<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                    June 30, 2002
                                ------------------------------------------------

                                       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:                        000-24915
                         -------------------------------------------------------

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

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

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

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

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


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

       The number of shares  outstanding of registrant's  $1.00 par value common
stock, as of the close of business on July 31, 2002: 1,000 shares.

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


                                     Page 1
<PAGE>

                           GOLDEN STATE HOLDINGS INC.
                     SECOND QUARTER 2002 REPORT ON FORM 10-Q
                                TABLE OF CONTENTS


                                                                            PAGE

PART I.          FINANCIAL INFORMATION

     Item 1.     Consolidated Financial Statements

                 Unaudited Consolidated Balance Sheets
                 June 30, 2002 and December 31, 2001..........................3

                 Unaudited Consolidated Statements of Income
                 Six Months Ended June 30, 2002 and 2001......................4

                 Unaudited Consolidated Statements of Income
                 Three Months Ended June 30, 2002 and 2001....................5

                 Unaudited Consolidated Statements of Comprehensive Income
                 Six Months Ended June 30, 2002 and 2001......................6

                 Unaudited Consolidated Statements of Comprehensive Income
                 Three Months Ended June 30, 2002 and 2001....................7

                 Unaudited Consolidated Statement of Stockholder's Equity
                 Six Months Ended June 30, 2002 and 2001......................8

                 Unaudited Consolidated Statements of Cash Flows
                 Six Months Ended June 30, 2002 and 2001......................9

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

     Item 2.     Management's Narrative Analysis of Results of Operations....31

                 Critical Accounting Policies................................31

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


PART II.         OTHER INFORMATION

     Item 1.     Legal Proceedings...........................................51

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

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

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

     Item 5.     Other Information...........................................52

     Item 6.     Exhibits and Reports on Form 8-K............................53

     Glossary of Defined Terms...............................................54

     Signatures..............................................................56

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

          Golden  State  Holdings  Inc. is a wholly owned  subsidiary  of Golden
          State Bancorp Inc. For more information, refer to Golden State Bancorp
          Inc.'s  Quarterly  Report on Form 10-Q for the quarterly  period ended
          June 30, 2002.


                                     Page 2
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                       JUNE 30, 2002 AND DECEMBER 31, 2001
                                   (Unaudited)
                  (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                    ASSETS                                     June 30, 2002      December 31, 2001
                                    ------                                     -------------      -----------------
<S>                                                                             <C>                  <C>
    Cash and due from banks                                                     $   770,042          $   709,139
    Interest-bearing deposits in other banks                                             98                  103
    Short-term investment securities                                                 82,792               95,929
                                                                                -----------          -----------
         Cash and cash equivalents                                                  852,932              805,171

    Securities available for sale, at fair value                                    118,231              116,054
    Securities held to maturity                                                      29,260               30,602
    Mortgage-backed securities available for sale, at fair value                  4,887,838            7,057,903
    Mortgage-backed securities held to maturity                                   1,170,973            1,385,113
    Loans held for sale, net                                                      1,324,335            2,608,365
    Loans receivable, net                                                        38,626,259           39,335,623
    Investment in FHLB System                                                     1,195,657            1,446,607
    Premises and equipment, net                                                     267,200              276,411
    Foreclosed real estate, net                                                      13,565               18,564
    Accrued interest receivable                                                     269,255              288,308
    Goodwill (net of accumulated amortization of $286,470
         at both June 30, 2002 and December 31, 2001)                               564,560              590,420
    Other intangible assets (net of accumulated amortization of $21,875
         at June 30, 2002 and $19,541 at December 31, 2001)                          48,089               50,423
    MSRs (net of valuation allowance of $280,452 at June 30, 2002 and
         $153,345 at December 31, 2001)                                           1,539,592            1,623,947
    Derivative assets                                                               224,000              349,026
    Other assets                                                                    766,602              536,281
                                                                                -----------          -----------
             Total assets                                                       $51,898,348          $56,518,818
                                                                                ===========          ===========


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

    Deposits                                                                    $24,381,991          $25,146,827
    Securities sold under agreements to repurchase                                2,060,144            2,363,945
    Borrowings                                                                   20,708,897           24,444,541
    Derivative liabilities                                                          262,162              250,711
    Other liabilities                                                             1,213,111            1,188,005
                                                                                -----------          -----------
             Total liabilities                                                   48,626,305           53,394,029
                                                                                -----------          -----------

    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                                               1,575,565            1,569,894
         Accumulated other comprehensive loss, net                                  (83,572)             (63,327)
         Retained earnings (substantially restricted)                             1,280,049            1,118,221
                                                                                -----------          -----------
         Total stockholder's equity                                               2,772,043            2,624,789
                                                                                -----------          -----------
             Total liabilities, minority interest and stockholder's equity      $51,898,348          $56,518,818
                                                                                ===========          ===========
</TABLE>
    See accompanying notes to unaudited consolidated financial statements.


