straight line
basis over the vesting period for each tranche of the award with a corresponding
increase to additional paid-in capital.  During the three months ended March 31,
2000,  $0.6  million in  compensation  expense  was  recognized  related to such
awards. These restricted shares have full voting rights.

(9)    Newly Issued Accounting Pronouncements
       --------------------------------------

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS No. 133"). SFAS No. 133 was amended by
Statement of Financial  Accounting  Standards No. 137, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS  AND  HEDGING  ACTIVITIES-DEFERRAL  OF THE  EFFECTIVE  DATE  OF FASB
STATEMENT  NO. 133 ("SFAS No.  137").  SFAS No. 137  mandates  that SFAS No. 133
shall be effective for all fiscal  quarters of all fiscal years  beginning after
June 15, 2000. SFAS No. 133 requires that all derivative instruments be recorded
on the balance sheet at fair value. Changes in the fair value of derivatives are
recorded  each  period  in  current  earnings  or  other  comprehensive  income,
depending on the type of hedge transaction.


                                    Page 13

<PAGE>

                  GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


       Under SFAS No. 133, an entity  that elects to apply hedge  accounting  is
required to establish  at the  inception of the hedge the method it will use for
assessing  the  effectiveness  of the  hedging  derivative  and the  measurement
approach  for   determining  the   ineffective   portion  of  the  hedge.   Upon
implementation,  hedging  relationships  must be designated  anew and documented
pursuant to the provisions of this statement.

       For fair-value hedge transactions in which the Company is hedging changes
in the fair value of assets,  liabilities  or firm  commitments,  changes in the
fair value of the derivative  instrument  will generally be offset in the income
statement  by changes in the hedged  item's  fair  value.  For  cash-flow  hedge
transactions  in which the  Company is  hedging  the  variability  of cash flows
related  to a  variable-rate  asset,  liability,  or a  forecasted  transaction,
changes in the fair value of the derivative instrument will be reported in other
comprehensive  income.  The gains and losses on derivative  instruments that are
reported in other  comprehensive  income will be reclassified as earnings in the
periods in which  earnings are impacted by the  variability of the cash flows of
the hedged item.  The  ineffective  portion of all hedges will be  recognized in
current-period earnings.

       The  Company  has  identified  four  instruments  which  will  qualify as
derivatives  pursuant to SFAS No. 133. The hedge  instruments  used to hedge the
Company's  mortgage  servicing  rights will be  reported as a fair value  hedge,
while forward loan sale commitments,  deferred pair-offs and interest rate swaps
qualify as cash flow hedges.  On April 27, 2000, the Derivatives  Implementation
Group  of  the  FASB  issued   guidance   indicating  that  interest  rate  lock
commitments,  given by lending institutions to potential borrowers,  met the net
settlement  criteria  described  in  paragraph  nine of SFAS No.  133 and  would
therefore be considered derivative instruments.  The Bank is currently assessing
the impact of this guidance.

     SFAS No. 133 applies to all entities  and amends SFAS No. 107,  DISCLOSURES
ABOUT FAIR VALUES OF  FINANCIAL  INSTRUMENTS,  to include in  Statement  107 the
disclosure  provisions about  concentrations  of credit risk from Statement 105.
SFAS  No.  133  supersedes  FASB  Statements  No.  80,  ACCOUNTING  FOR  FUTURES
CONTRACTS,  No. 105, DISCLOSURE OF INFORMATION ABOUT FINANCIAL  INSTRUMENTS WITH
OFF-BALANCE SHEET RISK AND FINANCIAL  INSTRUMENTS WITH  CONCENTRATIONS OF CREDIT
RISK, and No. 119,  DISCLOSURE ABOUT DERIVATIVE  FINANCIAL  INSTRUMENTS AND FAIR
VALUE OF  FINANCIAL  INSTRUMENTS.  SFAS No. 133 also  nullifies  or modifies the
consensuses  reached in a number of issues addressed by the Emerging Issues Task
Force.

       One of the qualifying criteria for hedge accounting under SFAS No. 133 is
that the hedging relationship between the hedging instrument and the hedged item
must be highly effective in achieving the offset of changes in those fair values
or cash flows that are attributable to the hedged risk, both at the inception of
the hedge and on an  ongoing  basis.  An  assessment  of this  effectiveness  is
required  at least every  three  months and  whenever  financial  statements  or
earnings are reported by the Bank.

       The high-effectiveness  requirement has been interpreted to mean that the
cumulative  changes in the value of the hedging instrument since hedge inception
should be between  80% and 125% of the  inverse  cumulative  change  since hedge
inception in the fair value or cash flows of the hedged items.

       Early application of all of the provisions of SFAS No. 133 is encouraged,
but is  permitted  only as of the  beginning  of any fiscal  quarter that begins
after  issuance  of  this  statement.   SFAS  No.  133  should  not  be  applied
retroactively to financial statements of prior periods.

       SFAS No.  133 will  significantly  change  the  accounting  treatment  of
derivative  instruments  used by the  Bank.  Depending  on the  underlying  risk
management strategy,  these accounting changes could affect reported net income,
assets,  liabilities and stockholder's  equity. As a result, the Bank may choose
to  reconsider  its risk  management  strategies,  since  SFAS No.  133 will not
reflect  the results of many of those  strategies  in the same manner as current
accounting  practice.  The Bank  continues to evaluate the  potential  impact of
implementing  SFAS  No.  133.  An  accurate   assessment  of  the  Bank's  hedge
effectiveness  and hence,  the net impact of adopting  SFAS No. 133, will not be
possible until the FASB, which is currently both  interpreting and amending SFAS
No. 133 with regard to the  measurement  of hedge  effectiveness,  concludes its
deliberations, and until after the Bank has fully implemented hedging strategies
in accordance with the FASB's amendments and interpretations.


                                    Page 14

<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

       THE STATEMENTS  CONTAINED IN THIS REPORT ON FORM 10-Q THAT ARE NOT PURELY
HISTORICAL ARE  FORWARD-LOOKING  STATEMENTS WITHIN THE MEANING OF SECTION 27A OF
THE  SECURITIES  ACT OF 1933 AND SECTION 21E OF THE  SECURITIES  EXCHANGE ACT OF
1934,  INCLUDING STATEMENTS  REGARDING THE COMPANY'S  EXPECTATIONS,  INTENTIONS,
BELIEFS OR STRATEGIES REGARDING THE FUTURE.  FORWARD-LOOKING  STATEMENTS INCLUDE
THE COMPANY'S STATEMENTS REGARDING LIQUIDITY, PROVISION FOR LOAN LOSSES, CAPITAL
RESOURCES  AND  ANTICIPATED  EXPENSE  LEVELS  IN  "MANAGEMENT'S  DISCUSSION  AND
ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF  OPERATIONS."  IN ADDITION,  IN
THOSE AND OTHER PORTIONS OF THIS DOCUMENT,  THE WORDS  "ANTICIPATE,"  "BELIEVE,"
"ESTIMATE," "EXPECT," "INTEND," AND OTHER SIMILAR EXPRESSIONS, AS THEY RELATE TO
THE   COMPANY  OR  THE   COMPANY'S   MANAGEMENT,   ARE   INTENDED   TO  IDENTIFY
FORWARD-LOOKING  STATEMENTS.  SUCH  STATEMENTS  REFLECT THE CURRENT VIEWS OF THE
COMPANY  WITH  RESPECT  TO FUTURE  EVENTS  AND ARE  SUBJECT  TO  CERTAIN  RISKS,
UNCERTAINTIES AND ASSUMPTIONS. IT IS IMPORTANT TO NOTE THAT THE COMPANY'S ACTUAL
RESULTS COULD DIFFER  MATERIALLY  FROM THOSE  DESCRIBED  HEREIN AS  ANTICIPATED,
BELIEVED,  ESTIMATED OR EXPECTED.  AMONG THE FACTORS THAT COULD CAUSE RESULTS TO
DIFFER  MATERIALLY  ARE:  (A) CHANGES IN LEVELS OF MARKET  INTEREST  RATES,  (B)
CHANGES IN THE CALIFORNIA  ECONOMY OR CALIFORNIA REAL ESTATE VALUES, (C) CHANGES
IN THE LEVEL OF MORTGAGE LOAN  PREPAYMENTS,  (D) CHANGES IN FEDERAL BANKING LAWS
AND  REGULATIONS,  (E) ACTIONS BY THE COMPANY'S  COMPETITORS,  AND (F) THE RISKS
DESCRIBED IN THE "RISK FACTORS" SECTION  INCLUDED IN THE REGISTRATION  STATEMENT
ON FORM S-1 FILED BY GS HOLDINGS WITH THE SECURITIES AND EXCHANGE  COMMISSION ON
SEPTEMBER 29, 1998 (FILE NO.  333-64597) AND DECLARED  EFFECTIVE ON NOVEMBER 12,
1998.  THE  COMPANY  ASSUMES NO  OBLIGATION  TO UPDATE ANY SUCH  FORWARD-LOOKING
STATEMENT.

OVERVIEW

       The  principal  business  of GS  Holdings,  through  California  Federal,
consists of operating  retail  branches  that provide  deposit  products such as
demand, transaction and savings accounts, and investment products such as mutual
funds,  annuities and  insurance.  In addition,  it engages in mortgage  banking
activities,  including originating and purchasing 1-4 unit residential loans for
sale to various  investors in the  secondary  market or for retention in its own
portfolio,  and servicing loans for itself and others.  To a lesser extent,  the
Company  originates  and/or  purchases  commercial  real estate,  commercial and
consumer  loans for  investment.  Revenues are derived  primarily  from interest
earned on loans,  interest  received on  government  and agency  securities  and
mortgage-backed  securities,  gains on sales of loans and other  investments and
fees received in connection with loan servicing,  securities brokerage and other
customer  service  transactions.  Expenses  primarily  consist  of  interest  on
customer  deposit  accounts,  interest on short-term  and long-term  borrowings,
general and  administrative  expenses  consisting of compensation  and benefits,
data  processing,  occupancy and equipment,  communications,  deposit  insurance
assessments,  advertising and marketing, professional fees and other general and
administrative expenses.

