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

                                    FORM 10-Q

(Mark one)

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

For the quarterly period ended                September 30, 2000
                               -------------------------------------------------

                                       or

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

For the transition period from         N/A             to           N/A
                               ---------------------        --------------------

Commission File Number:                       333-64597
                        --------------------------------------------------------

                           Golden State Holdings Inc.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              Delaware                                  95-4669792
----------------------------------------- --------------------------------------
(State or other jurisdiction of            (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 October 31, 2000: 1,000 shares.






                                     Page 1

<PAGE>
                           GOLDEN STATE HOLDINGS INC.
                     THIRD QUARTER 2000 REPORT ON FORM 10-Q
                                TABLE OF CONTENTS



PART I.          FINANCIAL INFORMATION                                      Page
                 ---------------------                                      ----

     Item 1.     Consolidated Financial Statements

                 Unaudited Consolidated Balance Sheets
                 September 30, 2000 and December 31, 1999......................3

                 Unaudited Consolidated Statements of Income
                 Nine Months Ended September 30, 2000 and 1999.................4

                 Unaudited Consolidated Statements of Income
                 Three Months Ended September 30, 2000 and 1999................5

                 Unaudited Consolidated Statements of Comprehensive Income
                 Nine Months Ended September 30, 2000 and 1999.................6

                 Unaudited Consolidated Statements of Comprehensive Income
                 Three Months Ended September 30, 2000 and 1999................7

                 Unaudited Consolidated Statements of Stockholder's Equity
                 Nine Months Ended September 30, 2000..........................8

                 Unaudited Consolidated Statements of Cash Flows
                 Nine Months Ended September 30, 2000 and 1999.................9

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

     Item 2.     Management's Discussion and Analysis of
                 Financial Condition and Results of Operations................20

     Item 3.     Quantitative and Qualitative Disclosures About Market Risk...46


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

     Item 1.     Legal Proceedings............................................47

     Item 2.     Changes in Securities........................................47

     Item 3.     Defaults Upon Senior Securities..............................47

     Item 4.     Submission of Matters to a Vote of Security Holders..........47

     Item 5.     Other Information............................................47

     Item 6.     Exhibits and Reports on Form 8-K.............................48

     Signatures...............................................................49




                                     Page 2


<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                    September 30, 2000 and December 31, 1999
                                   (Unaudited)
                  (dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                              September 30,       December 31,
             Assets                                                               2000                1999
             ------                                                           -------------       -----------
<S>                                                                            <C>                <C>
    Cash and due from banks                                                    $   582,968        $   508,812
    Interest-bearing deposits in other banks                                           108                  5
    Short-term investment securities                                                73,841             84,061
                                                                               -----------        -----------
             Cash and cash equivalents                                             656,917            592,878

    Securities available for sale, at fair value                                   631,923          1,075,734
    Securities held to maturity                                                    594,230            185,357
    Mortgage-backed securities available for sale, at fair value                10,771,448         13,764,565
    Mortgage-backed securities held to maturity                                  2,997,522          2,149,696
    Loans held for sale, net                                                       874,663            729,062
    Loans receivable, net                                                       39,047,992         33,953,461
    Investment in Federal Home Loan Bank ("FHLB") System                         1,338,801          1,167,144
    Premises and equipment, net                                                    290,106            296,800
    Foreclosed real estate, net                                                     23,089             45,091
    Accrued interest receivable                                                    352,089            321,596
    Intangible assets (net of accumulated amortization of $230,745
         at September 30, 2000 and $183,433 at December 31, 1999)                  727,198            819,561
    Mortgage servicing rights                                                    1,515,806          1,272,393
    Other assets                                                                   764,626            667,793
                                                                               -----------        -----------
             Total assets                                                      $60,586,410        $57,041,131
                                                                               ===========        ===========


             Liabilities, Minority Interest and Stockholder's Equity
             -------------------------------------------------------

    Deposits                                                                   $23,249,809        $23,040,571
    Securities sold under agreements to repurchase                               5,338,055          5,481,747
    Borrowings                                                                  28,365,117         25,668,626
    Other liabilities                                                            1,015,956            688,870
                                                                               -----------        -----------
             Total liabilities                                                  57,968,937         54,879,814
                                                                               -----------        -----------

    Commitments and contingencies                                                       --                 --

    Minority interest                                                              500,000            500,000

    Stockholder's equity:
         Common stock, $1.00 par value, 1,000 shares authorized,
             issued and outstanding                                                      1                  1
         Additional paid-in capital                                              1,564,045          1,542,171
         Accumulated other comprehensive loss                                     (203,768)          (276,832)
         Retained earnings (substantially restricted)                              757,195            395,977
                                                                               -----------        -----------
             Total stockholder's equity                                          2,117,473          1,661,317
                                                                               -----------        -----------
             Total liabilities, minority interest and stockholder's equity     $60,586,410        $57,041,131
                                                                               ===========        ===========
</TABLE>

    See accompanying notes to unaudited consolidated financial statements.


                                     Page 3

<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                        Consolidated Statements of Income
                  Nine Months Ended September 30, 2000 and 1999
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                            Nine Months Ended September 30,
                                                                                            -------------------------------
                                                                                                 2000             1999
                                                                                              ----------       ----------
<S>                                                                                           <C>              <C>
Interest income:
     Loans receivable                                                                         $2,085,599       $1,721,858
     Mortgage-backed securities available for sale                                               625,205          645,539
     Mortgage-backed securities held to maturity                                                 149,265          137,810
     Loans held for sale                                                                          46,405           95,958
     Securities available for sale                                                                44,426           57,466
     Securities held to maturity                                                                  19,628            9,053
     Interest-bearing deposits in other banks                                                      4,582            3,851
     Dividends on FHLB stock                                                                      70,305           43,143
                                                                                              ----------       ----------
         Total interest income                                                                 3,045,415        2,714,678
                                                                                              ----------       ----------

Interest expense:
     Deposits                                                                                    679,138          667,387
     Securities sold under agreements to repurchase                                              267,622          188,085
     Borrowings                                                                                1,235,282          967,102
                                                                                              ----------       ----------
         Total interest expense                                                                2,182,042        1,822,574
                                                                                              ----------       ----------
         Net interest income                                                                     863,373          892,104
     Provision for loan losses                                                                        --           10,000
                                                                                              ----------       ----------
         Net interest income after provision for loan losses                                     863,373          882,104
                                                                                              ----------       ----------

Noninterest income:
     Loan servicing fees, net                                                                    138,744          108,358
     Customer banking fees and service charges                                                   147,284          138,820
     Gain on sale, settlement and transfer of loans, net                                          37,608           25,385
     (Loss) gain on sale of assets, net                                                          (15,348)          18,296
     Other income                                                                                 25,108           26,325
                                                                                              ----------       ----------
         Total noninterest income                                                                333,396          317,184
                                                                                              ----------       ----------

Noninterest expense:
     Compensation and employee benefits                                                          323,201          299,202
     Occupancy and equipment                                                                     114,238          104,918
     Professional fees                                                                            28,439           39,758
     Loan expense                                                                                 21,145           29,249
     Foreclosed real estate operations, net                                                       (4,047)          (5,068)
     Amortization of intangible assets                                                            47,312           52,794
     Merger and integration costs                                                                     --            7,747
     Other expense                                                                               149,555          164,824
                                                                                              ----------       ----------
         Total noninterest expense                                                               679,843          693,424
                                                                                              ----------       ----------

Income before income taxes, minority interest and extraordinary items                            516,926          505,864
Income tax expense                                                                                67,531          151,681
Minority interest: provision in lieu of income tax expense                                            --           79,005
Minority interest: other                                                                          20,191           28,338
                                                                                              ----------       ----------
         Income before extraordinary items                                                       429,204          246,840
 Extraordinary item - gain on early extinguishment of debt, net of applicable
     taxes of $2,083 in 2000                                                                       3,014               --
                                                                                              ----------       ----------
         Net income                                                                           $  432,218       $  246,840
                                                                                              ==========       ==========
</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 September 30, 2000 and 1999
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                            Three Months Ended September 30,
                                                                                            --------------------------------
                                                                                                 2000             1999
                                                                                              ----------       ----------
<S>                                                                                           <C>               <C>
 Interest income:
      Loans receivable                                                                        $  742,092        $587,080
      Mortgage-backed securities available for sale                                              189,661         221,923
      Mortgage-backed securities held to maturity                                                 58,428          41,910
      Loans held for sale                                                                         17,719          28,266
      Securities available for sale                                                               11,450          19,399
      Securities held to maturity                                                                 10,147           2,750
      Interest-bearing deposits in other banks                                                     1,198           1,551
      Dividends on FHLB stock                                                                     25,195          14,959
                                                                                              ----------        --------
          Total interest income                                                                1,055,890         917,838

 Interest expense:
      Deposits                                                                                   235,992         223,329
      Securities sold under agreements to repurchase                                              94,888          80,475
      Borrowings                                                                                 439,057         326,942
                                                                                              ----------        --------
          Total interest expense                                                                 769,937         630,746
                                                                                              ----------        --------
          Net interest income                                                                    285,953         287,092
      Provision for loan losses                                                                       --              --
                                                                                              ----------        --------
          Net interest income after provision for loan losses                                    285,953         287,092
                                                                                              ----------        --------

 Noninterest income:
      Loan servicing fees, net                                                                    48,152          38,068
      Customer banking fees and service charges                                                   48,560          47,453
      Gain on sale, settlement and transfer of loans, net                                         10,546           4,932
      Gain on sale of assets, net                                                                    688           3,187
      Other income                                                                                 7,304           9,506
                                                                                              ----------        --------
          Total noninterest income                                                               115,250         103,146
                                                                                              ----------        --------

 Noninterest expense:
      Compensation and employee benefits                                                         108,253          97,417
      Occupancy and equipment                                                                     40,730          36,874
      Professional fees                                                                           10,833          12,594
      Loan expense                                                                                 7,142           7,109
      Foreclosed real estate operations, net                                                        (669)         (3,000)
      Amortization of intangible assets                                                           15,405          17,626
      Other expense                                                                               46,543          50,056
                                                                                              ----------        --------
          Total noninterest expense                                                              228,237         218,676
                                                                                              ----------        --------

 Income before income taxes and minority interest                                                172,966         171,562
 Income tax expense (benefit)                                                                     75,421          (3,033)
 Minority interest: provision in lieu of income tax expense                                           --          79,005
 Minority interest: other                                                                          6,797           8,431
                                                                                              ----------        --------
          Net income                                                                          $   90,748        $ 87,159
                                                                                              ==========        ========
</TABLE>

 See accompanying notes to unaudited consolidated financial statements.


                                     Page 5

<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 Consolidated Statements of Comprehensive Income
                  Nine Months Ended September 30, 2000 and 1999
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                            Nine Months Ended September 30,
                                                                                            -------------------------------
                                                                                                 2000            1999
                                                                                               --------        ---------
<S>                                                                                            <C>             <C>
    Net income                                                                                 $432,218        $ 246,840

    Other comprehensive income (loss), net of tax:
        Unrealized holding gain (loss) on securities available for
    sale:
           Unrealized holding gain (loss) arising during the period                              59,397         (204,906)
           Less: reclassification adjustment for loss (gain)
              included in net income                                                             10,859             (743)
                                                                                               --------        ---------
                                                                                                 70,256         (205,649)
        Amortization of market adjustment for securities
           transferred from available for sale to held to maturity                                2,808               --
                                                                                               --------        ---------
     Other comprehensive income (loss)                                                           73,064         (205,649)
                                                                                               --------        ---------
     Comprehensive income                                                                      $505,282        $  41,191
                                                                                               ========        =========
</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 September 30, 2000 and 1999
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                            Three Months Ended September 30,
                                                                                            --------------------------------
                                                                                                 2000             1999
                                                                                               --------         --------
<S>                                                                                            <C>              <C>

    Net income                                                                                 $ 90,748         $ 87,159

    Other comprehensive income (loss), net of tax:
        Unrealized holding gain (loss) on securities available for sale:
           Unrealized holding gain (loss) arising during the period                              79,068          (43,571)
           Less: reclassification adjustment for loss (gain) included
               in net income                                                                       (231)            (549)
                                                                                               --------         --------
                                                                                                 78,837          (44,120)
        Amortization of market adjustment for securities
           transferred from available for sale to held to maturity                                2,138               --
                                                                                               --------         --------
     Other comprehensive income (loss)                                                           80,975          (44,120)
                                                                                               --------         --------
     Comprehensive income                                                                      $171,723         $ 43,039
                                                                                               ========         ========
</TABLE>

    See accompanying notes to unaudited consolidated financial statements.
















                                     Page 7

<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 Consolidated Statement of Stockholder's Equity
                      Nine Months Ended September 30, 2000
                                   (Unaudited)
                                 (in thousands)

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

Net income                                      --               --                --          432,218            432,218
Change in net unrealized holding loss
    on securities available for sale            --               --            70,256               --             70,256
Amortization of unrealized holding
    loss on securities held to maturity         --               --             2,808               --              2,808
Dividends to parent                             --               --                --          (71,000)           (71,000)
Contributions from parent                       --           19,000                --               --             19,000
Impact of Golden State restricted
    common stock                                --            2,742                --               --              2,742
Tax benefits on exercise of stock
    options                                     --              132                --               --                132
                                               ---       ----------         ---------         --------         ----------
Balance at September 30, 2000                  $ 1       $1,564,045         $(203,768)        $757,195         $2,117,473
                                               ===       ==========         =========         ========         ==========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.