                                     Page 3
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                     SIX MONTHS ENDED JUNE 30, 2002 AND 2001
                                   (UNAUDITED)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                 Six Months Ended June 30,
                                                                                                 -------------------------
                                                                                                    2002           2001
                                                                                                    ----           ----
<S>                                                                                              <C>            <C>
Interest income:
     Loans receivable                                                                            $1,291,002     $1,541,014
     Mortgage-backed securities available for sale                                                  168,498        344,977
     Mortgage-backed securities held to maturity                                                     39,730         70,983
     Loans held for sale                                                                             70,703         52,676
     Securities available for sale                                                                    3,281         14,575
     Securities held to maturity                                                                        276         16,452
     Interest-bearing deposits in other banks                                                           158            539
     Dividends on FHLB stock                                                                         40,792         45,372
     Other                                                                                           12,078             --
                                                                                                 ----------     ----------
         Total interest income                                                                    1,626,518      2,086,588
                                                                                                 ----------     ----------

Interest expense:
     Deposits                                                                                       260,862        464,489
     Securities sold under agreements to repurchase                                                  42,354        121,392
     Borrowings                                                                                     583,848        853,847
     Other                                                                                            1,455             --
                                                                                                 ----------     ----------
         Total interest expense                                                                     888,519      1,439,728
                                                                                                 ----------     ----------
         Net interest income                                                                        737,999        646,860
Provision for loan losses                                                                                --             --
                                                                                                 ----------     ----------
         Net interest income after provision for loan losses                                        737,999        646,860
                                                                                                 ----------     ----------

Noninterest income:
     Loan servicing fees, net                                                                      (106,586)        (6,906)
     Customer banking fees and service charges                                                      119,020        105,820
     Gain on sale, settlement and transfer of loans, net                                             55,515         21,885
     Gain on sale of assets, net                                                                      8,382         16,221
     Other income                                                                                    11,637         36,440
                                                                                                 ----------     ----------
         Total noninterest income                                                                    87,968        173,460
                                                                                                 ----------     ----------

Noninterest expense:
     Compensation and employee benefits                                                             242,595        231,197
     Occupancy and equipment                                                                         81,012         77,801
     Professional fees                                                                               16,069         14,650
     Loan expense                                                                                     7,531          8,569
     Foreclosed real estate operations, net                                                            (671)          (853)
     Amortization of goodwill and other intangible assets                                             2,334         29,880
     Other expense                                                                                  108,168        111,164
                                                                                                 ----------     ----------
         Total noninterest expense                                                                  457,038        472,408
                                                                                                 ----------     ----------

Income before income taxes,  minority interest and cumulative effect of change
     in accounting principle                                                                        368,929        347,912
Income tax expense                                                                                  113,607        123,709
Minority interest                                                                                    13,494         13,494
                                                                                                 ----------     ----------
         Income before cumulative effect of change in accounting principle                          241,828        210,709
Cumulative effect of change in accounting principle, net of applicable taxes of $1,072 in 2001           --         (1,552)
                                                                                                 ----------     ----------
         Net income                                                                              $  241,828     $  209,157
                                                                                                 ==========     ==========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                     Page 4
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                    THREE MONTHS ENDED JUNE 30, 2002 AND 2001
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                Three Months Ended June 30,
                                                                                                ---------------------------
                                                                                                    2002           2001
                                                                                                    ----           ----
<S>                                                                                              <C>            <C>
Interest income:
     Loans receivable                                                                            $641,843       $  763,224
     Mortgage-backed securities available for sale                                                 75,932          163,994
     Mortgage-backed securities held to maturity                                                   18,313           33,572
     Loans held for sale                                                                           28,898           32,549
     Securities available for sale                                                                  1,651            3,795
     Securities held to maturity                                                                      129            7,951
     Interest-bearing deposits in other banks                                                          33              120
     Dividends on FHLB stock                                                                       19,953           22,326
     Other                                                                                         12,078               --
                                                                                                 --------       ----------
         Total interest income                                                                    798,830        1,027,531
                                                                                                 --------       ----------