       NET INCOME

       GS Holdings reported net income for the three months ended March 31, 2000
of  $249.5   million   compared  with  net  income  of  $73.9  million  for  the
corresponding  period in 1999.  Net income for the three  months ended March 31,
2000  included  a  tax  benefit  of  $161.7  million  and  gains  on  the  early
extinguishment  of debt, net of tax, of $1.2 million.  Excluding  these amounts,
net  income  for the three  months  ended  March 31,  2000 would have been $86.6
million.

       YEAR 2000

       The Company completed all major milestones in executing its comprehensive
plan to make its computer systems,  applications and facilities Year 2000 ready.
This  extensive  planning  process  resulted in a smooth  transition  during the
rollover to the Year 2000. No significant  Y2K-related events were reported, and
it was not necessary to activate any of the Company's  contingency  plans either
internally  or with  outside  vendors.  Special  attention  was  provided to the
possibility of Y2K-related  exceptions  throughout  January,  February and March
2000, but no material irregularities occurred. Staffing expenses incurred during
the first quarter of 2000 were less than anticipated.


                                    Page 15

<PAGE>


       The Company has completed all  activities  associated  with the Year 2000
project.  Costs related to making the Company's  computer systems,  applications
and facilities  Year 2000 compliant total  approximately  $17.3 million over the
years 1997 to 2000.  Noninterest  expense for the three  months  ended March 31,
2000 included less than $0.1 million in connection  with the Company's Year 2000
efforts.

       For  additional  information  regarding  the Year  2000  issue,  refer to
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations -- Year 2000" in the Company's 1999 Form 10-K.

       FINANCIAL CONDITION

       During the three months ended March 31, 2000,  consolidated  total assets
increased  $2.0  billion,  to $59.0  billion from  December 31, 1999,  and total
liabilities increased from $54.9 billion to $56.6 billion.

       During  the three  months  ended  March 31,  2000,  stockholder's  equity
increased $225.8 million to $1.9 billion.  The increase in stockholder's  equity
is  principally  the net result of $249.5  million in net income for the period,
partially  offset  by a  $20.5  million  net  unrealized  loss,  after  tax,  on
securities available for sale and $5.0 million in dividends to parent.

       The  unrealized  loss on  securities  available  for sale is  primarily a
result of a decline  in the value of the  Company's  mortgage-backed  securities
available  for sale due to an increase in Treasury  yields and wider  spreads on
private label collateralized mortgage obligations. This unrealized loss reflects
general  declines in the prices of fixed-rate  instruments  during the year as a
consequence  of rising  interest  rates,  which led to a slowing  of  prepayment
expectations and extended the expected lives of the mortgage-related  securities
in the portfolio.  The total  accumulated  unrealized loss represents a decline,
after tax, in the combined fair value of the  securities  available for sale and
mortgage-backed securities available for sale portfolios of approximately 2.0%.

       GS Holdings'  non-performing assets,  consisting of non-performing loans,
net of  purchase  accounting  adjustments,  foreclosed  real  estate,  net,  and
repossessed  assets,  decreased to $177 million at March 31, 2000  compared with
$200 million at December 31, 1999. Total  non-performing  assets as a percentage
of the Bank's  total  assets  decreased to 0.30% at March 31, 2000 from 0.35% at
December 31, 1999.


                                    Page 16

<PAGE>


RESULTS OF OPERATIONS

       THREE MONTHS  ENDED MARCH  31, 2000  VERSUS THREE  MONTHS ENDED MARCH 31,
       1999

       The following  table shows the  Company's  consolidated  average  balance
sheets,  with the  related  interest  income,  interest  expense and the average
interest rates for the periods  presented.  Average balances are calculated on a
daily basis.
<TABLE>
<CAPTION>
                                                                                  Three Months Ended March 31, 2000
                                                                                  ---------------------------------
                                                                                  Average                   Average
                                                                                  Balance      Interest       Rate
                                                                                  -------      --------       ----
                                                                                        (dollars in millions)
ASSETS
<S>                                                                               <C>            <C>           <C>
Interest-earning assets (1):
      Securities and interest-bearing deposits in banks (2)                       $ 1,427        $ 22         6.04%
      Mortgage-backed securities available for sale                                13,870         229         6.61
      Mortgage-backed securities held to maturity                                   2,080          39         7.57
      Loans held for sale, net                                                        714          13         7.46
      Loans receivable, net                                                        35,313         646         7.32
      FHLB stock                                                                    1,193          18         5.78
                                                                                  -------        ----
         Total interest-earning assets                                             54,597         967         7.08
                                                                                                 ----
Noninterest-earning assets                                                          2,763
                                                                                  -------
          Total assets                                                            $57,360
                                                                                  =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
      Deposits                                                                    $22,894         219         3.84
      Securities sold under agreements to repurchase (3)                            5,709          83         5.75
      Borrowings (3)                                                               25,773         378         5.90
                                                                                  -------        ----
         Total interest-bearing liabilities                                        54,376         680         5.03
                                                                                                 ----
Noninterest-bearing liabilities                                                       838
Minority interest                                                                     495
Stockholder's equity                                                                1,651
                                                                                  -------
           Total liabilities, minority interest
                   and  stockholder's equity                                      $57,360
                                                                                  =======
Net interest income                                                                              $287
                                                                                                 ====
Interest rate spread                                                                                          2.05%
                                                                                                             =====
Net interest margin                                                                                           2.08%
                                                                                                             =====

Return on average assets                                                                                      1.74%
                                                                                                             =====
Return on average equity                                                                                     60.47%
                                                                                                             =====
Average equity to average assets                                                                              2.88%
                                                                                                             =====
</TABLE>


                                    Page 17

<PAGE>


<TABLE>
<CAPTION>
                                                                    Three Months Ended March 31, 1999
                                                               ---------------------------------------------
                                                               Average                               Average
                                                               Balance           Interest              Rate
                                                               -------           --------              ----
ASSETS
<S>                                                            <C>                 <C>                <C>
Interest-earning assets (1):
     Securities and interest-bearing deposits in banks (2)     $ 1,444             $ 23                6.35%
     Mortgage-backed securities available for sale              12,993              204                6.28
     Mortgage-backed securities held to maturity                 2,643               50                7.63
     Loans held for sale, net                                    2,139               35                6.48
     Loans receivable, net                                      30,745              567                7.38
     FHLB stock                                                  1,043               14                5.27
                                                               -------             ----                7.01
         Total interest-earning assets                          51,007              893
                                                               -------             ----
Noninterest-earning assets                                       4,297
         Total assets                                          $55,304
                                                               =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                  $24,080              222                3.74
     Securities sold under agreements to repurchase              4,319               54                5.01
     Borrowings                                                 22,873              309                5.48
                                                               -------             ----
         Total interest-bearing liabilities                     51,272              585                4.63
                                                                                   ----
Noninterest-bearing liabilities                                  1,678
Minority interest                                                  590
Stockholder's equity                                             1,764
                                                               -------
         Total liabilities, minority interest
            and stockholder's equity                           $55,304
                                                               =======
Net interest income                                                                $308
                                                                                   ====
Interest rate spread                                                                                   2.38%
                                                                                                      =====
Net interest margin                                                                                    2.36%
                                                                                                      =====
Return on average assets                                                                               0.53%
                                                                                                      =====
Return on average equity                                                                              16.75%
                                                                                                      =====
Average equity to average assets                                                                       3.19%
                                                                                                      =====
</TABLE>
----------
(1)   Non-performing assets are included in the average balances for the periods
      indicated.

(2)   Includes  securities  held  to  maturity,  securities  available for sale,
      interest-bearing   deposits  in  other  banks  and  short-term  investment
      securities.

(3)   Interest and average rate include the impact of interest rate swaps.


                                    Page 18

<PAGE>


       The following  table shows what portion of the changes in interest income
and interest  expense were due to changes in rate and volume.  For each category
of  interest-earning  assets and  interest-bearing  liabilities,  information is
provided  on changes  attributable  to volume  (change  in  average  outstanding
balance  multiplied  by the prior  period's  rate) and rate  (change  in average
interest rate multiplied by the prior period's volume).  Changes attributable to
both volume and rate have been allocated proportionately.
<TABLE>
<CAPTION>
                                                                  Three Months Ended March 31, 2000 vs. 1999
                                                                          Increase (Decrease) Due to
                                                                  ------------------------------------------
                                                                      Volume          Rate           Net
                                                                      ------          ----           ---
INTEREST INCOME:                                                                  (in millions)
<S>                                                                    <C>            <C>           <C>
     Securities and interest-bearing deposits in banks                 $ --           $ (1)         $ (1)
     Mortgage-backed securities available for sale                       14             11            25
     Mortgage-backed securities held to maturity                        (11)            --           (11)
     Loans held for sale, net                                           (28)             6           (22)
     Loans receivable, net                                               84             (5)           79
     FHLB stock                                                           2              2             4
                                                                       ----           ----          ----
               Total                                                     61             13            74
                                                                       ----           ----          ----

INTEREST EXPENSE:

     Deposits                                                            (8)             5            (3)
     Securities sold under agreements to repurchase                      20              9            29
     Borrowings                                                          42             27            69
                                                                       ----           ----          ----
               Total                                                     54             41            95
                                                                       ----           ----          ----
                  Change in net interest income                        $  7           $(28)         $(21)
                                                                       ====           ====          ====
</TABLE>

       The volume  variances in total interest income and total interest expense
for the three months ended March 31, 2000 compared to the  corresponding  period
in  1999  are  largely  due  to   increased   loan  volume  and   purchases   of
mortgage-backed  securities  during  1999,  partially  offset by an  increase in
borrowings.