                                     Page 8

<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                  Nine Months Ended September 30, 2000 and 1999
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                            Nine Months Ended September 30,
                                                                                            -------------------------------
                                                                                                 2000              1999
                                                                                              -----------      -----------
<S>                                                                                           <C>              <C>
  Cash flows from operating activities:
  Net income                                                                                  $   432,218      $   246,840
  Adjustments to reconcile net income to net cash provided by
     operating activities:
     Amortization of intangible assets                                                             47,312           52,794
     (Accretion) amortization of purchase accounting premiums and
         discounts, net                                                                               (27)           8,902
     Accretion of discount on borrowings                                                              813              756
     Amortization of mortgage servicing rights                                                    149,037          157,782
     Provision for loan losses                                                                         --           10,000
     Loss (gain) on sale of assets, net                                                            15,348          (18,296)
     Gain on sale of branches, net                                                                     --           (2,343)
     Gain on sale of foreclosed real estate, net                                                   (7,591)         (10,494)
     Loss on sale, settlement and transfer of loans, net                                           52,213          147,013
     Capitalization of originated mortgage servicing rights                                       (89,821)        (172,398)
     Extraordinary items - gain on early extinguishment of debt, net                               (3,014)              --
     Depreciation and amortization of premises and equipment                                       38,866           27,324
     Amortization of deferred debt issuance costs                                                   5,511            5,456
     FHLB stock dividends                                                                         (70,305)         (43,143)
     Purchases and originations of loans held for sale                                         (3,789,358)      (7,217,334)
     Net proceeds from the sale of loans held for sale                                          3,522,307        8,509,343
     (Increase) decrease in other assets                                                          (30,764          235,332
     (Increase) decrease in accrued interest receivable                                           (29,255)           2,040
     Increase (decrease) in other liabilities                                                     240,588         (151,213)
     Amortization of deferred compensation expense-Golden State
         restricted common stock                                                                    1,500              238
     Minority interest                                                                             20,191           28,338
                                                                                              -----------      -----------
         Net cash provided by operating activities                                            $   505,769      $ 1,816,937
                                                                                              ===========      ===========
</TABLE>
                                                                     (Continued)


  See accompanying notes to unaudited consolidated financial statements.


                                     Page 9

<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                Consolidated Statements of Cash Flows (continued)
                  Nine Months Ended September 30, 2000 and 1999
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                            Nine Months Ended September 30,
                                                                                            -------------------------------
                                                                                                 2000             1999
                                                                                             ------------     ------------
<S>                                                                                          <C>              <C>
  Cash flows from investing activities:
       Downey Acquisition                                                                    $   (379,314)    $         --
       Nevada Purchase                                                                                 --          458,943
       Purchases of securities available for sale                                                 (33,388)        (791,952)
       Proceeds from maturities of securities available for sale                                   35,469          390,328
       Purchases of securities held to maturity                                                    (2,849)         (27,527)
       Principal payments and proceeds from maturities
          of securities held to maturity                                                           41,747           64,855
       Purchases of mortgage-backed securities available for sale                                 (58,340)      (4,140,171)
       Principal payments on mortgage-backed securities available for sale                      1,438,573        3,088,120
       Proceeds from sales of mortgage-backed securities available for sale                       666,924          193,732
       Principal payments on mortgage-backed securities held to maturity                          315,554          504,968
       Proceeds from sales of loans                                                                62,360           16,820
       Net increase in loans receivable                                                        (3,671,238)      (1,168,370)
       Purchases of loans receivable                                                           (1,213,023)      (1,218,415)
       Purchases of FHLB stock, net                                                              (107,570)         (98,517)
       Purchases of premises and equipment                                                        (34,958)         (74,929)
       Proceeds from disposal of premises and equipment                                             2,977           47,002
       Proceeds from sales of foreclosed real estate                                               63,947          114,938
       Purchases of mortgage servicing rights                                                    (303,061)        (289,922)
       Proceeds from sales of mortgage servicing rights                                               765           30,616
                                                                                             ------------     ------------
          Net cash used in investing activities                                                (3,175,425)      (2,899,481)
                                                                                             ------------     ------------

  Cash flows from financing activities:
       Branch sales                                                                                    --          (69,340)
       Net increase (decrease) in deposits                                                        210,435       (1,420,256)
       Proceeds from additional borrowings                                                     29,518,911       22,388,086
       Principal payments on borrowings                                                       (26,779,900)     (21,751,828)
       Net (decrease) increase in securities sold under
          agreements to repurchase                                                               (143,692)       1,725,530
       Bank Preferred Stock Tender Offers                                                              --          (97,621)
       Debt Tender Offers                                                                              --             (253)
       Dividends on common stock                                                                  (71,000)        (105,000)
       Dividends paid to minority stockholders, net of taxes                                      (20,191)         (24,153)
         Tax benefit on exercise of stock options                                                     132            2,013
       Capital contribution from parent                                                            19,000           10,000
                                                                                             ------------     ------------
          Net cash provided by financing activities                                             2,733,695          657,178
                                                                                             ------------     ------------

  Net change in cash and cash equivalents                                                          64,039         (425,366)
  Cash and cash equivalents at beginning of period                                                592,878          967,950
                                                                                             ------------     ------------
  Cash and cash equivalents at end of period                                                 $    656,917     $    542,584
                                                                                             ============     ============
</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 nine months ended September 30, 2000 are not necessarily indicative of
the results that may be expected for the entire fiscal year or any other interim
period.  Certain amounts for the three- and nine-month periods in the prior year
have been reclassified to conform to the current period's presentation.

     Golden State Holdings Inc. (the "Company" or "GS Holdings"), a wholly owned
subsidiary of Golden State Bancorp Inc. ("Golden State"),  was formed to acquire
all of the assets of First Nationwide  Holdings Inc. ("FN Holdings"),  including
common and  preferred  stock of  California  Federal  Bank and its  subsidiaries
("California  Federal" or "Bank"),  as part of the Golden State  Acquisition (as
defined herein).  GS Holdings is a holding company whose only significant  asset
is all of the common 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  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  Bank,
Federal Savings Bank ("Glendale Federal") merged with and into the Bank pursuant
to the Glen Fed  Merger  (as  defined  herein).  Unless  the  context  otherwise
indicates,  "California  Federal" or "Bank" refers to California Federal Bank as
the surviving entity after the consummation of the Glen Fed Merger.

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

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

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

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

     GOLDEN STATE ACQUISITION

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


                                    Page 11

<PAGE>
"Glen Fed Merger").  The FN Holdings Asset Transfer, the Holding Company Mergers
and  the Glen Fed Merger  are  referred  to  collectively  as  the "Golden State
Acquisition."

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

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

     Merger and integration  costs associated with the Golden State  Acquisition
totalled $7.7 million for the nine months ended  September  30, 1999,  including
severance for terminated  California Federal employees,  expenses for California
Federal branch  closures,  and conversion and  consolidation  costs,  as well as
transition  expenses for duplicate  personnel,  facilities and computer  systems
during the  integration  period.  No such expenses were incurred during the nine
months ended September 30, 2000.

     During the third quarter of 1999, the Company recorded fair value and other
adjustments to reduce intangible assets in the Golden State Acquisition by $16.6
million,  $18.1  million and $12.4  million  related to (i)  previously  accrued
severance  and  contract  termination  costs (which had not been  utilized  upon
completion of the integration plan), (ii) a "true-up" adjustment of the deferred
tax asset and (iii) the purchase price, respectively.

     OTHER ACQUISITIONS AND DIVESTITURES

     On February 29, 2000, Auto One acquired Downey Auto Finance Corporation,  a
subsidiary of Downey Savings and Loan  Association,  F.A., with prime auto loans
of approximately $370 million (the "Downey  Acquisition").  Intangible assets of
$7.7 million were recorded in connection with this acquisition.

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

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

(3)  Reclassification of Securities
     ------------------------------

     On April 30, 2000, the Company reclassified $1.1 billion and $497.9 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 comprise  securities which
are required as part of the Bank's regulatory liquidity  portfolio.  The Company
has both the  positive  intent  and the  ability  to hold  these  securities  to
maturity.  The net unrealized loss related to these securities of $64.0 million,
which is included  as a component  of equity  (accumulated  other  comprehensive
loss), is amortized to interest income over the remaining life of the securities
using the interest method. 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.

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

     Cash paid for interest on deposits and other  interest-bearing  liabilities
during the nine months  ended  September  30, 2000 and 1999 was $2.2 billion and
$1.7  billion,  respectively.  Net cash paid for  income  taxes  during the nine
months ended  September 30, 2000 and 1999 was $33.4  million and $85.4  million,
respectively.


                                    Page 12

<PAGE>
     During the nine months ended September 30, 2000, noncash activity consisted
of the  reclassification  of $1.1 billion and $497.9 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 $113.2 million from loans receivable to mortgage-backed  securities
upon the securitization of certain of the Bank's single-family loans,  transfers
of $54.7  million from loans held for sale (at lower of cost or market) to loans
receivable,  transfers of $41.1 million from loans receivable to foreclosed real
estate and $5.4 million of loans made to facilitate sales of real estate owned.

     Noncash  activity  during the nine  months  ended  September  30, 2000 also
included  the  following:  (a) 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 (b) an increase of $2.7  million in  additional  paid-in  capital
reflecting the impact of Golden State restricted  common stock outstanding under
an employee incentive plan.

     During the nine months ended September 30, 1999, noncash activity consisted
of  transfers  of  $227.1  million  from  loans  receivable  to  mortgage-backed
securities upon the securitization of certain of the Bank's single-family loans,
transfers  of  $108.1  million  from  loans  held for sale (at  lower of cost or
market) to loans receivable, transfers of $81.0 million from loans receivable to
foreclosed  real estate and $8.4  million of loans made to  facilitate  sales of
real estate owned.

     Noncash  activity  during the nine  months  ended  September  30, 1999 also
included (a) a reduction of $18.9  million in previously  accrued  severance and
contract  termination  costs, (b) an $18.1 million  "true-up"  adjustment of the
deferred tax asset and $12.4 million in purchase  price  adjustments  related to
the Golden State  Acquisition,  (c) an increase of $238  thousand in  additional
paid-in  capital  reflecting  the  impact  of  56,908  shares  of  Golden  State
restricted  common stock  issued  during the period and (d) an increase of $66.4
million in retained earnings related to an adjustment of the initial dividend of
tax  benefits  due to parent  upon the  Company's  deconsolidation  from its tax
reporting group as a result of the Golden State Acquisition.

(5)  Redemption of FN Holdings Notes
     -------------------------------

     On May 15, 1999, GS Holdings redeemed the remaining $225 thousand aggregate
principal amount of the FN  Holdings  12 1/4%  Senior  Notes  for  an  aggregate
redemption price including  accrued interest  payable,  of $252.6 thousand.  The
premium paid in connection with such redemption was not material.


                                    Page 13

<PAGE>
(6)  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>
                                     Nine Months Ended September 30,            Three Months Ended September 30,
                                    ----------------------------------        ------------------------------------
                                    Community     Mortgage                    Community     Mortgage
                                     Banking       Banking       Total         Banking       Banking        Total
                                     -------       -------       -----         -------       -------        -----
                                                                    (in thousands)
<S>                                 <C>           <C>          <C>            <C>           <C>           <C>
Net interest income: (1)
2000                                $1,019,206    $(74,251)    $944,955       $343,866      $(26,339)     $317,527
1999                                 1,017,322     (40,562)     976,760        331,236       (16,710)      314,526

Noninterest income: (2)
2000                                $  181,517    $188,763     $370,280       $ 63,292      $ 64,345      $127,637
1999                                   189,278     164,678      353,956         68,077        46,701       114,778

Noninterest expense: (3)
2000                                $  562,640    $120,683     $683,323       $189,501      $ 39,896      $229,397
1999                                   564,563     132,341      696,904        178,943        40,893       219,836

</TABLE>
_____________
(1)    Includes  $81.6 million  and  $84.7 million  for the  nine  months  ended
       September 30, 2000 and 1999, respectively, in earnings credit provided to
       FNMC by the Bank, primarily for custodial bank account balances generated
       by FNMC.  Also includes  $192.8 million and  $184.9 million for  the nine
       months  ended  September 30, 2000  and  1999,  respectively,  in interest
       income and expense on intercompany loans.

       Includes  $31.6 million  and  $27.4  million  for the  three months ended
       September 30, 2000 and 1999, respectively, in earnings credit provided to
       FNMC by the Bank, primarily for custodial bank account balances generated
       by FNMC.  Also includes  $70.5 million  and  $60.8 million  for the three
       months  ended  September 30, 2000  and  1999, respectively,  in  interest
       income and expense on intercompany loans.

(2)    Includes  $36.9 million  and  $36.8  million  for the nine  months  ended
       September  30, 2000  and  1999, respectively,  in intercompany  servicing
       fees. Includes $12.4 million and $11.6 million for the three months ended
       September 30, 2000  and  1999, respectively,  in  intercompany  servicing
       fees.

(3)    Includes $3.5 million for each of the nine-month periods ended  September
       30, 2000 and 1999,  in  intercompany noninterest expense.  Includes  $1.2
       million for each of the  three-month  periods  ended  September  30, 2000
       and 1999, in intercompany noninterest expense.







                                    Page 14

<PAGE>
     The  following  reconciles  the  above  table to the  amounts  shown on the
consolidated  financial statements for the nine and three months ended September
30, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
                                                              Nine Months Ended               Three Months Ended
                                                                 September 30,                    September 30,
                                                          ------------------------         -------------------------
                                                            2000            1999             2000             1999
                                                          --------        --------         --------         --------
<S>                                                       <C>             <C>              <C>              <C>
Net interest income:
Total net interest income for reportable segments         $944,955        $976,760         $317,527         $314,526
Elimination of intersegment net interest income            (81,582)        (84,656)         (31,574)         (27,434)
                                                          --------        --------         --------         --------
Total                                                     $863,373        $892,104         $285,953         $287,092
                                                          ========        ========         ========         ========

Noninterest income:
Total noninterest income for reportable segments          $370,280        $353,956         $127,637         $114,778
Elimination of intersegment servicing fees                 (36,884)        (36,772)         (12,387)         (11,632)
                                                          --------        --------         --------         --------
Total                                                     $333,396        $317,184         $115,250         $103,146
                                                          ========        ========         ========         ========

Noninterest expense:
Total noninterest expense for reportable segments         $683,323        $696,904         $229,397         $219,836
Elimination of intersegment expense                         (3,480)         (3,480)          (1,160)          (1,160)
                                                          --------        --------         --------         --------
Total                                                     $679,843        $693,424         $228,237         $218,676
                                                          ========        ========         ========         ========
</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 data processing  expenses).  The merger and integration  plan relative to the
Golden State  Acquisition  was in place on September 11, 1998.  Certain of these
costs  were  included  in the  allocation  of  purchase  price and  others  were
recognized in net income.  The table below reflects a summary of the activity in
the  liability  for the costs  related to such plan since  December 31, 1999 (in
thousands):
<TABLE>
<CAPTION>
                                                 Branch            Severance and          Contract
                                             Consolidations     Termination Benefits     Termination        Total
                                             --------------     --------------------     -----------        -----
<S>                                             <C>                   <C>                    <C>           <C>
Balance at December 31, 1999                    $24,051               $12,770                $25           $36,846
    Additional liabilities recorded               2,504                    --                 --             2,504
    Charges to liability account                 (9,419)                 (204)                --            (9,623)
                                                -------               -------                ---           -------
Balance at September 30, 2000                   $17,136               $12,566                $25           $29,727
                                                =======               =======                ===           =======
</TABLE>

(8)  Income Taxes
     ------------

     During the nine months ended  September 30, 2000, GS Holdings  recorded net
income tax expense of $67.5 million.  Based on favorable  resolutions of federal
income tax audits of Old California  Federal and Glendale Federal,  and based on
the current  status of Mafco's,  including the  Company's,  audits for the years
1991 through 1995,  management  changed its judgment about the  realizability of
the Company's  deferred tax asset and reduced its valuation  allowance by $211.7
million  during the nine-month  period ended  September 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.


