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                  June 30, 2001
                               -------------------------------------------------

                                       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             (I.R.S. Employer Identification No.)
incorporation or organization)

  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 July 31, 2001: 1,000 shares.

     Registrant  meets the conditions set forth in General  Instruction H (1)(a)
and (b) of Form 10-Q and is  therefore  filing  this Form with  certain  reduced
disclosures, as permitted by General Instruction H (2).



                                     Page 1
<PAGE>

                           GOLDEN STATE HOLDINGS INC.
                     SECOND QUARTER 2001 REPORT ON FORM 10-Q
                                TABLE OF CONTENTS


                                                                            Page
                                                                            ----
PART I.       FINANCIAL INFORMATION

   Item 1.    Consolidated Financial Statements

              Unaudited Consolidated Balance Sheets
              June 30, 2001 and December 31, 2000............................ 3

              Unaudited Consolidated Statements of Income
              Six Months Ended June 30, 2001 and 2000........................ 4

              Unaudited Consolidated Statements of Income
              Three Months Ended June 30, 2001 and 2000...................... 5

              Unaudited Consolidated Statements of Comprehensive Income
              Six Months Ended June 30, 2001 and 2000........................ 6

              Unaudited Consolidated Statements of Comprehensive Income
              Three Months Ended June 30, 2001 and 2000...................... 7

              Unaudited Consolidated Statement of Stockholder's Equity
              Six Months Ended June 30, 2001................................. 8

              Unaudited Consolidated Statements of Cash Flows
              Six Months Ended June 30, 2001 and 2000........................ 9

              Notes to Unaudited Consolidated Financial Statements...........11

     Item 2.     Management's Narrative Analysis of Results of Operations....24

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

PART II.         OTHER INFORMATION

     Item 1.     Legal Proceedings...........................................43

     Item 2.     Changes in Securities....................................... *

     Item 3.     Defaults Upon Senior Securities............................. *

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

     Item 5.     Other Information...........................................44

     Item 6.     Exhibits and Reports on Form 8-K............................44

     Glossary of Defined Terms...............................................45

     Signatures..............................................................47

*    Item 3 of  Part I and  Items 2, 3 and 4 of  Part II are not included as per
     conditions met by Registrant set forth in General Instruction H (1) (a) and
     (b) of Form 10-Q.

     Golden State Holdings  Inc. is a  wholly owned  subsidiary of  Golden State
     Bancorp  Inc.  For more information, refer to  Golden State  Bancorp Inc.'s
     Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001.


                                     Page 2
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                       JUNE 30, 2001 AND DECEMBER 31, 2000
                                   (Unaudited)
                  (dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                                 June 30,         December 31,
                          ASSETS                                                   2001                2000
                          ------                                               -----------        ------------
<S>                                                                            <C>                 <C>
    Cash and due from banks                                                    $   779,750        $   697,441
    Interest-bearing deposits in other banks                                        30,105                123
    Short-term investments                                                          78,730             85,510
                                                                               -----------        -----------
           Cash and cash equivalents                                               888,585            783,074

    Securities available-for-sale, at fair value                                   160,594            637,070
    Securities held-to-maturity                                                    445,008            587,503
    Mortgage-backed securities available-for-sale, at fair value                 9,610,187          9,866,823
    Mortgage-backed securities held-to-maturity                                  1,589,039          2,886,612
    Loans held for sale, net                                                     2,304,092            845,763
    Loans receivable, net                                                       41,316,066         39,592,814
    Investment in FHLB System                                                    1,406,933          1,361,066
    Premises and equipment, net                                                    284,272            290,899
    Foreclosed real estate, net                                                     21,489             19,080
    Accrued interest receivable                                                    341,813            364,414
    Intangible assets (net of accumulated amortization of $276,030
         at June 30, 2001 and $246,150 at December 31, 2000)                       661,408            691,288
    Mortgage servicing rights, net of valuation allowance                        1,513,557          1,559,323
    Derivative assets                                                              193,430                 --
    Other assets                                                                   567,317          1,029,082
                                                                               -----------        -----------
           Total assets                                                        $61,303,790        $60,514,811
                                                                               ===========        ===========

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

    Deposits                                                                   $24,365,511        $23,462,372
    Securities sold under agreements to repurchase                               3,914,931          4,511,309
    Borrowings                                                                  28,753,608         28,800,557
    Derivative liabilities                                                         126,624                 --
    Other liabilities                                                            1,161,855            942,397
                                                                               -----------        -----------
             Total liabilities                                                  58,322,529         57,716,635
                                                                               -----------        -----------

    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                                              1,568,097          1,564,821
         Accumulated other comprehensive loss                                      (60,753)           (91,405)
         Retained earnings (substantially restricted)                              973,916            824,759
                                                                               -----------        -----------
             Total stockholder's equity                                          2,481,261          2,298,176
                                                                               -----------        -----------
             Total liabilities, minority interest and stockholder's equity     $61,303,790        $60,514,811
                                                                               ===========        ===========
</TABLE>
    See accompanying notes to unaudited consolidated financial statements.


                                     Page 3
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                     SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                                Six Months Ended June 30,
                                                                                                --------------------------
                                                                                                   2001            2000
                                                                                                ----------      ----------
<S>                                                                                             <C>             <C>
Interest income:
     Loans receivable                                                                           $1,541,014      $1,343,507
     Mortgage-backed securities available-for-sale                                                 344,977         435,545
     Mortgage-backed securities held-to-maturity                                                    70,983          90,836
     Loans held for sale                                                                            52,676          28,686
     Securities available-for-sale                                                                  14,575          32,975
     Securities held-to-maturity                                                                    16,452           9,482
     Interest-bearing deposits in other banks                                                          539           3,384
     Dividends on FHLB stock                                                                        45,372          45,110
                                                                                                ----------      ----------
         Total interest income                                                                   2,086,588       1,989,525
                                                                                                ----------      ----------

Interest expense:
     Deposits                                                                                      464,489         443,146
     Securities sold under agreements to repurchase                                                121,392         172,734
     Borrowings                                                                                    853,847         796,225
                                                                                                ----------      ----------
         Total interest expense                                                                  1,439,728       1,412,105
                                                                                                ----------      ----------
         Net interest income                                                                       646,860         577,420
                                                                                                ----------      ----------
Provision for loan losses                                                                               --              --
                                                                                                ----------      ----------
         Net interest income after provision for loan losses                                       646,860         577,420
                                                                                                ----------      ----------

Noninterest income:
     Loan servicing fees, net                                                                       (6,906)         85,823
     Customer banking fees and service charges                                                     105,820          98,724
     Gain on sale, settlement and transfer of loans, net                                            21,885          27,062
     Gain (loss) on sale of assets, net                                                             16,221         (16,036)
     Other income                                                                                   36,440          17,804
                                                                                                ----------      ----------
         Total noninterest income                                                                  173,460         213,377
                                                                                                ----------      ----------

Noninterest expense:
     Compensation and employee benefits                                                            231,197         214,948
     Occupancy and equipment                                                                        77,801          73,508
     Professional fees                                                                              14,650          17,606
     Loan expense                                                                                    8,569           9,234
     Foreclosed real estate operations, net                                                           (853)         (3,378)
     Amortization of intangible assets                                                              29,880          31,907
     Other expense                                                                                 111,164         103,012
                                                                                                ----------      ----------
         Total noninterest expense                                                                 472,408         446,837
                                                                                                ----------      ----------

Income before income taxes,  minority interest, extraordinary items and
     cumulative effect of change in accounting principle                                           347,912         343,960
Income tax expense (benefit)                                                                       123,709          (7,890)
Minority interest                                                                                   13,494          13,394
                                                                                                ----------      ----------
         Income before extraordinary items and cumulative effect of change in
            accounting principle                                                                   210,709         338,456
 Extraordinary items - gains on early extinguishment of debt,
     net of applicable taxes of $2,083 in 2000                                                          --           3,014
Cumulative effect of change in accounting principle, net of applicable taxes of $1,072 in           (1,552)             --
                                                                                                ----------      ----------
         Net income                                                                             $  209,157      $  341,470
                                                                                                ==========      ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.


                                     Page 4
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                    THREE MONTHS ENDED JUNE 30, 2001 AND 2000
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                                Three Months Ended June 30,
                                                                                                ---------------------------
                                                                                                   2001             2000
                                                                                                ----------       ----------
<S>                                                                                             <C>              <C>
Interest income:
     Loans receivable                                                                           $  763,224       $  697,314
     Mortgage-backed securities available-for-sale                                                 163,994          206,483
     Mortgage-backed securities held-to-maturity                                                    33,572           51,457
     Loans held for sale                                                                            32,549           15,368
     Securities available-for-sale                                                                   3,795           13,972
     Securities held-to-maturity                                                                     7,951            7,331
     Interest-bearing deposits in other banks                                                          120            2,983
     Dividends on FHLB stock                                                                        22,326           27,963
                                                                                                ----------       ----------
         Total interest income                                                                   1,027,531        1,022,871
                                                                                                ----------       ----------

Interest expense:
     Deposits                                                                                      223,652          224,354
     Securities sold under agreements to repurchase                                                 53,447           89,828
     Borrowings                                                                                    414,044          418,372
                                                                                                ----------       ----------
         Total interest expense                                                                    691,143          732,554
                                                                                                ----------       ----------
         Net interest income                                                                       336,388          290,317
                                                                                                ----------       ----------
Provision for loan losses                                                                               --               --
         Net interest income after provision for loan losses                                       336,388          290,317
                                                                                                ----------       ----------

Noninterest income:
     Loan servicing fees, net                                                                       19,746           43,031
     Customer banking fees and service charges                                                      54,559           50,065
     Gain on sale, settlement and transfer of loans, net                                            16,961           20,400
     Gain (loss) on sale of assets, net                                                             15,782          (16,455)
     Other income                                                                                    7,181            8,238
                                                                                                ----------       ----------
         Total noninterest income                                                                  114,229          105,279
                                                                                                ----------       ----------

Noninterest expense:
     Compensation and employee benefits                                                            113,462          107,194
     Occupancy and equipment                                                                        39,951           36,137
     Professional fees                                                                               9,802            8,850
     Loan expense                                                                                    4,367            5,274
     Foreclosed real estate operations, net                                                           (455)          (1,145)
     Amortization of intangible assets                                                              14,940           15,464
     Other expense                                                                                  59,203           51,814
                                                                                                ----------       ----------
         Total noninterest expense                                                                 241,270          223,588
                                                                                                ----------       ----------

Income before income taxes,  minority interest, extraordinary items and
     cumulative effect of change in accounting principle                                           209,347          172,008
Income tax expense                                                                                  87,526           75,057
Minority interest                                                                                    6,747            6,795
                                                                                                ----------       ----------
         Income before extraordinary items and cumulative effect of change in
             accounting principle                                                                  115,074           90,156
Extraordinary items - gains on early extinguishment of debt, net of applicable
     taxes of $1,204 in 2000                                                                            --            1,808
Cumulative effect of change in accounting principle, net of applicable taxes of                     (1,552)              --
     $1,072 in 2001                                                                             ----------       ----------
         Net income                                                                             $  113,522       $   91,964
                                                                                                ==========       ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.


                                     Page 5
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                     SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                              Six Months Ended June 30,
                                                                             ---------------------------
                                                                               2001               2000
                                                                             --------           --------
<S>                                                                          <C>                <C>
     Net income                                                              $209,157           $341,470

     Other comprehensive income (loss), net of tax:
         Unrealized holding gain (loss) on securities available-for-sale:
            Unrealized holding gain (loss) arising during the period           98,165            (19,427)
            Less: reclassification adjustment for (gain) loss
               included in net income                                          (9,572)            10,846
                                                                             --------           --------
                                                                               88,593             (8,581)
         Amortization of market adjustment for securities
            transferred from available-for-sale to held-to-maturity             3,466                670

         Transition adjustment upon adoption of SFAS No. 133                  (44,647)                --

         Change in fair value of derivatives used for cash flow hedges,
            net of applicable taxes of $11,574                                (16,760)                --
                                                                             --------           --------

     Other comprehensive income (loss)                                         30,652            (7,911)
                                                                             --------           --------

      Comprehensive income                                                   $239,809           $333,559
                                                                             ========           ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.


                                     Page 6
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                    THREE MONTHS ENDED JUNE 30, 2001 AND 2000
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                               Three Months Ended June 30,
                                                                               ---------------------------
                                                                                 2001              2000
                                                                               --------          --------
<S>                                                                            <C>               <C>
    Net income                                                                 $113,522          $ 91,964

    Other comprehensive income, net of tax:
        Unrealized holding (loss) gain on securities available-for-sale:
           Unrealized holding (loss) gain arising during the period              (1,050)            1,118
           Less: reclassification adjustment for (gain) loss included
               in net income                                                     (9,490)           10,846
                                                                                -------          --------
                                                                                (10,540)           11,964
        Amortization of market adjustment for securities
           transferred from available-for-sale to held-to-maturity                1,989               670

        Change in fair value of derivatives used for cash flow hedges,
           net of applicable taxes of $14,114                                    20,437                --
                                                                               --------          --------

    Other comprehensive income                                                   11,886            12,634
                                                                               --------          --------

     Comprehensive income                                                      $125,408          $104,598
                                                                               ========          ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.


                                     Page 7
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
                         SIX MONTHS ENDED JUNE 30, 2001
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                         Accumulated Other                Retained
                                                    Additional      Comprehensive (Loss) Income           Earnings         Total
                                            Common   Paid-in     -----------------------------------  (Substantially   Stockholder's
                                             Stock   Capital     Securities  Derivatives    Total       Restricted)       Equity
                                             -----   -------     ----------  -----------    -----       -----------       ------
<S>                                           <C>   <C>          <C>           <C>        <C>            <C>            <C>
Balance at December 31, 2000                  $1    $1,564,821   $(91,405)     $    --    $(91,405)      $824,759       $2,298,176

Net income                                    --            --         --           --          --        209,157          209,157
 Change in net unrealized holding gain
    (loss) on securities available-for-sale   --            --     58,219           --      58,219             --           58,219
 Change in net unrealized holding loss
    on derivatives                            --            --         --      (16,760)    (16,760)            --          (16,760)
Amortization of unrealized holding
    loss on securities held-to-maturity       --            --      3,466           --       3,466             --            3,466
Unrealized loss on securities reclassified
    to available-for-sale, net of tax         --            --     30,374           --      30,374             --           30,374
Transition adjustment upon adoption
    of SFAS No. 133                           --            --         --      (44,647)    (44,647)            --          (44,647)
Dividends to parent                           --            --         --           --          --        (60,000)         (60,000)
Impact of Golden State restricted
    common stock                              --         2,531         --           --          --             --            2,531
Tax benefits on exercise of stock options     --           745         --           --          --             --              745
                                              --    ----------   --------      -------    --------       --------       ----------

Balance at June 30, 2001                      $1    $1,568,097   $    654      $61,407    $(60,753)      $973,916       $2,481,261
                                              ==    ==========   ========      =======    ========       ========       ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.