       INTEREST  INCOME.  Total interest income was $966.7 million for the three
months ended March 31, 2000,  an increase of $73.8 million from the three months
ended March 31, 1999. Total  interest-earning  assets for the three months ended
March 31,  2000  averaged  $54.6  billion,  compared  to $51.0  billion  for the
corresponding period in 1999, primarily as a result of increased loan volume and
purchases  of  mortgage-backed  securities  during  1999.  The  yield  on  total
interest-earning  assets during the three months ended March 31, 2000  increased
to 7.08% from 7.01% for the three months ended March 31, 1999,  primarily due to
a  higher   percentage   of  loans  to  total  earning   assets,   purchases  of
mortgage-backed  securities  with  higher  market  yields  during  1999  and the
repricing of variable-rate earning assets.

       GS Holdings earned $646.2 million of interest income on loans  receivable
for the three months ended March 31, 2000, an increase of $78.9 million from the
three months ended March 31, 1999. The average  balance of loans  receivable was
$35.3  billion  for the three  months  ended March 31,  2000,  compared to $30.7
billion  for the  same  period  in  1999.  The  weighted  average  rate on loans
receivable  decreased  to 7.32% for the three  months  ended March 31, 2000 from
7.38% for the three  months  ended  March 31,  1999.  The changes in the average
balance  and  weighted  average  rate  reflect  the  impact of  originations  of
mortgages with low introductory interest rates during the fourth quarter of 1999
and the first quarter of 2000,  offset in part by the repricing of variable-rate
loans.

       GS Holdings  earned  $13.3  million of interest  income on loans held for
sale for the three months ended March 31, 2000, a decrease of $21.3 million from
the three  months ended March 31,  1999.  The average  balance of loans held for
sale was $0.7  billion for the three  months ended March 31, 2000, a decrease of
$1.4 billion from the comparable period in 1999, primarily due to a reduction in
fixed-rate  originations  due to the current rising  interest rate  environment,
coupled  with  longer  holding  periods for loans held for sale during the three
months  ended March


                                    Page 19

<PAGE>


31, 1999.  The weighted  average rate on loans held for sale increased  to 7.46%
for the three months ended March 31, 2000 from 6.48% for the three  months ended
March 31, 1999,  primarily due to increasing  market interest rates.

       Interest  income on  mortgage-backed  securities  available  for sale was
$229.1  million for the three months ended March 31, 2000,  an increase of $25.0
million  from the three  months  ended March 31,  1999.  The  average  portfolio
balances  increased $0.9 billion,  to $13.9 billion,  for the three months ended
March 31, 2000 compared to the same period in 1999.  The weighted  average yield
on these assets  increased  from 6.28% for the three months ended March 31, 1999
to 6.61% for the three months  ended March 31, 2000.  The increase in the volume
and the weighted average yield is primarily due to purchases of  mortgage-backed
securities with higher market yields during 1999 and lower premium  amortization
associated with slower prepayment of variable-rate securities during 2000.

       Interest income on mortgage-backed  securities held to maturity was $39.4
million for the three months  ended March 31, 2000, a decrease of $11.1  million
from the three  months  ended  March 31,  1999.  The average  portfolio  balance
decreased  $563 million,  to $2.1 billion,  for the three months ended March 31,
2000 compared to the same period in 1999, primarily attributed to an increase in
principal  paydowns  on such  securities.  The run-off in these  securities  was
replaced with the  origination and purchase of whole loans instead of additional
mortgage-backed securities,  evidenced by only $38.9 million in purchases during
the  quarter  ended March 31, 2000  compared to $2.6  billion in such  purchases
during the same period in 1999. The weighted  average rates for the three months
ended March 31, 2000 and 1999 were 7.57% and 7.63%, respectively.

       Interest  income on  securities  and  interest-bearing  deposits in other
banks was $21.6 million for the three months ended March 31, 2000, a decrease of
$1.3 million from the three months ended March 31, 1999.  The average  portfolio
balance was $1.4  billion for each of the three  months ended March 31, 1999 and
2000. The lower weighted  average rate of 6.04% for the three months ended March
31, 2000  compared to 6.35% for the three months  ended March 31, 1999  reflects
interest earned in 1999 on the investment of proceeds from the assumption of the
GS Holdings Notes.

       Dividends  on FHLB stock were $17.1  million for the three  months  ended
March 31,  2000,  an increase of $3.6  million from the three months ended March
31, 1999, due to an increase in the amount of such stock owned by the Company as
a result of an increase in borrowings  under FHLB advances.  The average balance
outstanding  during  the three  months  ended  March 31,  2000 and 1999 was $1.2
billion and $1.0 billion,  respectively.  The weighted  average dividend on FHLB
stock  increased  to 5.78% for the three  months ended March 31, 2000 from 5.27%
for the three months ended March 31, 1999.

       INTEREST EXPENSE. Total interest expense was $679.6 million for the three
months ended March 31, 2000,  an increase of $94.7 million from the three months
ended  March 31,  1999.  The  increase  is  primarily  the result of  additional
borrowings   under  FHLB  advances  and  securities  sold  under  agreements  to
repurchase  used to fund loans and to  purchase  mortgage-backed  securities  in
1999.

       Interest expense on customer deposits,  including brokered deposits,  was
$218.8  million for the three  months  ended March 31,  2000, a decrease of $3.2
million  from the three  months  ended March 31,  1999.  The average  balance of
customer deposits outstanding  decreased from $24.1 billion for the three months
ended March 31, 1999 to $22.9 billion for the three months ended March 31, 2000.
The decrease in the average balance is primarily due to lower custodial  account
balances as a result of lower  prepayment  rates on loans  serviced  for others.
Partially  offsetting  this  decrease is $543  million in deposits at an average
cost of 3.71%,  which were  assumed in the Nevada  Purchase in April  1999.  The
overall  weighted  average  cost of  deposits  increased  to 3.84% for the three
months  ended  March 31,  2000 from 3.74% for the three  months  ended March 31,
1999, primarily due to rising market interest rates.

       Interest  expense on  securities  sold  under  agreements  to  repurchase
totalled $82.9 million for the three months ended March 31, 2000, an increase of
$28.9 million from the three months ended March 31, 1999. The average


                                    Page 20

<PAGE>


balance of such  borrowings  for the three  months ended March 31, 2000 and 1999
was $5.7  billion and $4.3  billion,  respectively.  The  increase is  primarily
attributed  to the  funding  of  loans  and  the  purchases  of  mortgage-backed
securities in 1999, as well as deposit  run-off.  The weighted  average interest
rate on these  instruments  increased  to 5.75% for the three months ended March
31, 2000 from 5.01% for the three months ended March 31, 1999,  primarily due to
an increase in market rates on new borrowings in 2000 compared to 1999.

       Interest  expense on  borrowings  totalled  $377.9  million for the three
months ended March 31, 2000,  an increase of $69.0 million from the three months
ended March 31, 1999. The average balance outstanding for the three months ended
March 31, 2000 and 1999 was $25.8 billion and $22.9 billion,  respectively.  The
weighted average interest rate on these  instruments  increased to 5.90% for the
three  months  ended March 31, 2000 from 5.48% for the three  months ended March
31, 1999,  primarily due to higher  prevailing  market rates in 2000. The higher
volume  reflects  the  increase  in FHLB  advances  used to fund  loans  and the
purchases of mortgage-backed securities in 1999.

       NET INTEREST INCOME. Net interest income was $287.1 million for the three
months ended March 31,  2000, a decrease of $20.9  million from the three months
ended March 31, 1999.  The interest rate spread  declined to 2.05% for the three
months  ended  March 31,  2000 from 2.38% for the three  months  ended March 31,
1999,  primarily  as a  result  of  maturities  and  repayments  of  lower  rate
interest-bearing  liabilities being replaced with  interest-bearing  liabilities
having comparatively higher rates. The effect of higher rates on liabilities was
partially  offset by higher  yielding  assets  replenishing  asset  run-off in a
rising rate environment.

       NONINTEREST  INCOME.  Total noninterest income,  consisting  primarily of
loan servicing  fees,  customer  banking fees and gains on sales of assets,  was
$110.2  million for the three  months  ended  March 31,  2000,  representing  an
increase of $4.1 million from the three months ended March 31, 1999.

       Loan servicing fees, net of amortization  of mortgage  servicing  rights,
were $44.9 million for the three months ended March 31, 2000,  compared to $36.0
million for the three months ended March 31, 1999. The single-family residential
loan servicing portfolio,  excluding loans serviced for the Bank, increased from
$66.4 billion at March 31, 1999 to $76.2 billion at March 31, 2000.  Incremental
loan  servicing  fees  were  partially  offset  by  amortization  of  MSRs.  MSR
amortization  for the quarter  decreased  by $4.6  million from the three months
ended  March  31,  1999  due to a  reduction  in the  assumed  prepayment  rate,
partially  offset by a higher MSR basis.  Loan servicing fees benefited from the
slowdown in mortgage loan  prepayments in 2000, with an average  prepayment rate
on loans serviced for others of 7% in the first quarter of 2000, compared to 25%
in the comparable period in 1999.