                                    Page 15

<PAGE>
     In  connection  with the Golden  State Merger on  September  11, 1998,  the
Company deconsolidated from the Mafco Group. As a result, only the amount of the
net operating  losses ("NOLs") of the Company not utilized by the Mafco Group on
or before  December  31,  1998 are  available  to offset  taxable  income of the
Company thereafter.

     Based  upon the  actual  filing of the Mafco  Group  and GS  Holdings  1998
consolidated  federal  income tax returns,  tax  benefits of $79.0  million were
recognized  during the third quarter of 1999. The tax benefit is fully offset by
an increase in minority  interest  expense,  since under the Golden State Merger
agreement,  the tax benefits  from any NOLs and other tax  attributes  of Parent
Holdings and its subsidiaries are retained by First Gibraltar and Hunter's Glen.

     In addition,  the Company recorded an adjustment of $66.4 million to reduce
the initial dividend of tax benefits to parent due to its  deconsolidation  from
the Mafco Group,  which was recorded as an increase to retained  earnings during
the third quarter of 1999.

(9)  Minority Interest
     -----------------

     On April  1,  1999,  GS  Holdings  redeemed  all of the  remaining  607,299
outstanding shares of the Bank's 10 5/8% Preferred Stock not already owned by it
for  $105.313  per share for a total  redemption  price of $63.9  million.  This
transaction  reduced  minority  interest  on the  Company's  balance  sheet  and
resulted in a charge of $3.2 million to minority interest expense.

     On September 1, 1999,  GS Holdings  redeemed all of the  remaining  318,341
shares of the Bank's 11 1/2% Preferred Stock not already owned by it for $105.75
per share,  for a total  redemption  price of $33.7  million.  This  transaction
reduced minority interest by $31.8 million on the Company's consolidated balance
sheet and resulted in a charge of $1.8 million to minority interest expense.

     During  the third  quarter  of 1999,  minority  interest  expense  of $79.0
million was recorded  based upon changes to  estimated  pre-merger  tax benefits
retained  by Parent  Holdings.  This  amount  was fully  offset by an income tax
benefit in the same period. See note 8.

(10) Stockholder's Equity
     --------------------

     At September 30, 2000,  there were 1,000 shares of GS Holdings common stock
issued and outstanding.

     Dividends on common stock during the nine months ended  September  30, 2000
and 1999 totalled $71.0 million and $105.0 million, respectively.

     During the third  quarters of 2000 and 1999, the Company  received  capital
contributions from its parent of $19.0 million and $10.0 million,  respectively.
In  addition,  in the third  quarter  of 1999,  the  Company  also  recorded  an
adjustment  to the  purchase  price in the  Golden  State  Acquisition  of $12.4
million. See note 2.

     During the third  quarter of 1999,  the  Company  recorded a $66.4  million
increase in retained  earnings  representing an adjustment to reduce the initial
dividend of tax benefits to parent upon the Company's  deconsolidation  from its
tax reporting group on September 11, 1998. See note 8.

(11) Executive and Stock Compensation
     --------------------------------

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


                                    Page 16

<PAGE>
     In the  first  quarter  of 2000,  Golden  State  granted  to its  employees
non-qualified  stock options equivalent to 1,333,850 shares of common stock at a
weighted  average  price of $13.99 per share under the Golden State Bancorp Inc.
Omnibus Stock Plan (the "Stock  Plan").  In the second  quarter of 2000,  Golden
State granted an  additional  12,000  non-qualified  stock options at a weighted
average price of $16.25 per share.  In the third  quarter of 2000,  Golden State
granted an additional 5,000 non-qualified options at a weighted average price of
$21.31 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 nine months ended  September  30, 2000,  in
accordance  with  the  intrinsic  value  accounting  methodology  prescribed  in
Accounting  Principles  Board  Opinion No. 25,  Accounting  for Stock  Issued to
Employees,  whereby  compensation  expense to employees is determined based upon
the excess,  if any, of the market price of Golden  State's  common stock at the
measurement date over the exercise price of the award.

     During the three  months ended  September  30,  2000,  36,893  options were
exercised and 18,584 options were  cancelled or expired under all plans.  During
the nine months ended  September  30, 2000,  51,200  options were  exercised and
82,950 options were cancelled or expired under all plans. At September 30, 2000,
options  to acquire an  equivalent  of  3,777,782  shares and  1,129,382  LTWTMs
remained outstanding under all plans.

     During the three and nine  months  ended  September  30,  1999,  a total of
149,226 and 506,243 options, respectively, were exercised and 57,500 and 230,000
options, respectively, were cancelled or expired under all plans.

     On January 24, 2000 and July 19, 1999,  Golden State  awarded to certain of
its employees 220,327 and 56,908 shares, respectively, of restricted stock under
the Golden State Bancorp Inc.  Executive  Compensation Plan. The market value on
the dates of the awards  were $14.00 and $22.38 per share,  respectively.  These
shares  generally vest over two years in one-half  increments on the anniversary
of the  grant  date,  based  upon the  continued  service  of the  employee.  At
September 30, 2000, a total of 246,756  restricted  shares was outstanding.  The
compensation  expense  related to these awards is  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 nine months ended
September 30, 2000, $0.4 million and $1.5 million, respectively, in compensation
expense was recognized related to such awards.  During the three and nine months
ended September 30, 1999,  $0.2 million in  compensation  expense was recognized
related to such awards.  These  restricted  shares have full voting and dividend
rights.

(12) 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.

(13) Newly Issued Accounting Pronouncements
     --------------------------------------

     ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS No. 133"). SFAS No. 133 was amended by
Statement of Financial  Accounting  Standards No. 137, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS  AND  HEDGING  ACTIVITIES-DEFERRAL  OF THE  EFFECTIVE  DATE  OF FASB
STATEMENT  NO. 133 ("SFAS No.  137").  SFAS No. 137  mandates  that SFAS No. 133
shall be effective for all fiscal  quarters of all fiscal years  beginning after
June 15,


                                    Page 17

<PAGE>
2000. SFAS No. 133 requires that  all derivative  instruments be recorded on the
balance sheet  at fair value.  Changes  in the  fair value  of  derivatives  are
recorded  each  period  in  current  earnings  or  other  comprehensive  income,
depending on the type of hedge transaction.

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

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

     The Company has identified  various types of instruments which will qualify
as  derivatives  pursuant to SFAS No. 133.  It is expected  that the  derivative
instruments  (interest rate floors,  principal only swaps and swaptions) used to
hedge the change in the fair value of the Company's  mortgage  servicing  rights
will be reported as fair value hedges. The derivative instruments (interest rate
swaps) used to hedge the change in the cash flows of the Company's  Federal Home
Loan Bank advances and reverse  repurchase  agreements  will be reported as cash
flow hedges.

     During  their  meeting of October 26 and 27,  2000,  the FASB staff  issued
guidance to the Derivatives  Implementation  Group ("DIG") of the FASB resolving
Issue 11-4,  DEFINITION OF A DERIVATIVE:  WHEN A LOAN  COMMITMENT  MEETS THE NET
SETTLEMENT  CRITERIA.  This  guidance  was issued for DIG review and  clarifying
comments.  This guidance will be posted to the FASB web site in November of 2000
and given a 35-day  comment  period.  The FASB  staff  guidance  indicated  that
interest  rate  lock  commitments,  given to  potential  borrowers,  met the net
settlement criteria described in paragraph 9 of SFAS No. 133 and would therefore
be considered a derivative instrument.  At the end of the 35-day comment period,
the FASB staff guidance will become Level D GAAP. In their meeting of October 26
and 27, 2000,  the DIG also  reviewed  Issue 12-4,  FAIR VALUE  HEDGES:  HEDGING
MORTGAGE SERVICING RIGHT ASSETS USING PRESET HEDGE COVERAGE RATIOS. There was no
resolution to this issue at the meeting.  The Company is currently assessing the
impact of both areas of potential guidance.

     On June 15,  2000,  the  FASB  issued  Statement  of  Financial  Accounting
Standards No. 138  ACCOUNTING  FOR CERTAIN  DERIVATIVE  INSTRUMENTS  AND CERTAIN
HEDGING ACTIVITIES, AN AMENDMENT OF FASB NO. 133 ("SFAS No. 138").

     The Board amended SFAS No. 133 by:

     (a) Expanding the normal purchases and normal sales exception,

     (b) Permitting an entity to hedge to a designated  benchmark interest  rate
         defined as either (i) the  interest rate on direct Treasury obligations
         of the  U.S. government  (Treasury rate), or  (ii) the London Interbank
         Offered Rate (LIBOR) swap rate,

     (c) Permitting  entities to hedge  recognized  foreign-currency-denominated
         assets and liabilities  for which a foreign  currency  transaction gain
         or loss is recognized in earnings, and

     (d) Permitting certain internal derivatives to qualify for hedge accounting
         in  the  affiliate  financial  statements  even  though  these internal
         derivatives  are  offset on  a  net  or aggregate  basis,  rather  than
         individually, by third party derivative contracts in  another member of
         the consolidated financial group.


                                    Page 18

<PAGE>
     In addition,  certain  decisions arising from the DIG process that required
specific amendments to SFAS No. 133 are incorporated in SFAS No. 138.

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

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

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

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

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

     ACCOUNTING FOR TRANSFERS AND SERVICING FINANCIAL ASSETS AND EXTINGUISHMENTS
     OF LIABILITIES

     On September 29, 2000,  the FASB issued  Statement of Financial  Accounting
Standards No. 140,  ACCOUNTING  FOR TRANSFERS AND SERVICING OF FINANCIAL  ASSETS
AND  EXTINGUISHMENTS OF LIABILITIES ("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 is
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 is not expected to materially impact the
Company's financial results.


                                    Page 19



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

     The statements contained in this Quarterly Report on Form 10-Q that are not
purely historical are  forward-looking  statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, including statements regarding the Company's expectations,  intentions,
beliefs or strategies regarding the future.  Forward-looking  statements include
the Company's statements regarding liquidity, provision for loan losses, capital
resources  and  anticipated  expense  levels  in  "Management's  Discussion  and
Analysis of Financial  Condition  and Results of  Operations."  In addition,  in
those and other portions of this document,  the words  "anticipate,"  "believe,"
"estimate," "expect," "intend," and other similar expressions, as they relate to
the   Company  or  the   Company's   management,   are   intended   to  identify
forward-looking  statements.  Such  statements  reflect the current views of the
Company  with  respect  to future  events  and are  subject  to  certain  risks,
uncertainties and assumptions. It is important to note that the Company's actual
results could differ  materially  from those  described  herein as  anticipated,
believed,  estimated or expected.  Among the factors that could cause results to
differ  materially  are:  (a) changes in levels of market  interest  rates,  (b)
changes in the California  economy or California real estate values, (c) changes
in the level of mortgage loan  prepayments,  (d) changes in federal banking laws
and  regulations,  (e) actions by the Company's  competitors,  and (f) the risks
described in the "Risk Factors" section  included in the Registration  Statement
on Form S-1 filed by Golden State Holdings Inc. with the Securities and Exchange
Commission on September 29, 1998 (File No. 333-64597) and declared  effective on
November  12,  1998.  The  Company  assumes  no  obligation  to update  any such
forward-looking statement.

OVERVIEW

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

     NET INCOME

     GS Holdings  reported  net income for the nine months ended  September  30,
2000 of $432.2  million  compared  with net  income of  $246.8  million  for the
corresponding period in 1999. Net income for the nine months ended September 30,
2000 includes  gains on the early  extinguishment  of debt,  net of tax, of $3.0
million.  Net income for the nine months ended  September  30, 1999 includes the
following  nonrecurring  items,  net of tax: a $9.4  million  gain from the 1999
Servicing  Sale,  $5.0  million  in  minority  interest  expense  related to the
redemption of the Bank Preferred  Stock and a $1.4 million gain from the sale of
branches.

     GS Holdings  reported net income for the three months ended  September  30,
2000 of  $90.7  million  compared  with net  income  of  $87.2  million  for the
corresponding  period in 1999.  Net income for the three months ended  September
30, 1999 includes the following  nonrecurring  items, net of tax: a $1.4 million
gain from the sale of branches  and $1.8  million in minority  interest  expense
related to the redemption of the Bank's 11 1/2% Preferred Stock.


                                    Page 20

<PAGE>
     FINANCIAL CONDITION

     During the nine months ended September 30, 2000,  consolidated total assets
increased  $3.5  billion,  to $60.6  billion from  December 31, 1999,  and total
liabilities increased from $54.9 billion to $58.0 billion.

     During the nine months  ended  September  30,  2000,  stockholder's  equity
increased $456.2 million to $2.1 billion.  The increase in stockholder's  equity
is principally the net result of $432.2 million in net income for the period,  a
$70.3 million net unrealized gain,  after tax, on securities  available for sale
and $19.0  million in capital  contributions  from parent,  partially  offset by
$71.0 million in common stock dividends.

     GS Holdings' non-performing assets, consisting of non-performing loans, net
of purchase accounting adjustments, foreclosed real estate, net, and repossessed
assets,  decreased  to $134  million at September  30, 2000  compared  with $200
million at December 31, 1999. Total non-performing assets as a percentage of the
Bank's  total  assets  decreased  to 0.22% at  September  30, 2000 from 0.35% at
December 31, 1999.