                                     Page 8
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                Six Months Ended June 30,
                                                                             -----------------------------
                                                                                 2001              2000
                                                                             ------------      -----------
<S>                                                                          <C>                <C>
  Cash flows from operating activities:
  Net income                                                                 $    209,157      $   341,470
  Adjustments to reconcile net income to net cash provided by
     operating activities:
     Amortization of intangible assets                                             29,880           31,907
     Amortization (accretion) of purchase accounting premiums and
         discounts, net                                                             4,308             (343)
     Accretion of discount on borrowings                                              573              535
     Amortization of mortgage servicing rights                                    147,013           97,236
     (Gain) loss on sale of assets, net                                           (16,221)          16,036
     Gain on sale of foreclosed real estate, net                                   (1,717)          (6,324)
     Loss on sale, settlement and transfer of loans, net                          109,487           27,416
     Capitalization of originated mortgage servicing rights                      (131,372)         (54,478)
     Extraordinary items - gains on early extinguishment of debt, net                  --           (3,014)
     Depreciation and amortization of premises and equipment                       26,084           23,766
     Amortization of deferred debt issuance costs                                   3,676            3,674
     FHLB stock dividends                                                         (45,372)         (45,110)
     Purchases and originations of loans held for sale                         (7,060,801)      (2,289,613)
     Net proceeds from the sale of loans held for sale                          5,478,985        2,156,218
     Change in fair value of MSRs/MSR derivatives                                  (8,957)              --
     MSR valuation provision                                                       77,000               --
     Decrease (increase) in other assets                                          367,547          (53,679)
     Decrease (increase) in accrued interest receivable                            22,601          (22,913)
     Increase in other liabilities                                                332,142          210,338
     Amortization of deferred compensation expense - Golden State
         restricted common stock                                                      992            1,103
     Reduction in accrued liability for state income taxes                        (25,805)              --
     Minority interest: other                                                      13,494           13,394
     Other operating activity                                                          35               --
                                                                             ------------      -----------
         Net cash (used) provided by operating activities                    $   (467,271)     $   447,619
                                                                             ------------      -----------


                                                                                                (Continued)


See accompanying notes to unaudited consolidated financial statements.
</TABLE>

                                     Page 9
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                     SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                               Six Months Ended June 30,
                                                                             ------------------------------
                                                                                 2001              2000
                                                                             ------------      ------------
<S>                                                                          <C>               <C>
Cash flows from investing activities:
     Downey Acquisition                                                      $         --      $   (379,314)
     Purchases of securities available-for-sale                                   (12,202)          (33,082)
     Proceeds from maturities of securities available-for-sale                    586,733            35,469
     Purchases of securities held-to-maturity                                      (4,992)           (1,734)
     Principal payments and proceeds from maturities
        of securities held-to-maturity                                             68,363            23,809
     Purchases of mortgage-backed securities available-for-sale                  (120,810)          (58,340)
     Principal payments on mortgage-backed securities available-for-sale        1,290,937           953,057
     Principal payments on mortgage-backed securities held-to-maturity            229,638           188,014
     Proceeds from sales of mortgage-backed securities available-for-sale         304,365           480,159
     Proceeds from sales of loans                                                  51,358            32,820
     Net decrease (increase) in loans receivable                                  557,082        (3,304,202)
     Purchases of loans receivable                                             (2,349,144)         (811,740)
     Purchases of FHLB stock, net                                                 (23,193)         (107,570)
     Purchases of premises and equipment                                          (20,485)          (20,201)
     Proceeds from disposal of premises and equipment                               6,639               719
     Proceeds from sales of foreclosed real estate                                 17,131            48,641
     Purchases of mortgage servicing rights                                      (128,085)         (173,109)
     Hedge receipts                                                               (14,533)           (6,025)
     Purchases of derivatives                                                    (272,589)          (24,739)
     Proceeds from sales of derivatives                                           215,420            11,875
     Proceeds from sales of mortgage servicing rights                                  --               689
                                                                             ------------      ------------
        Net cash provided (used )in investing activities                          381,633        (3,144,804)
                                                                             ------------      ------------
Cash flows from financing activities:
     Net increase in deposits                                                     903,555           228,661
     Proceeds from additional borrowings                                       59,921,714        20,055,022
     Principal payments on borrowings                                         (59,964,993)      (17,531,143)
     Net (decrease) increase in securities sold under agreements to
        repurchase                                                               (596,378)          127,798
     Dividends on common stock                                                    (60,000)          (71,000)
     Dividends paid to minority stockholders of subsidiary, net of taxes          (13,494)          (13,394)
     Tax benefit on exercise of stock options                                         745                 9
                                                                             ------------      ------------
        Net cash provided by financing activities                                 191,149         2,795,953
                                                                             ------------      ------------
Net change in cash and cash equivalents                                           105,511            98,768
Cash and cash equivalents at beginning of period                                  783,074           592,878
                                                                             ------------      ------------
Cash and cash equivalents at end of period                                   $    888,585      $    691,646
                                                                             ============      ============
</TABLE>




See accompanying notes to unaudited consolidated financial statements.


                                    Page 10
<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 and six months ended June 30, 2001 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 and six-month  periods in the prior year
have been reclassified to conform to the current period's presentation.

     GS  Holdings,  a wholly  owned  subsidiary  of Golden  State,  is a holding
company whose only significant asset is all of the common and preferred stock of
the Bank and  therefore,  activities for the  consolidated  entity are primarily
carried out by the Bank and its operating subsidiaries.

     The accompanying  unaudited  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,  and as the surviving  entity in the GS Escrow Merger
for periods after the GS Escrow Merger. On September 11, 1998,  Glendale Federal
merged  with and  into the Bank  pursuant  to the Glen Fed  Merger.  Unless  the
context otherwise indicates, "California Federal" or "Bank" refers to California
Federal  Bank as the  surviving  entity after the  consummation  of the Glen Fed
Merger.

     Other minority  interest  represents  amounts  attributable to (a) the REIT
Preferred Stock of California  Federal Preferred Capital  Corporation,  a wholly
owned  subsidiary of the Bank, and (b) that portion of  stockholders'  equity of
Auto One, a subsidiary of the Bank, attributable to 20% of its common stock.

     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, 2000. A glossary of
defined terms begins on page 45 of this document. 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)  RECLASSIFICATION OF SECURITIES

     On January 1, 2001, the Company reclassified $1.1 billion and $85.0 million
carrying  value of  mortgage-backed  securities  and U.S.  government and agency
securities,  respectively,  from securities held-to-maturity to their respective
available-for-sale  portfolios,  as permitted upon the adoption of SFAS No. 133.
The net unrealized loss related to these securities of $30.4 million,  which was
recorded in OCI upon their initial transfer to the held-to-maturity portfolio in
April 2000, was reclassified from accumulated other  comprehensive loss, and the
securities were subsequently marked to market, in accordance with SFAS No. 115.

     On April 30, 2000, the Company reclassified $1.1 billion and $445.0 million
carrying  value of  mortgage-backed  securities  and U.S.  government and agency
securities, respectively, from securities available-for-sale to their respective
held-to-maturity   portfolios.   These  assets  primarily  comprised  securities
required  as  part  of  the  Bank's  regulatory  liquidity  portfolio.  The  net
unrealized  loss related to these  securities  of $64.0  million,  included as a
component of equity (accumulated other  comprehensive  loss), is being amortized
to interest income over the remaining life of the securities as an adjustment of
yield. The effect of this amortization on interest income is fully offset by the
effect of amortization of the related  discount  recorded against the respective
assets at the time of transfer.



                                    Page 11
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements


(3)  CASH, CASH EQUIVALENTS, AND STATEMENTS OF CASH FLOWS

     Cash paid (including  interest credited) for interest on deposits and other
interest-bearing  liabilities during the six months ended June 30, 2001 and 2000
was $1.5 billion and $1.4 billion,  respectively. Net cash paid for income taxes
during the six months ended June 30, 2001 and 2000 was $100.8  million and $12.0
million, respectively.

     During the six months ended June 30, 2001,  noncash  activity  consisted of
the  reclassification  of $1.1  billion  and $85.0  million  of  mortgage-backed
securities  and U. S.  government  and  agency  securities,  respectively,  from
securities held-to-maturity to their respective  available-for-sale  portfolios,
as permitted upon the adoption of SFAS No. 133, the  reclassification  of $164.8
million from mortgage servicing rights to derivative assets ($173.6 million) and
derivative  liabilities  ($8.8 million) related to the adoption of SFAS No. 133,
transfers  of $5.2 million from loans held for sale (at lower of cost or market)
to loans  receivable,  transfers  of $17.8  million  from  loans  receivable  to
foreclosed  real estate and $0.2  million of loans made to  facilitate  sales of
real estate owned.

     Noncash activity during the six months ended June 30, 2001 also included an
increase of $2.5 million in additional  paid-in capital reflecting the impact of
Golden State restricted  common stock  outstanding  under an employee  incentive
plan.

     During the six months ended June 30, 2000,  noncash  activity  consisted of
the  reclassification  of $1.1  billion  and $445.0  million of  mortgage-backed
securities  and  U.S.  government  and  agency  securities,  respectively,  from
securities  available-for-sale to their respective held-to-maturity  portfolios,
transfers of $31.9  million from loans  receivable  to  foreclosed  real estate,
transfers of $24.2 million from loans held for sale (at lower of cost or market)
to loans  receivable and $5.4 million of loans made to facilitate  sales of real
estate owned.

     Noncash  activity during the six months ended June 30, 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 $2.4 million
in additional  paid-in capital  reflecting the impact of Golden State restricted
common stock outstanding under an employee incentive plan.



                                    Page 12
<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>
                                        Six Months Ended June 30,                 Three Months Ended June 30,
                                   ------------------------------------      ------------------------------------
                                   Community     Mortgage                    Community     Mortgage
                                    Banking       Banking        Total        Banking       Banking       Total
                                    -------       -------        -----        -------       -------       -----
                                                                    (in thousands)
<S>                                <C>           <C>            <C>          <C>           <C>           <C>
Net interest income: (a)
2001                               $673,654      $ 41,788       $715,442     $341,625      $ 33,760      $375,385
2000                                625,332         2,096        627,428      316,261         1,716       317,977

Noninterest income: (b)
2001                               $166,868      $ 22,125       $188,993     $ 83,609      $ 37,665      $121,274
2000                                118,225       119,649        237,874       57,949        59,671       117,620

Noninterest expense: (c)
2001                               $397,711       $77,017       $474,728     $203,317      $ 39,113      $242,430
2000                                373,139        76,018        449,157      187,457        37,291       224,748

Pre-tax contribution:
2001                               $442,811      $(13,104)      $429,707     $221,917      $ 32,312      $254,229
2000                                370,418        45,727        416,145      186,753        24,096       210,849

</TABLE>
_____________
(a)    Includes $68.6 million and $50.0 million for the six months ended June
       30, 2001 and 2000, respectively, in earnings credit provided to FNMC by
       the Bank, primarily for custodial bank account balances generated by
       FNMC. Also includes $134.1 million and $122.3 million for the six months
       ended June 30, 2001 and 2000, respectively, in interest income and
       expense on intercompany loans.

       Includes $39.0 million and $27.7 million for the three months ended June
       30, 2001 and 2000, respectively, in earnings credit provided to FNMC by
       the Bank, primarily for custodial bank account balances generated by
       FNMC. Also includes $75.9 million and $69.0 million for the three months
       ended June 30, 2001 and 2000, respectively, in interest income and
       expense on intercompany loans.

(b)    Includes $15.5 million and $24.5 million for the six months ended June
       30, 2001 and 2000, respectively, in intercompany servicing fees. Includes
       $7.0 million and $12.3 million for the three months ended June 30, 2001
       and 2000, respectively, in intercompany servicing fees.

(c)    Includes $2.3 million for each of the six months ended June 30, 2001 and
       2000, in intercompany noninterest expense. Includes $1.2 million for each
       of the three months ended June 30, 2001 and 2000, in intercompany
       noninterest expense.


                                    Page 13
<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 six and three months ended June 30,
2001 and 2000 (in thousands):
<TABLE>
<CAPTION>
                                                          Six Months Ended June 30,      Three Months Ended June 30,
                                                          -------------------------      ---------------------------
                                                            2001             2000            2001            2000
                                                            ----             ----            ----            ----
<S>                                                       <C>             <C>              <C>             <C>
Net interest income:
Total net interest income for reportable segments         $715,442        $627,428         $375,385        $317,977
Elimination of intersegment net interest income            (68,582)        (50,008)         (38,997)        (27,660)
                                                          --------        --------         --------        --------
Total                                                     $646,860        $577,420         $336,388        $290,317
                                                          ========        ========         ========        ========

Noninterest income:
Total noninterest income for reportable segments          $188,993        $237,874         $121,274        $117,620
Elimination of intersegment servicing fees                 (15,533)        (24,497)          (7,045)        (12,341)
                                                          --------        --------         --------        --------
Total                                                     $173,460        $213,377         $114,229        $105,279
                                                          ========        ========         ========        ========

Noninterest expense:
Total noninterest expense for reportable segments         $474,728        $449,157         $242,430        $224,748
Elimination of intersegment expense                         (2,320)         (2,320)          (1,160)         (1,160)
                                                          --------        --------         --------        --------
Total                                                     $472,408        $446,837         $241,270        $223,588
                                                          ========        ========         ========        ========

Pre-tax contribution
Total contribution for reportable segments                $429,707        $416,145         $254,229        $210,849
Elimination of intersegment contributions                  (81,795)        (72,185)         (44,882)        (38,841)
                                                          ---------       --------         --------        --------
Total                                                     $347,912        $343,960         $209,347        $172,008
                                                          ========        ========         ========        ========
</TABLE>

(5)  LOANS RECEIVABLE, NET

     The following details the components of loans receivable,  net, at June 30,
2001 and December 31, 2000 (in thousands):
<TABLE>
<CAPTION>
                                                                         June 30, 2001     December 31, 2000
                                                                         -------------     -----------------
<S>                                                                        <C>                 <C>
     Loan Portfolio:
            1-4 unit residential                                           $31,778,010         $30,828,368
            Multi-family residential                                         3,963,298           3,569,228
            Commercial real estate                                           2,470,338           2,487,093
            Land                                                                19,410              22,384
            Construction                                                         6,984               7,416
                                                                           -----------         -----------
               Total real estate loans                                      38,238,040          36,914,489
                                                                           -----------         -----------

            Equity-line                                                        566,411             538,524
            Other consumer loans                                               311,101             302,559
            Auto loans, net                                                  1,808,634           1,567,257
            Commercial loans                                                   654,750             557,796
                                                                           -----------         -----------
               Total loans receivable                                       41,578,936          39,880,625
                                                                           -----------         -----------

            Deferred loan fees, costs, discounts and premiums, net             246,216             229,962
            Allowance for loan losses                                         (515,979)           (526,308)
            Purchase accounting adjustments, net                                 6,893               8,535
                                                                           -----------         -----------
               Loans receivable, net                                       $41,316,066         $39,592,814
                                                                           ===========         ===========
</TABLE>



                                    Page 14
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements


(6)  DEPOSITS

     Deposits  at June 30,  2001 and  December  31,  2000 are  comprised  of the
following (dollars in thousands):
<TABLE>
<CAPTION>
                                                                    June 30, 2001      December 31, 2000
                                                                    -------------      -----------------
<S>                                                                  <C>                   <C>
       Transaction Accounts:
            Non-interest checking                                    $ 1,869,598           $ 1,749,359
            Interest-bearing checking                                  2,032,122             2,063,185
                                                                     -----------           -----------
               Subtotal checking                                       3,901,720             3,812,544

            Money market                                               4,100,378             2,948,853
            Passbook savings                                           2,998,400             3,086,851
                                                                     -----------           -----------
               Total transaction accounts                             11,000,498             9,848,248

       Certificates of deposit                                        11,232,122            12,241,809
                                                                     -----------           -----------
                   Subtotal retail deposits                           22,232,620            22,090,057

            Custodial accounts                                         1,885,850               825,438
            Accrued interest payable                                      64,225                80,225
            Purchase accounting                                              654                 1,009
                                                                     -----------           -----------
               Total retail deposits                                  24,183,349            22,996,729

            Brokered deposits                                            182,162               465,643
                                                                     -----------           -----------
               Total deposits                                        $24,365,511           $23,462,372
                                                                     ===========           ===========

           Demand deposits as a % of retail deposits
                (including custodials)                                      24.0%                 20.2%
            Transaction accounts as a % of retail deposits
                (including custodials)                                      53.4%                 46.6%
</TABLE>

(7)  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 DP systems 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, 2000 (in thousands):
<TABLE>
<CAPTION>
                                                                    Severance and
                                                  Branch             Termination           Contract
                                              Consolidations           Benefits          Terminations        Total
                                              --------------           --------          ------------        -----
<S>                                             <C>                    <C>                   <C>            <C>
Balance at December 31, 2000                    $16,044                $12,529               $--            $28,573
     Additional liabilities recorded                 --                     --                --                 --
     Charges to liability account                (2,144)                   (29)               --             (2,173)
                                                -------                -------               ---            -------
Balance at June 30, 2001                        $13,900                $12,500               $--            $26,400
                                                =======                =======               ===            =======
</TABLE>


                                    Page 15
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements


(8)  INCOME TAXES

     During the six months ended June 30, 2001, GS Holdings  recorded net income
tax expense of $123.7 million, which included net tax benefits of $29.0 million.
In prior  years,  an  accrued  liability  was  established  for the  purpose  of
satisfying  assessments  that may result from issues  arising during audits with
various state taxing  authorities.  As a result of the completion and settlement
of audits in various  state  taxing  jurisdictions,  additional  guidance on the
deductibility  of covered asset losses,  and the current  assessment of exposure
for tax  strategies  employed  for prior years,  management  reduced its accrued
state tax  liability  by $39.7  million.  The Company also  recorded  additional
Federal  tax  expense of $13.9  million  due to the  reduction  of the state tax
expense.