       Customer banking fees were $48.7 million for the three months ended March
31, 2000  compared to $44.7  million for the three  months ended March 31, 1999.
The increase is primarily  attributed  to increased  emphasis by  management  on
transaction  account growth and the impact of revenues from the deposits assumed
in the Nevada Purchase.

       Gain on sale and  settlement of loans,  net totalled $6.7 million for the
three  months  ended March 31,  2000,  a decrease of $8.9 million from the three
months ended March 31, 1999. Gains attributed to early payoffs and settlement of
commercial  loans with  unamortized  discounts  were $2.5 million  lower in 2000
compared  to 1999.  During the three  months  ended March 31,  2000,  California
Federal sold $1.1 billion in  single-family  mortgage loans  originated for sale
with  servicing  rights  retained  as  part  of  its  ongoing  mortgage  banking
operations  compared to $3.2 billion of such sales for the corresponding  period
in 1999.

       NONINTEREST EXPENSE. Total noninterest expense was $225.3 million for the
three months ended March 31, 2000, a decrease of $28.2  million  compared to the
three  months  ended March 31,  1999.  The  variance  between the two periods is
primarily  attributed  to continued  expense  reduction  efforts by the Company.
Noninterest expense for the three months ended March 31, 2000 included decreases
of $13.1  million in other  noninterest  expense,  $6.1 million in loan expense,
$6.1 million in merger and integration costs incurred in 1999 in connection with
the Golden  State  Acquisition,  and $5.2  million in  professional  fees.  This
decrease was  partially  offset by an increase of $5.2  million in  compensation
expense.


                                    Page 21

<PAGE>


       Compensation  and employee  benefits  expense was $107.8  million for the
three months  ended March 31,  2000,  an increase of $5.2 million from the three
months ended March 31, 1999.  The  increase is  primarily  attributed  to normal
salary adjustments.

       Merger and integration costs were $6.1 million for the three months ended
March 31, 1999,  representing  transition  expenses,  which  include  severance,
conversion and consolidation  costs incurred in connection with the Golden State
Acquisition. Such costs were not incurred during the first quarter of 2000.

       Amortization of intangible  assets was $16.4 million for the three months
ended March 31,  2000,  a decrease of $0.7  million  from the three months ended
March 31, 1999,  primarily  attributed  to a lower  goodwill base due to a $38.2
million reduction resulting from an income tax refund received during the fourth
quarter of 1999 related to Old California  Federal.  This decrease was partially
offset by amortization  expense related to goodwill  recorded in connection with
the Downey Acquisition and the Nevada Purchase.

       Other  noninterest  expense was $51.2  million in 2000  compared to $64.3
million in 1999.  The decline in operating  expenses is primarily  attributed to
management's continued expense reduction efforts.

       PROVISION  FOR INCOME TAX.  During the three  months ended March 31, 2000
and 1999, GS Holdings  recorded income tax (benefit)  expense of $(82.9) million
and $72.4  million,  respectively.  Based on  favorable  resolutions  of federal
income tax audits of Old California Federal and Glendale Federal and the current
status of Mafco's,  including the  Company's,  audits for the years 1991 through
1995,  management  changed its judgment  about  realizability  of the  Company's
deferred tax asset and reduced its valuation  allowance by $211.7 million during
the  three-month  period  ended  March 31,  2000.  As a result of  reducing  the
valuation  allowance,  income tax  expense  was  reduced by $161.7  million  and
goodwill was reduced by $50.0 million.

       GS  Holdings'  effective  federal  tax rate was (56)% and 39%  during the
three  months  ended  March 31, 2000 and 1999,  respectively,  while its federal
statutory tax rate was 35%. For the period ended March 31, 2000,  the difference
between the effective and statutory rates was the result of the reduction in the
deferred  tax asset  valuation  allowance,  partially  offset  by  nondeductible
goodwill  amortization.  For the period  ended March 31,  1999,  the  difference
between  the  effective  and  statutory   rates  was  primarily  the  result  of
nondeductible goodwill  amortization.  GS Holdings' effective state tax rate was
8% during each of the three months ended March 31, 2000 and 1999.

       MINORITY INTEREST.  Dividends on the REIT Preferred Stock totalling $11.4
million were  recorded  during each of the three months ended March 31, 2000 and
1999. Minority interest relative to the REIT Preferred Stock is reflected net of
related income tax benefit of $4.8 million, which will inure to the Company as a
result of the deductibility of such dividends for income tax purposes.

       During the three  months  ended March 31, 1999,  minority  interest  also
included dividends on the Bank Preferred Stock that had not yet been acquired by
GS  Holdings  totalling  $0.9  million  and  a  $1.7  million  benefit  reversal
representing that portion of Auto One's loss attributable to the 20% interest in
the common stock of Auto One that was issued as part of the GSAC Acquisition.

PROVISION FOR LOAN LOSSES

       The adequacy of the allowance for loan losses is  periodically  evaluated
by  management to maintain the allowance at a level that is sufficient to absorb
expected  loan losses.  The allowance for loan losses is increased by provisions
for loan  losses as well as by balances  acquired  through  acquisitions  and is
decreased  by  charge-offs  (net of  recoveries).  The Company  charges  current
earnings with a provision for estimated credit losses on loans  receivable.  The
provision considers both specifically identified problem loans as well as credit
risks not  specifically  identified in the loan  portfolio.  See -- "Problem and
Potential Problem Assets" for a discussion of the methodology


                                    Page 22

<PAGE>


used in determining  the adequacy of the allowance for loan losses.  The Company
recorded no provision for loan losses during the first quarter of 2000, and a $5
million provision for loan losses during the three months ended March 31, 1999.

       The  decrease in the  provision  for loan losses  during the  three-month
period  ended  March 31,  2000  compared  to the same  period  in 1999  reflects
management's  evaluation of the adequacy of the allowance  based on, among other
things, past loan loss experience and known and inherent risks in the portfolio,
evidenced  in  part  by  the  continued   decline  in  the  Company's  level  of
non-performing  assets.  In addition,  management's  periodic  evaluation of the
adequacy of the allowance for loan losses considers potential adverse situations
that have occurred but are not yet known that may affect the borrower's  ability
to repay, the estimated value of underlying collateral and economic conditions.

       Activity in the allowance for loan losses is as follows (in thousands):
<TABLE>
<CAPTION>
                                                          Three Months Ended March 31,
                                                          ----------------------------
                                                            2000                1999
                                                            ----                ----
<S>                                                       <C>                 <C>
      Balance - beginning of period                       $554,893            $588,533
           Provision for loan losses                            --               5,000
           Charge-offs                                     (12,470)            (10,304)
           Recoveries                                          765                 655
           Reclassification                                     --                (670)
                                                          --------            --------
      Balance - end of period                             $543,188            $583,214
                                                          ========            ========
</TABLE>

       Although  management  believes  that the  allowance  for loan  losses  is
adequate,  it will continue to review its loan portfolio to determine the extent
to which any  changes in  economic  conditions  or loss  experience  may require
further provisions in the future.

PROBLEM AND POTENTIAL PROBLEM ASSETS

       The  Company   considers  a  loan  impaired  when,   based  upon  current
information  and events,  it is "probable" that it will be unable to collect all
amounts due (i.e.,  both  principal and interest)  according to the  contractual
terms of the loan agreement.  Any insignificant delay or insignificant shortfall
in  amount  of  payments  will not cause a loan to be  considered  impaired.  In
determining  impairment,  the  Company  considers  large  non-homogeneous  loans
including nonaccrual loans,  troubled debt restructurings,  and performing loans
that exhibit,  among other  characteristics,  high LTV ratios, low debt-coverage
ratios or other indications that the borrowers are experiencing increased levels
of financial  difficulty.  Loans  collectively  reviewed for  impairment  by the
Company include all single-family  loans,  business banking loans under $100,000
and performing  multi-family  and commercial  real estate loans under  $500,000,
excluding loans which have entered the work-out process.

       The  measurement  of impairment  may be based on (a) the present value of
the expected  future cash flows of the impaired  loan  discounted  at the loan's
original  effective  interest  rate,  (b) the  observable  market  price  of the
impaired loan, or (c) the fair value of the collateral of a collateral-dependent
loan. The Company bases the measurement of  collateral-dependent  impaired loans
on the fair value of the loan's collateral,  less disposal costs. The amount, if
any, by which the  recorded  investment  of the loan  exceeds the measure of the
impaired  loan's value is recognized by recording a valuation  allowance.  Large
groups of smaller  balance  homogeneous  loans are  collectively  evaluated  for
impairment.

       Cash receipts on impaired loans not  performing  according to contractual
terms are generally  used to reduce the carrying  value of the loan,  unless the
Company  believes it will recover the remaining  principal  balance of the loan.
Impairment  losses  are  included  in  the  allowance  for  loan  losses.   Upon
disposition of an impaired loan, loss of principal,  if any, is recorded through
a charge-off to the allowance for loan losses.


                                    Page 23

<PAGE>


       At March 31, 2000,  loans that were  considered  to be impaired  totalled
$114.7 million (of which $17.2 million were on nonaccrual  status).  The average
recorded  investment in impaired loans during the three-month period ended March
31, 2000 was  approximately  $127.9 million.  For the  three-month  period ended
March 31, 2000, GS Holdings  recognized  interest income on those impaired loans
of $2.6 million, which included $0.8 million of interest income recognized using
the cash basis method of income recognition.