                                    Page 21

<PAGE>
RESULTS OF OPERATIONS

     NINE MONTHS ENDED SEPTEMBER 30, 2000 VERSUS NINE MONTHS ENDED SEPTEMBER 30,
     1999

     The  following  table  shows the  Company's  consolidated  average  balance
sheets,  with the  related  interest  income,  interest  expense and the average
interest rates for the periods  presented.  Average balances are calculated on a
daily basis.
<TABLE>
<CAPTION>
                                                                     Nine Months Ended September 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         $   69            6.39%
     Mortgage-backed securities available for sale                  12,514            625            6.66
     Mortgage-backed securities held to maturity                     2,640            149            7.54
     Loans held for sale, net                                          832             46            7.44
     Loans receivable, net                                          37,397          2,086            7.44
     FHLB stock                                                      1,278             70            7.35
                                                                   -------         ------
          Total interest-earning assets                             56,090          3,045            7.24
                                                                                   ------
Noninterest-earning assets                                           2,985
                                                                   -------
          Total assets                                             $59,075
                                                                   =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                      $23,066            679            3.93
     Securities sold under agreements to repurchase (3)              5,551            268            6.34
     Borrowings (3)                                                 27,148          1,235            6.05
                                                                   -------         ------
          Total interest-bearing liabilities                        55,765          2,182            5.20
                                                                                   ------
Noninterest-bearing liabilities                                        994
Minority interest                                                      496
Stockholder's equity                                                 1,820
                                                                   -------
          Total liabilities, minority interest
             and stockholder's equity                              $59,075
                                                                   =======

Net interest income                                                                $  863
                                                                                   ======
Interest rate spread                                                                                 2.04%
                                                                                                    =====
Net interest margin                                                                                  2.07%
                                                                                                    =====

Return on average assets                                                                             0.98%
                                                                                                    =====
Return on average total equity                                                                      31.66%
                                                                                                    =====
Average equity to average assets                                                                     3.08%
                                                                                                    =====
</TABLE>


                                    Page 22

<PAGE>

<TABLE>
<CAPTION>
                                                                     Nine Months Ended September 30, 1999
                                                                   ---------------------------------------
                                                                   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)         $ 1,571         $   70            5.97%
     Mortgage-backed securities available for sale                  13,623            645            6.32
     Mortgage-backed securities held to maturity                     2,471            138            7.44
     Loans held for sale, net                                        1,939             96            6.60
     Loans receivable, net                                          31,427          1,722            7.31
     FHLB stock                                                      1,100             43            5.24
                                                                   -------        --------
         Total interest-earning assets                              52,131          2,714            6.94
                                                                                  --------
Noninterest-earning assets                                           3,748
                                                                   -------
         Total assets                                              $55,879
                                                                   =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                      $24,104            667            3.70
     Securities sold under agreements to repurchase (3)              4,826            188            5.14
     Borrowings (3)                                                 23,469            967            5.51
                                                                   -------        --------
         Total interest-bearing liabilities                         52,399          1,822            4.65
                                                                                  --------
Noninterest-bearing liabilities                                      1,210
Minority interest                                                      551
Stockholder's equity                                                 1,719
                                                                   -------
         Total liabilities, minority interest
              and stockholder's equity                             $55,879
                                                                   =======

Net interest income                                                                $  892
                                                                                   ======
Interest rate spread                                                                                 2.29%
                                                                                                    =====
Net interest margin                                                                                  2.27%
                                                                                                    =====

Return on average assets                                                                             0.59%
                                                                                                    =====
Return on average equity                                                                            19.14%
                                                                                                    =====
Average equity to average assets                                                                     3.08%
                                                                                                    =====
</TABLE>
 ________________
(1)   Non-performing assets are included in the average balances for the periods
      indicated.

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

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


                                    Page 23

<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>
                                                                 Nine Months Ended September 30, 2000 vs. 1999
                                                                         Increase (Decrease) Due to
                                                                 ---------------------------------------------
                                                                    Volume          Rate             Net
                                                                    ------          ----             ---
INTEREST INCOME:                                                                (in millions)
<S>                                                                  <C>            <C>             <C>
     Securities and interest-bearing deposits in banks               $ (6)          $  5            $ (1)
     Mortgage-backed securities available for sale                    (59)            39             (20)
     Mortgage-backed securities held to maturity                        9              2              11
     Loans held for sale, net                                         (64)            14             (50)
     Loans receivable, net                                            333             31             364
     FHLB stock                                                         8             19              27
                                                                     ----           ----            ----
          Total                                                       221            110             331
                                                                     ----           ----            ----

INTEREST EXPENSE:

     Deposits                                                         (27)            39              12
     Securities sold under agreements to repurchase                    31             49              80
     Borrowings                                                       164            104             268
                                                                     ----           ----            ----
          Total                                                       168            192             360
                                                                     ----           ----            ----
                  Change in net interest income                      $ 53           $(82)           $(29)
                                                                     ====           ====            ====
</TABLE>

     The volume  variances in total interest  income and total interest  expense
for the nine  months  ended  September  30, 2000  compared to the  corresponding
period in 1999 are largely due to increased loan volume,  partially offset by an
increase in borrowings.

     INTEREST INCOME. Total interest income was $3.0 billion for the nine months
ended  September  30, 2000,  an increase of $330.7  million from the nine months
ended  September  30, 1999.  Total  interest-earning  assets for the nine months
ended  September 30, 2000 averaged $56.1 billion,  compared to $52.1 billion for
the  corresponding  period  in 1999,  primarily  as a result of  increased  loan
volume. The yield on total interest-earning  assets during the nine months ended
September  30,  2000  increased  to 7.24% from 6.94% for the nine  months  ended
September  30,  1999,  primarily  due to a higher  percentage  of loans to total
earning assets and the repricing of variable-rate earning assets.

     GS Holdings earned $2.1 billion of interest income on loans  receivable for
the nine months ended September 30, 2000, an increase of $363.7 million from the
nine months ended  September 30, 1999. The average  balance of loans  receivable
was $37.4  billion for the nine months ended  September  30,  2000,  compared to
$31.4  billion for the same period in 1999.  The weighted  average rate on loans
receivable  increased to 7.44% for the nine months ended September 30, 2000 from
7.31% for the nine months ended  September 30, 1999. The increase in the average
balance reflects an increase in residential  loan  origination  activity and new
auto loan production from the Downey  Acquisition.  The increase in the weighted
average rate  reflects the repricing of  variable-rate  loans and an increase in
the prime rate on commercial  banking loans,  partially offset by lower rates on
new  purchases  of prime auto loans,  including  those  purchased  in the Downey
Acquisition.

     GS Holdings  earned $46.4 million of interest income on loans held for sale
for the nine months ended  September  30, 2000, a decrease of $49.6 million from
the nine months ended  September 30, 1999. The average balance of loans held for
sale was $832 million for the nine months ended  September  30, 2000, a decrease
of $1.1 billion from the comparable  period in 1999,  primarily  attributed to a
reduction in fixed-rate  originations due to higher interest rates, coupled with
longer  holding  periods for loans held for sale  during the nine  months  ended
September 30, 1999.  The weighted  average rate on loans held for sale increased
to 7.44% for the nine months ended


                                    Page 24

<PAGE>
September 30, 2000  from  6.60%  for the  nine months  ended September 30, 1999,
primarily due to higher market interest rates.

     Interest income on mortgage-backed securities available for sale was $625.2
million  for the nine  months  ended  September  30,  2000,  a decrease of $20.3
million from the nine months ended  September  30, 1999.  The average  portfolio
balance  decreased  $1.1 billion,  to $12.5  billion,  for the nine months ended
September  30, 2000  compared to the same period in 1999.  The weighted  average
yield on these assets  increased from 6.32% for the nine months ended  September
30, 1999 to 6.66% for the nine months ended  September 30, 2000. The decrease in
the volume and the increase in the weighted  average  yield is primarily  due to
the  reclassification  of $1.1  billion  in  mortgage-backed  securities  to the
held-to-maturity  portfolio,  run-off  of  existing  portfolios  and the sale of
approximately $688 million in  mortgage-backed  securities during the second and
third quarters of 2000,  partially  offset by the impact of purchases during the
fourth quarter of 1999.

     Interest income on  mortgage-backed  securities held to maturity was $149.3
million for the nine  months  ended  September  30,  2000,  an increase of $11.5
million from the nine months ended  September  30, 1999.  The average  portfolio
balance  increased  $169  million,  to $2.6  billion,  for the nine months ended
September 30, 2000 compared to the same period in 1999,  primarily attributed to
the  reclassification  of $1.1 billion in  mortgage-backed  securities  from the
available-for-sale  portfolio,  partially  offset  by the  run-off  of  existing
portfolios.  The run-off in these  securities was replaced with the  origination
and purchase of whole loans  instead of additional  mortgage-backed  securities.
The weighted average rates for the nine months ended September 30, 2000 and 1999
were 7.54% and 7.44%, respectively.

     Interest income on securities and interest-bearing  deposits in other banks
was $68.6  million for the nine months ended  September  30, 2000, a decrease of
$1.7  million  from the nine  months  ended  September  30,  1999.  The  average
portfolio  balance was $1.4  billion and $1.6  billion for the nine months ended
September 30, 2000 and 1999,  respectively.  The higher weighted average rate of
6.39% for the nine months  ended  September  30, 2000  compared to 5.97% for the
nine months ended September 30, 1999 reflects $2.4 million in interest income on
a federal income tax refund related to Old California  Federal for periods prior
to the Golden State Acquisition for which there is no corresponding asset.

     Dividends  on FHLB stock  were  $70.3  million  for the nine  months  ended
September  30,  2000,  an increase of $27.2  million  from the nine months ended
September 30, 1999. The average balance outstanding during the nine months ended
September 30, 2000 and 1999 was $1.3 billion and $1.1 billion, respectively. The
weighted  average  dividend on FHLB stock increased to 7.35% for the nine months
ended  September  30, 2000 from 5.24% for the nine months  ended  September  30,
1999. The increase in the average  balance and weighted  average yield is due to
an  increase  in the amount of such stock owned by the Company as a result of an
increase in borrowings  under FHLB advances and an increase in the dividend rate
on FHLB stock.

     INTEREST  EXPENSE.  Total  interest  expense was $2.2  billion for the nine
months ended  September  30, 2000,  an increase of $359.5  million from the nine
months  ended  September  30,  1999.  The  increase is  primarily  the result of
additional  borrowings  under FHLB advances and securities sold under agreements
to repurchase used to fund loans and offset the reduction in deposit balances.

     Interest  expense on  deposits,  including  brokered  deposits,  was $679.1
million for the nine  months  ended  September  30,  2000,  an increase of $11.8
million from the nine months ended  September 30, 1999.  The average  balance of
deposits  outstanding  decreased  from $24.1  billion for the nine months  ended
September  30, 1999 to $23.1  billion for the nine months  ended  September  30,
2000.  The  decrease in the  average  balance  includes  declines in the average
balance of certificates of deposit, money market and passbook savings, offset in
part by an increase in the average  balance of customer  checking  accounts  and
custodial  accounts.  These changes  reflect the Company's  focus during 2000 on
consumer checking account growth.  The overall weighted average cost of deposits
increased to 3.93% for the nine months ended  September  30, 2000 from 3.70% for
the nine  months  ended  September  30,  1999,  primarily  due to rising  market
interest rates.


                                    Page 25

<PAGE>
     Interest expense on securities sold under agreements to repurchase totalled
$267.6  million for the nine months ended  September  30,  2000,  an increase of
$79.5 million from the nine months ended September 30, 1999. The average balance
of such  borrowings  for the nine months ended  September  30, 2000 and 1999 was
$5.6  billion  and  $4.8  billion,   respectively.  The  increase  is  primarily
attributed  to  the  funding  of  loans  and  the  purchase  of  mortgage-backed
securities  in the fourth  quarter  of 1999,  as well as  deposit  run-off.  The
weighted average interest rate on these  instruments  increased to 6.34% for the
nine  months  ended  September  30,  2000 from 5.14% for the nine  months  ended
September  30,  1999,  primarily  due to an  increase  in  market  rates  on new
borrowings in 2000 compared to 1999.

     Interest  expense on  borrowings  totalled $1.2 billion for the nine months
ended  September  30, 2000,  an increase of $268.2  million from the nine months
ended  September 30, 1999. The average  balance  outstanding for the nine months
ended  September  30,  2000  and 1999  was  $27.1  billion  and  $23.5  billion,
respectively.  The weighted average interest rate on these instruments increased
to 6.05% for the nine months  ended  September  30, 2000 from 5.51% for the nine
months ended September 30, 1999, primarily due to higher prevailing market rates
in 2000.  The higher volume  reflects the increase in FHLB advances used to fund
loans and the purchase of  mortgage-backed  securities in the fourth  quarter of
1999.

     NET INTEREST  INCOME.  Net interest  income was $863.4 million for the nine
months  ended  September  30,  2000,  a decrease of $28.7  million from the nine
months ended  September 30, 1999. The interest rate spread declined to 2.04% for
the nine months  ended  September  30, 2000 from 2.29% for the nine months ended
September 30, 1999,  primarily as a result of maturities and repayments of lower
rate   interest-bearing   liabilities   being  replaced  with   interest-bearing
liabilities  having  comparatively  higher rates.  The effect of higher rates on
liabilities was partially  offset by higher yielding assets  replenishing  asset
run-off in a rising rate environment and the repricing of variable-rate assets.

     NONINTEREST INCOME. Total noninterest income,  consisting primarily of loan
servicing fees,  customer banking fees and gains on sales of assets,  was $333.4
million for the nine months ended  September 30, 2000,  representing an increase
of $16.2 million from the nine months ended September 30, 1999.

     Loan servicing fees, net of amortization of mortgage servicing rights, were
$138.7 million for the nine months ended September 30, 2000,  compared to $108.4
million  for the  nine  months  ended  September  30,  1999.  The  single-family
residential  loan servicing  portfolio,  excluding  loans serviced for the Bank,
increased from $72.3 billion at September 30, 1999 to $83.0 billion at September
30, 2000.  Incremental loan servicing fees were partially offset by amortization
of MSRs. MSR amortization for the nine months ended September 30, 2000 decreased
by $8.7 million from the nine months ended September 30, 1999 due to a reduction
in the estimated  prepayment rate,  partially offset by a higher MSR basis. Loan
servicing fees benefited from the slowdown in mortgage loan prepayments in 2000,
with an average  prepayment rate on loans serviced for others of 8.5% during the
first nine months of 2000, compared to 19.3% in the comparable period in 1999.

     Customer  banking  fees  were  $147.3  million  for the nine  months  ended
September  30,  2000  compared  to  $138.8  million  for the nine  months  ended
September 30, 1999. The increase is primarily  attributed to increased  emphasis
by  management  on  transaction  account  growth and higher fee income on mutual
fund, annuity and other security sales through Cal Fed Investments.