     In addition, an income tax benefit was recorded for $3.2 million due to the
utilization of net operating  losses of a subsidiary  made available as a result
of the subsidiary's liquidation into California Federal Bank.

     During  the six months  ended June 30,  2000,  GS  Holdings  recorded a net
income  tax  benefit of $7.9  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  status of Mafco
Holdings',  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 six-month  period ended June 30, 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.

(9)  STOCKHOLDER'S EQUITY

     At June 30,  2001,  there were 1,000  shares of GS  Holdings  common  stock
issued and outstanding.

     Dividends  on common  stock  during the six months  ended June 30, 2001 and
2000 totalled $60.0 million and $71.0 million, respectively.

(10) EXECUTIVE AND STOCK COMPENSATION

     In the  first  quarter  of 2001,  Golden  State  granted  to its  employees
non-qualified  stock options  equivalent to 851,000  shares of common stock at a
weighted  average  price of $25.67 per share under the Golden State Bancorp Inc.
Omnibus  Stock Plan.  In the second  quarter of 2001,  Golden  State  granted an
additional  560,100  non-qualified  stock options at a weighted average price of
$30.75 per share.  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 six months ended June 30, 2001, in accordance
with the intrinsic value  accounting  methodology  prescribed in APB Opinion No.
25,  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 June 30, 2001,  91,101 options were exercised
and 4,432  options  were  cancelled or expired  under all plans.  During the six
months ended June 30, 2001,  154,617  options were  exercised and 21,677 options
were cancelled or expired under all plans. During the three and six months ended
June 30, 2000,  14,307  options were  exercised  and 45,116 and 64,366  options,
respectively, were cancelled or expired under all plans.

     At June 30, 2001 and 2000,  options to acquire an  equivalent  of 4,906,205
and 3,828,259 shares and 966,166 and 1,177,775 LTW (TM)s, respectively, remained
outstanding under all plans.


                                    Page 16
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements


     On January  22,  2001,  Golden  State  awarded to certain of its  employees
99,108 shares of restricted stock under the Golden State Bancorp Inc.  Executive
Compensation  Plan.  The  market  value on the date of the awards was $26.38 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.
During  the  three  and six  months  ended  June 30,  2001,  5,911  and  115,045
restricted  shares were vested.  No restricted stock vested during the three and
six months ended June 30, 2000. At June 30, 2001, a total of 230,819  restricted
shares was outstanding. The compensation expense based on the stock price on the
date of these awards was  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 and six months  ended  June 30,  2001,  $0.5
million and $1.0 million,  respectively,  in compensation expense was recognized
related to such  awards.  During the three and six months  ended June 30,  2000,
$0.5  million  and $1.1  million,  respectively,  in  compensation  expense  was
recognized related to such awards.  These restricted shares have full voting and
dividend rights.

(11) EXTRAORDINARY ITEMS

     During the first quarter of 2000, the FHLB called and the Bank prepaid $200
million in FHLB advances,  resulting in an  extraordinary  gain of $1.2 million,
net of  income  taxes  of $0.8  million,  on the  early  extinguishment  of such
borrowings.

     Also during the first quarter of 2000,  the Bank  repurchased  $2.5 million
outstanding  principal  amount of the  Convertible  Subordinated  Debentures due
2001, resulting in an extraordinary gain of $41 thousand, net of income taxes of
$30 thousand, on the early extinguishment of debt.

     During the second  quarter of 2000,  the FHLB  called and the Bank  prepaid
$200  million  in FHLB  advances,  resulting  in an  extraordinary  gain of $1.8
million,  net of income taxes of $1.2 million,  on the early  extinguishment  of
such borrowings.

(12) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

     On September 21, 2000, the EITF issued EITF No. 99-20. This document, which
was  effective  on April  1,  2001,  establishes  guidance  for (1)  recognizing
interest  income  (including  amortization  of premiums or discounts) on (a) all
credit-sensitive   mortgage  and   asset-backed   securities   and  (b)  certain
prepayment-sensitive  securities  including agency  interest-only strips and (2)
determining  when these securities must be written down to fair value because of
impairment.  Existing GAAP did not provide  interest  recognition and impairment
guidance  for  securities  on  which  cash  flows  change  as a  result  of both
prepayments and credit losses and, in some cases, interest rate adjustments.

     On April 1, 2001, the Company  identified a portfolio of securities  with a
total book value of $80.7 million which are subject to the impairment provisions
of EITF No.  99-20.  All of these  securities  had  previously  been reported as
available-for-sale securities, with changes in fair value reflected in OCI. As a
result of its  implementation  of EITF No. 99-20, the Company recorded a loss of
$1.6  million,  net of income tax  credits  of $1.1  million,  representing  the
cumulative effect of a change in accounting principle.


                                    Page 17
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements


(13) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     INTEREST  RATE  RISK   MANAGEMENT - RISK  MANAGEMENT  POLICIES - CASH  FLOW
     HEDGING INSTRUMENTS AND FAIR VALUE HEDGING INSTRUMENTS

     The primary focus of the Company's asset/liability management program is to
monitor the  sensitivity  of the Company's  net  portfolio  value and net income
under  varying  interest  rate  scenarios  in order to take steps to control its
risks. On a quarterly basis,  the Company  simulates the net portfolio value and
net income expected to be earned over a twelve-month  period  following the date
of simulation.  The simulation is based on a projection of market interest rates
at varying levels and estimates the impact of such market rates on the levels of
interest-earning  assets  and  interest-bearing   liabilities  and  on  mortgage
prepayment speeds (which affect the mortgage  servicing rights asset) during the
measurement  period.  Based upon the  outcome of the  simulation  analysis,  the
Company  considers the use of  derivatives as a means of reducing the volatility
of net  portfolio  value and  projected  net  income  within  certain  ranges of
projected  changes in interest rates. The Company evaluates the effectiveness of
entering into any derivative  instrument agreement by measuring the cost of such
an agreement in relation to the reduction in net portfolio  value and net income
volatility within an assumed range of interest rates.

     INTEREST RATE  RISK  MANAGEMENT - CASH FLOW  HEDGING  INSTRUMENTS - BALANCE
     SHEET HEDGES

     OBJECTIVES AND CONTEXT

     The  Company  uses  variable  rate debt as a source of funds for use in the
Company's lending and investment activities and other general business purposes.
It has received  short-term  variable-rate  FHLB advances and Repos.  These debt
obligations  expose the  Company to  variability  in  interest  payments  due to
changes  in  interest  rates.  If  interest  rates  increase,  interest  expense
increases. Conversely, if interest rates decrease, interest expense decreases.

     Management  believes it is prudent to limit the variability of a portion of
its interest payments, and therefore,  generally hedges a significant portion of
its variable-rate interest payments.

     STRATEGIES

     To meet  this  objective,  management  enters  into  derivative  instrument
agreements to manage  fluctuations  in cash flows  resulting  from interest rate
risk. These instruments include interest rate swaps.

     The interest rate swaps change the variable-rate  cash flow exposure on the
short-term  FHLB  advances  and Repos to fixed rate cash flows by entering  into
receive-variable,  pay-fixed interest rate swaps. Under the interest rate swaps,
the Company  receives  variable  interest rate payments and makes fixed interest
rate payments, thereby creating fixed rate FHLB advances and Repos.

     RESULTS

     Risk management  results for the quarter ended June 30, 2001 related to the
balance sheet  hedging of FHLB advances and Repos  indicate that the hedges were
100%  effective and that there was no component of the  derivative  instruments'
gain or loss which was excluded from the assessment of hedge effectiveness.

     Changes in the fair value of  interest  rate  swaps  designated  as hedging
instruments of the  variability of cash flows  associated with FHLB advances and
Repos are reported in OCI.  These amounts  subsequently  are  reclassified  into
interest  expense as a yield  adjustment in the same period in which the related
interest on the FHLB advances and Repos affects earnings.  The net amount of OCI
reclassified  into interest  expense  during the three and six months ended June
30, 2001 was $14.7 million and $20.1 million, respectively.


                                    Page 18
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements


     As of the date of the initial application of SFAS No. 133, January 1, 2001,
approximately  $18.1 million of losses  reported in OCI and associated  with the
transition  adjustment  related to the interest  rate swaps were  expected to be
reclassified  into  interest  expense as a yield  adjustment  of the hedged FHLB
advances and Repos during the twelve month period ending December 31, 2001.

     As of June 30, 2001,  approximately $30.4 million of losses reported in OCI
related to the  interest  rate  swaps  were  expected  to be  reclassified  into
interest  expense as a yield  adjustment  of the hedged FHLB  advances and Repos
during the twelve month period ending June 30, 2002.

     INTEREST RATE  RISK MANAGEMENT - FAIR VALUE  HEDGING INSTRUMENTS - MORTGAGE
     SERVICING RIGHTS HEDGES

     OBJECTIVES AND CONTEXT

     The Company either purchases or originates  mortgage  servicing rights as a
source of fee  income.  These  mortgage-servicing  rights  expose the Company to
variability  in their fair  value due to  changes  in the level of  prepayments.
Mortgage servicing rights are generally recorded in the financial  statements at
the  lesser  of  their  amortized  cost or their  fair  value,  unless  they are
designated as a fair value hedge,  in accordance with SFAS No. 133. The carrying
value of mortgage servicing rights in a designated hedging  relationship will be
adjusted upwards or downwards depending upon the effectiveness of the hedge.

     Management believes that it is prudent to limit the variability in the fair
value of a portion of its MSR asset. It is the Company's  objective to hedge the
servicing rights asset associated with fixed rate,  non-prepayment penalty loans
for which it has recorded mortgage servicing rights, at coverage levels that are
appropriate, given anticipated or existing interest rate levels and other market
considerations,  as well as the  relationship  of change in this  asset to other
assets of the Company.

     STRATEGIES

     To meet this objective, the Company utilizes interest rate swaps, principal
only swaps, interest rate floors, and swaptions as an asset/liability management
strategy to hedge against  prepayment risk in its mortgage  servicing  portfolio
caused by declining  interest  rates.  Although the Company hedges the change in
value of its MSRs, its hedge coverage ratio does not equate to 100%.

     Interest  rate swap  agreements  are contracts to make a series of floating
rate  payments  in  exchange  for  receiving  a series of fixed  rate  payments.
Payments related to swap contracts are made either quarterly or semi-annually by
one of the parties depending on the specific terms of the related contract.  The
notional  amount of the  contracts,  on which the  payments  are based,  are not
exchanged.

     PO swap agreements simulate the ownership of a PO strip, the value of which
is affected  directly by prepayment rates themselves in an inverse manner to the
servicing rights. Under the terms of the PO swap agreements, the counterparty to
the  transaction  purchases  a PO strip and  places  the PO strip in a trust.  A
decrease in the market value of the PO swap requires the Company to increase the
amount paid to the counterparty and an increase in the market value requires the
counterparty  to increase  their payment to the Company.  The amounts to be paid
and to be received are then netted  together  each month.  The structure of this
instrument  results in increased cash flows and positive changes in the value of
the swap during a declining  interest rate environment.  This positive change in
the value of the swap is highly correlated to prepayment activity.

     Interest rate floors are interest rate protection  instruments that involve
payment  from  the  seller  to  the  buyer  of an  interest  differential.  This
differential  represents the difference between a long-term rate (e.g.,  10-year
Constant Maturity Swap), and an agreed-upon rate, the strike rate,  applied to a
notional  principal  amount. By purchasing a floor, the Company will be paid the
differential by the  counterparty,  should the current long-term rate fall below
the strike level of the agreement.  The Company generally  receives cash monthly
on  purchased  floors  (when the  current  interest  rate falls below the strike
rate).


                                    Page 19
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements


     A swaption is an  over-the-counter  option that provides the right, but not
the obligation,  to enter into an interest rate swap agreement at  predetermined
terms at a specified time in the future.  The nature and  strategies  associated
with swaptions are similar to the other derivative instruments described above.

     RESULTS

     Risk management results related to the hedging of mortgage servicing rights
for the quarter ended June 30, 2001 are summarized below and are included in the
caption  entitled "Loan servicing fees,  net" in the  accompanying  consolidated
statements of income (in thousands):
<TABLE>
<CAPTION>

<S>                                                                      <C>
     Loss on designated derivative contracts                             $(108,198)
     Increase in value of designated mortgage servicing rights             114,750
                                                                         ---------

     Net hedge ineffectiveness                                           $   6,552
                                                                         =========
</TABLE>
     INTEREST RATE RISK MANAGEMENT - FAIR VALUE HEDGING  INSTRUMENTS - WAREHOUSE
     LOANS

     OBJECTIVES AND CONTEXT

     The Company,  as part of its  traditional  real estate lending  activities,
originates  fixed-rate  1-4 unit  residential  loans  for sale in the  secondary
market.  At the  time of  origination,  management  identifies  loans  that  are
expected  to be sold in the  near  future.  These  warehoused  loans  have  been
classified as loans held for sale,  net, in the  consolidated  balance sheet and
are recorded at the lower of aggregate  amortized  cost or market  value.  These
loans  expose the Company to  variability  in their fair value due to changes in
interest rates. If interest rates  increase,  the value of the loans  decreases.
Conversely, if interest rates decrease, the value of the loans increases.

     Management  believes  it is  prudent  to limit the  variability  of a major
portion  of the  change  in fair  value of its loans  held for  sale.  It is the
Company's objective to hedge primarily all of its warehoused loans held for sale
to third parties.

     STRATEGIES

     To meet this  objective,  management  employs  forward  loan  sale  hedging
techniques to minimize the interest rate and pricing risks  associated  with the
origination and sale of such warehoused loans.

     The  forward  loan  sales  lock in the  price  for the sale of  either  the
specific  loans  classified  as held  for sale or for a  generic  group of loans
similar to the specific loans classified as held for sale.

     RESULTS

     Risk  management  results related to the hedging of warehouse loans for the
quarter ended June 30, 2001 are summarized below and are included in the caption
entitled  "Gain  on  sale,  settlement  and  transfer  of  loans,  net"  in  the
accompanying consolidated statements of income (in thousands):
<TABLE>
<CAPTION>

<S>                                                                    <C>
       Gain on designated forward loan sale commitments                $ 12,080
       Decrease in value of warehouse loans                             (10,443)
                                                                       --------

       Net hedge ineffectiveness                                       $  1,637
                                                                       ========
</TABLE>



                                    Page 20
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements


     DERIVATIVE INSTRUMENTS NOT DESIGNATED AS HEDGING INSTRUMENTS

     PURPOSE - INTEREST RATE LOCK COMMITMENTS AND FORWARD LOAN SALE COMMITMENTS

     The Company enters into rate lock commitments to extend credit to borrowers
for  generally  a  30-day  period.  Some of these  rate  lock  commitments  will
ultimately  expire without being completed.  During  discussions  leading to the
implementation of SFAS No. 133, the DIG, a committee organized by FASB to advise
it on initial  implementation  issues,  concluded that rate lock commitments for
mortgages  that would be held for sale  should be  accounted  for as  derivative
instruments and valued, therefore, at fair market value. In determining the fair
market  value of the rate lock  commitments,  the Bank  excludes the fair market
value of any future servicing rights.