       The  following  table  presents  the  Company's   non-performing   loans,
foreclosed real estate,  repossessed  assets,  troubled debt  restructurings and
impaired  loans as of the dates  indicated.  These  categories  are not mutually
exclusive; certain loans are included in more than one classification. Purchased
sub-prime auto loans are reflected as  non-performing,  impaired or restructured
using each individual loan's contractual unpaid principal balance.
<TABLE>
<CAPTION>
                                                                        March 31, 2000
                                                      ----------------------------------------------------
                                                      Non-performing         Impaired         Restructured
                                                      --------------         --------         ------------
                                                                           (in millions)
<S>                                                        <C>                 <C>                <C>
  Real Estate:
      1-4 unit residential                                 $112                $  1               $ 1
      5+ unit residential                                     6                  33                --
      Commercial and other                                    7                  53                --
      Land                                                   --                   1                --
      Construction                                           --                  --                --
                                                           ----                ----               ---
             Total real estate                              125                  88                 1
  Non-real estate                                            10                  27                --
                                                           ----                ----               ---
         Total loans                                        135  (a)           $115  (b)          $ 1
                                                                               ====               ===
  Foreclosed real estate, net                                37
  Repossessed assets                                          5
                                                           ----
         Total non-performing assets                       $177
                                                           ====
</TABLE>

<TABLE>
<CAPTION>
                                                                        March 31, 2000
                                                      ----------------------------------------------------
                                                      Non-performing         Impaired         Restructured
                                                      --------------         --------         ------------
                                                                           (in millions)
<S>                                                        <C>                 <C>                 <C>
  Real Estate:
     1-4 unit residential                                  $126                $ --                $ 2
     5+ unit residential                                      6                  34                  5
     Commercial and other                                     8                  67                 18
     Land                                                    --                   2                 --
     Construction                                            --                  --                 --
                                                           ----                ----                ---
         Total real estate                                  140                 103                 25
  Non-real estate                                            11                  21                 --
                                                           ----                ----                ---
         Total loans                                        151  (a)           $124  (b)           $25
                                                                               ====                ===
  Foreclosed real estate, net                                45
  Repossessed assets                                          4
                                                           ----
         Total non-performing assets                       $200
                                                           ====
</TABLE>

-------------
(a)  Includes loans securitized with recourse on  non-performing  status of $1.4
     million  and  $2.0  million  at  March  31,  2000 and  December  31,  1999,
     respectively.

(b)  Includes $17.2 million and $18.9 million of  non-performing  loans at March
     31, 2000 and December 31, 1999,  respectively.  Also  includes $9.0 million
     and $13.7 million of loans  classified as troubled debt  restructurings  at
     March 31, 2000 and December 31, 1999, respectively.

       There were no accruing  loans  contractually  past due 90 days or more at
March 31, 2000 or December 31, 1999.


                                    Page 24

<PAGE>


       The Company's  non-performing  assets,  consisting  of nonaccrual  loans,
repossessed assets and foreclosed real estate, net, decreased to $177 million at
March 31, 2000, from $200 million at December 31, 1999. Non-performing assets as
a percentage  of the Bank's  total assets  decreased to 0.30% at March 31, 2000,
from 0.35% at December 31, 1999.

       The Company  places a high degree of  emphasis on the  management  of its
asset  portfolio.  The Company has three  distinct asset  management  functions:
performing  loan asset  management,  problem  loan asset  management  and credit
review.  Each of these three  functions  is charged with the  responsibility  of
reducing the risk profile within the  commercial,  multi-family  and other asset
portfolios by applying asset management and risk evaluation  techniques that are
consistent  with the  Company's  portfolio  management  strategy and  regulatory
requirements. In addition to these asset management functions, the Company has a
specialized credit risk management group that is charged with the development of
credit policies and performing credit risk analyses for all asset portfolios.

       The  following  table  presents  non-performing  real  estate  assets  by
geographic region of the country as of March 31, 2000:
<TABLE>
<CAPTION>
                                                                                Total
                                     Non-performing        Foreclosed       Non-performing
                                       Real Estate        Real Estate,        Real Estate      Geographic
                                     Loans, Net (2)          Net (2)            Assets        Concentration
                                     --------------          -------            ------        -------------
                                                               (dollars in millions)
<S>                                      <C>                   <C>               <C>               <C>
     Region:
         California                      $ 72                  $17               $ 89               55%
         Northeast (1)                     15                    4                 19               12
         Other regions                     38                   16                 54               33
                                         ----                  ---               ----              ---
              Total                      $125                  $37               $162              100%
                                         ====                  ===               ====              ===
</TABLE>
_______________
(1) Consists of Connecticut,  Massachusetts, New Hampshire, New Jersey, New York
    Pennsylvania, Rhode Island, Delaware, Maine and Vermont.

(2) Net of purchase accounting adjustments.

       At March  31,  2000,  the  Company's  largest  non-performing  asset  was
approximately $3.3 million, and it had two non-performing assets over $2 million
in size with balances averaging  approximately $2.2 million.  At March 31, 2000,
the Company had 1,059 non-performing  assets below $2 million in size, including
1,002 non-performing 1-4 unit residential assets.

       An  allowance  is  maintained  to  absorb  losses  inherent  in the  loan
portfolio.  The adequacy of the allowance is periodically evaluated and is based
on past loan loss  experience,  known and inherent risks in the loan  portfolio,
adverse  situations that have occurred but are not yet known that may affect the
borrower's  ability to repay,  the estimated value of underlying  collateral and
economic conditions.  Management's methodology for assessing the adequacy of the
allowance  includes the  evaluation  of the following  three key  elements:  the
formula  allowance,  specific  allowances for  identified  problem loans and the
unallocated allowance.

       The formula  allowance is determined by applying loss factors against all
non-impaired  loans. Loss factors may be adjusted for significant  factors that,
in management's  judgment,  affect the collectibility of the portfolio as of the
evaluation  date.  Loss factors are  calculated  based on migration  models that
estimate the probability that loans will become delinquent and ultimately result
in foreclosure over a period of between one and 2.5 years, depending on the loan
type, and the rates of loss that have been experienced on foreclosed  loans. The
foreclosure  migration and loss  severity  rates are then averaged over the past
eight  years in order to  capture  experience  across a period  that  management
believes  approximates a business  cycle. A contingency  factor is then added to
provide for the modeling risk associated with imprecision in estimating inherent
loan losses.


                                    Page 25

<PAGE>


       The  specific   allowances  are  established  against  individual  loans,
including  impaired  loans in  accordance  with  SFAS  No.  114,  ACCOUNTING  BY
CREDITORS FOR IMPAIRMENT OF A LOAN.  Specific allowances are established against
individual residential 1-4 mortgage loans,  commercial loans and commercial real
estate loans for which  management  has performed  analyses and concluded  that,
based on current  information  and events,  it is probable that the Bank will be
unable to collect all amounts due according to the contractual terms of the loan
agreement. Generally, management believes that collectibility is improbable if a
loan is severely delinquent or if it has been determined that borrower cash flow
is inadequate for debt repayment. The amount of specific allowance is determined
by an estimation of collateral deficiency, including consideration of costs that
will likely be incurred through the disposal of any repossessed  collateral.  In
other words, management estimates the fair value of collateral,  net of the cost
of disposition of the collateral, and the fair value is compared to the net book
value of the loan.  If the net book value  exceeds  the fair  value,  a specific
allowance is established in an amount equal to the excess.  Loans  evaluated for
specific allowance are excluded from the formula allowance analysis so as not to
double-count loss exposure.

       The  unallocated  allowance is established  for inherent losses which may
not have been identified through the more objective processes used to derive the
formula and  specific  portions of the  allowance.  The  unallocated  portion is
necessarily  more  subjective and requires a high degree of management  judgment
and  experience.  Management  has  identified  several  factors  that impact the
potential for credit losses that are not considered in either the formula or the
specific  allowance  segments.  These factors consist of industry and geographic
loan  concentrations,  changes in the  composition  of loan  portfolios  through
acquisitions and new business strategies, changes in underwriting processes, and
trends in problem  loan and loss  recovery  rates.  Each factor is analyzed  and
assigned a range of values.  At this time,  management has chosen an unallocated
allowance amount at the mid-point of the range for each factor.

       At March 31,  2000,  the  allowance  for loan  losses  was $543  million,
consisting of a $375 million formula allowance, a $29 million specific allowance
and a $139 million unallocated allowance.

       Although the loan loss  allowance has been  allocated by type of loan for
internal valuation purposes,  $512 million of the allowance is general in nature
and is available to support any losses which may occur,  regardless  of type, in
the Company's loan  portfolio.  A summary of the activity in the total allowance
for loan losses by loan type is as follows:
<TABLE>
<CAPTION>
                                                                      5+ Unit
                                                                    Residential
                                                 1-4 Unit         and Commercial            Consumer
                                                Residential         Real Estate             and Other           Total
                                                -----------         -----------             ---------           -----
                                                                   (in millions)
<S>                                                <C>                 <C>                     <C>
Balance - December 31, 1999                        $235                $276                    $44              $555
     Provision for loan losses                       --                  (1)                     1                --
     Charge-offs                                     (2)                 (4)                    (7)              (13)
     Recoveries                                      --                  --                      1                 1
                                                   ----                ----                    ---              ----
Balance - March 31, 2000                           $233                $271                    $39              $543
                                                   ====                ====                    ===              ====
</TABLE>


                                    Page 26

<PAGE>


ASSET AND LIABILITY MANAGEMENT

       Banks and savings  associations  are subject to interest rate risk to the
degree  that  their  interest-bearing  liabilities,  consisting  principally  of
deposits,  securities  sold under  agreements to repurchase  and FHLB  advances,
mature or reprice more or less frequently,  or on a different basis,  than their
interest-earning assets. A key element of the banking business is the monitoring
and management of liquidity risk and interest rate risk. The process of planning
and controlling  asset and liability mixes,  volumes and maturities to influence
the net interest  spread is referred to as asset and liability  management.  The
objective of the Company's asset and liability management is to maximize its net
interest  income  over  changing  interest  rate cycles  within the  constraints
imposed by prudent lending and investing practices,  liquidity needs and capital
planning.