     Gain on sale,  settlement and transfer of loans, net totalled $37.6 million
for the nine months ended  September 30, 2000, an increase of $12.2 million from
the nine months ended September 30, 1999. 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
present, 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.  Gains  attributed to early payoffs and settlement of commercial  loans
with  unamortized  discounts  were $5.9  million  lower in the nine months ended
September 30, 2000  compared to the same period in 1999.  During the nine months
ended September 30, 2000,  California Federal sold $3.7 billion in single-family
mortgage loans originated for sale with servicing rights retained as part of its
ongoing mortgage banking  operations  compared to $8.7 billion of such sales for
the  corresponding  period in 1999, while the gains on such sales increased $3.7
million between the two periods.


                                    Page 26

<PAGE>
     Net loss on sale of assets totalled $15.3 million for the nine months ended
September 30, 2000,  compared to a net gain of $18.3 million for the nine months
ended  September  30, 1999.  The loss during 2000 is 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  and  a  $0.9  million   loss  from  the  sale  of  $187.6   million  of
mortgage-backed  securities  with an  average  yield of 6.59%  during  the third
quarter,  partially offset by a $1.3 million gain from the sale of interest rate
swaps with a notional  amount of $284.0  million in August 2000.  It is expected
that these sales will  benefit both the net  interest  margin and the  Company's
interest rate sensitivity in future periods.  The $18.3 million gain reported in
1999 primarily relates to the $16.3 million gain on the Servicing Sale.

     Other  noninterest  income  was $25.1  million  for the nine  months  ended
September  30,  2000,  a decrease of $1.2  million  from the nine  months  ended
September  30, 1999,  primarily  attributed  to the sale of the Eureka and Ukiah
branches in the third quarter of 1999.

     NONINTEREST  EXPENSE.  Total noninterest expense was $679.8 million for the
nine months ended  September 30, 2000, a decrease of $13.6  million  compared to
the nine months ended  September 30, 1999. The variance  between the two periods
is primarily  attributed to continued  expense  reduction efforts by the Company
and the completion of merger and integration  efforts in the first half of 1999.
Noninterest  expense  for the nine months  ended  September  30,  2000  included
decreases  of $15.3  million  in other  noninterest  expense,  $11.3  million in
professional fees, $8.1 million in loan expense, $7.7 million in specific merger
and  integration  costs  incurred in 1999 in  connection  with the Golden  State
Acquisition  and $5.5  million  in  amortization  of  intangible  assets.  These
decreases  were partially  offset by increases of $24.0 million in  compensation
expense and $9.3 million in occupancy and equipment expense.

     Compensation and employee  benefits expense was $323.2 million for the nine
months  ended  September  30, 2000,  an increase of $24.0  million from the nine
months ended September 30, 1999. The increase is primarily  attributed to normal
salary  increases and higher  employment  levels in expanding lines of business,
including the impact of additional employees from the Downey Acquisition.

     Occupancy  and  equipment  expense  was $114.2  million for the nine months
ended September 30, 2000, an increase of $9.3 million from the nine months ended
September  30, 1999,  primarily  attributed  to increased  depreciation  expense
related to a change in the depreciable lives of personal computers.

     Professional  fees were $28.4  million for the nine months ended  September
30, 2000, a decrease of $11.3  million from the nine months ended  September 30,
1999,  primarily  due to legal and  consulting  fee  expenses  incurred  in 1999
related to goodwill litigation and the Y2K project.

     Loan  expense was $21.1  million for the nine months  ended  September  30,
2000, a decrease of $8.1 million from the nine months ended  September 30, 1999,
primarily due to a decrease in pass-through interest expense on loans attributed
to a decrease in payoffs  during  2000.  Repayment  rates on loans  serviced for
others  averaged  12.2%  during the first  nine  months of 2000,  a  significant
decline from the 23.5% average experienced during the same period of 1999.

     Merger and  integration  costs were $7.7  million for the nine months ended
September 30, 1999, representing  transition expenses,  which include severance,
conversion and consolidation  costs incurred in connection with the Golden State
Acquisition. Such costs were not incurred during the first nine months of 2000.

     Amortization  of  intangible  assets was $47.3  million for the nine months
ended  September 30, 2000, a decrease of $5.5 million from the nine months ended
September 30, 1999, primarily attributed to a lower goodwill base due to a $50.0
million  reduction in goodwill in the first  quarter of 2000,  resulting  from a
reduction in the valuation  allowance  against the Company's  deferred tax asset
(see "- Provision  for Income Tax"),  and a $38.2 million  reduction in goodwill
resulting from an income tax refund  received  during the fourth quarter of 1999
related  to Old  California  Federal.  This  decrease  was  partially  offset by
amortization  expense  related to the $7.7 million and $50.7 million in goodwill
recorded in  connection  with the Downey  Acquisition  and the Nevada  Purchase,
respectively.


                                    Page 27

<PAGE>
     Other  noninterest  expense was $149.6  million in 2000  compared to $164.8
million in 1999.  The decline in operating  expenses is primarily  attributed to
management's continued expense reduction efforts.

     PROVISION FOR INCOME TAX.  During the nine months ended  September 30, 2000
and 1999,  GS  Holdings  recorded  net income tax  expense of $67.5  million and
$151.7 million,  respectively.  Based on favorable resolutions of federal income
tax audits of Old  California  Federal  and  Glendale  Federal,  and the current
status of Mafco's,  including the  Company's,  audits for the years 1991 through
1995,  management  changed its judgment about the realizability of the Company's
deferred tax asset and reduced its valuation  allowance by $211.7 million during
the  nine-month  period ended  September  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.

     During the nine months  ended  September  30,  1999,  a federal  income tax
benefit  of $79.0  million  was  recognized  and was  offset by a  corresponding
increase to minority  interest:  provision in lieu of income taxes. This federal
income  tax  benefit  relates to  pre-merger  tax  benefits,  in the form of net
operating loss  carryovers  and other items,  which are retained by the previous
owners of FN Holdings. To the extent these tax benefits are recognized, there is
a reduction in income tax expense, which is an offset by an increase in minority
interest:  provision in lieu of income tax expense.  These adjustments  resulted
from 1998 tax filings in the third quarter of 1999.

     GS  Holdings'  effective  federal  tax rate was 7% and 22%  during the nine
months  ended  September  30,  2000 and 1999,  respectively,  while its  federal
statutory tax rate was 35% during both periods.  For the period ended  September
30, 2000, the  difference  between the effective and statutory was primarily the
result of a reduction in the deferred tax asset valuation  allowance,  partially
offset by nondeductible  goodwill  amortization.  For the period ended September
30, 1999, the difference between the effective and statutory rates was primarily
the result of adjustments  related to pre-merger tax benefits which are retained
by the  previous  owners  of FN  Holdings,  partially  offset  by  nondeductible
goodwill  amortization.  GS  Holdings'  effective  state  tax rate was 6% and 8%
during each of the nine months ended September 30, 2000 and 1999,  respectively.
The  effective  tax  rate  declined  during  2000  as a  result  of  changes  in
management's estimates of the expected state tax liability of the Company.

     MINORITY  INTEREST.  Dividends on the REIT Preferred  Stock totalling $34.2
million were recorded during the nine months ended September 30, 2000.  Minority
interest  expense  relative  to the REIT  Preferred  Stock is  reflected  net of
related income tax benefit of $14.0 million,  which will inure to the Company as
a result of the deductibility of such dividends for income tax purposes.

     Minority  interest for the nine months ended  September 30, 1999 included a
$79.0 million  provision in lieu of income taxes,  representing  pre-merger  tax
benefits  retained by the previous owners of FN Holdings and $5.0 million in net
premiums paid in connection  with the  redemption of the Bank  Preferred  Stock.
Minority  interest  expense also included  dividends on the Bank Preferred Stock
that had not yet been  acquired  by GS  Holdings  and the REIT  Preferred  Stock
totalling  $1.8  million  and $34.2  million,  respectively.  Minority  interest
expense  relative to the REIT Preferred Stock is reflected net of related income
tax benefit of $14.4  million which will inure to the Company as a result of the
deductibility  of such  dividends  for income tax  purposes.  Minority  interest
expense  for the nine  months  ended  September  30,  1999 also  included a $1.7
million  benefit  reversal   representing   that  portion  of  Auto  One's  loss
attributable to the 20% interest in the common stock of Auto One that was issued
as part of the GSAC Acquisition.


                                    Page 28

<PAGE>
RESULTS OF OPERATIONS

       THREE MONTHS ENDED SEPTEMBER 30, 2000 VERSUS THREE MONTHS ENDED SEPTEMBER
       30, 1999

     The  following  table  shows the  Company's  consolidated  average  balance
sheets,  with the  related  interest  income,  interest  expense and the average
interest rates for the periods  presented.  Average balances are calculated on a
daily basis.

<TABLE>
<CAPTION>
                                                                    Three Months Ended September 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         $   23            6.36%
     Mortgage-backed securities available for sale                  11,278            190            6.73
     Mortgage-backed securities held to maturity                     3,096             58            7.55
     Loans held for sale, net                                          926             18            7.65
     Loans receivable, net                                          39,084            742            7.59
     FHLB stock                                                      1,334             25            7.51
                                                                   -------         ------
         Total interest-earning assets                              57,147          1,056            7.39
                                                                                   ------
Noninterest-earning assets                                           3,279
                                                                   -------
         Total assets                                              $60,426
                                                                   =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                      $23,352            236            4.02
     Securities sold under agreements to repurchase (3)              5,444             95            6.83
     Borrowings (3)                                                 27,975            439            6.23
                                                                   -------         ------
         Total interest-bearing liabilities                         56,771            770            5.38
                                                                                   ------
Noninterest-bearing liabilities                                      1,167
Minority interest                                                      495
Stockholder's equity                                                 1,993
                                                                   -------
         Total liabilities, minority interest
               and stockholder's equity                            $60,426
                                                                   =======
Net interest income                                                                $  286
                                                                                   ======
Interest rate spread                                                                                 2.01%
                                                                                                    =====
Net interest margin                                                                                  2.04%
                                                                                                    =====

Return on average assets                                                                             0.60%
                                                                                                    =====
Return on average total equity                                                                      18.21%
                                                                                                    =====
Average equity to average assets                                                                     3.30%
                                                                                                    =====
</TABLE>


                                    Page 29

<PAGE>

<TABLE>
<CAPTION>
                                                                    Three Months Ended September 30, 1999
                                                                   ---------------------------------------
                                                                    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)         $  1,623         $ 24             5.84%
     Mortgage-backed securities available for sale                   13,918          222             6.38
     Mortgage-backed securities held to maturity                      2,303           42             7.28
     Loans held for sale, net                                         1,635           28             6.91
     Loans receivable, net                                           32,390          587             7.25
     FHLB stock                                                       1,137           15             5.22
                                                                    -------         ----
         Total interest-earning assets                               53,006          918             6.92
                                                                                    ----
 Noninterest-earning assets                                           3,245
                                                                    -------
         Total assets                                               $56,251
                                                                    =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

 Interest-bearing liabilities:
     Deposits                                                       $24,060          223             3.68
     Securities sold under agreements to repurchase (3)               5,840           80             5.39
     Borrowings (3)                                                  23,292          328             5.57
                                                                    -------         ----
         Total interest-bearing liabilities                          53,192          631             4.70
                                                                                    ----
 Noninterest-bearing liabilities                                      1,091
 Minority interest                                                      518
 Stockholder's equity                                                 1,450
                                                                    -------
         Total liabilities, minority interest
              and stockholder's equity                              $56,251
                                                                    =======
 Net interest income                                                                $287
                                                                                    ====
 Interest rate spread                                                                                2.22%
                                                                                                    =====
 Net interest margin                                                                                 2.20%
                                                                                                    =====

 Return on average assets                                                                            0.62%
                                                                                                    =====
 Return on average total equity                                                                     20.99%
                                                                                                    =====
 Average equity to average assets                                                                    2.95%
                                                                                                    =====
</TABLE>
 __________
(1)  Non-performing assets are included  in the average balances for the periods
     indicated.

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

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


                                    Page 30

<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 September 30, 2000 vs. 1999
                                                                         Increase (Decrease) Due to
                                                                 ----------------------------------------------
                                                                    Volume          Rate             Net
                                                                    ------          ----             ---
INTEREST INCOME:                                                                (in millions)
<S>                                                                  <C>            <C>             <C>
     Securities and interest-bearing deposits in banks               $ (3)          $  2            $ (1)
     Mortgage-backed securities available for sale                    (45)            13             (32)
     Mortgage-backed securities held to maturity                       14              2              16
     Loans held for sale, net                                         (13)             3             (10)
     Loans receivable, net                                            126             29             155
     FHLB stock                                                         3              7              10
                                                                     ----           ----            ----
               Total                                                   82             56             138
                                                                     ----           ----            ----

INTEREST EXPENSE:

     Deposits                                                          (7)            20              13
     Securities sold under agreements to repurchase                    (4)            19              15
     Borrowings                                                        70             41             111
                                                                     ----           ----            ----
               Total                                                   59             80             139
                                                                     ----           ----            ----
                  Change in net interest income                      $ 23           $(24)           $ (1)
                                                                     ====           ====            ====
</TABLE>

     The volume  variances in total interest  income and total interest  expense
for the three  months ended  September  30, 2000  compared to the  corresponding
period in 1999 are  largely  due to  increased  loan  volume  and  purchases  of
mortgage-backed securities in the fourth quarter of 1999, partially offset by an
increase in borrowings and the sale of mortgage-backed securities in 2000.

     INTEREST  INCOME.  Total  interest  income was $1.1  billion  for the three
months ended  September 30, 2000,  an increase of $138.1  million from the three
months ended  September 30, 1999.  Total  interest-earning  assets for the three
months  ended  September  30, 2000  averaged  $57.1  billion,  compared to $53.0
billion for the corresponding period in 1999, primarily as a result of increased
loan volume. The yield on total interest-earning  assets during the three months
ended  September  30, 2000  increased  to 7.39% from 6.92% for the three  months
ended September 30, 1999, primarily due to a higher percentage of loans to total
earning assets and the repricing of variable-rate earning assets.

     GS Holdings  earned $742.1 million of interest  income on loans  receivable
for the three months ended  September  30, 2000,  an increase of $155.0  million
from the three months ended  September  30, 1999.  The average  balance of loans
receivable  was $39.1  billion for the three  months ended  September  30, 2000,
compared to $32.4 billion for the same period in 1999. The weighted average rate
on loans receivable  increased to 7.59% for the three months ended September 30,
2000 from 7.25% for the three months ended  September 30, 1999.  The increase in
the average  balance  reflects an increase in the residential  loan  origination
activity and new auto loan production from the Downey acquisition.  The increase
in the weighted average rate reflects the repricing of  variable-rate  loans and
an increase in the prime rate on commercial  banking loans,  partially offset by
lower rates on new purchases of prime auto loans,  including  those purchased in
the Downey Acquisition.