     To the extent that a loan is ultimately granted and the borrower ultimately
accepts the terms of the loan, these rate lock commitments expose the Company to
variability  in their fair value due to changes in interest  rates.  If interest
rates increase, the value of these rate lock commitments decreases.  Conversely,
if interest rates decrease, the value of these rate lock commitments increases.

     To mitigate the effect of this interest rate risk,  the Company enters into
offsetting  derivative contracts,  primarily forward loan sale commitments.  The
forward loan sale commitments lock in an interest rate and price for the sale of
loans  similar  to  the  specific  rate  lock  loan  commitments  classified  as
derivatives.   Both  the  rate  lock  commitments  and  the  forward  loan  sale
commitments are undesignated  derivatives,  and accordingly are marked to market
through earnings.

     Risk  management  results related to the  undesignated  hedging of interest
rate lock  commitments with  undesignated  forward loan sale commitments for the
quarter ended June 30, 2001 are summarized below and are included in the caption
entitled  "Gain  on  sale,  settlement  and  transfer  of  loans,  net"  in  the
consolidated statements of income (in thousands):
<TABLE>
<CAPTION>

<S>                                                                                  <C>
     Gain on undesignated forward loan sale commitments recognized to income         $11,096
     Loss on undesignated interest rate loan commitments recognized to income         (9,093)
                                                                                     -------
     Net gain on derivatives                                                         $ 2,003
                                                                                     =======
</TABLE>

(14) RECENT ACCOUNTING PRONOUNCEMENTS

     BUSINESS COMBINATIONS

     On July 20,  2001,  the FASB issued  SFAS No. 141 which  defines a business
combination  as a  transaction  through  which an  enterprise  acquires all or a
portion of the net assets that constitute a business or equity  interests of one
or more enterprises and obtains control over those enterprises.  This definition
is not substantively different from the APB Opinion No. 16 definition.

     SFAS No. 141 requires that all business combinations be accounted for using
the  purchase  method.  Use of the  pooling-of-interests  method to account  for
business combinations, which APB Opinion No. 16 required to be used when certain
criteria were met, is prohibited. SFAS No. 141 provides guidance for determining
the acquired  enterprise.  In addition,  SFAS No. 141 requires  that  additional
information be disclosed about business combination transactions.

     The accounting,  disclosure and financial statement  provisions of SFAS No.
141 are effective for business combinations initiated after June 30, 2001.

     The implementation of SFAS No. 141 is not expected to materially impact the
Company's financial condition or operating results.



                                    Page 21
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements


     GOODWILL AND OTHER INTANGIBLE ASSETS

     On July  20,  2001,  the  FASB  also  issued  SFAS No.  142.  SFAS No.  142
supersedes APB Opinion No. 17 and establishes new accounting  standards for both
identifiable  and  unidentifiable  intangible  assets  acquired  in  a  business
combination,  including  goodwill,  but does not  address  internally  developed
intangible  assets.  It would continue to require  recognition of goodwill as an
asset but would not permit amortization of goodwill as currently required by APB
Opinion No. 17.  Instead,  goodwill  would be tested for  impairment  at a level
referred to as a reporting  unit. A reporting  unit is the same level as, or one
level below, an operating segment (as that term is used in SFAS No. 131).

     Goodwill would be tested for impairment annually and on an interim basis if
an event or circumstance  occurs between annual tests that might reduce the fair
value of a reporting unit below its carrying  value. An example of such an event
or circumstance may include an adverse change in the business climate or market,
a legal factor,  an action by regulators,  an introduction of competition,  or a
loss of key  personnel.  Goodwill  would  also be tested  for  impairment  on an
interim  basis  when  (a)  a  more-likely-than-not  expectation  exists  that  a
reporting  unit or a  significant  portion of a  reporting  unit will be sold or
otherwise  disposed of, (b) a significant asset group within a reporting unit is
tested  for  recoverability  under SFAS No.  121,  or (c) a  subsidiary  of that
reporting unit has recognized a goodwill impairment loss. The fair value of each
reporting  unit would not have to be recomputed  every year if the components of
the reporting  unit had not changed  since the previous fair value  computation,
the previous  fair value amount  exceeded the carrying  amount of the  reporting
unit by a substantial margin, and no evidence exists indicating that the current
fair value of the reporting unit may be less than its current carrying amount.

     Goodwill  would be tested for  impairment  using a two-step  approach.  The
first step is a comparison of the fair value of a reporting unit to its carrying
amount,  including goodwill.  If the fair value of the reporting unit is greater
than its carrying  amount,  goodwill is not  considered  impaired and no further
work is  required.  If the fair  value of the  reporting  unit is less  than its
carrying amount,  the second step of the impairment test must be performed.  The
second step of the impairment  test is a comparison of the implied fair value of
goodwill to its carrying  amount.  If the implied fair value of goodwill is less
than its carrying amount, goodwill is considered impaired and an impairment loss
recognized.  The  impairment  loss would be  measured as the amount by which the
carrying amount of goodwill exceeds its implied fair value.

     An acquired  intangible  asset other than goodwill  would be amortized over
its useful economic life and reviewed for impairment in accordance with SFAS No.
121.

     The aggregate amount of goodwill would be presented as a separate line item
in the balance sheet. The aggregate amount of goodwill  impairment  losses would
be  presented  as a separate  line item in the  operating  section of the income
statement  unless a goodwill  impairment  loss is associated with a discontinued
operation. At a minimum,  intangible assets would be aggregated and presented as
a  separate  line item in the  statement  of  financial  position.  Amortization
expense and impairment losses for intangible assets other than goodwill would be
presented in income statement line items as deemed appropriate for each entity.

     SFAS No. 142 is effective for the Company on January 1, 2002.

     Management  is in the process of reviewing  the records from the  Company's
various acquisitions.  At present, it appears that at least 90% of the Company's
intangible  asset  represents  goodwill  and will  cease to be  amortized  as of
January 1, 2002 pursuant to SFAS No. 142. As a result,  management  expects GAAP
earnings to increase by $13.8 million per quarter in 2002.


                                    Page 22
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements


     ACCOUNTING FOR TRANSFERS AND SERVICING FINANCIAL ASSETS AND EXTINGUISHMENTS
     OF LIABILITIES

     On September 29, 2000,  the FASB issued SFAS No. 140. SFAS No. 140 replaces
SFAS No. 125,  which was issued in June of 1996.  It revises the  standards  for
accounting  for  securitizations  and other  transfers of  financial  assets and
collateral  and requires  certain  disclosures,  but it carries over most of the
provisions of SFAS No. 125 without reconsideration. In general, SFAS No. 140 was
effective for transfers of financial  assets  occurring after March 31, 2001 and
for  disclosures  relating to  securitization  transactions  and  collateral for
fiscal years ending after December 15, 2000.

     The implementation of SFAS No. 140 on April 1, 2001 (incremental provisions
that were not  previously  part of SFAS No. 125) did not  materially  impact the
Company's financial condition or operating results.


                                    Page 23
<PAGE>

ITEM 2.  MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

     FORWARD-LOOKING  STATEMENTS. THIS QUARTERLY REPORT CONTAINS FORWARD-LOOKING
STATEMENTS,  WITHIN THE MEANING OF THE PRIVATE SECURITIES  LITIGATION REFORM ACT
OF  1995,  THAT  PERTAIN  TO  OUR  FUTURE  OPERATING  RESULTS.   WORDS  SUCH  AS
"ANTICIPATE,"  "BELIEVE,"  "EXPECT," "INTEND" AND OTHER SIMILAR  EXPRESSIONS ARE
INTENDED  TO  IDENTIFY  THESE  STATEMENTS.  FORWARD-LOOKING  STATEMENTS  ARE NOT
HISTORICAL FACTS AND ARE INHERENTLY  SUBJECT TO SIGNIFICANT  BUSINESS,  ECONOMIC
AND COMPETITIVE  UNCERTAINTIES AND  CONTINGENCIES,  MANY OF WHICH ARE BEYOND OUR
CONTROL.   OUR  ACTUAL  RESULTS  COULD  DIFFER  MATERIALLY  FROM  THOSE  IN  THE
FORWARD-LOOKING  STATEMENTS DUE TO SUCH FACTORS AS (I) PORTFOLIO CONCENTRATIONS;
(II) INTEREST RATE CHANGES,  INCLUDING CHANGES IN SHORT-TERM INTEREST RATES, THE
SHAPE OF THE YIELD CURVE AND THE  TREASURY-EURODOLLAR  SPREAD;  (III) CHANGES IN
ASSET  PREPAYMENT  SPEEDS;  (IV)  CHANGES  IN  OUR  COMPETITIVE  AND  REGULATORY
ENVIRONMENTS;  AND  (V)  CHANGES  IN  THE  AVAILABILITY  OF NET  OPERATING  LOSS
CARRYOVERS AND DEFERRED TAX LIABILITIES.  IN NOVEMBER 2000, GOLDEN STATE BANCORP
INC.  FILED AN S-3  REGISTRATION  STATEMENT  WITH THE SEC THAT  DISCUSSES  THESE
FACTORS  IN  GREATER  DETAIL.  WE ASSUME  NO  OBLIGATION  TO  UPDATE  ANY OF OUR
FORWARD-LOOKING STATEMENTS.

OVERVIEW

     GS Holdings,  through  California  Federal,  operates  retail branches that
provide deposit products such as demand,  transaction and savings accounts,  and
sells  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  income  before the  cumulative  effect of change in
accounting  principle of $210.7  million for the six months ended June 30, 2001.
Income before  extraordinary  items was $338.5  million for the six months ended
June 30,  2000.  Net income for the six  months  ended June 30,  2001 was $209.2
million compared with net income of $341.5 million for the corresponding  period
in 2000.  Net income for the six months  ended June 30, 2001  includes a loss of
$1.6 million,  net of tax, from the cumulative  effect of a change in accounting
principle.  Net  income for the six months  ended June 30,  2000  includes a tax
benefit of $161.7 million and gains on the early  extinguishment of debt, net of
tax, of $3.0 million.

     GS  Holdings  reported  income  before the  cumulative  effect of change in
accounting principle of $115.1 million for the three months ended June 30, 2001.
Income before  extraordinary  items was $90.2 million for the three months ended
June 30,  2000.  Net income for the three  months ended June 30, 2001 was $113.5
million compared with net income of $92.0 million for the  corresponding  period
in 2000.  Net income for the three months ended June 30, 2001 includes a loss of
$1.6 million,  net of tax, from the cumulative  effect of a change in accounting
principle. Net income for the three months ended June 30, 2000 includes gains on
the early extinguishment of debt, net of tax, of $1.8 million.


                                    Page 24
<PAGE>

     FINANCIAL CONDITION

     During  the six months  ended  June 30,  2001,  consolidated  total  assets
increased  $789.0  million from December 31, 2000, to $61.3  billion,  and total
liabilities increased from $57.7 billion to $58.3 billion.  Loans receivable and
loans held for sale  increased  $1.7  billion  and $1.5  billion,  respectively,
during the six month period,  while  securities and  mortgage-backed  securities
declined  $619 million and $1.6 billion,  respectively,  during the same period.
This shift  represents  strong loan  production by the Company coupled with high
repayment rates for both loans and securities in light of the current  declining
interest rate environment. Deposits increased $903 million during the six months
ended June 30,  2001,  reflecting  an  increase of $1.2  billion in  transaction
accounts,  offset by a $1.0 billion decline in certificates of deposit - part of
management's  goal to become  more  "bank-like"  and to lower its cost of funds.
Custodial  accounts  increased  $1.1  billion,  or 128%,  over December 31, 2000
balances,  a direct result of the increase in  repayments in the loan  servicing
portfolio.  Total  borrowings,  including  securities  sold under  agreements to
repurchase, FHLB advances and other borrowings, declined $643 million during the
six months ended June 30, 2001.

     During the six months ended June 30, 2001,  stockholder's  equity increased
$183.1  million  to $2.5  billion.  The  increase  in  stockholder's  equity  is
principally  the net result of $209.2  million in net income for the  period,  a
$58.2 million improvement in net unrealized gain/loss,  after tax, on securities
available-for-sale   and  $30.4  million  in   unrealized   loss  on  securities
reclassified from  held-to-maturity to  available-for-sale,  partially offset by
$60.0 million in common stock dividends,  a $44.6 million transition  adjustment
recorded upon the adoption of SFAS No. 133 and $16.8  million in net  unrealized
losses, after tax, on derivatives.

     GS Holdings' non-performing assets, consisting of non-performing loans, net
of purchase accounting adjustments, foreclosed real estate, net, and repossessed
assets,  decreased  to $127.2  million at June 30,  2001  compared  with  $140.9
million at December 31, 2000. Total non-performing assets as a percentage of the
Bank's total  assets  decreased to 0.21% at June 30, 2001 from 0.23% at December
31, 2000.


                                    Page 25
<PAGE>

RESULTS OF OPERATIONS

     SIX MONTHS ENDED JUNE 30, 2001 VERSUS SIX MONTHS ENDED JUNE 30, 2000

     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>
                                                                        Six Months Ended June 30, 2001
                                                                   ---------------------------------------
                                                                   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)         $ 1,051         $   32            6.01%
     Mortgage-backed securities available-for-sale                  10,385            345            6.64
     Mortgage-backed securities held-to-maturity                     1,685             71            8.43
     Loans held for sale, net                                        1,565             53            6.73
     Loans receivable, net:
         Residential                                                31,761          1,124            7.08
         Commercial real estate                                      6,130            256            8.36
         Commercial banking                                            570             25            8.69
         Consumer                                                      875             40            9.31
         Auto                                                        1,700             96           11.38
                                                                   -------         ------
     Total loans receivable, net                                    41,036          1,541            7.52
      FHLB stock                                                     1,391             45            6.58
                                                                   -------         ------
         Total interest-earning assets                              57,113          2,087            7.31%
                                                                                   ------
Noninterest-earning assets                                           3,593
                                                                   -------
         Total assets                                              $60,706
                                                                   =======

LIABILITIES, MINORITY INTEREST AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                      $23,996            465            3.90%
     Securities sold under agreements to repurchase (3)              3,992            121            6.05
     Borrowings (3)                                                 28,784            854            5.96
                                                                   -------         ------
         Total interest-bearing liabilities                         56,772          1,440            5.09%
                                                                                   ------
Noninterest-bearing liabilities                                      1,123
Minority interest                                                      497
Stockholder's equity                                                 2,314
                                                                   -------
          Total liabilities, minority interest
                and stockholder's equity                           $60,706
                                                                   =======
Net interest income                                                                $  647
                                                                                   ======
Interest rate spread                                                                                 2.22%
                                                                                                    =====
Net interest margin                                                                                  2.25%
                                                                                                    =====
Return on average assets                                                                             0.69%
                                                                                                    =====
Return on average equity                                                                            18.08%
                                                                                                    =====
Average equity to average assets                                                                     3.81%
                                                                                                    =====
</TABLE>


                                    Page 26
<PAGE>

<TABLE>
<CAPTION>
                                                                                    Six Months Ended June 30, 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)                     $ 1,429          $   46          6.42%
     Mortgage-backed securities available-for-sale                              13,158             435          6.62
     Mortgage-backed securities held-to-maturity                                 2,390              91          7.60
     Loans held for sale, net                                                      764              29          7.51
     Loans receivable, net:
         Residential                                                            28,667             992          6.92
         Commercial real estate                                                  5,553             227          8.20
         Commercial banking                                                        506              24          9.68
         Consumer                                                                  716              36          9.99
         Auto                                                                    1,073              64         11.96
                                                                               -------          ------
     Total loans receivable, net                                                36,515           1,343          7.36
     FHLB stock                                                                  1,250              45          7.26
                                                                               -------          ------
         Total interest-earning assets                                          55,506           1,989          7.17%
                                                                                                ------
Noninterest-earning assets                                                       2,887
                                                                               -------
         Total assets                                                          $58,393
                                                                               =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                                    $22,920           443            3.89%
     Securities sold under agreements to repurchase (3)                            5,606           173            6.09
     Borrowings (3)                                                               26,729           796            5.97
                                                                                --------        ------
         Total interest-bearing liabilities                                       55,255         1,412            5.12%
                                                                                                ------
Noninterest-bearing liabilities                                                      912
Minority interest                                                                    497
Stockholder's equity                                                               1,729
                                                                               ---------
         Total liabilities, minority interest
              and stockholder's equity                                           $58,393
                                                                                 =======
Net interest income                                                                             $  577
                                                                                                ======
Interest rate spread                                                                                            2.05%
                                                                                                               =====
Net interest margin                                                                                             2.07%
                                                                                                               =====

Return on average assets                                                                                        1.17%
                                                                                                               =====
Return on average equity                                                                                       39.50%
                                                                                                               =====
Average equity to average assets                                                                                2.96%
                                                                                                               =====
</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 and
     interest-bearing deposits in other banks.