Interest expense:
     Deposits                                                                                     125,720          223,652
     Securities sold under agreements to repurchase                                                21,004           53,447
     Borrowings                                                                                   281,038          414,044
     Other                                                                                            750               --
                                                                                                 --------       ----------
         Total interest expense                                                                   428,512          691,143
                                                                                                 --------       ----------
         Net interest income                                                                      370,318          336,388
Provision for loan losses                                                                              --               --
                                                                                                 --------       ----------
         Net interest income after provision for loan losses                                      370,318          336,388
                                                                                                 --------       ----------

Noninterest income:
     Loan servicing fees, net                                                                     (97,771)          19,746
     Customer banking fees and service charges                                                     60,872           54,559
     Gain on sale, settlement and transfer of loans, net                                           20,896           16,961
     Gain on sale of assets, net                                                                   10,268           15,782
     Other income                                                                                   5,409            7,181
                                                                                                 --------       ----------
         Total noninterest income                                                                    (326)         114,229
                                                                                                 --------       ----------

Noninterest expense:
     Compensation and employee benefits                                                           117,811          113,462
     Occupancy and equipment                                                                       40,777           39,951
     Professional fees                                                                              8,743            9,802
     Loan expense                                                                                   3,375            4,367
     Foreclosed real estate operations, net                                                           161             (455)
     Amortization of goodwill and other intangible assets                                           1,167           14,940
     Other expense                                                                                 52,466           59,203
                                                                                                  -------       ----------
         Total noninterest expense                                                                224,500          241,270
                                                                                                  -------       ----------

Income before income taxes,  minority interest and cumulative effect of change
     in accounting principle                                                                      145,492          209,347
Income tax expense                                                                                 22,320           87,526
Minority interest                                                                                   6,747            6,747
                                                                                                 --------       ----------
         Income before cumulative effect of change in accounting principle                        116,425          115,074
Cumulative effect of change in accounting principle, net of applicable taxes of $1,072 in 2001         --           (1,552)
                                                                                                 --------       ----------
         Net income                                                                              $116,425       $  113,522
                                                                                                 ========       ==========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                     Page 5
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                     SIX MONTHS ENDED JUNE 30, 2002 AND 2001
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                 Six Months Ended June 30,
                                                                                                 -------------------------
                                                                                                   2002             2001
                                                                                                   ----             ----
<S>                                                                                              <C>              <C>
     Net income                                                                                  $241,828         $209,157

     Other comprehensive (loss) income, net of tax:
         Unrealized holding (loss) gain on securities available for sale:
            Unrealized holding (loss) gain arising during the period                               (2,185)          98,165
            Less: reclassification adjustment for gain included in
               net income                                                                          (1,202)          (9,572)
                                                                                                 --------         --------
                                                                                                   (3,387)          88,593
         Amortization of market adjustment for securities
            transferred from available-for-sale to held-to-maturity                                    --            3,466

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

         Unrealized loss on derivatives used for cash flow hedges:
            Unrealized holding loss arising during the period                                     (68,286)         (28,677)
            Less: reclassification adjustment for loss included
               in net income                                                                       51,428           11,917
                                                                                                 --------         --------

         Change in fair value of derivatives  used for cash flow hedges, net of
            applicable taxes of $11,642 in 2002 and $11,574 in 2001                               (16,858)         (16,760)
                                                                                                 --------         --------

     Other comprehensive (loss) income                                                            (20,245)          30,652
                                                                                                 --------         --------

     Comprehensive income                                                                        $221,583         $239,809
                                                                                                 ========         ========
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.


                                     Page 6
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                    THREE MONTHS ENDED JUNE 30, 2002 AND 2001
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                Three Months Ended June 30,
                                                                                                ---------------------------
                                                                                                    2002           2001
                                                                                                    ----           ----
<S>                                                                                              <C>              <C>
    Net income                                                                                   $116,425         $113,522

    Other comprehensive (loss) income, net of tax:
        Unrealized holding gain (loss) on securities available for sale:
           Unrealized holding gain (loss) arising during the period                                21,537           (1,050)
           Less: reclassification adjustment for gain included
               in net income                                                                         (435)          (9,490)
                                                                                                 --------         --------
                                                                                                   21,102          (10,540)
        Amortization of market adjustment for securities
           transferred from available-for-sale to held-to-maturity                                     --            1,989