     GS Holdings  earned $17.7 million of interest income on loans held for sale
for the three months ended  September 30, 2000, a decrease of $10.5 million from
the three months ended September 30, 1999. The average balance of loans held for
sale was $926 million for the three months ended  September 30, 2000, a decrease
of $709 million from the comparable  period in 1999,  primarily  attributed to a
reduction in fixed-rate  originations due to higher interest rates, coupled with
longer  holding  periods for loans held for sale during the three  months  ended
September 30, 1999.  The weighted  average rate on loans held for sale increased
to 7.65% for the three months


                                    Page 31

<PAGE>
ended  September 30, 2000  from 6.91% for the  three months  ended September 30,
1999, primarily due to higher market interest rates.

     Interest income on mortgage-backed securities available for sale was $189.7
million for the three  months  ended  September  30,  2000,  a decrease of $32.3
million from the three months ended  September 30, 1999.  The average  portfolio
balance  decreased $2.6 billion,  to $11.3  billion,  for the three months ended
September  30, 2000  compared to the same period in 1999.  The weighted  average
yield on these assets  increased from 6.38% for the three months ended September
30, 1999 to 6.73% for the three months ended September 30, 2000. The decrease in
the volume and the increase in the weighted  average  yield are primarily due to
the  reclassification  of $1.1  billion  in  mortgage-backed  securities  to the
held-to-maturity  portfolio,  run-off  of  existing  portfolios  and the sale of
approximately $688 million of mortgage-backed  securities during the nine months
ended September 30, 2000, partially offset by the impact of purchases during the
fourth quarter of 1999.

     Interest  income on  mortgage-backed  securities held to maturity was $58.4
million for the three months  ended  September  30,  2000,  an increase of $16.5
million from the three months ended  September 30, 1999.  The average  portfolio
balance  increased  $793 million,  to $3.1  billion,  for the three months ended
September 30, 2000 compared to the same period in 1999,  primarily attributed to
the  reclassification  of $1.1 billion in  mortgage-backed  securities  from the
available-for-sale  portfolio,  partially  offset  by the  run-off  of  existing
portfolios.  The run-off in these  securities was replaced with the  origination
and purchase of whole loans  instead of additional  mortgage-backed  securities.
The weighted  average  rates for the three months ended  September  30, 2000 and
1999 were 7.55% and 7.28%, respectively.

     Interest income on securities and interest-bearing  deposits in other banks
was $22.8  million for the three months ended  September 30, 2000, a decrease of
$0.9  million  from the three  months  ended  September  30,  1999.  The average
portfolio  balance was $1.4  billion and $1.6 billion for the three months ended
September 30, 2000 and 1999,  respectively.  The higher weighted average rate of
6.36% for the three months ended  September  30, 2000  compared to 5.84% for the
three months ended September 30, 1999 reflects rising market interest rates.

     Dividends  on FHLB stock  were $25.2  million  for the three  months  ended
September  30,  2000,  an increase of $10.2  million from the three months ended
September  30, 1999.  The average  balance  outstanding  during the three months
ended   September  30,  2000  and  1999  was  $1.3  billion  and  $1.1  billion,
respectively. The weighted average dividend on FHLB stock increased to 7.51% for
the three months ended  September 30, 2000 from 5.22% for the three months ended
September  30, 1999.  The increase in the average  balance and weighted  average
yield is due to an  increase in the amount of such stock owned by the Company as
a result of an increase in borrowings under FHLB advances and an increase in the
dividend rate on FHLB stock.

     INTEREST  EXPENSE.  Total interest expense was $769.9 million for the three
months ended  September 30, 2000,  an increase of $139.2  million from the three
months  ended  September  30,  1999.  The  increase is  primarily  the result of
additional  borrowings  under  FHLB  advances  used to fund loans and offset the
reduction in deposit balances.

     Interest  expense on  deposits,  including  brokered  deposits,  was $236.0
million for the three months  ended  September  30,  2000,  an increase of $12.7
million from the three months ended  September 30, 1999. The average  balance of
deposits  outstanding  decreased  from $24.1  billion for the three months ended
September  30, 1999 to $23.4  billion for the three months ended  September  30,
2000.  The  decrease in the  average  balance  includes  declines in the average
balance of certificates of deposit, money market and passbook savings, offset in
part by an increase in the average  balance of customer  checking  accounts  and
custodial  accounts.  These changes  reflect the Company's  focus during 2000 on
consumer checking account growth.  The overall weighted average cost of deposits
increased to 4.02% for the three months ended  September 30, 2000 from 3.68% for
the three  months  ended  September  30, 1999,  primarily  due to rising  market
interest rates.

     Interest expense on securities sold under agreements to repurchase totalled
$94.9  million for the three months  ended  September  30, 2000,  an increase of
$14.4  million  from the three  months ended  September  30,  1999.  The average
balance of such  borrowings  for the three months ended  September  30, 2000 and
1999 was $5.4 billion and $5.8 billion,  respectively. The decrease is primarily
attributed to a decline in the purchase of mortgage-backed securities during the
three months ended  September 30, 2000 compared to the same period in 1999.  The
weighted


                                    Page 32

<PAGE>
average interest rate  on  these instruments  increased  to  6.83% for the three
months ended September 30, 2000 from 5.39% for the three months  ended September
30, 1999, primarily due to an increase in market rates on new borrowings in 2000
compared to 1999.

     Interest expense on borrowings totalled $439.1 million for the three months
ended  September 30, 2000,  an increase of $112.1  million from the three months
ended September 30, 1999. The average  balance  outstanding for the three months
ended  September  30,  2000  and 1999  was  $28.0  billion  and  $23.3  billion,
respectively.  The weighted average interest rate on these instruments increased
to 6.23% for the three months ended  September 30, 2000 from 5.57% for the three
months ended September 30, 1999, primarily due to higher prevailing market rates
in 2000.  The higher volume  reflects the increase in FHLB advances used to fund
loans and the purchase of  mortgage-backed  securities in the fourth  quarter of
1999.

     NET INTEREST  INCOME.  Net interest income was $286.0 million for the three
months  ended  September  30,  2000,  a decrease of $1.1  million from the three
months ended  September 30, 1999. The interest rate spread declined to 2.01% for
the three months ended  September 30, 2000 from 2.22% for the three months ended
September 30, 1999,  primarily as a result of maturities and repayments of lower
rate   interest-bearing   liabilities   being  replaced  with   interest-bearing
liabilities  having  comparatively  higher rates.  The effect of higher rates on
liabilities was partially  offset by higher yielding assets  replenishing  asset
run-off in a rising rate environment and the repricing of variable-rate assets.

     NONINTEREST INCOME. Total noninterest income,  consisting primarily of loan
servicing fees,  customer banking fees and gains on sales of assets,  was $115.3
million for the three months ended September 30, 2000,  representing an increase
of $12.1 million from the three months ended September 30, 1999.

     Loan servicing fees, net of amortization of mortgage servicing rights, were
$48.2 million for the three months ended  September 30, 2000,  compared to $38.1
million  for the three  months  ended  September  30,  1999.  The  single-family
residential  loan servicing  portfolio,  excluding  loans serviced for the Bank,
increased from $72.3 billion at September 30, 1999 to $83.0 billion at September
30, 2000.  Incremental loan servicing fees were partially offset by amortization
of MSRs.  MSR  amortization  for the quarter  decreased by $1.0 million from the
three  months  ended  September  30,  1999 due to a reduction  in the  estimated
prepayment  rate,  partially  offset by a higher MSR basis.  Loan servicing fees
benefited  from the  slowdown  in mortgage  loan  prepayments  in 2000,  with an
average  prepayment  rate on loans  serviced  for  others  of 9.1% in the  third
quarter of 2000, compared to 13.3% in the comparable period in 1999.

     Customer  banking  fees  were  $48.6  million  for the three  months  ended
September  30,  2000  compared  to $47.5  million  for the  three  months  ended
September 30, 1999. The increase is primarily  attributed to increased  emphasis
by  management  on  transaction  account  growth and higher fee income on mutual
fund, annuity and other security sales through Cal Fed Investments.

     Gain on sale,  settlement and transfer of loans, net totalled $10.5 million
for the three months ended  September 30, 2000, an increase of $5.6 million from
the three  months  ended  September  30,  1999.  During the three  months  ended
September  30,  2000,  California  Federal  sold $1.4  billion in  single-family
mortgage loans originated for sale with servicing rights retained as part of its
ongoing mortgage banking  operations  compared to $2.9 billion of such sales for
the  corresponding  period in 1999,  while the gain on such sales increased $5.3
million  between  the  two  periods.  Gains  attributed  to  early  payoffs  and
settlement  of commercial  loans with  unamortized  discounts  were $0.3 million
higher in the three months ended  September 30, 2000 compared to the same period
in 1999.

     Net gain on sale of assets totalled $0.7 million for the three months ended
September  30,  2000,  compared  to $3.2  million  for the  three  months  ended
September  30,  1999.  The gain during 2000 is  primarily  attributed  to a $1.3
million  gain from the sale of  interest  rate swaps  with a notional  amount of
$284.0 million,  partially offset by a $0.9 million loss from the sale of $187.6
million of  mortgage-backed  securities  with an average yield of 6.59%.  See "-
Nine Months Ended September 30, 2000 versus Nine Months Ended September 30, 1999
- Noninterest Income."


                                    Page 33

<PAGE>
     Other  noninterest  income  was $7.3  million  for the three  months  ended
September  30,  2000,  a decrease of $2.2  million  from the three  months ended
September  30, 1999,  primarily  attributed  to the sale of the Eureka and Ukiah
branches in the third quarter of 1999.

     NONINTEREST  EXPENSE.  Total noninterest expense was $228.2 million for the
three months ended  September 30, 2000, an increase of $9.6 million  compared to
the three months ended September 30, 1999. The variance  between the two periods
is primarily  attributed to normal  inflation rates and investments in expanding
lines of business.  Noninterest expense for the three months ended September 30,
2000 included increases of $10.8 million in compensation  expense,  $3.9 million
in  occupancy  and  equipment,  and $2.3  million  related  to lower  gains from
foreclosed  real estate  operations.  These  increases were partially  offset by
decreases  of $3.5  million  in  other  noninterest  expense,  $2.2  million  in
amortization of intangible assets and $1.8 million in professional fees.

     Compensation and employee benefits expense was $108.3 million for the three
months ended  September  30, 2000,  an increase of $10.8  million from the three
months ended September 30, 1999. The increase is primarily  attributed to normal
salary  increases and higher  employment  levels in expanding lines of business,
including the impact of additional employees from the Downey Acquisition.

     Occupancy and equipment expense was $40.7 million and $36.9 million for the
three months ended  September  30, 2000 and 1999,  respectively.  This  increase
reflects  an  increase  in  depreciation  expense  related  to a  change  in the
depreciable lives of personal computers.

     Professional  fees were $10.8 million for the three months ended  September
30, 2000, a decrease of $1.8 million from the three months ended  September  30,
1999,  primarily due to expenses  incurred in 1999 attributed to the Y2K project
and goodwill litigation.

     Amortization  of  intangible  assets was $15.4 million for the three months
ended September 30, 2000, a decrease of $2.2 million from the three months ended
September 30, 1999, primarily attributed to a lower goodwill base due to a $50.0
million  reduction in goodwill in the first  quarter of 2000,  resulting  from a
reduction in the valuation  allowance against the Company's  deferred tax asset,
and a $38.2  million  reduction  resulting  from an income tax  refund  received
during the fourth  quarter of 1999  related  to Old  California  Federal.  These
decreases  were partially  offset by  amortization  expense  related to the $7.7
million in goodwill recorded in connection with the Downey Acquisition.

     Other  noninterest  expense  was $46.5  million in 2000  compared  to $50.1
million in 1999.  The decline in operating  expenses is primarily  attributed to
management's continued expense reduction efforts.

     PROVISION FOR INCOME TAX.  During the three months ended September 30, 2000
and 1999, GS Holdings recorded income tax expense of $75.4 million and an income
tax benefit of $3.0 million, respectively.

     GS Holdings' effective federal tax rate were 38% and (10)% during the three
months  ended  September  30,  2000 and 1999,  respectively,  while its  federal
statutory tax rate was 35% during both periods.  For the period ended  September
30, 2000, the difference between the effective and statutory rates was primarily
the  result  of  nondeductible  goodwill  amortization.  For  the  period  ended
September 30, 1999, the difference between the effective and statutory rates was
primarily the result of adjustments  related to pre-merger tax benefits,  in the
form of net operating loss carryovers and other items, which are retained by the
previous  owners  of FN  Holdings  partially  offset by  nondeductible  goodwill
amortization. GS Holdings' effective state tax rate was 6% and 8% during each of
the three months ended September 30, 2000 and 1999, respectively.  The effective
tax rate declined during 2000 as a result of changes in  management's  estimates
of the expected state tax liability of the Company.


                                    Page 34

<PAGE>
     MINORITY  INTEREST.  Minority  interest  expense for the three months ended
September  30, 2000 includes  dividends on the REIT  Preferred  Stock  totalling
$11.4 million. Minority interest expense relative to the REIT Preferred Stock is
reflected net of related income tax benefit of $4.6 million, which will inure to
the Company as a result of the  deductibility  of such  dividends for income tax
purposes.

     Minority  interest for the three months ended September 30, 1999 included a
$79.0 million  provision in lieu of income taxes,  representing  pre-merger  tax
benefits  retained by the previous owners of FN Holdings and $1.8 million in net
premiums paid in connection  with the  redemption of the Bank  Preferred  Stock.
Dividends on the REIT Preferred Stock totalling $11.4 million were also recorded
during the three months ended  September  30, 1999.  Minority  interest  expense
relative to the REIT  Preferred  Stock is  reflected  net of related  income tax
benefit  of $4.8  million  which  will  inure to the  Company as a result of the
deductibility of such dividends for income tax purposes.

PROVISION FOR LOAN LOSSES

     The adequacy of the allowance for loan losses is periodically  evaluated by
management  to maintain the  allowance at a level that is  sufficient  to absorb
expected  loan losses.  The allowance for loan losses is increased by provisions
for loan  losses as well as by balances  acquired  through  acquisitions  and is
decreased  by  charge-offs  (net of  recoveries).  The Company  charges  current
earnings with a provision for estimated credit losses on loans  receivable.  The
provision considers both specifically identified problem loans as well as credit
risks not  specifically  identified  in the loan  portfolio.  See "- Problem and
Potential   Problem  Assets"  for  a  discussion  of  the  methodology  used  in
determining the adequacy of the allowance for loan losses.  The Company recorded
no provision  for loan losses  during the nine months ended  September 30, 2000.
The  Company  recorded  provisions  for loan  losses of $10 million for the nine
months ended  September 30, 1999;  and no provision for loan losses was recorded
during the third quarter of 1999.