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



                                    Page 27
<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>
                                                                   Six Months Ended June 30, 2001 vs. 2000
                                                                        Increase (Decrease) Due to
                                                                   ---------------------------------------
                                                                    Volume          Rate          Net
                                                                    ------          ----          ---
INTEREST INCOME:                                                                 (in millions)
<S>                                                                  <C>            <C>          <C>
     Securities and interest-bearing deposits in banks               $(11)          $(3)         $(14)
     Mortgage-backed securities available-for-sale                    (92)            1           (91)
     Mortgage-backed securities held-to-maturity                      (31)           11           (20)
     Loans held for sale, net                                          27            (3)           24
     Loans receivable, net                                            169            29           198
                                                                     ----           ---          ----
          Total                                                        62            35            97
                                                                     ----           ---          ----

INTEREST EXPENSE:

     Deposits                                                          19             2            21
     Securities sold under agreements to repurchase                   (50)           (1)          (51)
     Borrowings                                                        60            (2)           58
                                                                     ----           ---          ----
          Total                                                        29            (1)           28
                                                                     ----           ---          ----
                Change in net interest income                        $ 33           $36          $ 69
                                                                     ====           ===          ====
</TABLE>

     INTEREST INCOME.  Total interest income was $2.1 billion for the six months
ended June 30, 2001, an increase of $97.1 million from the six months ended June
30, 2000. Total  interest-earning  assets for the six months ended June 30, 2001
averaged $57.1 billion,  compared to $55.5 billion for the corresponding  period
in 2000,  primarily as a result of increased loan volume,  partially offset by a
decline  in  mortgage-backed  securities.  The  yield on total  interest-earning
assets  during the six months ended June 30, 2001  increased to 7.31% from 7.17%
for the six months ended June 30, 2000,  primarily due to a higher percentage of
loans to total  earning  assets  and the  lagging  effect  of the  repricing  of
higher-rate  variable-rate  loans and  securities.  At June 30, 2001, 14% of the
Company's  portfolio  loans  were tied to COFI  indices,  14% to  Treasury-based
indices  and 44% were  "hybrid"  ARMS - fixed  for  three to ten  years and then
adjusting annually. Twenty-four percent of the portfolio is fixed. The remaining
4% of the portfolio is in other adjustable-rate products.


                                    Page 28
<PAGE>

     GS Holdings earned $1.5 billion of interest income on loans  receivable for
the six months ended June 30, 2001,  an increase of $197.5  million from the six
months ended June 30, 2000.  The average  balance of loans  receivable was $41.0
billion for the six months  ended June 30, 2001,  compared to $36.5  billion for
the same  period  in  2000.  The  weighted  average  yield  on loans  receivable
increased to 7.52% for the six months ended June 30, 2001 from 7.36% for the six
months ended June 30, 2000. The increase in the average  balance  reflects a net
increase in residential and commercial real estate loan  origination  activities
and new auto loan production from the Downey Acquisition. Loan production during
the six months  ended June 30,  2001 and 2000 is detailed in the table below (in
thousands):

<TABLE>
<CAPTION>
                                                                                  Six Months Ended June 30,
                                                                                  -------------------------
                                                                                  2001                 2000
                                                                                  ----                 ----
<S>                                                                            <C>                  <C>
           Loans funded:
              Residential real estate loans                                    $11,313,830          $7,387,065
              Commercial real estate loans                                         886,836             623,956
              Commercial loans                                                     523,254             343,056
              Consumer nonmortgage loans                                           403,546             354,117
              Other                                                                     --                 124
                                                                               -----------          ----------
                 Total loans funded                                            $13,127,466          $8,708,318
                                                                               ===========          ==========

           Loans purchased:
              Residential real estate loans                                    $ 1,723,576          $  335,845
              Auto loans                                                           625,568             475,895
                                                                               -----------          ----------
                 Total loans purchased                                         $ 2,349,144          $  811,740
                                                                               ===========          ==========
</TABLE>

     The increase in the weighted  average yield is primarily due to the lagging
effect of the repricing of variable-rate loans at higher rates, partially offset
by lower rates on new purchases of prime auto loans.

     GS Holdings  earned $52.7 million of interest income on loans held for sale
for the six months  ended June 30, 2001,  an increase of $24.0  million from the
six months ended June 30, 2000.  The average  balance of loans held for sale was
$1.6  billion  for the six months  ended June 30,  2001,  an  increase of $801.0
million from the comparable  period in 2000,  primarily  attributed to increased
originations of residential, fixed-rate loans as a result of heightened borrower
refinancing  activity  in  the  current  declining  interest  rate  environment.
Fixed-rate production for sale totalled $7.5 billion during the six months ended
June 30, 2001,  an increase of more than 200% over the $2.4  billion  originated
during the comparable  period in 2000. The weighted  average yield on loans held
for sale  decreased  to 6.73% for the six months  ended June 30, 2001 from 7.51%
for the six months  ended  June 30,  2000,  primarily  due to  declining  market
interest rates.


                                    Page 29
<PAGE>

     Interest income on mortgage-backed securities available-for-sale was $345.0
million for the six months ended June 30, 2001, a decrease of $90.6 million from
the six months ended June 30, 2000. The average portfolio balance decreased $2.8
billion,  to $10.4  billion,  for the six months ended June 30, 2001 compared to
the same period in 2000.  The weighted  average yield on these assets  increased
from  6.62% for the six months  ended June 30,  2000 to 6.64% for the six months
ended June 30,  2001.  The  decrease in the volume is  primarily  attributed  to
payments  and  sales of  mortgage-backed  securities,  partially  offset  by the
reclassification  of  $1.1  billion  in  mortgage-backed   securities  from  the
held-to-maturity  portfolio,  as permitted  upon the adoption of SFAS No. 133 on
January 1, 2001. The increase in the weighted  average yield is primarily due to
a lagging effect of the repricing of variable-rate securities at higher rates.

     Interest income on mortgage-backed  securities  held-to-maturity  was $71.0
million for the six months ended June 30, 2001, a decrease of $19.9 million from
the six months ended June 30, 2000. The average portfolio balance decreased $0.7
billion, to $1.7 billion, for the six months ended June 30, 2001 compared to the
same  period in 2000,  primarily  due to the $1.1  billion  reclassification  in
mortgage-backed  securities to the  available-for-sale  portfolio,  as permitted
upon the  adoption  of SFAS No. 133 on January 1,  2001.  The  weighted  average
yields  for the six months  ended  June 30,  2001 and 2000 were 8.43% and 7.60%,
respectively. The increase in the weighted average yield is primarily the result
of a lagging effect of the repricing of variable-rate securities at higher rates
and the $1.1 billion reclassification of securities with a weighted average rate
of 6.84%.

     Interest income on securities and interest-bearing  deposits in other banks
was $31.6  million for the six months  ended June 30,  2001, a decrease of $14.3
million from the six months ended June 30, 2000. The average  portfolio  balance
was $1.1  billion and $1.4  billion  for the six months  ended June 30, 2001 and
2000, respectively. The lower weighted average yield of 6.01% for the six months
ended June 30, 2001  compared to 6.42% for the six months ended June 30, 2000 is
primarily  due to the $2.4  million in interest  income on a federal  income tax
refund  related to Old  California  Federal,  received in the first half of 2000
(for which  there is no  corresponding  earning  asset),  and the  repricing  of
securities at lower rates during the first half of 2001.

     Dividends  on FHLB stock were $45.4  million for the six months  ended June
30,  2001,  an increase of $0.3 million from the six months ended June 30, 2000.
The average  balance  outstanding  during the six months ended June 30, 2001 and
2000 was $1.4  billion and $1.3  billion,  respectively.  The  weighted  average
dividend on FHLB stock  declined to 6.58% for the six months ended June 30, 2001
from 7.26% for the six months ended June 30,  2000.  The increase in the average
balance is due to an increase in borrowings from the FHLB, while the decrease in
the weighted  average yield is the result of a reduction in the dividend rate on
FHLB stock.

     INTEREST  EXPENSE.  Total  interest  expense  was $1.4  billion for the six
months  ended June 30,  2001,  an increase of $27.6  million from the six months
ended June 30, 2000.  The increase is primarily  the result of  additional  FHLB
borrowings and deposits used to fund the increase in total assets.

     Interest  expense on  deposits,  including  Brokered  Deposits,  was $464.5
million for the six months  ended June 30,  2001,  an increase of $21.3  million
from the six months  ended  June 30,  2000.  The  average  balance  of  deposits
outstanding  increased from $22.9 billion for the six months ended June 30, 2000
to $24.0  billion for the six months  ended June 30,  2001.  The increase in the
average balance is primarily  attributed to increases in the average balances of
custodial  accounts,  money  market  accounts,   retail  customer  checking  and
certificates  of  deposit,  partially  offset by a decline  in  savings  account
balances.  The overall weighted average cost of deposits  increased to 3.90% for
the six months  ended June 30, 2001 from 3.89% for the six months ended June 30,
2000,  primarily due to a higher average balance of higher rate  certificates of
deposit in the first half of 2001, as a result of a major CD campaign undertaken
during the fourth quarter of 2000.

     Interest expense on securities sold under agreements to repurchase totalled
$121.4  million  for the six months  ended June 30,  2001,  a decrease  of $51.3
million  from the six months ended June 30,  2000.  The average  balance of such
borrowings  for the six months ended June 30, 2001 and 2000 was $4.0 billion and
$5.6 billion, respectively. The decrease in the average balance is primarily the
result  of  maturities  during  the first  half of 2001.  The  weighted  average
interest rate on these  instruments  decreased to 6.05% for the six months ended
June 30, 2001 from 6.09% for the six months ended June 30, 2000,  primarily  due
to  maturities   of  higher  rate   fixed-rate   borrowings   and  repricing  of
variable-rate borrowings at lower rates during the first half of 2001.


                                    Page 30
<PAGE>

     Interest  expense on borrowings  totalled $853.8 million for the six months
ended June 30, 2001, an increase of $57.6 million from the six months ended June
30, 2000. The average balance outstanding for the six months ended June 30, 2001
and 2000 was $28.8 billion and $26.7 billion, respectively. The weighted average
interest rate on these  instruments  decreased to 5.96% for the six months ended
June 30, 2001 from 5.97% for the six months ended June 30,  2000.  The change in
the average volume is the result of additional  FHLB borrowings used to fund the
increase in total assets.

     NET INTEREST  INCOME.  Net interest  income was $646.9  million for the six
months  ended June 30,  2001,  an increase of $69.4  million from the six months
ended June 30,  2000.  The interest  rate spread  increased to 2.22% for the six
months  ended June 30, 2001 from 2.05% for the six months  ended June 30,  2000,
primarily as a result of the higher  percentage of loans to total earning assets
and the lagging effect of the repricing of higher-rate  variable-rate  loans and
securities,  coupled with the  replacement  of  maturities  and the repricing of
higher rate interest-bearing liabilities with lower costing instruments. The net
interest margin increased to 2.25% for the six months ended June 30, 2001, up 18
basis points, from the 2.07% reported during the first half of 2000.

     NONINTEREST INCOME. Total noninterest income,  consisting primarily of loan
servicing fees, customer banking fees, gain on sale,  settlement and transfer of
loans, net, gain on sale of assets,  net and other income was $173.5 million for
the six months ended June 30,  2001,  representing  a decrease of $39.9  million
from the six months ended June 30, 2000.

     Loan  servicing  fees  for  the  Company,  net  of  amortization  of  MSRs,
pass-through  interest expense, net unrealized gains on MSRs/MSR derivatives and
valuation  provision were $(6.9) million for the six months ended June 30, 2001,
compared to $85.8 million for the six months ended June 30, 2000.  The following
table details the components of loan servicing fees, net (in thousands):
<TABLE>
<CAPTION>
                                                                              For the Six Months Ended June 30,
                                                                              ---------------------------------
                                                                                  2001                2000
                                                                                  ----                ----
       Components of loan servicing fees, net:
<S>                                                                             <C>                  <C>
              Loan servicing fees                                               $ 224,292            $187,828
              Amortization of mortgage servicing rights                          (147,013)            (97,236)
              Pass-through interest expense                                       (16,142)             (4,769)
              Net gain on MSRs/MSR derivatives                                      8,957                  --
              MSR valuation provision                                             (77,000)                 --
                                                                                ---------            --------
                  Total loan servicing fees, net                                $  (6,906)           $ 85,823
                                                                                =========            ========
</TABLE>

     As the table  reflects,  loan servicing  fees increased  $36.5 million from
year-ago levels, which is primarily  attributable to the growth of the Company's
servicing  portfolio and higher  ancillary fees. The  single-family  residential
loan servicing portfolio,  excluding loans serviced for the Bank, increased from
$78.6 billion at June 30, 2000 to $83.3 billion at June 30, 2001. The annualized
runoff rate on the  Company's  portfolio  of  mortgages  serviced for others was
25.6% for the six  months  ended  June 30,  2001  compared  to 11.8% for the six
months ended June 30, 2000. This runoff rate also  influences MSR  amortization,
which  increased  $49.8  million  in the first six  months of 2001 over the same
period in 2000;  the MSR  amortization  rate  averaged  20.3% for the six months
ended  June 30,  2001  compared  to 14.0%  during the same  period in 2000.  MSR
amortization  was also  affected  by a higher  average  MSR  balance for the six
months  ended June 30, 2001  compared  to the same period in 2000.  Pass-through
interest expense  increased $11.4 million (238%) year over year, also influenced
by higher runoff rates.  Servicing  fee income  includes a $9.0 million  pre-tax
gain from the impact of SFAS No. 133 pertaining to the MSR fair value hedges.  A
$77.0 million  pre-tax  valuation  allowance was recorded  during the six months
ended June 30, 2001. On an aggregate  basis,  in all ten  tranches,  at June 30,
2001,  the estimated  fair value of the MSRs was $47.5 million  higher than book
value (net of valuation allowance).



                                    Page 31
<PAGE>

     Customer banking fees were $105.8 million for the six months ended June 30,
2001  compared to $98.7  million  for the six months  ended June 30,  2000.  The
increase  is  primarily  attributed  to  increased  emphasis  by  management  on
transaction account growth.  Transaction accounts (including custodial accounts)
as a percentage  of retail  deposits  increased to 53.4% at June 30, 2001,  from
48.3% at June 30, 2000.