        Unrealized (loss) gain on derivatives used for cash flow hedges:
           Unrealized holding (loss) gain arising during the period                               (79,519)          11,748
           Less: reclassification adjustment for loss included
               in net income                                                                       26,670            8,689
                                                                                                 --------         --------

        Change in fair value of  derivatives  used for cash flow hedges, net of
           applicable taxes of $36,500 in 2002 and $14,114 in 2001                                (52,849)          20,437
                                                                                                 --------         --------

    Other comprehensive (loss) income                                                             (31,747)          11,886
                                                                                                 --------         --------

    Comprehensive income                                                                         $ 84,678         $125,408
                                                                                                 ========         ========
</TABLE>

    See accompanying notes to unaudited consolidated financial statements.


                                     Page 7
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
                         SIX MONTHS ENDED JUNE 30, 2002
                                   (Unaudited)
                                 (in thousands)


<TABLE>
<CAPTION>

                                                                   Additional    Accumulated Other Comprehensive (Loss) Income, Net
                                                     Common          Paid-in     --------------------------------------------------
                                                      Stock          Capital        Securities        Derivatives           Total
                                                      -----          -------        ----------        -----------           -----
<S>                                                    <C>         <C>                <C>              <C>                <C>
Balance at December 31, 2001                           $ 1         $1,569,894         $56,052          $(119,379)         $(63,327)

Net income                                              --                 --              --                 --                --
Change in net unrealized holding gain
   on securities available for sale                     --                 --          (3,387)                --            (3,387)
Change in net unrealized holding loss
   on derivatives                                       --                 --              --            (16,858)          (16,858)
Dividends to parent                                     --                 --              --                 --                --
Impact of Golden State restricted
   common stock                                         --              2,600              --                 --                --
Tax benefit on exercise of stock options                --              3,071              --                 --                --
                                                       ---         ----------         -------          ---------           --------

Balance at June 30, 2002                               $ 1         $1,575,565         $52,665          $(136,237)          $(83,572)
                                                       ===         ==========         =======          =========           ========


                                                                                                                         (Continued)
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


<TABLE>
<CAPTION>
                                                              Retained
                                                              Earnings             Total
                                                           (Substantially       Stockholder's
                                                             Restricted)           Equity
                                                             -----------           ------
<S>                                                          <C>                 <C>
Balance at December 31, 2001                                 $1,118,221          $2,624,789

Net income                                                      241,828             241,828
Change in net unrealized holding gain
   on securities available for sale                                  --              (3,387)
Change in net unrealized holding loss
   on derivatives                                                    --             (16,858)
Dividends to parent                                             (80,000)            (80,000)
Impact of Golden State restricted
   common stock                                                      --               2,600
Tax benefit on exercise of stock options                             --               3,071
                                                             ----------          ----------

Balance at June 30, 2002                                     $1,280,049          $2,772,043
                                                             ==========          ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.


                                     Page 8
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     SIX MONTHS ENDED JUNE 30, 2002 AND 2001
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                 Six Months Ended June 30,
                                                                                                 -------------------------
                                                                                                   2002             2001
                                                                                                   ----             ----
<S>                                                                                           <C>                <C>
  Cash flows from operating activities:
  Net income                                                                                  $    241,828       $   209,157
  Adjustments to reconcile net income to net cash provided by (used in)
     operating activities:
     Amortization of goodwill and other intangible assets                                            2,334            29,880
     Amortization of purchase accounting premiums and discounts, net                                 6,033             4,308
     Accretion of discount on borrowings                                                               453               573
     Amortization of MSRs                                                                          212,596           147,013
     Gain on sale of assets, net                                                                    (8,382)          (16,221)
     Gain on sale of foreclosed real estate, net                                                    (1,179)           (1,717)
     Loss on sale, settlement and transfer of loans, net                                           210,001           109,487
     Capitalization of originated MSRs                                                            (265,516)         (131,372)
     Depreciation and amortization of premises and equipment                                        26,586            26,084
     Amortization of deferred debt issuance costs                                                    2,983             3,676
     FHLB stock dividends                                                                          (40,792)          (45,372)
     Purchases and originations of loans held for sale                                         (10,578,606)       (7,060,801)
     Net proceeds from the sale of loans held for sale                                          11,657,621         5,478,985
     Net gain on derivatives used to hedge MSRs                                                     (3,939)           (8,957)
     Provision for loss on MSRs                                                                    127,107            77,000
     (Increase) decrease in other assets                                                          (202,096)          370,794
     Decrease in accrued interest receivable                                                        19,053            22,601
     Increase in other liabilities                                                                 118,761           332,142
     Amortization of deferred compensation expense - Golden State
         restricted common stock                                                                       860               992
     Gain on non-monetary exchange of Star Systems common stock                                         --           (20,671)
     Reduction in net accrued tax liability                                                             --           (25,805)
     Income tax benefit                                                                            (37,129)           (3,247)
     Minority interest: other                                                                       13,494            13,494
     Dividends on restricted common stock                                                               11                35
                                                                                              ------------       -----------
         Net cash provided by (used in) operating activities                                     1,502,082          (487,942)
                                                                                              ------------       -----------