     The decrease in the provision for loan losses during the nine-month  period
ended  September  30,  2000  compared  to  the  same  period  in  1999  reflects
management's  evaluation of the adequacy of the allowance  based on, among other
things, past loan loss experience and known and inherent risks in the portfolio,
evidenced  in  part  by  the  continued   decline  in  the  Company's  level  of
non-performing  assets.  In addition,  management's  periodic  evaluation of the
adequacy of the allowance for loan losses considers potential adverse situations
that have occurred but are not yet known that may affect the borrower's  ability
to repay, the estimated value of underlying collateral and economic conditions.

     Activity in the allowance for loan losses is as follows (in thousands):

<TABLE>
<CAPTION>
                                            Nine Months Ended September 30,       Three Months Ended September 30,
                                            -------------------------------       --------------------------------
                                               2000               1999               2000                1999
                                               ----               ----               ----                ----
<S>                                          <C>                <C>                <C>                 <C>
Balance - beginning of period                $554,893           $588,533           $536,114            $578,369
   Provision for loan losses                       --             10,000                 --                  --
   Charge-offs                                (27,251)           (30,919)            (6,954)             (9,436)
   Recoveries                                   2,432              3,839                914               1,850
   Reclassification                                --               (670)                --                  --
                                             --------           --------           --------            --------
Balance - end of period                      $530,074           $570,783           $530,074            $570,783
                                             ========           ========           ========            ========
</TABLE>

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


                                    Page 35

<PAGE>
PROBLEM AND POTENTIAL PROBLEM ASSETS

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

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

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

     At September 30, 2000,  loans that were considered to be impaired  totalled
$101.4 million (of which $13.0 million were on nonaccrual  status).  The average
recorded  investment in impaired loans during the nine and  three-month  periods
ended  September 30, 2000 was  approximately  $96.5  million and $94.8  million,
respectively.  For the nine and three-month periods ended September 30, 2000, GS
Holdings  recognized interest income on those impaired loans of $6.5 million and
$2.3  million,  respectively,  which  included  $0.5  million and $0.2  million,
respectively,  of  interest  income  recognized  using the cash basis  method of
income recognition.


                                    Page 36

<PAGE>
     The following table presents the Company's non-performing loans, foreclosed
real estate, repossessed assets, troubled debt restructurings and impaired loans
as of the dates indicated. These categories are not mutually exclusive;  certain
loans are included in more than one  classification.  Purchased  sub-prime  auto
loans are  reflected  as  non-performing,  impaired or  restructured  using each
individual loan's contractual unpaid principal balance.

<TABLE>
<CAPTION>
                                                                           September 30, 2000
                                                          ---------------------------------------------------
                                                           Non-performing       Impaired         Restructured
                                                           --------------       --------         ------------
                                                                              (in millions)
<S>                                                            <C>                <C>                 <C>
Real Estate:
    1-4 unit residential                                       $ 83               $  1                $ 1
    5+ unit residential                                           3                 27                 --
    Commercial and other                                          3                 43                 --
    Land                                                         --                 --                 --
    Construction                                                 --                 --                 --
                                                               ----               ----                ---
       Total real estate                                         89                 71                  1
Non-real estate                                                  15                 30                 --
                                                               ----               ----                ---
       Total loans                                              104 (a)           $101 (b)            $ 1
                                                                                  ====                ===
Foreclosed real estate, net                                      23
Repossessed assets                                                7
                                                               ----
       Total non-performing assets                             $134
                                                               ====

                                                                            December 31, 1999
                                                          ---------------------------------------------------
                                                           Non-performing       Impaired         Restructured
                                                           --------------       --------         ------------
                                                                              (in millions)
<S>                                                            <C>                <C>                 <C>
Real Estate:
   1-4 unit residential                                        $126               $ --                $ 2
    5+ unit residential                                           6                 34                  5
    Commercial and other                                          8                 67                 18
    Land                                                         --                  2                 --
    Construction                                                 --                 --                 --
                                                               ----               ----                ---
       Total real estate                                        140                103                 25
Non-real estate                                                  11                 21                 --
                                                               ----               ----                ---
       Total loans                                              151 (a)           $124 (b)            $25
                                                                                  ====                ===
Foreclosed real estate, net                                      45
Repossessed assets                                                4
                                                               ----
       Total non-performing assets                             $200
                                                               ====
</TABLE>

(a)  Includes loans securitized with recourse on  non-performing  status of $2.0
     million at December 31, 1999.  There are no loans securitized with recourse
     on non-performing status at September 30, 2000.

(b)  Includes  $12.4  million  and  $18.9 million  of  non-performing  loans  at
     September 30, 2000 and December 31, 1999, respectively. Also includes $13.3
     million  and  $13.7   million  of   loans  classified   as   troubled  debt
     restructurings at September 30, 2000 and December 31, 1999, respectively.

     There  were no  accruing  loans  contractually  past due 90 days or more at
September 30, 2000 or December 31, 1999.

     The  Company's  non-performing  assets,  consisting  of  nonaccrual  loans,
repossessed assets and foreclosed real estate, net, decreased to $134 million at
September  30, 2000,  from $200  million at December  31,  1999.  Non-performing
assets  as a  percentage  of the  Bank's  total  assets  decreased  to  0.22% at
September 30, 2000, from 0.35% at December 31, 1999.


                                    Page 37

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

     The  following  table  presents   non-performing   real  estate  assets  by
geographic region of the country as of September 30, 2000:

<TABLE>
<CAPTION>
                                                                                 Total
                                     Non-performing        Foreclosed       Non-performing
                                       Real Estate        Real Estate,        Real Estate      Geographic
                                     Loans, Net (2)          Net (2)            Assets        Concentration
                                     --------------          -------            ------        -------------
                                                              (dollars in millions)
     Region:
<S>                                       <C>                  <C>               <C>               <C>
         California                       $56                  $11               $ 67               60%
         Northeast (1)                      9                    3                 12               10
         Other regions                     24                    9                 33               30
                                          ---                  ---               ----              ---
              Total                       $89                  $23               $112              100%
                                          ===                  ===               ====              ===
</TABLE>
_____________
(1)  Consists of  Connecticut,  Massachusetts,  New Hampshire,  New Jersey,  New
     York, Pennsylvania, Rhode Island, Delaware, Maine, Vermont and Maryland.

(2)  Net of purchase accounting adjustments.

     At September  30, 2000,  the Company had one  non-performing  asset over $2
million with a balance of $2.3 million.  At September 30, 2000,  the Company had
3,432   non-performing   assets  below  $2  million  in  size,  including  1,003
non-performing 1-4 unit residential assets.

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

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


                                    Page 38

<PAGE>
     The specific allowances are established against individual loans, including
impaired  loans.   Specific   allowances  are  established   against  individual
residential  1-4 mortgage  loans,  commercial  loans and commercial  real estate
loans for which  management has performed  analyses and concluded that, based on
current  information and events,  it is probable that the Bank will be unable to
collect  all  amounts  due  according  to the  contractual  terms  of  the  loan
agreement. Generally, management believes that collectibility is improbable if a
loan is severely delinquent or if it has been determined that borrower cash flow
is inadequate for debt repayment. The amount of specific allowance is determined
by an estimation of collateral deficiency, including consideration of costs that
will likely be incurred through the disposal of any repossessed  collateral.  In
other words, management estimates the fair value of collateral,  net of the cost
of disposition of the collateral, and the fair value is compared to the net book
value of the loan.  If the net book value  exceeds  the fair  value,  a specific
allowance is established in an amount equal to the excess.  Loans  evaluated for
specific allowance are excluded from the formula allowance analysis so as not to
double-count loss exposure.

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

     At September  30, 2000,  the  allowance  for loan losses was $530  million,
consisting of a $377 million formula allowance, a $23 million specific allowance
and a $130 million unallocated allowance.

     Although  the loan loss  allowance  has been  allocated by type of loan for
internal valuation purposes,  $507 million of the allowance is general in nature
and is available to support any losses which may occur,  regardless  of type, in
the Company's loan  portfolio.  A summary of the activity in the total allowance
for loan losses by loan type is as follows:

<TABLE>
<CAPTION>
                                                                   5+ Unit
                                                                 Residential
                                                1 - 4 Unit      and Commercial      Consumer
                                               Residential       Real Estate        and Other          Total
                                               -----------       -----------        ---------          -----
                                                                         (in millions)
<S>                                                <C>               <C>              <C>              <C>
Balance - December 31, 1999                        $235              $276             $ 44             $555
     Provision for loan losses                       --                (1)               1               --
     Charge-offs                                     (2)               (4)              (7)             (13)
     Recoveries                                      --                --                1                1
                                                   ----              ----             ----             ----
Balance - March 31, 2000                            233               271               39              543
     Provision for loan losses                       --                (1)               1               --
     Charge-offs                                     (2)               (2)              (4)              (8)
     Recoveries                                      --                --                1                1
                                                   ----              ----             ----             ----
Balance - June 30, 2000                             231               268               37              536
     Provision for loan losses                       --                (3)               3               --
     Charge-offs                                     (1)               --               (6)              (7)
     Recoveries                                      --                --                1                1
     Reclassifications                               --               (80)              80               --
                                                   ----              ----             ----             ----
Balance - September 30, 2000                       $230              $185             $115             $530
                                                   ====              ====             ====             ====
</TABLE>


                                    Page 39

<PAGE>
ASSET AND LIABILITY MANAGEMENT

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

     GS Holdings,  through the Bank,  actively  pursues  investment  and funding
strategies intended to minimize the sensitivity of its earnings to interest rate
fluctuations.  The Company measures the interest rate sensitivity of its balance
sheet  through gap and duration  analysis,  as well as net  interest  income and
market value simulation. After taking into consideration both the variability of
rates and the maturities of various  instruments,  it evaluates strategies which
may reduce the  sensitivity  of its  earnings to interest  rate and market value
fluctuations.  An  important  decision  is  the  selection  of  interest-bearing
liabilities  and the  generation  of  interest-earning  assets  which best match
relative to interest  rate  changes.  In order to reduce  interest  rate risk by
increasing  the  percentage  of  interest  sensitive  assets,  the  Company  has
continued its emphasis on the  origination of adjustable  rate mortgage  ("ARM")
products for its portfolio.  Where possible, the Company seeks to originate real
estate  and  other  loans  that  reprice  frequently.  At  September  30,  2000,
approximately 77% of the Company's loan portfolio consisted of ARMs.

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

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

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


                                    Page 40

<PAGE>
     The  following  table  sets  forth  the  projected  maturities  based  upon
contractual  maturities as adjusted for  projected  prepayments  and  "repricing
mechanisms"  (provisions  for  changes  in the  interest  rates  of  assets  and
liabilities).  Prepayment rates are assumed in each period on substantially  all
of the Company's loan portfolio based upon expected loan prepayments.  Repricing
mechanisms on the Company's  assets are subject to limitations,  such as caps on
the  amount  that  interest   rates  and  payments  on  its  loans  may  adjust.
Accordingly,  such  assets  may not  respond  in the same  manner or to the same
extent to changes in interest rates as the Company's  liabilities.  In addition,
the interest rate  sensitivity of the assets and liabilities  illustrated in the
table would vary  substantially if different  assumptions were used or if actual
experience  differed from the  assumptions  set forth.  The Company's  estimated
interest rate sensitivity gap at September 30, 2000 was as follows:

<TABLE>
<CAPTION>
                                                                      Maturity/Rate Sensitivity
                                                  ------------------------------------------------------------------
                                                    Within         1 - 5        Over 5      Noninterest
                                                    1 Year         Years         Years        Bearing        Total
                                                    ------         -----         -----        -------        -----
                                                                        (dollars in millions)
INTEREST-EARNING ASSETS:
<S>                                                 <C>           <C>            <C>           <C>         <C>
Interest-bearing deposits in other banks and
     short-term investment securities (1) (2)       $    74       $    --        $   --        $   --      $    74
Securities held to maturity (1)                          67           153           374            --          594
Securities available for sale (3)                       632            --            --            --          632
Mortgage-backed securities
     available for sale (3)                          10,771            --            --            --       10,771
Mortgage-backed securities
     held to maturity (1) (4)                         1,960           392           644            --        2,996
Loans held for sale, net (3)                            875            --            --            --          875
Loans receivable, net (1) (5)                        21,279        13,444         4,745            --       39,468
Investment in FHLB                                    1,339            --            --            --        1,339
                                                    -------       -------        ------        ------      -------
     Total interest-earning assets                   36,997        13,989         5,763            --       56,749
Noninterest-earning assets                               --            --            --         3,837        3,837
                                                    -------       -------        ------        ------      -------
                                                    $36,997       $13,989        $5,763        $3,837      $60,586
                                                    =======       =======        ======        ======      =======

INTEREST-BEARING LIABILITIES:
Deposits (6)                                        $21,654       $ 1,589        $    7        $   --      $23,250
 Securities sold under agreements to
     repurchase (1)                                   5,138           200            --            --        5,338
FHLB advances (1)                                    13,422        12,698            --            --       26,120
Other borrowings (1)                                    752         1,401            92            --        2,245
                                                    -------       -------        ------        ------      -------
Total interest-bearing liabilities                   40,966        15,888            99            --       56,953
Noninterest-bearing liabilities                          --            --            --         1,016        1,016
Minority interest                                        --            --            --           500          500
Stockholders' equity                                     --            --            --         2,117        2,117
                                                    -------       -------        ------        ------      -------
                                                    $40,966       $15,888        $   99        $3,633      $60,586
                                                    =======       =======        ======        ======      =======

Gap before interest rate swap agreements            $(3,969)      $(1,899)       $5,664                    $  (204)
Interest rate swap agreements                         3,550        (2,800)         (750)                        --
                                                    -------       -------        ------                    -------
Gap                                                 $  (419)      $(4,699)       $4,914                    $  (204)
                                                    =======       =======        ======                    =======

Cumulative gap                                      $  (419)      $(5,118)       $ (204)                   $  (204)
                                                    =======       =======        ======                    =======

Gap as a percentage of total assets                   (0.69)%       (7.76)%        8.11%                     (0.34)%
                                                      =====         =====        ======                      =====

Cumulative gap as a percentage of total assets        (0.69)%       (8.45)%       (0.34)%                    (0.34)%
                                                      =====         =====        ======                      =====
</TABLE>

                                                                     (Continued)


                                    Page 41

<PAGE>
 _______________
(1)  Based upon (a) contractual maturity,  (b)  instrument  repricing  date,  if
     applicable, and  (c) projected repayments and  prepayments of principal, if
     applicable.  Prepayments  were  estimated   generally    by    using    the
     prepayment  rates  forecast  by  various  large   brokerage  firms  as   of
     September 30, 2000.  The  actual maturity  and  rate sensitivity  of  these
     assets  could  vary  substantially  if  future   prepayments   differ  from
     prepayment estimates.