     Gain on sale,  settlement and transfer of loans, net totalled $21.9 million
for the six months  ended June 30, 2001, a decrease of $5.2 million from the six
months  ended June 30,  2000.  During the second  quarter of 2000,  the  Company
recorded a $14.5 million reduction in its recourse liability.  This liability is
a  life-of-asset  accrual.  Given  the  paydowns  which  have  occurred  on  the
underlying loans and the improving credit and real estate market conditions, the
Company  determined  that the  liability  balance  exceeded  its estimate of the
required accrual for the remaining life of the recourse assets by $14.5 million.
During the six months ended June 30, 2001,  California Federal sold $5.6 billion
in  single-family  mortgage  loans  originated  for sale with  servicing  rights
retained as part of its ongoing  mortgage  banking  operations at gains of $14.1
million compared to $2.2 billion of such sales for the  corresponding  period in
2000 at gains of $9.1 million. The overall reduction in the rate of gain on sale
relates to channel and product mix differences during the two periods, while the
increase in volume of loans sold relates to a significant increase in fixed-rate
loan  originations  as a result of the overall  decline in market interest rates
and increased  mortgage  refinancing.  Gain on sale also includes a $3.6 million
unrealized gain on forward loan sale commitments related to SFAS No. 133.

     Gain on sale of assets, net totalled $16.2 million for the six months ended
June 30, 2001,  compared to a net loss of $16.0 million for the six months ended
June 30, 2000,  primarily  attributed  to an $18.7 million loss from the sale of
approximately $500 million of  mortgage-backed  securities with an average yield
of 6.64%  during the second  quarter of 2000.  The gain during the first half of
2001  includes an  additional  gain of $9.3 million on the sale of the Company's
Concord  EFS  stock  and a $6.6  million  gain on the  sale of $298  million  in
mortgage-backed securities.

     Other income totalled $36.4 million for the six months ended June 30, 2001,
an increase of $18.6 million over the same period in 2000. The increase  relates
to a gain of $20.7 million on the  non-monetary  exchange of Star Systems common
stock for 634,520 shares of Concord EFS common stock which occurred in the first
quarter of 2001 as a result of Concord's acquisition of Star.

     NONINTEREST  EXPENSE.  Total noninterest expense was $472.4 million for the
six months ended June 30, 2001, an increase of $25.6 million compared to the six
months  ended June 30, 2000.  Noninterest  expense for the six months ended June
30, 2001  included  increases  of $16.2  million in  compensation  and  employee
benefit expense,  $8.2 million in other noninterest  expense and $4.3 million in
occupancy  and  equipment  expense.  These  changes  were  partially  offset  by
decreases of $3.0 million in professional  fees and $2.0 million in amortization
of intangible assets.

     Compensation  and employee  benefits expense was $231.2 million for the six
months  ended June 30,  2001,  an increase of $16.2  million from the six months
ended June 30,  2000.  The increase is  primarily  attributed  to an increase in
staff (from 7,842 FTE at June 30, 2000 to 8,015 at June 30, 2001),  primarily in
volume-related  operating  groups,  as well as  normal  salary  adjustments.  In
addition,  the Company has  experienced an increase in group insurance and other
benefit costs that it has elected not to pass on to its employees.

     Occupancy and equipment  expense was $77.8 million for the six months ended
June 30,  2001,  an increase of $4.3  million from the six months ended June 30,
2000, primarily due to an increase in depreciation expense, as well as increased
utility costs and higher contract maintenance and repair fees.

     Professional  fees were $14.7  million  for the six  months  ended June 30,
2001,  a  decrease  of $3.0  million  from the six months  ended June 30,  2000,
primarily  due  to a  decrease  in  consulting  fees  related  to  various  data
processing systems projects.



                                    Page 32
<PAGE>

     Amortization  of  intangible  assets was $29.9  million  for the six months
ended June 30,  2001,  a decrease of $2.0 million from the six months ended June
30, 2000,  primarily  attributed  to a December  2000  reduction in the goodwill
balance due to the reversal of Old California Federal Bank state deferred taxes.

     Other noninterest  expense was $111.2 million for the six months ended June
30, 2001 compared to $103.0 million  during the  comparable  period in 2000. The
increase in  expenses  relates to  increases  in a number of  operating  expense
categories,  including  postage,  telephone,  judgments and settlements,  office
supplies and marketing.

     PROVISION  FOR INCOME TAX.  During the six months ended June 30,  2001,  GS
Holdings  recorded net income tax expense of $123.7 million,  which included net
tax  benefits  of $29.0  million.  In prior  years,  an  accrued  liability  was
established  for the  purpose of  satisfying  assessments  that may result  from
issues arising during audits with various state taxing authorities.  As a result
of  the   completion   and   settlement   of  audits  in  various  state  taxing
jurisdictions, additional guidance on the deductibility of covered asset losses,
and the current  assessment  of exposure for tax  strategies  employed for prior
years,  management reduced its accrued state tax liability by $39.7 million. The
Company also recorded additional Federal tax expense of $13.9 million due to the
reduction of the state tax expense.

     In addition, an income tax benefit was recorded for $3.2 million due to the
utilization of net operating  losses of a subsidiary  made available as a result
of the subsidiary's liquidation into California Federal Bank.

     During  the six months  ended June 30,  2000,  GS  Holdings  recorded a net
income  tax  benefit of $7.9  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 the  current  status  of Mafco
Holdings',  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 six-month  period ended June 30, 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 41% during the six months ended
June 30,  2001 and (9)%  during the six months  ended June 30,  2000,  while its
federal statutory tax rate was 35% during both periods.  In 2001, the difference
between the effective and statutory  rate was primarily the result of additional
federal tax liability  recorded in  conjunction  with a reduction in the accrued
state tax liability and non-deductible  goodwill amortization,  partially offset
by an  adjustment  to net  operating  losses from prior  periods.  In 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.  GS Holdings' effective state tax rate was
(5)% and 6% during the six months  ended June 30,  2001 and 2000,  respectively.
The effective  state tax rate declined during 2001 as a result of a reduction in
the accrued state tax liability previously discussed.

     MINORITY  INTEREST.  Dividends on the REIT Preferred  Stock totalling $22.8
million  were  recorded  during  each of the six months  ended June 30, 2001 and
2000,  and were  recorded as minority  interest  on an  after-tax  basis for the
respective periods.

     EXTRAORDINARY ITEMS. During 2000, the FHLB called and the Bank prepaid $400
million in FHLB advances,  resulting in an  extraordinary  gain of $3.0 million,
net of  income  taxes  of $2.1  million,  on the  early  extinguishment  of such
borrowings.  Also during 2000,  the Bank  repurchased  $2.5 million  outstanding
principal amount of the Convertible  Subordinated Debentures due 2001, resulting
in an extraordinary  gain of $41 thousand,  net of income taxes of $30 thousand,
on the early extinguishment of debt.

     CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING  PRINCIPLE.  Cumulative effect of
change in accounting principle for the six months ended June 30, 2001 includes a
write-down  of $1.6  million,  net of income taxes of $1.1  million,  on certain
securities  as a result of the  Company's  implementation  of EITF No.  99-20 on
April 1, 2001.  See note 12 of the  Company's  Notes to  Unaudited  Consolidated
Financial Statements.



                                    Page 33
<PAGE>

     IMPACT OF SFAS NO. 133. On January 1, 2001,  the Company  adopted  SFAS No.
133.  In  connection  with  the  adoption  of this  pronouncement,  the  Company
reclassified   $1.2   billion   in   securities   from    held-to-maturity    to
available-for-sale,  which had the  effect of  improving  the OCI  component  of
stockholder's equity by $30.4 million. The pronouncement  impacted several other
areas of the financial  statements on a year-to-date  basis, as summarized below
(debit/(credit); in thousands):
<TABLE>
<CAPTION>
                                            Assets                      Liabilities and Equity             Pre-tax Earnings
                                --------------------------------   --------------------------------     ---------------------
                                 Loans                                             Taxes-                 Loan    (Gain)/Loss
                                  Held    Residential Derivative   Derivative       Other               Servicing  on Sale of
                                for Sale     MSRs       Assets     Liabilities   Liabilities   OCI      Fees, net     Loans
                                --------     ----       ------     -----------   -----------   ---      ---------     -----
<S>                             <C>       <C>         <C>          <C>           <C>         <C>         <C>       <C>
Transfer hedge component
        of MSR balance          $    --   $ (95,013)  $  95,013    $      --     $    --     $    --     $    --   $     --

Transition adjustment -
        (record initial
        fair values):
     MSRs and MSR hedges             --     (69,754)     78,610       (8,856)         --          --          --         --
     Warehouse loans              3,834          --          --           --          --          --          --     (3,834)
     Interest rate locks             --          --       2,911           --          --          --          --     (2,911)
     FLSC hedges                     --          --          --       (5,696)         --          --          --      5,696
     Cash flow hedges - swaps        --          --          --      (75,482)     30,835      44,647          --         --
                                -------   ---------   ---------    ---------     -------     -------     -------   --------
SUBTOTAL - JANUARY 1, 2001
     TRANSITION ENTRIES           3,834    (164,767)    176,534      (90,034)     30,835      44,647          --     (1,049)

Fair value adjustments:
     MSRs and MSR hedges             --      83,558     (74,203)        (398)         --          --      (8,957)        --
     Warehouse loans             (9,038)         --          --           --          --          --          --      9,038
     Interest rate locks             --          --      (2,911)      (6,069)         --          --          --      8,980
     FLSC hedges                     --          --      14,823        5,697          --          --          --    (20,520)
     Cash flow hedges -
        swaps                        --          --          --      (28,334)     11,574      16,760          --         --
                                -------   ---------   ---------    ---------     -------     -------     -------   --------
FAIR VALUE ADJUSTMENTS -
     SIX MONTHS ENDED
     JUNE 30, 2001               (9,038)     83,558     (62,291)     (29,104)     11,574      16,760      (8,957)    (2,502)

Other Activity - Six Months
     Ended June 30, 2001:
     MSR hedge additions             --          --     272,588           --          --          --          --         --
     MSR hedge sales and
        maturities                   --          --    (215,420)          --          --          --          --         --
     Hedge receipts and
        payments                     --        (121)     22,019       (7,486)         --          --          --         --
                                -------   ---------   ---------    ---------     -------     -------     -------   --------
TOTAL OTHER ACTIVITY -
     SIX MONTHS ENDED
     JUNE 30, 2001                   --        (121)     79,187       (7,486)         --          --          --         --
                                -------   ---------   ---------    ---------     -------     -------     -------   --------
TOTAL IMPACT FROM
     SFAS NO. 133 -
     SIX MONTHS ENDED
     JUNE 30, 2001              $(5,204)  $ (81,330)  $ 193,430    $(126,624)    $42,409     $61,407     $(8,957)   $(3,551)
                                =======   =========   =========    =========     =======     =======     =======   ========
</TABLE>








                                    Page 34
<PAGE>

RESULTS OF OPERATIONS

     THREE MONTHS ENDED JUNE 30, 2001 VERSUS THREE MONTHS ENDED JUNE 30, 2000

     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 June 30, 2001
                                                                   ---------------------------------------
                                                                   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)         $   811         $   12            5.85%
     Mortgage-backed securities available-for-sale                  10,005            164            6.56
     Mortgage-backed securities held-to-maturity                     1,631             34            8.24
     Loans held for sale, net                                        1,989             33            6.54
     Loans receivable, net:
         Residential                                                31,877            554            6.95
         Commercial real estate                                      6,225            128            8.22
         Commercial banking                                            590             13            8.24
         Consumer                                                      890             18            8.70
         Auto                                                        1,762             50           11.36
                                                                   -------         ------
     Total loans receivable, net                                    41,344            763            7.39
     FHLB stock                                                      1,402             22            6.39
                                                                   -------         ------
         Total interest-earning assets                              57,182          1,028            7.19%
                                                                                   ------
Noninterest-earning assets                                           3,722
                                                                   -------
         Total assets                                              $60,904
                                                                   =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                      $24,334            224            3.69%
     Securities sold under agreements to repurchase (3)              3,819             53            5.55
     Borrowings (3)                                                 28,755            415            5.75
                                                                   -------         ------
         Total interest-bearing liabilities                         56,908            692            4.86%
                                                                                   ------
Noninterest-bearing liabilities                                      1,146
Minority interest                                                      499
Stockholder's equity                                                 2,351
                                                                   -------
         Total liabilities, minority interest
              and stockholder's equity                             $60,904
                                                                   =======
Net interest income                                                                $  336
                                                                                   ======
Interest rate spread                                                                                 2.33%
                                                                                                    =====
Net interest margin                                                                                  2.36%
                                                                                                    =====

Return on average assets                                                                             0.75%
                                                                                                    =====
Return on average equity                                                                            19.31%
                                                                                                    =====
Average equity to average assets                                                                     3.86%
                                                                                                    =====
</TABLE>



                                    Page 35
<PAGE>

<TABLE>
<CAPTION>
                                                                       Three Months Ended June 30, 2001
                                                                   ---------------------------------------
                                                                   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)         $ 1,431         $   24            6.79%
     Mortgage-backed securities available-for-sale                  12,447            207            6.64
     Mortgage-backed securities held-to-maturity                     2,700             51            7.62
     Loans held for sale, net                                          814             15            7.56
     Loans receivable, net:
         Residential                                                29,580            513            6.94
         Commercial real estate                                      5,617            117            8.33
         Commercial banking                                            521             13            9.85
         Consumer                                                      738             19           10.17
         Auto                                                        1,260             36           11.52
                                                                   -------         ------
     Total loans receivable, net                                    37,716            698            7.40
     FHLB stock                                                      1,306             28            8.61
                                                                   -------         ------
         Total interest-earning assets                              56,414          1,023            7.26%
                                                                                   ------
Noninterest-earning assets                                           3,011
                                                                   -------
         Total assets                                              $59,425
                                                                   =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                      $22,948            224            3.93%
     Securities sold under agreements to repurchase (3)              5,503             90            6.46
     Borrowings (3)                                                 27,684            419            6.06
                                                                   -------         ------
         Total interest-bearing liabilities                         56,135            733            5.22%
                                                                                   ------
Noninterest-bearing liabilities                                        985
Minority interest                                                      498
Stockholder's equity                                                 1,807
                                                                   -------
         Total liabilities, minority interest
             and stockholder's equity                              $59,425
                                                                   =======
Net interest income                                                                $  290
                                                                                   ======
Interest rate spread                                                                                 2.04%
                                                                                                    =====
Net interest margin                                                                                  2.06%
                                                                                                    =====

Return on average assets                                                                             0.62%
                                                                                                    =====
Return on average equity                                                                            20.36%
                                                                                                    =====
Average equity to average assets                                                                     3.04%
                                                                                                    =====
</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  and
     interest-bearing deposits in other banks.

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



                                    Page 36
<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 June 30, 2001 vs. 2000
                                                                         Increase (Decrease) Due to
                                                                ---------------------------------------------
                                                                    Volume          Rate            Net
                                                                    ------          ----            ---
 INTEREST INCOME:                                                                (in millions)
<S>                                                                  <C>            <C>            <C>
     Securities and interest-bearing deposits in banks               $ (9)          $ (3)          $(12)
     Mortgage-backed securities available-for-sale                    (40)            (3)           (43)
     Mortgage-backed securities held-to-maturity                      (22)             5            (17)
     Loans held for sale, net                                          20             (2)            18
     Loans receivable, net                                             66             (1)            65
     FHLB stock                                                         2             (8)            (6)
                                                                     ----           ----           ----
               Total                                                   17            (12)             5
                                                                     ----           ----           ----

INTEREST EXPENSE:

     Deposits                                                           7             (8)            (1)
     Securities sold under agreements to repurchase                   (24)           (12)           (36)
     Borrowings                                                        19            (23)            (4)
                                                                     ----           ----           ----
               Total                                                    2            (43)           (41)
                                                                     ----           ----           ----
                  Change in net interest income                      $ 15           $ 31           $ 46
                                                                     ====           ====           ====
</TABLE>

     INTEREST  INCOME.  Total  interest  income was $1.0  billion  for the three
months  ended June 30,  2001,  an increase of $4.7 million from the three months
ended June 30, 2000.  Total  interest-earning  assets for the three months ended
June  30,  2001  averaged  $57.2  billion,  compared  to $56.4  billion  for the
corresponding  period in 2000,  primarily as a result of increased  loan volume,
partially offset by a decline in mortgage-backed  securities. The yield on total
interest-earning assets during the three months ended June 30, 2001 decreased to
7.19% from 7.26% for the three months ended June 30, 2000,  primarily due to the
repricing of  variable-rate  securities  at lower rates,  partially  offset by a
higher percentage of loans to total earning assets during 2001.