                                                                                                                 (Continued)

</TABLE>

  See accompanying notes to unaudited consolidated financial statements.


                                     Page 9
<PAGE>

                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                     SIX MONTHS ENDED JUNE 30, 2002 AND 2001
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                 Six Months Ended June 30,
                                                                                                 -------------------------
                                                                                                   2002             2001
                                                                                                   ----             ----
<S>                                                                                           <C>              <C>
Cash flows from investing activities:
     Purchases of securities available for sale                                               $    (25,647)    $    (21,479)
     Proceeds from maturities of securities available for sale                                      25,269          586,733
     Purchases of securities held to maturity                                                       (1,927)          (4,992)
     Principal payments and proceeds from maturities
        of securities held to maturity                                                               3,269           68,363
     Purchases of mortgage-backed securities available for sale                                    (43,644)        (120,810)
     Principal payments on mortgage-backed securities available for sale                         2,134,238        1,290,937
     Principal payments on mortgage-backed securities held to maturity                             214,160          229,638
     Proceeds from sales of mortgage-backed securities available for sale                           64,300          304,365
     Proceeds from sales of loans                                                                   41,222           51,358
     Loan originations and principal collections, net                                            3,496,685          557,082
     Purchases of loans receivable                                                              (2,815,296)      (2,349,144)
     Purchases of FHLB stock                                                                       (41,136)         (23,193)
     Redemption of FHLB stock                                                                      292,086               --
     Purchases of premises and equipment                                                           (20,223)         (20,485)
     Proceeds from disposal of premises and equipment                                               14,757            6,639
     Proceeds from sales of foreclosed real estate                                                  14,802           17,131
     Proceeds from sale of Concord  EFS common stock                                                    --           29,948
     Purchases of MSRs                                                                            (177,458)        (128,206)
     Hedge receipts (payments)                                                                      51,068          (14,412)
     Purchases of derivatives                                                                     (833,385)        (272,589)
     Proceeds from sales and settlements of derivatives                                          1,045,738          215,420
                                                                                              ------------     ------------
        Net cash provided by investing activities                                                3,438,878          402,304
                                                                                              ------------     ------------

Cash flows from financing activities:
     Net (decrease) increase in deposits                                                          (764,627)         903,555
     Proceeds from additional borrowings                                                        52,313,572       59,921,714
     Principal payments on borrowings                                                          (56,047,670)     (59,964,993)
     Principal payment of FN Holdings Notes                                                           (250)              --
     Net decrease in securities sold under agreements to repurchase                               (303,801)        (596,378)
     Dividends on common stock                                                                     (80,000)         (60,000)
     Dividends paid to minority stockholders of subsidiary, net of taxes                           (13,494)         (13,494)
       Tax benefit on exercise of stock options                                                      3,071              745
                                                                                              ------------     ------------
        Net cash (used in) provided by financing activities                                     (4,893,199)         191,149
                                                                                              ------------     ------------

Net change in cash and cash equivalents                                                             47,761          105,511
Cash and cash equivalents at beginning of period                                                   805,171          783,074
                                                                                              ------------     ------------
Cash and cash equivalents at end of period                                                    $    852,932     $    888,585
                                                                                              ============     ============
</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
     ---------------------

     These  financial  statements  are  in  accordance  with  GAAP  for  interim
financial  information  and Regulation  S-X,  Article 10. They are unaudited and
exclude some of the disclosures for complete  financial  statements.  Management
believes it has made all adjustments  necessary so that the financial statements
are presented  fairly.  The results of  operations  for the three and six months
ended June 30,  2002 may not  indicate  future  results.  Certain  prior  period
amounts have been reclassified to conform to current presentation.