(2)  Consists of  $74 million of short-term investment  securities and less than
     $0.1 million of interest-bearing deposits in other banks.

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

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

(5)  Excludes allowance for loan losses of $530 million and non-performing loans
     of $102 million, net of $8 million related to specific allowances.

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

     At September 30, 2000, GS Holdings' cumulative gap totalled $(204) million.
At December 31, 1999, GS Holdings' cumulative gap totalled $(693) million.

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

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

LIQUIDITY

     The standard  measure of liquidity in the savings  industry is the ratio of
cash and short-term U.S. Government securities and other specified securities to
deposits  and  borrowings  due within one year.  The OTS  established  a minimum
liquidity  requirement  for the Bank of 4.00%.  California  Federal  has been in
compliance with the liquidity regulations during the nine months ended September
30, 2000 and the year ended December 31, 1999.

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


                                    Page 42

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

     Interest on the GS Holdings  Notes  approximates  $142.5  million per year.
Although GS Holdings  expects that  distributions  and tax sharing payments from
the Bank will be sufficient to make  required  interest and principal  payments,
there can be no assurance that earnings from the Bank will be sufficient to make
such distributions to GS Holdings.  In addition,  there can be no assurance that
such  distributions will be permitted by the terms of any debt instruments of GS
Holdings'  subsidiaries  then in effect,  by the terms of any class of preferred
stock  issued  by the Bank or its  subsidiaries,  including  the REIT  Preferred
Stock, or under applicable federal thrift laws.

     The Company  anticipates  that cash and cash  equivalents on hand, the cash
flows  from  assets as well as other  sources  of funds  will  provide  adequate
liquidity  for its  operating,  investing  and  financing  needs and the  Bank's
regulatory  liquidity  requirements for the foreseeable  future.  In addition to
cash and cash  equivalents  of $656.9 million at September 30, 2000, the Company
has substantial additional borrowing capacity with the FHLB and other sources.

     The  consolidated  Company's  primary uses of funds are the  origination or
purchase of loans, the purchase of  mortgage-backed  securities,  the funding of
maturing certificates of deposit,  demand deposit withdrawals,  the repayment of
borrowings  and  dividends  to  common  shareholders.  Certificates  of  deposit
scheduled to mature during the twelve months ending September 30, 2001 aggregate
$10.0 billion. The Company may renew these certificates, attract new replacement
deposits,  replace such funds with other  borrowings,  or it may elect to reduce
the size of the balance sheet.  In addition,  at September 30, 2000, GS Holdings
had FHLB  advances,  securities  sold under  agreements to repurchase  and other
borrowings aggregating $19.3 billion maturing or repricing within twelve months.
The Company may elect to pay off such debt or to replace  such  borrowings  with
additional  FHLB  advances,  securities  sold under  agreements to repurchase or
other borrowings at prevailing rates.

     As presented in the accompanying unaudited consolidated  statements of cash
flows,  the sources of liquidity vary between  periods.  The primary  sources of
funds  during the nine months  ended  September  30, 2000 were $29.5  billion in
proceeds  from  additional  borrowings,  $3.5 billion in proceeds  from sales of
loans held for sale,  $1.8  billion in  principal  payments  on  mortgage-backed
securities available for sale and held to maturity, and $667 million in proceeds
from sales of mortgage-backed securities available for sale. The primary uses of
funds were $26.8 billion in principal payments on borrowings, a $3.7 billion net
increase in loans  receivable,  $3.8 billion in purchases  and  originations  of
loans held for sale,  $1.2 billion in purchases of loans  receivable  and $379.3
million for the Downey Acquisition.

MORTGAGE BANKING OPERATIONS

     During the nine months  ended  September  30, 2000 and 1999,  the  Company,
through  the Bank's  wholly  owned  mortgage  bank  subsidiary,  FNMC,  acquired
mortgage-servicing rights on loan portfolios of $13.5 billion and $12.9 billion,
respectively.  The 1-4 unit  residential  loans  serviced for others  (including
loans  sub-serviced  for  others  and  excluding  loans  serviced  for the Bank)
totalled  $83.0  billion at September 30, 2000, an increase of $10.1 billion and
$10.7  billion from  December  31, 1999 and  September  30, 1999,  respectively.
During the nine months  ended  September  30, 2000 and 1999,  the Bank,  through
FNMC,  originated  $10.3  billion  and  $12.9  billion,  respectively,  and sold
(generally with servicing retained) $3.7 billion and $8.7 billion, respectively,
of 1-4 unit  residential  loans.  Gross  revenues from  mortgage loan  servicing
activities for the nine months ended September 30, 2000 totalled $234.0 million,
an increase of $28.0  million  from the nine months  ended  September  30, 1999.
Gross loan  servicing  fees for the nine months  ended  September  30, 2000 were
reduced by $146.8 million of amortization  of servicing  rights to arrive at net
loan  servicing  fees of $87.2 million.


                                    Page 43

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

     The Company  owned  several  derivative  instruments  at September 30, 2000
which  were used to hedge  against  prepayment  risk in its  mortgage  servicing
portfolio. These derivative instruments included Constant Maturity Swap interest
rate floor  contracts,  swaptions and principal  only swaps.  The estimated fair
value of all  derivatives  used to hedge  prepayment  risk was $50.8  million at
September 30, 2000. The interest rate floor  contracts had a notional  amount of
$1.5 billion, strike rates between 5.70% and 7.13%, mature in the years 2002 and
2003,  and had an estimated  fair value of $24.4  million at September 30, 2000.
Premiums paid to  counterparties  in exchange for cash payments when the 10-year
Constant  Maturity Swap rate falls below the strike rate are recorded as part of
the MSR asset on the balance sheet. The swaption contracts had a notional amount
of $1.4 billion,  strike rates between 6.50% and 7.88%, expire in the years 2002
and 2003,  and had an estimated  fair value of $34.7  million at  September  30,
2000. Premiums paid to counterparties in exchange for the right to enter into an
interest  rate swap are recorded as part of the MSR asset on the balance  sheet.
Principal  only swap  agreements  had notional  amounts of $195.5 million and an
estimated fair value of $(8.3) million at September 30, 2000.

     The following is a summary of activity in MSRs  (including  non-residential
MSRs)  and the MSR  Hedge  for the nine  months  ended  September  30,  2000 (in
millions):

<TABLE>
<CAPTION>
                                                                                                    Total MSR
                                                                MSRs            MSR Hedge          Balance
                                                                ----            ---------          -------
<S>                                                            <C>                <C>              <C>
     Balance at December 31, 1999                              $1,232             $ 40             $1,272
         Additions - purchases                                    288               --                288
         Originated servicing                                      90               --                 90
         Swaption sales                                            (5)             (13)               (18)
         Servicing Sale/Transfer                                   (1)              --                 (1)
         Floor sales                                               (4)              (7)               (11)
         Premiums paid                                             --               42                 42
         Payments made to counterparties, net                       3               --                  3
         Amortization                                            (138)             (11)              (149)
                                                               ------             ----             ------
     Balance at September 30, 2000                             $1,465             $ 51             $1,516
                                                               ======             ====             ======
</TABLE>

     Capitalized  MSRs are amortized in  proportion  to, and over the period of,
estimated net servicing income. SFAS No. 125 requires enterprises to measure the
impairment of MSRs based on the  difference  between the carrying  amount of the
MSRs and their current fair value.  At September 30, 2000 and December 31, 1999,
no allowance for impairment of the MSRs was necessary.

CAPITAL RESOURCES

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

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

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


                                    Page 44

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

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

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

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

     At September 30, 2000, the Bank's  regulatory  capital levels  exceeded the
minimum  regulatory  capital  requirements,  with tangible,  core and risk-based
capital  ratios of 6.25%,  6.25% and 13.20%,  respectively.  The  following is a
reconciliation of the Bank's  stockholder's  equity to regulatory  capital as of
September 30, 2000:

<TABLE>
<CAPTION>
                                                              Tangible           Core           Risk-based
                                                               Capital          Capital           Capital
                                                               -------          -------           -------
                                                                          (dollars in millions)
<S>                                                            <C>              <C>               <C>
 Stockholder's equity of the Bank                              $4,001           $4,001            $4,001
 Minority interest - REIT Preferred Stock                         500              500               500
 Unrealized holding loss on securities,  net                      202              202               202
 Non-allowable capital:
       Intangible assets                                         (727)            (727)             (727)
       Goodwill Litigation Assets                                (159)            (159)             (159)
       Investment in non-includable subsidiaries                  (63)             (63)              (63)
       Excess deferred tax asset                                  (10)             (10)              (10)
 Supplemental capital:
       Qualifying subordinated debentures                          --               --                93
       General loan loss allowance                                 --               --               401
 Assets required to be deducted:
       Land loans with more than 80% LTV ratio                     --               --                (5)
       Equity in subsidiaries                                      --               --                (6)
       Low-level recourse deduction                                --               --               (10)
                                                               ------           ------            ------
 Regulatory capital of the Bank                                 3,744            3,744             4,217
 Minimum regulatory capital requirement                           898            2,397             2,556
                                                               ------           ------            ------
 Excess above minimum capital requirement                      $2,846           $1,347            $1,661
                                                               ======           ======            ======

 Regulatory capital of the Bank                                  6.25%            6.25%            13.20%
 Minimum regulatory capital requirement                          1.50             4.00              8.00
                                                                 ----             ----             -----
 Excess above minimum capital requirement                        4.75%            2.25%             5.20%
                                                                 ====             ====             =====
</TABLE>

     The amount of adjusted  total  assets used for the  tangible  and  leverage
capital  ratios is $59.9 billion.  Risk-weighted  assets used for the risk-based
capital ratio amounted to $31.9 billion.


                                    Page 45

<PAGE>
     The  Bank is also  subject  to the  "prompt  corrective  action"  standards
prescribed  in FDICIA and related OTS  regulations,  which,  among other things,
define specific capital categories based on an association's capital ratios. The
capital  categories,  in declining  order, are "well  capitalized,"  "adequately
capitalized,"   "undercapitalized,"    "significantly   undercapitalized,"   and
"critically  undercapitalized." Under the regulation, the ratio of total capital
to risk-weighted  assets, core capital to risk-weighted  assets and the leverage
capital ratio are used to determine an association's capital classification. The
Bank met the capital requirements of a "well capitalized"  institution under the
FDICIA prompt  corrective action standards as of September 30, 2000. The Bank is
not presently subject to any enforcement  action or other regulatory  proceeding
with respect to the prompt corrective action regulation.

     At September 30, 2000, the Bank's capital levels were  sufficient for it to
be considered "well capitalized," as presented below.

<TABLE>
<CAPTION>
                                                                              Risk-based
                                                     Leverage         ---------------------------
                                                     Capital           Tier 1       Total Capital
                                                     -------           ------       -------------
<S>                                                   <C>              <C>              <C>
       Regulatory capital of the Bank                 6.25%            11.69%           13.20%
       "Well capitalized" ratio                       5.00              6.00            10.00
                                                      ----             -----            -----
       Excess above "well capitalized" ratio          1.25%             5.69%            3.20%
                                                      ====             =====            =====
</TABLE>

     OTS  capital  regulations  allow a  savings  association  to  include a net
deferred tax asset in regulatory capital, subject to certain limitations. To the
extent  that the  realization  of a  deferred  tax  asset  depends  on a savings
association's  future  taxable  income,  such  deferred tax asset is limited for
regulatory  capital  purposes  to the lesser of the amount  that can be realized
within  one year or 10 percent of core  capital.  At  September  30,  2000,  $10
million of the net tax benefit was determined to be  attributable  to the amount
of taxable income that may be realized in periods beyond one year.  Accordingly,
such amount has been  excluded from the Bank's  regulatory  capital at September
30, 2000.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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


                                    Page 46

<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

     GOODWILL LITIGATION AGAINST THE GOVERNMENT

     On April 9, 1999,  the Claims  Court  issued its decision on a claim by the
Bank against the United States  Government  (the  "Government")  in the lawsuit,
GLENDALE FEDERAL BANK,  FEDERAL SAVINGS BANK V. UNITED STATES,  Civil Action No.
90-772-C (the "Glendale Goodwill  Litigation"),  ruling that the Government must
compensate the Bank in the sum of $908.9 million.  This decision was appealed by
the Government and the Bank.  After all appellate  briefs were filed by both the
Government  and the Bank,  oral argument on the appeal took place in conjunction
with the argument in the  California  Federal  Goodwill  Litigation  (as defined
herein) on July 7, 2000.

     On April 16,  1999,  the Claims Court issued its decision on a claim by the
Bank against the  Government in the lawsuit,  CALIFORNIA  FEDERAL BANK V. UNITED
STATES, Civil Action No. 92-138C (the "California Federal Goodwill Litigation"),
ruling that the Government must compensate the Bank in the sum of $23.0 million.
The summary judgment liability decision by the first Claims Court Judge has been
appealed by the Government and the damage award by the second Claims Court Judge
has been  appealed by the Bank.  After all  appellate  briefs  were filed,  oral
argument in the Federal Circuit Court of Appeals took place in conjunction  with
the appellate argument in the Glendale Goodwill Litigation on July 7, 2000.

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

     OTHER LITIGATION

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

ITEM 2.  CHANGES IN SECURITIES.

       None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

       None.

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

       None.

ITEM 5.  OTHER INFORMATION.

       None.








                                    Page 47

<PAGE>
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

     (a) Exhibits:

          3.1   Certificate  of  Incorporation  of the  Registrant,  as amended.
                (Incorporated  by  reference  to Exhibit 3.1 to the Registrant's
                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.)

         27.1   Financial Data Schedule.

     (b) Reports on Form 8-K:

         None.







                                    Page 48

<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)



November 8, 2000







                                    Page 49