                                    Page 37
<PAGE>

     GS Holdings  earned $763.2 million of interest  income on loans  receivable
for the three months ended June 30, 2001,  an increase of $65.9 million from the
three months ended June 30, 2000.  The average  balance of loans  receivable was
$41.3  billion  for the three  months  ended June 30,  2001,  compared  to $37.7
billion  for the  same  period  in 2000.  The  weighted  average  yield on loans
receivable  decreased  to 7.39% for the three  months  ended June 30,  2001 from
7.40% for the three  months  ended June 30,  2000.  The  increase in the average
balance  reflects a net increase in residential  and commercial real estate loan
origination activities and new auto loan production from the Downey Acquisition.
Loan production during the three months ended June 30, 2001 and 2000 is detailed
in the table below (in thousands):
<TABLE>
<CAPTION>
                                                                               Three Months Ended June 30,
                                                                               ---------------------------
                                                                                2001                2000
                                                                                ----                ----
<S>                                                                           <C>                 <C>
           Loans funded:
              Residential real estate loans                                   $7,222,122          $4,260,442
              Commercial real estate loans                                       555,456             325,285
              Commercial loans                                                   297,011             158,730
              Consumer nonmortgage loans                                         220,802             201,538
                                                                              ----------          ----------
                 Total loans funded                                           $8,295,391          $4,945,995
                                                                              ==========          ==========

           Loans purchased:
              Residential real estate loans                                   $  558,081          $   66,316
              Auto loans                                                         304,610             287,938
                                                                              ----------          ----------
                 Total loans purchased                                        $  862,691          $  354,254
                                                                              ==========          ==========
</TABLE>

     The decrease in the weighted average yield primarily reflects the repricing
of variable-rate loans at lower rates during 2001.

     GS Holdings  earned $32.5 million of interest income on loans held for sale
for the three months ended June 30, 2001,  an increase of $17.2 million from the
three months ended June 30, 2000. The average balance of loans held for sale was
$2.0  billion  for the three  months  ended June 30,  2001,  an increase of $1.2
billion from the comparable  period in 2000,  primarily  attributed to increased
originations of residential, fixed-rate loans as a result of heightened borrower
refinancing  activity  in  the  current  declining  interest  rate  environment.
Fixed-rate  production  for sale totalled $5.0 billion  during the quarter ended
June 30, 2001 compared to $1.4 billion  originated  during the comparable period
in 2000.  The weighted  average yield on loans held for sale  decreased to 6.54%
for the three  months  ended June 30, 2001 from 7.56% for the three months ended
June 30, 2000, primarily due to declining market interest rates.

     Interest income on mortgage-backed securities available-for-sale was $164.0
million for the three months  ended June 30,  2001, a decrease of $42.5  million
from the three  months  ended  June 30,  2000.  The  average  portfolio  balance
decreased $2.4 billion,  to $10.0  billion,  for the three months ended June 30,
2001  compared to the same period in 2000.  The weighted  average yield on these
assets  decreased  from 6.64% for the three  months ended June 30, 2000 to 6.56%
for the  three  months  ended  June 30,  2001.  The  decrease  in the  volume is
primarily  attributed  to  payments  and  sales of  mortgage-backed  securities,
partially  offset by the  reclassification  of $1.1  billion in  mortgage-backed
securities from the held-to-maturity  portfolio,  as permitted upon the adoption
of SFAS No. 133 on January 1, 2001.  The decrease in the weighted  average yield
reflects the repricing of variable-rate securities at lower rates.



                                    Page 38
<PAGE>

     Interest income on mortgage-backed  securities  held-to-maturity  was $33.6
million for the three months  ended June 30,  2001, a decrease of $17.9  million
from the three  months  ended  June 30,  2000.  The  average  portfolio  balance
decreased  $1.1 billion,  to $1.6  billion,  for the three months ended June 30,
2001  compared  to the same  period in 2000,  primarily  attributed  to the $1.1
billion reclassification in mortgage-backed securities to the available-for-sale
portfolio,  as  permitted  upon the adoption of SFAS No. 133 on January 1, 2001.
The  weighted  average  yields for the three months ended June 30, 2001 and 2000
were 8.24% and 7.62%,  respectively.  The increase in the weighted average yield
is primarily the result of a lagging  effect of the  repricing of  variable-rate
securities  at higher  rates  during  the  second  quarter  of 2000 and the $1.1
billion reclassification of securities with a weighted average rate of 6.84%.

     Interest income on securities and interest-bearing  deposits in other banks
was $11.9  million for the three months ended June 30, 2001, a decrease of $12.4
million from the three months ended June 30, 2000. The average portfolio balance
was $0.8  billion and $1.4  billion for the three months ended June 30, 2001 and
2000,  respectively.  The lower  weighted  average  yield of 5.85% for the three
months ended June 30, 2001 compared to 6.79% for the three months ended June 30,
2000 reflects the $2.4 million in interest income on a federal income tax refund
related to Old California  Federal (for which there is no corresponding  earning
asset),  received in the second quarter of 2000, and the repricing of securities
at lower market interest rates during the second quarter of 2001.

     Dividends on FHLB stock were $22.3  million for the three months ended June
30,  2001, a decrease of $5.6 million from the three months ended June 30, 2000.
The average balance  outstanding during the three months ended June 30, 2001 and
2000 was $1.4  billion and $1.3  billion,  respectively.  The  weighted  average
dividend on FHLB stock  decreased  to 6.39% for the three  months ended June 30,
2001 from 8.61% for the three months  ended June 30,  2000.  The increase in the
average  balance is due to an increase in  borrowings  from the FHLB,  while the
decrease  in the  weighted  average  yield is the result of a  reduction  in the
dividend rate on FHLB stock.

     INTEREST  EXPENSE.  Total interest expense was $691.1 million for the three
months ended June 30,  2001,  a decrease of $41.4  million from the three months
ended June 30, 2000. The decrease is primarily due to declining  market interest
rates.  In  addition,  the  decrease is the result of a reduction in higher rate
securities sold under agreements to repurchase,  offset by additional borrowings
under lower rate FHLB advances and deposits used to fund loans.

     Interest  expense on  deposits,  including  Brokered  Deposits,  was $223.7
million for the three  months  ended June 30,  2001,  a decrease of $0.7 million
from the three  months  ended June 30,  2000.  The  average  balance of deposits
outstanding  increased  from $22.9  billion for the three  months ended June 30,
2000 to $24.3 billion for the three months ended June 30, 2001.  The increase in
the average balance is primarily attributed to increases in the average balances
of custodial  accounts,  money  market  accounts  and retail  customer  checking
accounts,  partially  offset  by a  decline  in  savings  account  balances  and
certificates of deposit. The overall weighted average cost of deposits decreased
to 3.69% for the  three  months  ended  June 30,  2001 from  3.93% for the three
months ended June 30, 2000,  primarily due to a lower average  balance of higher
rate certificates of deposit and a higher average balance of lower rate checking
and custodial accounts during the second quarter of 2001.

     Interest expense on securities sold under agreements to repurchase totalled
$53.4  million for the three  months  ended June 30,  2001,  a decrease of $36.4
million from the three months ended June 30, 2000.  The average  balance of such
borrowings  for the three  months  ended June 30, 2001 and 2000 was $3.8 billion
and  $5.5  billion,  respectively.  The  decrease  in the  average  balances  is
primarily  the  result of  maturities  during the  second  quarter of 2001.  The
weighted average interest rate on these  instruments  decreased to 5.55% for the
three  months ended June 30, 2001 from 6.46% for the three months ended June 30,
2000,  primarily  due to  maturities of higher rate  fixed-rate  borrowings  and
repricing of borrowings at lower rates during the second quarter of 2001.



                                    Page 39
<PAGE>

     Interest expense on borrowings totalled $414.0 million for the three months
ended June 30, 2001, a decrease of $4.3 million from the three months ended June
30, 2000. The average  balance  outstanding  for the three months ended June 30,
2001 and 2000 was $28.8 billion and $27.7  billion,  respectively.  The weighted
average  interest  rate on these  instruments  decreased  to 5.75% for the three
months  ended June 30, 2001 from 6.06% for the three months ended June 30, 2000.
The changes in the average volume and weighted average rate reflect the increase
in the volume of FHLB advances at market interest rates used to fund loans.

     NET INTEREST  INCOME.  Net interest income was $336.4 million for the three
months ended June 30, 2001,  an increase of $46.1  million from the three months
ended June 30, 2000.  The interest rate spread  increased to 2.33% for the three
months  ended June 30, 2001 from 2.04% for the three months ended June 30, 2000,
primarily as a result of the  replacement  of  maturities  and the  repricing of
higher rate  interest-bearing  liabilities with lower costing  liabilities.  The
effect of lower rates on  liabilities  was  partially  offset by lower  yielding
assets  replenishing  asset  run-off in a  declining  rate  environment  and the
downward repricing of variable-rate assets. The net interest margin increased to
2.36% for the three  months  ended June 30,  2001,  up 30 basis  points from the
2.06% reported during the second quarter of 2000.

     NONINTEREST INCOME. Total noninterest income,  consisting primarily of loan
servicing fees, customer banking fees, gain on sale,  settlement and transfer of
loans,  net,  and gain on sale of assets,  net was $114.2  million for the three
months  ended June 30, 2001,  representing  an increase of $9.0 million from the
three months ended June 30, 2000.

     Loan  servicing  fees  for  the  Company,  net  of  amortization  of  MSRs,
pass-through  interest expense and net unrealized gains on MSRs/MSR  derivatives
were $19.7  million for the three months ended June 30, 2001,  compared to $43.0
million for the three months ended June 30, 2000.  The  following  table details
the components of loan servicing fees, net (in thousands):
<TABLE>
<CAPTION>
                                                                             For the Three Months Ended June 30,
                                                                             -----------------------------------
                                                                                  2001                2000
                                                                                  ----                ----

       Components of loan servicing fees, net:
<S>                                                                             <C>                 <C>
              Loan servicing fees                                               $111,050            $ 96,286
              Amortization of mortgage servicing rights                          (88,598)            (50,569)
              Pass-through interest expense                                       (9,258)             (2,686)
              Net gain on MSRs/MSR derivatives                                     6,552                  --
                                                                                --------            --------
                  Total loan servicing fees, net                                $ 19,746            $ 43,031
                                                                                =========           ========
</TABLE>

     As the table  reflects,  loan servicing  fees increased  $14.8 million from
year-ago levels, which is primarily  attributable to the growth of the Company's
servicing  portfolio and higher  ancillary fees. The  single-family  residential
loan  servicing  portfolio,  excluding  loans  serviced  for the Bank,  declined
slightly from $83.4 billion at March 31, 2001 to $83.3 billion at June 30, 2001.
The annualized runoff rate on the Company's  portfolio of mortgages serviced for
others was 30.5% in the second quarter of 2001 compared to 12.9% during the same
period  in 2000.  This  runoff  rate also  influences  MSR  amortization,  which
increased  $38.0  million in the second  quarter of 2001 over the same period in
2000; the MSR amortization rate averaged 23.5% during the quarter ended June 30,
2001 compared to 14.1% during the same period in 2000. MSR amortization was also
affected by a higher  average MSR balance during the quarter ended June 30, 2001
compared to the same period in 2000.  Pass-through  interest  expense  increased
$6.6 million (245%) compared to the year-ago quarter,  also influenced by higher
runoff rates.  Servicing fee income includes a $6.6 million pre-tax gain for the
three months ended June 30, 2001 from the impact of SFAS No. 133  pertaining  to
the MSR fair value hedges.  On an aggregate basis, in all ten tranches,  at June
30, 2001,  the estimated  fair value of the MSRs was $47.5  million  higher than
book value (net of valuation allowance).



                                    Page 40
<PAGE>

     Customer  banking  fees were $54.6  million for the three months ended June
30, 2001 compared to $50.1 million for the three months ended June 30, 2000. The
increase  is  primarily  attributed  to  increased  emphasis  by  management  on
transaction  account  growth and higher  fee income on mutual  fund and  annuity
products.

     Gain on sale,  settlement and transfer of loans, net totalled $17.0 million
for the three  months  ended June 30,  2001, a decrease of $3.4 million from the
three months ended June 30, 2000. During the second quarter of 2000, the Company
recorded a $14.5 million reduction in its recourse liability.  See "- Six Months
Ended June 30, 2001 versus Six Months Ended June 30, 2000 - Noninterest Income."
During  the three  months  ended June 30,  2001,  California  Federal  sold $4.2
billion in  single-family  mortgage  loans  originated  for sale with  servicing
rights retained as part of its ongoing mortgage  banking  operations at gains of
$10.5  million  compared  to $1.1  billion of such  sales for the  corresponding
period in 2000 at gains of $4.5  million.  The overall  reduction in the rate of
gain on sale  relates to channel  and  product  mix  differences  during the two
periods,  while the  increase in volume of loans sold  relates to a  significant
increase in fixed-rate  loan  originations as a result of the overall decline in
market  interest  rates and increased  mortgage  refinancing.  Gain on sale also
includes a $3.6 million unrealized gain on forward loan sale commitments related
to SFAS No. 133.

     Gain on sale of assets,  net  totalled  $15.8  million for the three months
ended  June 30,  2001,  compared  to a net loss of $16.5  million  for the three
months ended June 30, 2000,  primarily  attributed to an $18.7 million loss from
the sale of approximately  $500 million of  mortgage-backed  securities with the
average yield of 6.64% during the second  quarter of 2000.  The Company sold its
634,520  shares of Concord EFS common stock  during the second  quarter of 2001,
realizing a gain of $9.3  million.  In addition,  the Company  recognized a $6.6
million gain on the sale of $298 million in mortgage-backed securities.

     NONINTEREST  EXPENSE.  Total noninterest expense was $241.3 million for the
three months ended June 30, 2001, an increase of $17.7  million  compared to the
three months ended June 30, 2000. Noninterest expense for the three months ended
June 30, 2001 included  increases of $7.4 million in other noninterest  expense,
$6.3 million in compensation and employee benefits and $3.8 million in occupancy
and equipment expense.

     Compensation and employee benefits expense was $113.5 million for the three
months  ended June 30,  2001,  an increase of $6.3 million from the three months
ended June 30,  2000.  The increase is  primarily  attributed  to an increase in
staff (from 7,842 FTE at June 30, 2000 to 8,015 at June 30, 2001),  primarily in
volume-related operating groups, and normal salary adjustments. In addition, the
Company has  experienced an increase in group  insurance and other benefit costs
that it has elected not to pass on to its employee.

     Occupancy  and  equipment  expense was $40.0  million for the three  months
ended June 30,  2001,  an increase of $3.8  million  from the three months ended
June 30, 2000, primarily due to an increase in depreciation  expense, as well as
increased utility costs and higher contract maintenance and rental fees.

     Other noninterest expense was $59.2 million for the three months ended June
30, 2001, an increase of $7.4 million from the three months ended June 30, 2000.
The  increase in  expenses  is  primarily  related to  increases  in a number of
operating expense categories,  including  marketing,  judgments and settlements,
travel, office supplies, postage and telephone expense.

     PROVISION  FOR INCOME TAX.  During the three months ended June 30, 2001 and
2000,  GS Holdings  recorded  net income tax expense of $87.5  million and $75.1
million,  respectively.  The expense recorded during the three months ended June
30, 2001, is net of an income tax benefit of $3.2 million  recognized due to the
utilization of net operating  losses of a subsidiary  made available as a result
of the subsidiary's liquidation into California Federal Bank.