     These financial  statements should be read 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, 2001. A glossary of defined terms begins on page
54 of this  document.  All  terms  used  but not  defined  in the  glossary  are
clarified in the Company's Annual Report on Form 10-K.

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

     These unaudited  consolidated  financial statements include the accounts of
GS Holdings, the Bank and the Bank's wholly owned subsidiaries.  All significant
intercompany balances and transactions have been eliminated in consolidation.

     Minority  interest:  other  represents  amounts  attributable  to the  REIT
Preferred Stock of California  Federal Preferred Capital  Corporation,  a wholly
owned subsidiary of the Bank.

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

(2)  PENDING MERGER
     --------------

     On May  21,  2002,  Citigroup  and  Mercury  Merger  Sub,  a  wholly  owned
subsidiary  of  Citigroup,  entered  into a merger  agreement  with Golden State
whereby  Golden  State will be merged with and into  Mercury  Merger  Sub,  with
Mercury Merger Sub as the surviving  company.  The Merger,  which is expected to
close in the third quarter of 2002,  is subject to  regulatory  and Golden State
stockholder  approvals.  The Special  Meeting of Golden State's  stockholders to
vote on the Merger is scheduled on August 22, 2002.

     The  value of the  merger  consideration  per share of the  Golden  State's
common stock will be the sum of

(a)  $16.40 and

(b)  0.5234 fractional share of  Citigroup common stock for each share of Golden
     State common stock delivered at closing.

     Golden  State's  common  stockholders  will be entitled to elect to receive
merger  consideration in the form of cash or Citigroup common stock,  subject to
certain limitations.

(3)  RECLASSIFICATION OF SECURITIES
     ------------------------------

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


                                    Page 11
<PAGE>


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


(4)  CASH, CASH EQUIVALENTS, AND STATEMENTS OF CASH FLOWS
     ----------------------------------------------------

<TABLE>
<CAPTION>
                                                                                           Six Months Ended June 30,
                                                                                           -------------------------
                                                                                             2002            2001
                                                                                             ----            ----
                                                                                                 (in thousands)
<S>                                                                                        <C>            <C>
Cash paid for:                                                                             $929,970       $1,544,070
    Interest                                                                                 79,291          100,799
    Income taxes, net

    Transfer of loans to foreclosed real estate                                               8,535           17,812
    Loans made to facilitate the sale of real estate                                             --              168
    Reclassification of loans from loans held for sale to loans receivable                       --            5,245
    Reclassification of loans receivable to loans held for sale                              95,521           22,351
    Goodwill adjustment related to tax adjustments                                          (25,860)              --
    Impact of restricted common stock                                                         2,600            2,531
    Reclassification of mortgage-backed securities from the held-to-maturity
       portfolio to the available-for-sale portfolio upon the adoption of SFAS No. 133           --        1,067,933
    Reclassification of securities from the held-to-maturity portfolio to the
       available-for-sale portfolio upon the adoption of SFAS No. 133                            --           84,984
    Reclassification of derivative assets ($173.6 million) and derivative liabilities
       ($8.8 million) related to MSRs at fair value upon the adoption of SFAS No. 133            --          164,767
    Transfer of loans receivable to claims receivable                                       122,247          103,077
</TABLE>

(5)  REDEMPTION OF FN HOLDINGS NOTES
     -------------------------------

     On January 2, 2002,  GS  Holdings  redeemed  the  remaining  $250  thousand
principal of the FN Holdings 10 5/8% Senior Notes for a redemption price of $263
thousand,  including accrued  interest.  The premium paid in connection with the
redemption was not material.


                                    Page 12
<PAGE>


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


(6)  SEGMENT REPORTING
     -----------------

     The Company derives most of its revenues from interest income, and interest
expense is the most significant  expense.  Therefore,  net interest income after
provision  for loan losses is presented  for each  segment.  Because the Company
also evaluates  performance based on noninterest income and noninterest  expense
goals, these measures of segment profit and loss are also presented. The Company
does not allocate income taxes to the segments.