       GS Holdings,  through the Bank,  actively pursues  investment and funding
strategies intended to minimize the sensitivity of its earnings to interest rate
fluctuations.  The Company measures the interest rate sensitivity of its balance
sheet  through gap and duration  analysis,  as well as net  interest  income and
market value simulation. After taking into consideration both the variability of
rates and the maturities of various  instruments,  it evaluates strategies which
may reduce the  sensitivity  of its  earnings to interest  rate and market value
fluctuations.  An  important  decision  is  the  selection  of  interest-bearing
liabilities  and the  generation  of  interest-earning  assets  which best match
relative to interest  rate  changes.  In order to reduce  interest  rate risk by
increasing  the  percentage  of  interest  sensitive  assets,  the  Company  has
continued its emphasis on the  origination of adjustable  rate mortgage  ("ARM")
products for its portfolio.  Where possible, the Company seeks to originate real
estate and other loans that reprice  frequently  and that on the whole adjust in
accordance  with  the  repricing  of  its   liabilities.   At  March  31,  2000,
approximately 77% of the Company's loan portfolio consisted of ARMs.

       One of the  most  important  sources  of the  Bank's  net  income  is net
interest  income,  which is the difference  between the combined yield earned on
interest-earning   assets  and  the  combined  rate  paid  on   interest-bearing
liabilities.  Net interest income is also dependent on the relative  balances of
interest-earning assets and interest-bearing liabilities.

       ARMs have,  from time to time,  been  offered  with low initial  interest
rates as marketing inducements.  In addition,  most ARMs are subject to periodic
interest rate adjustment  caps or floors.  In a period of rising interest rates,
ARMs could reach a periodic  adjustment cap while still at a rate  significantly
below their  contractual  margin over  existing  market rates.  Since  repricing
liabilities   are  typically  not  subject  to  such  interest  rate  adjustment
constraints,  the Company's net interest  margin would most likely be negatively
impacted in this situation. Certain ARMs now offered by the Company have a fixed
monthly  payment  for a given  period,  with any  changes  as a result of market
interest  rates  reflected  in the unpaid  principal  balance  through  negative
amortization.

       A traditional  measure of interest rate risk within the savings  industry
is the interest rate sensitivity  gap, which is the sum of all  interest-earning
assets minus the sum of all  interest-bearing  liabilities to be repriced within
the same period.  A gap is considered  positive when the amount of interest rate
sensitive assets exceed interest rate sensitive liabilities,  while the opposite
results in a negative gap.  During a period of rising interest rates, a negative
gap would tend to adversely affect net interest income, and a positive gap would
tend to result in an increase in net interest income. During a period of falling
rates, the opposite would tend to occur.


                                    Page 27

<PAGE>


      The  following  table  sets  forth the  projected  maturities  based upon
contractual  maturities as adjusted for  projected  prepayments  and  "repricing
mechanisms"  (provisions  for  changes  in the  interest  rates  of  assets  and
liabilities).  Prepayment rates are assumed in each period on substantially  all
of the Company's loan portfolio based upon expected loan prepayments.  Repricing
mechanisms on the Company's  assets are subject to limitations,  such as caps on
the  amount  that  interest   rates  and  payments  on  its  loans  may  adjust.
Accordingly,  such  assets  may not  respond  in the same  manner or to the same
extent to changes in interest rates as the Company's  liabilities.  In addition,
the interest rate  sensitivity of the assets and liabilities  illustrated in the
table would vary  substantially if different  assumptions were used or if actual
experience  differed from the  assumptions  set forth.  The Company's  estimated
interest rate sensitivity gap at March 31, 2000 was as follows:
<TABLE>
<CAPTION>
                                                                         Maturity/Rate Sensitivity
                                                    -------------------------------------------------------------
                                                    Within          1-5         Over 5     Noninterest
                                                    1 Year         Years        Years        Bearing        Total
                                                    ------         -----        -----        -------        -----
                                                                           (dollars in millions)
<S>                                                 <C>           <C>           <C>          <C>           <C>
INTEREST-EARNING ASSETS:
Securities held to maturity, interest-bearing
     deposits in other banks and short-term
     investment securities(1)(2)                    $   181       $    --       $   85       $   --        $   266
Securities available for sale (3)                     1,066            --           --           --          1,066
Mortgage-backed securities
     available for sale (3)                          13,318            --           --           --         13,318
Mortgage-backed securities
     held to maturity (1)(4)                          2,013            19           18           --          2,050
Loans held for sale, net (3)                            687            --           --           --            687
Loans receivable, net (1)(5)                         18,979        12,533        5,030           --         36,542
Investment in FHLB                                    1,258            --           --           --          1,258
                                                    -------       -------       ------       ------        -------
     Total interest-earning assets                   37,502        12,552        5,133           --         55,187
Noninterest-earning assets                               --            --           --        3,845          3,845
                                                    -------       -------       ------       ------        -------
                                                    $37,502       $12,552       $5,133       $3,845        $59,032
                                                    =======       =======       ======       ======        =======

INTEREST-BEARING LIABILITIES:
Deposits (6)                                        $20,051       $ 2,988       $    9       $   --        $23,048
Securities sold under agreements to
     repurchase (1)                                   5,354            --           --           --          5,354
FHLB advances (1)                                    14,442        10,836           --           --         25,278
Other borrowings (1)                                     26         1,201          892           --          2,119
                                                    -------       -------       ------       ------         ------
     Total interest-bearing liabilities              39,873        15,025          901           --         55,799
Noninterest-bearing liabilities                          --            --           --          846            846
Minority interest                                        --            --           --          500            500
Stockholder's equity                                     --            --           --        1,887          1,887
                                                    -------       -------       ------       ------        -------
                                                    $39,873       $15,025       $  901       $3,233        $59,032
                                                    =======       =======       ======       ======        =======

Gap before interest rate swap agreements            $(2,371)      $(2,473)      $4,232                     $  (612)
Interest rate swap agreements                         3,250        (2,350)        (900)                         --
                                                    -------       -------       ------                     -------
Gap                                                 $   879       $(4,823)      $3,332                     $  (612)
                                                    =======       =======       ======                     =======

Cumulative gap                                      $   879       $(3,944)      $ (612)                    $  (612)
                                                    =======       =======       ======                     =======

Gap as a percentage of total assets                    1.49%        (8.17)%       5.64%                      (1.04)%
                                                    =======       =======       ======                     =======

Cumulative gap as a percentage of total assets         1.49%        (6.68)%      (1.04)%                     (1.04)%
                                                    =======       =======       ======                     =======

                                                                                                         (Continued)
</TABLE>


                                    Page 28

<PAGE>

_______________
(1)  Based upon (a)  contractual  maturity,  (b) instrument  repricing  date, if
     applicable,  and (c) projected repayments and prepayments of principal,  if
     applicable.  Prepayments  were estimated  generally by using the prepayment
     rates forecast by various large  brokerage  firms as of March 31, 2000. The
     actual   maturity  and  rate   sensitivity   of  these  assets  could  vary
     substantially if future prepayments differ from prepayment estimates.

(2)  Consists of $165 million of  securities  held to  maturity,  $76 million of
     short-term  investment  securities  and  $25  million  of  interest-bearing
     deposits in other banks.

(3)  As securities and mortgage-backed  securities  available for sale and loans
     held  for sale may be sold  within  one  year,  they are  considered  to be
     maturing within one year.

(4)      Excludes underlying non-performing loans of $1 million.

(5)  Excludes allowance for loan losses of $543 million and non-performing loans
     of $134 million, net of $11 million related to specific allowances.

(6)  Fixed rate deposits and deposits with fixed pricing intervals are reflected
     as maturing in the year of contractual  maturity or first  repricing  date.
     Money  market  deposit  accounts,  demand  deposit  accounts  and  passbook
     accounts are reflected as maturing within one year.

       At March 31, 2000, GS Holdings'  cumulative gap totalled  $(612) million.
At December 31, 1999, GS Holdings' cumulative gap totalled $(693) million.

       The Company  utilizes  computer  modeling,  under  various  interest rate
scenarios,  to provide a dynamic  view of the  effects of the  changes in rates,
spreads,   and  yield  curve  shifts  on  net  interest  income.   However,  the
maturity/rate  sensitivity  analysis is a static view of the balance  sheet with
assets and  liabilities  grouped into certain  defined  time  periods,  and only
partially  depicts the dynamics of the  Company's  sensitivity  to interest rate
changes.  Therefore,  this  analysis may not fully  describe the  complexity  of
relationships  between  product  features and  pricing,  market rates and future
management of the balance sheet mix.

       The  Company's   risk   management   policies  are   established  by  the
Asset/Liability Management Committee ("ALCO") of the Bank. ALCO meets monthly to
formulate  the  Bank's  investment  and risk  management  strategies.  The basic
responsibilities  of ALCO include  management of net interest  income and market
value of portfolio  equity to measure the  stability of earnings,  management of
liquidity to provide adequate  funding,  and the  establishment of asset product
priorities by  formulating  performance  evaluation  criteria,  risk  evaluation
techniques  and  a  system  to   standardize   the  analysis  and  reporting  of
originations,  competitive trends, profitability and risk. On a quarterly basis,
the Board of  Directors of the Bank is apprised of ALCO  strategies  adopted and
their impact on operations,  and, at least  annually,  the Board of Directors of
the Bank reviews the Bank's interest rate risk management policy statements.