                                    Page 41
<PAGE>

     GS Holdings'  effective  gross  federal tax rate was 36% and 38% during the
three  months  ended June 30,  2001 and 2000,  respectively,  while its  federal
statutory tax rate was 35% during both periods.  In 2001, the difference between
the  effective and  statutory  rates was  primarily the result of  nondeductible
goodwill amortization, partially offset by an adjustment to net operating losses
from prior periods.  In 2000, the difference between the effective and statutory
rates was  primarily  the  result of  nondeductible  goodwill  amortization.  GS
Holdings' effective state tax rate was 6% and 6% during each of the three months
ended June 30, 2001 and 2000, respectively.

     MINORITY  INTEREST.  Dividends on the REIT Preferred  Stock totalling $11.4
million  were  recorded  during each of the three months ended June 30, 2001 and
2000,  and were  recorded as minority  interest  on an  after-tax  basis for the
respective periods.

     EXTRAORDINARY ITEMS. During the second quarter of 2000, the FHLB called and
the Bank prepaid $200 million in FHLB  advances,  resulting in an  extraordinary
gain of  $1.8  million,  net of  income  taxes  of $1.2  million,  on the  early
extinguishment of such borrowings.

     CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING  PRINCIPLE.  Cumulative effect of
change in accounting principle for the three months ended June 30, 2001 includes
a write-down of $1.6 million,  net of income taxes, of $1.1 million,  on certain
securities  as a result of the  Company's  implementation  of EITF No.  99-20 on
April 1, 2001.  See note 12 of the  Company's  Notes to  Unaudited  Consolidated
Financial Statements.

     IMPACT OF SFAS NO. 133. On January 1, 2001,  the Company  adopted  SFAS No.
133. The pronouncement  impacted several other areas of the financial statements
for the three months ended June 30, 2001, as summarized  below  (debit/(credit);
in thousands):
<TABLE>
<CAPTION>
                                             Assets                      Liabilities and Equity           Pre-tax Earnings
                                --------------------------------     ------------------------------     ---------------------
                                 Loans                                              Taxes-                Loan    (Gain)/Loss
                                  Held    Residential  Derivative    Derivative     Other               Servicing  on Sale of
                                for Sale      MSRs       Assets      Liabilities  Liabilities   OCI     Fees, net    Loans
                                --------      ----       ------      -----------  -----------   ---     ---------    -----
<S>                             <C>        <C>         <C>           <C>           <C>       <C>        <C>        <C>
Fair value adjustments:
     MSRs and MSR hedges        $     --   $114,750    $(99,527)     $(8,671)      $     --  $     --   $(6,552)   $     --
     Warehouse loans             (10,443)        --          --           --             --        --        --      10,443
     Interest rate locks              --         --      (3,024)      (6,069)            --        --        --       9,093
     FLSC hedges                      --         --      14,823        8,353             --        --        --     (23,176)
     Cash flow hedges - swaps         --         --          --       34,551        (14,114)  (20,437)       --          --
                                --------   --------    --------      -------       --------  --------   -------    --------
FAIR VALUE ADJUSTMENTS -
     THREE MONTHS ENDED
     JUNE 30, 2001               (10,443)   114,750     (87,728)      28,164        (14,114)  (20,437)   (6,552)     (3,640)

Other Activity - Three
     Months Ended
     June 30, 2001:
     MSR hedge additions              --         --     150,621           --             --        --        --          --
     MSR hedge sales and
       maturities                     --         --     (81,708)          --             --        --        --          --
     Hedge receipts and
       payments                       --         --       7,582       (3,055)            --        --        --          --
                                --------   --------    --------      -------       --------  --------   -------    --------
TOTAL OTHER ACTIVITY -
     THREE MONTHS ENDED
     JUNE 30, 2001                    --         --      76,495       (3,055)            --        --        --          --
                                --------   --------    --------      -------       --------  --------   -------    --------

TOTAL IMPACT FROM
     SFAS NO. 133 -
     THREE MONTHS ENDED
     JUNE 30, 2001              $(10,443)  $114,750    $(11,233)     $25,109       $(14,114) $(20,437)  $(6,552)   $ (3,640)
                                ========   ========    ========      =======       ========  ========   =======    ========
</TABLE>



                                    Page 42
<PAGE>

                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.

     CALIFORNIA FEDERAL GOODWILL LITIGATION

     The  Bank  is the  plaintiff  in a  lawsuit  against  the  Government,  the
California  Federal  Goodwill  Litigation.  In the California  Federal  Goodwill
Litigation,  the Bank alleged,  among other things, that the Government breached
certain  contractual  commitments  regarding the  computation  of its regulatory
capital for which the Bank sought  damages and  restitution.  The Bank's  claims
arose from changes,  mandated by FIRREA, with respect to the rules for computing
Old California Federal's regulatory capital.

     In late 1997, a Claims Court Judge ruled in favor of the Bank's  motion for
partial summary judgment as to the Government's liability to the Bank for breach
of contract,  and a formal order in that regard was subsequently issued. In late
1998, a second Claims Court Judge ruled that  California  Federal could not meet
its burden for proving lost profits damages and ordered that the case proceed to
trial on the damage issue of restitution and reliance.

     On April 16,  1999,  the Claims  Court  issued its  decision on the damages
claim against the  Government in the  California  Federal  Goodwill  Litigation,
ruling that the Government must compensate the Bank in the sum of $23.4 million.
The summary  judgment  liability  decision by the first  Claims  Court Judge was
appealed by the  Government,  and the damage  award by the second  Claims  Court
Judge was appealed by the Bank.

     On April 3, 2001,  the Court of Appeals for the Federal  Circuit upheld the
summary judgment liability decision and ruled that California Federal be allowed
to present  evidence  regarding  damages incurred under the lost profits theory.
The case has been  remanded  back to the Claims Court for a damages  trial under
the lost profits theory. The Bank intends to vigorously pursue its claim against
the Government.

     GLENDALE GOODWILL LITIGATION

     By virtue of the Glen Fed Merger,  the Bank is also a plaintiff  in a claim
against the United States in a second lawsuit, the Glendale Goodwill Litigation.
In the  Glendale  Goodwill  Litigation,  Glendale  Federal  sued the  Government
contending that FIRREA's treatment of supervisory  goodwill constituted a breach
by the  Government of its 1981 contract with the Bank,  under which the Bank had
merged with a Florida thrift and was permitted to include the goodwill resulting
from the merger in its  regulatory  capital.  In 1992, the Claims Court found in
favor of Glendale Federal's  position,  ruling that the Government  breached its
express contractual commitment to permit Glendale Federal to include supervisory
goodwill in its regulatory capital and that Glendale Federal is entitled to seek
financial compensation.

     The trial began in February 1997 and concluded in September  1998. On April
9,  1999,  the  Claims  Court  issued  its  decision  in the  Glendale  Goodwill
Litigation,  ruling that the Government  must  compensate the Bank in the sum of
$908.9 million. This decision was appealed by the Government and the Bank.

     On February 16, 2001 the Court of Appeals for the Federal  Circuit  vacated
the trial court's award of damages and remanded the case back to the trial court
for determination of total reliance damages to which the Bank might be entitled.
Oral  argument  before the trial court on that issue took place on June 26, 2001
and the Bank is awaiting  the Claims  Court's  decision.  The Bank  continues to
vigorously pursue its case for damages against the Government.



                                    Page 43
<PAGE>

     BARTOLD V. GLENDALE FEDERAL BANK ET AL

     On September  18,  1995,  four  plaintiffs  commenced an action in Superior
Court of California,  County of Orange,  alleging that the  defendants  Glendale
Federal, to which the Bank is a successor by merger, and Verdugo, a wholly owned
subsidiary  of the Bank,  failed  timely to record their release of the mortgage
interest  following payoffs of residential  mortgage loans and, in at least some
instances,  improperly  required  borrowers to pay fees for these releases.  The
plaintiffs'  complaint  seeks  relief  for  the  named  plaintiffs,  as  well as
purportedly for all others  similarly  situated in California and throughout the
United  States and the  general  public,  on causes of action for  violation  of
California Civil Code Section 2941 and California  Business and Professions Code
Section 17200, breach of contract,  fraud and unjust enrichment.  The plaintiffs
seek statutory damages of $300 for each supposed,  separate violation of Section
2941 by Glendale Federal and Verdugo, restitution,  punitive damages, injunctive
relief and attorney's fees, among other things.

     In  October  1997,  the  trial  court  granted  summary  judgment  for  the
defendants. In June 2000, the California Court of Appeals reversed this decision
and remanded for further  proceedings,  including  further  development of class
certification  issues.  On March 2, 2001, the trial court held that a California
class had been certified.  On June 7, 2001, the trial court dismissed two of the
four causes of action  against the Bank,  holding  that the OTS  pre-empted  the
California courts from regulating the Bank's  procedures for reconveying  deeds.
The Bank believes that it has  additional  meritorious  defenses to  plaintiffs'
claims and intends to continue  to contest the  remaining  claims in the lawsuit
vigorously.

     OTHER LITIGATION

     In  addition  to  the  matters   described   above,  GS  Holdings  and  its
subsidiaries  are involved in other legal  proceedings and 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 5.  OTHER INFORMATION.

       None.

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
              Quarterly 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 3.2 of the  Registrant's Quarterly Report on Form 10-Q
              for the quarter ended September 30, 1998.)

     (b) Reports on Form 8-K:

         None.



                                    Page 44
<PAGE>

                            GLOSSARY OF DEFINED TERMS

APB - Accounting Principles Board
APB OPINION NO. 16 - Business Combinations
APB OPINION NO. 17 - Intangible Assets
APB OPINION NO. 25 - Accounting for Stock Issued to Employees
ARM - Adjustable rate mortgage
AUTO ONE - Auto One Acceptance Corporation
BANK - California Federal Bank
BROKERED DEPOSITS - Issued  certificates  of deposit  through  direct  placement
     programs and national investment banking firms.
CAL FED  ACQUISITION  - Agreement and Plan of Merger among FN Holdings,  Cal Fed
     Bancorp  Inc.  and  California  Federal  Bank, A  Federal Savings Bank.  FN
     Holdings  acquired  100%  of  the  outstanding  stock  of  Cal  Fed and Old
     California  Federal,   and  First  Nationwide  merged  with  and  into  Old
     California Federal in January 1997.
CALIFORNIA FEDERAL - California Federal Bank
CALIFORNIA FEDERAL  GOODWILL  LITIGATION - California  Federal  Bank  v.  United
     Sates, Civil Action 92-138
CALIFORNIA FEDERAL GOODWILL LITIGATION ASSET - an  asset, related to  California
     Federal  Goodwill  Litigation,  arising  out  of  the  purchase  of the Old
     California Federal.
CD - Certificate of deposit
CLAIMS COURT - United States Court of Federal Claims
COFI - Cost of Funds Index (tied to the FHLB's 11th District cost of funds)
COMPANY - Golden State Holdings Inc.
CONVERTIBLE  SUBORDINATED  DEBENTURES  DUE  2001 - In  1986,  Cal Fed Inc.,  Old
     California  Federal's  former  parent company,  issued $125 million of 6.5%
     convertible subordinated debentures due February 20, 2001.
DIG - Derivatives Implementation Group
DOWNEY  ACQUISITION - Auto  One's  acquisition   of  the  Downey   Auto  Finance
     Corporation in February, 2000.
EITF - Emerging Issues Task Force
EITF NO. 99-20 -  Recognition  of Interest Income and  Impairment  on  Purchased
     and Retained  Beneficial  Interests in  Securitized Financial Assets
FASB - Financial Accounting Standards Board
FDICIA - Federal Deposit Insurance Corporation Improvement Act
FHLB - Federal Home Loan Bank
FHLB SYSTEM - Federal Home Loan Bank System
FIRREA - Financial Institutions Reform, Recovery and Enforcement Act of 1989 and
     its implementing regulations.
FLSC - forward loan sale commitments
FN HOLDINGS - First Nationwide Holdings Inc.
FN  HOLDINGS  ASSET  TRANSFER - FN  Holdings  contributed  all   of  its  assets
     (including all of the common stock of the Bank) to GS Holdings in September
     1998.
FNMC - First Nationwide Mortgage Corporation
FTE - Full-time equivalent staff
GAAP - generally accepted accounting principles
GLENDALE FEDERAL - Glendale Federal Bank, Federal Savings Bank
GLENDALE  GOODWILL  LITIGATION - Glendale  Federal  Bank  v.  United States, No.
     90-772C
GLENDALE GOODWILL LITIGATION ASSET - an asset,  related to the Glendale Goodwill
     Litigation, arising out of the purchase of Glendale Federal.
GLEN FED MERGER - Glendale Federal Bank merged with and into the Bank.
GOLDEN STATE - Golden State Bancorp Inc.
GOLDEN STATE ACQUISITION - FN Holdings  Asset Transfer,  Holding Company Mergers
     and Glen Fed Merger, collectively
GOLDEN STATE  MERGER - the  merger,  completed  on  September 11, 1998,  between
     Golden State,  the publicly traded parent company  of Glendale Federal, and
     First Nationwide Holdings Inc. and Hunter's Glen/Ford Ltd.
GOODWILL LITIGATION ASSETS - the  California Federal  Goodwill  Litigation Asset
     and the Glendale Goodwill Litigation Asset, collectively
GOVERNMENT - United States Government



                                    Page 45
<PAGE>

GS ESCROW MERGER - GS Escrow was merged with and into GS Holdings, pursuant to a
     merger agreement by and between GS Escrow and GS Holdings in September 1998
GS HOLDINGS - Golden State Holdings Inc.
GSB INVESTMENTS - GSB Investments Corp.
HOLDING  COMPANY  MERGERS - FN  Holdings  merged  with  and  into  Golden  State
     Financial  Corporation,  which  owned  all of the  common stock of Glendale
     Federal.
IO - Interest only
LIBOR - London Interbank Offered Rate
LTV - Loan to value
LTW - Litigation Tracking Warrant
MAFCO HOLDINGS - Mafco Holdings Inc.
MSR - Mortgage servicing rights
NOL - Net operating loss
OCI - Other comprehensive income
OLD CALIFORNIA FEDERAL - California  Federal Bank, A Federal  Savings Bank prior
     to the Cal Fed Acquisition.
PO - Principal only
REIT - Real Estate Investment Trust
REIT PREFERRED STOCK - 9 1/8% Noncumulative Exchangeable Preferred Stock, Series
     A, issued by  California Federal Preferred Capital Corporation  in  January
     1996.
REPOS - short-term securities sold under agreements to repurchase
SEC - Securities and Exchange Commission
SFAS - Statement of Financial Accounting Standards
SFAS NO. 114 - Accounting by Creditors for Impairment of a Loan
SFAS NO. 115 - Accounting for  Certain Investments in Debt and Equity Securities
SFAS NO. 121 - Accounting for the Impairment  of Long-lived Assets and for Long-
     lived Assets to be Disposed of
SFAS NO. 125 - Accounting  for Transfers and  Servicing of  Financial Assets and
     Extinguishment of Liabilities
SFAS  NO.  131 - Disclosures  about  Segments  of  an   Enterprise  and  Related
     Information
SFAS NO. 133 - Accounting  for  Derivative  Instruments and  Hedging  Activities
SFAS NO. 140 - Accounting  for Transfers and Servicing  of Financial  Assets and
     Extinguishments  of  Liabilities,  a  replacement of FASB Statement No. 125
SFAS NO. 141 - Accounting for Business Combinations
SFAS NO. 142 - Accounting for Goodwill and Intangible Assets
STOCK PLAN - Golden State Bancorp Inc. Omnibus Stock Plan
VERDUGO - Verdugo Trustee Service Corporation



                                    Page 46
<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)




August 8, 2001


















                                    Page 47