<TABLE>
<CAPTION>
                                          Six Months Ended June 30,                Three Months Ended June 30,
                                    ---------------------------------------   ---------------------------------------
                                     Community     Mortgage                    Community     Mortgage
                                      Banking       Banking        Total        Banking       Banking        Total
                                      -------       -------        -----        -------       -------        -----
                                                                     (in thousands)
<S>                                 <C>           <C>           <C>           <C>           <C>           <C>
Net interest income after
   provision for loan losses: (a)
2002                                $   707,665   $   77,894    $   785,559   $   359,743   $   32,507    $   392,250
2001                                    673,654       41,788        715,442       341,625       33,760        375,385

Noninterest income: (b)
2002                                $   166,169   $  (58,958)   $   107,211   $    90,579   $  (81,296)   $     9,283
2001                                    166,868       22,125        188,993        83,609       37,665        121,274

Noninterest expense: (c)
2002                                $   377,576   $   81,782    $   459,358   $   187,293   $   38,367    $   225,660
2001                                    397,711       77,017        474,728       203,317       39,113        242,430

Pre-tax contribution:
2002                                $   496,258   $  (62,846)   $   433,412   $   263,029   $  (87,156)   $   175,873
2001                                    442,811      (13,104)       429,707       221,917       32,312        254,229

Segment assets at period end: (d)
2002                                $51,668,656   $4,265,407(e) $55,934,063   $51,668,656   $4,265,407(e) $55,934,063
2001                                 60,911,345    7,346,871(e)  68,258,216    60,911,345    7,346,871(e)  68,258,216
</TABLE>
-------------
(a)    Includes  $47.6  million and $68.6  million for the six months ended June
       30, 2002 and 2001,  respectively,  in earnings credit provided to FNMC by
       the Bank,  primarily for  custodial  bank account  balances  generated by
       FNMC.  Also includes  $72.2 million and $134.1 million for the six months
       ended  June 30,  2002 and 2001,  respectively,  in  interest  income  and
       expense on intercompany loans.

       Includes  $21.9 million and $39.0 million for the three months ended June
       30, 2002 and 2001,  respectively,  in earnings credit provided to FNMC by
       the Bank,  primarily for  custodial  bank account  balances  generated by
       FNMC.  Also includes $32.3 million and $75.9 million for the three months
       ended  June 30,  2002 and 2001,  respectively,  in  interest  income  and
       expense on intercompany loans.

(b)    Includes  $19.2  million and $15.5  million for the six months ended June
       30, 2002 and 2001,  respectively,  in  intercompany  servicing fees. Also
       includes  $9.6  million and $7.0  million for the three months ended June
       30, 2002 and 2001, respectively, in intercompany servicing fees.

(c)    Includes  $2.3 million for each of the six months ended June 30, 2002 and
       2001, in intercompany noninterest expense. Also includes $1.2 million for
       each of the three  months ended June 30, 2002 and 2001,  in  intercompany
       noninterest expense.

(d)    Includes  $4.0 billion and $6.9 billion for 2002 and 2001,  respectively,
       in  intercompany  borrowings and $48.4 million and $47.8 million for 2002
       and 2001,  respectively,  in  intercompany  deposits  maintained with the
       Bank.

(e)    Includes $1.7  billion for  both 2002  and 2001, in MSRs  and the related
       hedge.


                                    Page 13
<PAGE>


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


     The  following  reconciles  the  above  table to the  amounts  shown on the
consolidated financial statements (in thousands):

<TABLE>
<CAPTION>
                                                         Six Months Ended June 30,      Three Months Ended June 30,
                                                         -------------------------      ---------------------------
                                                            2002            2001            2002            2001
                                                            ----            ----            ----            ----
<S>                                                     <C>             <C>             <C>             <C>
Net interest income after provision for loan losses:
Total net interest income for reportable segments       $   785,559     $   715,442     $   392,250     $   375,385
Elimination of intersegment net interest income             (47,560)        (68,582)        (21,932)        (38,997)
                                                        -----------     -----------     -----------     -----------
    Total                                               $   737,999     $   646,860     $   370,318     $   336,388
                                                        ===========     ===========     ===========     ===========

Noninterest income:
Total noninterest income for reportable segments        $   107,211     $   188,993     $     9,283     $   121,274
Elimination of intersegment servicing fees                  (19,243)        (15,533)         (9,609)         (7,045)
                                                        -----------     -----------     -----------     -----------
    Total                                               $    87,968     $   173,460     $      (326)    $   114,229
                                                        ===========     ===========     ============    ===========

Noninterest expense:
Total noninterest expense for reportable segments       $   459,358     $   474,728     $   225,660     $   242,430
Elimination of intersegment expense                          (2,320)         (2,320)         (1,160)         (1,160)
                                                        -----------     -----------     -----------     -----------
    Total                                               $   457,038     $   472,408     $   224,500     $   241,270
                                                        ===========     ===========     ===========     ===========