LIQUIDITY

       The standard measure of liquidity in the savings industry is the ratio of
cash and short-term U.S. Government securities and other specified securities to
deposits  and  borrowings  due within one year.  The OTS  established  a minimum
liquidity  requirement  for the Bank of 4.00%.  California  Federal  has been in
compliance  with the liquidity  regulations  during the three months ended March
31, 2000 and the year ended December 31, 1999.


                                    Page 29

<PAGE>


       The major source of funding for GS Holdings on an unconsolidated basis is
distributions  of the  Bank's  earnings  and tax  sharing  payments.  Net income
generated  by the Bank is used to meet its cash  flow  needs,  including  paying
dividends on its preferred  stock owned by the Company,  and may be distributed,
subject to certain  restrictions,  to GS  Holdings.  In turn,  GS Holdings  uses
distributions   received   from  the  Bank   primarily   to  meet  debt  service
requirements,  pay any expenses it may incur,  and make  distributions to Golden
State,  subject  to  certain  restrictions.  For more  information  on  dividend
restrictions  for the Bank and GS Holdings,  refer to "Business - Regulation and
Supervision" and note 26 of the "Notes to Consolidated  Financial Statements" in
the Company's 1999 Form 10-K.

       On a  consolidated  basis,  a major  source of the  Company's  funding is
expected  to be the Bank's  retail  deposit  branch  network,  which  management
believes will be sufficient to meet its long-term  liquidity  needs. The ability
of the Company to retain and attract new deposits is dependent  upon the variety
and  effectiveness  of its  customer  account  products,  customer  service  and
convenience,  and rates paid to  customers.  The Company also obtains funds from
the repayment  and  maturities of loans and  mortgage-backed  securities,  while
additional  funds can be  obtained  from a variety of other  sources,  including
customer and brokered deposits,  loan sales, securities sold under agreements to
repurchase,  FHLB advances,  and other secured and unsecured  borrowings.  It is
anticipated   that  FHLB  advances  and  securities  sold  under  agreements  to
repurchase  will  continue to be important  sources of funding,  and  management
expects there to be adequate collateral for such funding requirements.

       Interest on the GS Holdings Notes  approximates  $138.9 million per year.
Although GS Holdings  expects that  distributions  and tax sharing payments from
the Bank will be sufficient to pay interest when due and the principal amount of
its long-term debt at maturity, there can be no assurance that earnings from the
Bank will be sufficient to make such distributions to GS Holdings.  In addition,
there can be no assurance that such distributions will be permitted by the terms
of any debt  instruments  of GS Holdings'  subsidiaries  then in effect,  by the
terms of any class of preferred  stock  issued by the Bank or its  subsidiaries,
including the REIT Preferred Stock, or under applicable federal thrift laws.

       The Company  anticipates that cash and cash equivalents on hand, the cash
flows  from  assets as well as other  sources  of funds  will  provide  adequate
liquidity  for its  operating,  investing  and  financing  needs and the  Bank's
regulatory  liquidity  requirements for the foreseeable  future.  In addition to
cash and cash  equivalents  of $641.2 million at March 31, 2000, the Company has
substantial additional borrowing capacity with the FHLB and other sources.

       The consolidated  Company's  primary uses of funds are the origination or
purchase of loans, the purchase of  mortgage-backed  securities,  the funding of
maturing  certificates of deposit,  demand deposit withdrawals and the repayment
of  borrowings.  Certificates  of deposit  scheduled to mature during the twelve
months ending March 31, 2001 aggregate $8.8 billion. The Company may renew these
certificates,  attract new replacement  deposits,  replace such funds with other
borrowings,  or it may  elect  to  reduce  the  size of the  balance  sheet.  In
addition,  at March 31, 2000,  GS Holdings had FHLB  advances,  securities  sold
under  agreements to repurchase and other borrowings  aggregating  $19.8 billion
maturing or repricing  within  twelve  months.  The Company may elect to pay off
such  debt  or  to  replace  such  borrowings  with  additional  FHLB  advances,
securities sold under agreements to repurchase or other borrowings at prevailing
rates.

       As presented in the  accompanying  unaudited  consolidated  statements of
cash flows, the sources of liquidity vary between  periods.  The primary sources
of funds  during the three  months  ended  March 31,  2000 were $8.7  billion in
proceeds  from  additional  borrowings,  $1.0 billion in proceeds  from sales of
loans  held  for  sale  and  $554.6   million   from   principal   payments   on
mortgage-backed  securities available for sale and held to maturity. The primary
uses of funds were $6.9  billion in  principal  payments on  borrowings,  a $1.4
billion  net  increase  in loans  receivable,  $1.0  billion  in  purchases  and
originations  of loans  held for sale,  $457.5  million  in  purchases  of loans
receivable and $379.3 million for the Downey Acquisition.


                                    Page 30

<PAGE>


MORTGAGE BANKING OPERATIONS

       During the three  months  ended  March 31,  2000 and 1999,  the  Company,
through  the Bank's  wholly  owned  mortgage  bank  subsidiary,  FNMC,  acquired
mortgage-servicing  rights on loan  portfolios of $4.4 billion and $2.5 billion,
respectively.  The 1-4 unit  residential  loans  serviced for others  (including
loans  sub-serviced  for  others  and  excluding  loans  serviced  for the Bank)
totalled  $76.2  billion at March 31, 2000, an increase of $3.3 billion and $9.8
billion  from  December 31, 1999 and March 31,  1999,  respectively.  During the
three months ended March 31, 2000 and 1999, the Bank,  through FNMC,  originated
$3.1 billion and $4.7 billion,  respectively, and sold (generally with servicing
retained) $1.1 billion and $3.2 billion,  respectively,  of 1-4 unit residential
loans.  Gross  revenues from mortgage loan  servicing  activities  for the three
months ended March 31, 2000 totalled $77.8 million,  an increase of $8.7 million
from the three months ended March 31, 1999.  Gross loan  servicing  fees for the
three months ended March 31, 2000 were reduced by $45.9 million of  amortization
of servicing rights to arrive at net loan servicing fees of $31.9 million.

       A  decline  in  long-term   interest  rates   generally   results  in  an
acceleration of mortgage loan  prepayments.  Higher than  anticipated  levels of
prepayments  generally cause the accelerated  amortization of mortgage servicing
rights ("MSRs"), and generally will result in a reduction in the market value of
MSRs and in the Company's servicing fee income. To reduce the sensitivity of its
earnings to interest rate and market value fluctuations,  the Company hedged the
change in value of its MSRs based on changes in interest rates ("MSR Hedge").

       The Company owned several derivative  instruments at March 31, 2000 which
were used to hedge against prepayment risk in its mortgage servicing  portfolio.
These derivative instruments included Constant Maturity Swap interest rate floor
contracts,  swaptions,  principal only swaps, and  prepayment-linked  swaps. The
estimated fair value of all derivatives  used to hedge prepayment risk was $24.1
million at March 31, 2000.  The  interest  rate floor  contracts  had a notional
amount of $820  million,  strike rates  between  5.70% and 7.13%,  mature in the
years 2004 and 2005,  and had an estimated  fair value of $12.7 million at March
31, 2000. Premiums paid to counterparties in exchange for cash payments when the
10-year Constant  Maturity Swap rate falls below the strike rate are recorded as
part of the MSR  asset  on the  balance  sheet.  The  swaption  contracts  had a
notional amount of $986 million, strike rates between 6.75% and 7.88%, expire in
the years 2002 and 2003,  and had an  estimated  fair value of $24.3  million at
March 31, 2000.  Premiums  paid to  counterparties  in exchange for the right to
enter into an  interest  rate swap are  recorded as part of the MSR asset on the
balance  sheet.  Principal only swap  agreements had notional  amounts of $200.5
million and an estimated fair value of $(12.9) million at March 31, 2000.  There
were no prepayment-linked swaps at March 31, 2000.

       The  following is a summary of activity in MSRs and the MSR Hedge for the
three months ended March 31, 2000 (in millions):
<TABLE>
<CAPTION>
                                                                                                             Total MSR
                                                                           MSRs            MSR Hedge          Balance
                                                                           ----            ---------          -------
<S>                                                                       <C>                 <C>             <C>
        Balance at December 31, 1999                                      $1,232              $40             $1,272
         Additions - purchases                                                97               --                 97
         Originated servicing                                                 26               --                 26
         Swaption sales                                                       (4)              (8)               (12)
         Premiums paid                                                        --               11                 11
         Payments made to counterparties, net                                  3               --                  3
         Amortization                                                        (43)              (3)               (46)
                                                                          ------              ---             ------
        Balance at March 31, 2000                                         $1,311              $40             $1,351
                                                                          ======              ===             ======
</TABLE>


                                    Page 31

<PAGE>


       Capitalized  MSRs are amortized in proportion to, and over the period of,
estimated net servicing income. SFAS No. 125 requires enterprises to measure the
impairment of MSRs based on the  difference  between the carrying  amount of the
MSRs and their  current fair value.  At March 31, 2000 and December 31, 1999, no
allowance for impairment of the MSRs was necessary.

CAPITAL RESOURCES

       OTS capital  regulations  require  savings  associations to satisfy three
minimum capital  requirements:  tangible capital,  core (leverage) capital,  and
risk-based capital.

       TANGIBLE  CAPITAL.  Tangible  capital is the sum of common  stockholder's
equity (including  retained earnings),  noncumulative  perpetual preferred stock
and minority  interest in equity  accounts of fully  consolidated  subsidiaries,
less disallowed intangibles.  Tangible capital must be at least 1.5% of adjusted
total assets.

       CORE CAPITAL.  Core capital generally is the sum of tangible capital plus
certain other qualifying intangibles.  Under the leverage requirement, a savings
association  is required to maintain  core  capital  equal to a minimum of 4% of
adjusted total assets.

       RISK-BASED  CAPITAL.  Risk-based  capital  equals the sum of core capital
plus  supplementary  capital.   Risk-based  capital  must  be  at  least  8%  of
risk-weighted assets.

       RISK-WEIGHTED  ASSETS.  Risk-weighted assets equal assets plus the credit
risk  equivalent  of  certain   off-balance  sheet  items,   multiplied  by  the
appropriate risk weight.

       SUPPLEMENTARY  CAPITAL.  Supplementary capital includes certain permanent
capital instruments, such as qualifying cumulative perpetual preferred stock, as
well as some forms of term capital instruments,  such as qualifying subordinated
debt.  Supplementary capital may not exceed 100% of core capital for purposes of
the risk-based requirement.

       MINIMUM  REQUIREMENTS.  These capital  requirements  discussed  above are
viewed as minimum  standards by the OTS, and most  associations  are expected to
maintain capital levels well above the minimum. In addition, the OTS regulations
provide  that  minimum   capital  levels  higher  than  those  provided  in  the
regulations may be established by the OTS for individual  savings  associations,
depending upon their  circumstances.  These capital  requirements  are currently
applicable  to the Bank but not to GS  Holdings.  The Bank is not subject to any
such individual regulatory capital requirement that is higher than the minimum.


                                    Page 32

<PAGE>


       At March 31, 2000,  the Bank's  regulatory  capital  levels  exceeded the
minimum  regulatory  capital  requirements,  with tangible,  core and risk-based
capital  ratios of 5.98%,  5.98% and 12.96%,  respectively.  The  following is a
reconciliation of the Bank's  stockholder's  equity to regulatory  capital as of
March 31, 2000:
<TABLE>
<CAPTION>
                                                                      Tangible           Core           Risk-based
                                                                       Capital          Capital           Capital
                                                                       -------          -------           -------
                                                                                  (dollars in millions)
<S>                                                                    <C>              <C>               <C>
 Stockholder's equity of the Bank                                      $3,765           $3,765            $3,765
 Minority interest - REIT Preferred Stock                                 500              500               500
 Unrealized holding loss on securities available for sale,  net           296              296               296
 Non-allowable capital:
       Intangible assets                                                 (761)            (761)             (761)
       Goodwill Litigation Assets                                        (159)            (159)             (159)
       Investment in non-includable subsidiaries                          (58)             (58)              (58)
       Excess deferred tax asset                                          (82)             (82)              (82)
 Supplemental capital:
       Qualifying subordinated debentures                                  --               --                93
       General loan loss allowance                                         --               --               383
 Assets required to be deducted:
       Land loans with more than 80% LTV ratio                             --               --                (4)
       Equity in subsidiaries                                              --               --                (6)
       Low-level recourse deduction                                        --               --               (11)
                                                                       ------           ------            ------
 Regulatory capital of the Bank                                         3,501            3,501             3,956
 Minimum regulatory capital requirement                                   878            2,340             2,442
                                                                       ------           ------            ------
 Excess above minimum capital requirement                              $2,623           $1,161            $1,514
                                                                       ======           ======            ======

 Regulatory capital of the Bank                                          5.98%            5.98%            12.96%
 Minimum regulatory capital requirement                                  1.50             4.00              8.00
                                                                       ------           ------            ------
 Excess above minimum capital requirement                                4.48%            1.98%             4.96%
                                                                       ======           ======            ======
</TABLE>

       The amount of adjusted  total  assets used for the  tangible and leverage
capital  ratios is $58.5 billion.  Risk-weighted  assets used for the risk-based
capital ratio amounted to $30.5 billion.

       The Bank is also  subject to the  "prompt  corrective  action"  standards
prescribed  in FDICIA and related OTS  regulations,  which,  among other things,
define specific capital categories based on an association's capital ratios. The
capital  categories,  in declining  order, are "well  capitalized,"  "adequately
capitalized,"   "undercapitalized,"    "significantly   undercapitalized,"   and
"critically  undercapitalized." Under the regulation, the ratio of total capital
to risk-weighted  assets, core capital to risk-weighted  assets and the leverage
capital ratio are used to determine an association's capital classification. The
Bank met the capital requirements of a "well capitalized"  institution under the
FDICIA prompt  corrective action standards as of March 31, 2000. The Bank is not
presently subject to any enforcement action or other regulatory  proceeding with
respect to the prompt corrective action regulation.


                                    Page 33

<PAGE>


       At March 31, 2000, the Bank's capital levels were sufficient for it to be
considered "well capitalized," as presented below.
<TABLE>
<CAPTION>
                                                                                          Risk-based
                                                               Leverage           --------------------------
                                                                Capital           Tier 1       Total Capital
                                                                -------           ------       -------------
<S>                                                              <C>              <C>              <C>
       Regulatory capital of the Bank                            5.98%            11.44%           12.96%
       "Well capitalized" ratio                                  5.00              6.00            10.00
                                                                 ----             -----            -----
       Excess above "well capitalized" ratio                     0.98%             5.44%            2.96%
                                                                 ====             =====            =====
</TABLE>

       OTS  capital  regulations  allow a savings  association  to include a net
deferred tax asset in regulatory capital, subject to certain limitations. To the
extent  that the  realization  of a  deferred  tax  asset  depends  on a savings
association's  future  taxable  income,  such  deferred tax asset is limited for
regulatory  capital  purposes  to the lesser of the amount  that can be realized
within one year or 10 percent of core capital.  At March 31, 2000, $82.2 million
of the net tax  benefit  was  determined  to be  attributable  to the  amount of
taxable  income that may be realized  in periods  beyond one year.  Accordingly,
such amount has been  excluded from the Bank's  regulatory  capital at March 31,
2000.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       There have been no material  changes in reported market risks faced by GS
Holdings  since  the  Company's  report in Item 7A of its Form 10-K for the year
ended December 31, 1999.


                                    Page 34

<PAGE>


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

       GOODWILL LITIGATION AGAINST THE GOVERNMENT

       On April 9, 1999,  the Claims Court issued its decision on a claim by the
Bank against the United States  Government  (the  "Government")  in the lawsuit,
GLENDALE FEDERAL BANK,  FEDERAL SAVINGS BANK V. UNITED STATES,  Civil Action No.
90-772-C (the "Glendale Goodwill  Litigation"),  ruling that the Government must
compensate  the  Bank in the sum of  $908.9  million.  This  decision  has  been
appealed by the Government and the Bank. All appellate briefs have been filed by
both  the  Government  and the  Bank and oral  argument  on the  appeal  will be
scheduled in conjunction  with the argument in the California  Federal  Goodwill
Litigation (as defined herein) in mid 2000.

       On April 16, 1999, the Claims Court issued its decision on a claim by the
Bank against the  Government in the lawsuit,  CALIFORNIA  FEDERAL BANK V. UNITED
STATES, Civil Action No. 92-138C (the "California Federal Goodwill Litigation"),
ruling that the Government must compensate the Bank in the sum of $23.0 million.
The summary judgment liability decision by the first Claims Court Judge has been
appealed by the Government and the damage award by the second Claims Court Judge
has been appealed by the Bank.  All  appellate  briefs have been filed and it is
anticipated that oral argument in the Federal Circuit Court of Appeals will take
place in  conjunction  with the  appellate  argument  in the  Glendale  Goodwill
Litigation in mid 2000.

       In each of the Glendale  Goodwill  Litigation and the California  Federal
Goodwill Litigation,  it is alleged,  among other things, that the United States
breached  certain  contractual  commitments  regarding  the  computation  of its
regulatory  capital for which each of Glendale  Federal and  California  Federal
seek  damages  and  restitution.  The  claims  arose  from  changes  made by the
Financial  Institutions  Reform,  Recovery and  Enforcement  Act of 1989 and its
implementing  regulations  ("FIRREA")  with  respect to the rules for  computing
regulatory capital.

       OTHER LITIGATION

       In  addition  to  the  matters  described  above,  GS  Holdings  and  its
subsidiaries are involved in other legal proceedings on claims incidental to the
normal  conduct of their  business.  Although  it is  impossible  to predict the
outcome of any  outstanding  legal  proceedings,  management  believes that such
legal proceedings and claims,  individually or in the aggregate, will not have a
material effect on GS Holdings or the Bank.

ITEM 2.  CHANGES IN SECURITIES.

       None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

       None.

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

       None.

ITEM 5.  OTHER INFORMATION.

       None.


                                    Page 35

<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits:

         3.1  Certificate  of  Incorporation  of  the  Registrant,  as  amended.
              (Incorporated  by  reference  to Exhibit  3.1 to the  Registrant's
              Report on Form 10-Q for the quarter ended September 30, 1998).

         3.2  By-laws  of   the  Registrant,  as   amended.   (Incorporated   by
              reference to Exhibit 3.3 to the Registrant's Annual Report on Form
              10-K for the year ended December 31, 1998).

        27.1  Financial Data Schedule.

     (b) Reports on Form 8-K:

              None.


                                    Page 36

<PAGE>


                                   SIGNATURES

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

                                    Golden State Holdings Inc.




                                    /s/  Richard H. Terzian
                                    ---------------------------------------
                                    By:  Richard H. Terzian
                                         Executive Vice President
                                         and Chief Financial Officer
                                         (Principal Financial Officer)


                                    /s/  Renee Nichols Tucei
                                    ---------------------------------------
                                    By:  Renee Nichols Tucei
                                         Executive Vice President and Controller
                                         (Principal Accounting Officer)



May 10, 2000



                                    Page 37