Pre-tax contribution:
Total contributions for reportable segments             $   433,412     $   429,707     $   175,873     $   254,229
Elimination of intersegment contributions                   (64,483)        (81,795)        (30,381)        (44,882)
                                                        -----------     -----------     -----------     -----------
    Total                                               $   368,929     $   347,912     $   145,492     $   209,347
                                                        ===========     ===========     ===========     ===========

Total assets at period end:
Total assets for reportable segments                    $55,934,063     $68,258,216     $55,934,063     $68,258,216
Elimination of intersegment borrowings                   (3,987,287)     (6,906,614)     (3,987,287)     (6,906,614)
Elimination of intersegment deposits                        (48,428)        (47,812)        (48,428)        (47,812)
                                                        -----------     -----------     -----------     -----------
    Total                                               $51,898,348     $61,303,790     $51,898,348     $61,303,790
                                                        ===========     ===========     ===========     ===========
</TABLE>


                                    Page 14
<PAGE>


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


(7)  LOANS RECEIVABLE, NET
     ---------------------

     Loans receivable, net, included the following (in thousands):

<TABLE>
<CAPTION>
                                                                           June 30, 2002      December 31, 2001
                                                                           -------------      -----------------
<S>                                                                         <C>                  <C>
     Real estate loans:
         1-4 unit residential                                               $28,219,385          $29,546,035
         Multi-family residential                                             4,455,768            4,130,287
         Commercial real estate                                               2,234,097            2,354,919
         Land                                                                    10,651               14,055
         Construction                                                               870                2,495
                                                                            -----------          -----------
            Total real estate loans                                          34,920,771           36,047,791
                                                                            -----------          -----------

         Equity-line                                                            802,916              639,297
         Other consumer loans                                                   237,569              283,434
         Auto loans, net (a)                                                  2,090,849            1,917,591
         Commercial loans                                                       800,038              693,114
                                                                            -----------          -----------
            Total consumer and other loans                                    3,931,372            3,533,436
                                                                            -----------          -----------
            Total loans receivable                                           38,852,143           39,581,227
                                                                            -----------          -----------

         Deferred loan fees, costs, discounts and premiums, net                 236,657              243,120
         Allowance for loan losses                                             (469,047)            (497,298)
         Purchase accounting adjustments, net                                     6,506                8,574
                                                                            -----------          -----------
            Total loans receivable, net                                     $38,626,259          $39,335,623
                                                                            ===========          ===========
</TABLE>
     -----------
     (a) $884 million,  or 42%  and $766  million, or  40%  of  this  portfolio,
         represents prime  product as  of June 30, 2002  and  December 31, 2001,
         respectively.

(8)  INTANGIBLE ASSETS
     -----------------

     Upon  adopting  SFAS No. 142,  management  reviewed  the  records  from the
Company's  various  acquisitions.  At June 30, 2002, the Company's  goodwill and
other intangible assets totalled $612.6 million. Of this amount,  $564.6 million
represents  goodwill  that is no longer  being  amortized  as of January 1, 2002
pursuant  to  SFAS  No.  142.  The  remaining  $48.1  million  represents  other
intangible assets that continue to be amortized.  In addition,  the Company held
MSR balances in the amount of $1,539.6 million at June 30, 2002.

     The following table provides details on intangible assets including MSRs:

<TABLE>
<CAPTION>
                                            As of June 30, 2002                       As of December 31, 2001
                                 -----------------------------------------   -----------------------------------------
                                     Gross                         Net          Gross                          Net
                                   Carrying     Accumulated     Carrying      Carrying    Accumulated       Carrying
                                     Value      Amortization      Value         Value     Amortization        Value
                                     -----      ------------      -----         -----     ------------        -----
                                                                 (dollars in thousands)
<S>                               <C>           <C>            <C>           <C>          <C>              <C>
Amortizable intangible assets:
    Unidentifiable intangibles    $   64,451    $   (17,182)   $   47,269    $   64,451   $   (15,030)     $   49,421
    Core deposit intangibles           5,513         (4,693)          820         5,513        (4,511)          1,002
                                  ----------    -----------    ----------    ----------   -----------      ----------
       Other intangible assets        69,964        (21,875)       48,089        69,964       (19,541)         50,423
    MSRs                           2,856,885(a)  (1,317,293)    1,539,592(a)  2,728,643(a) (1,104,696)      1,623,947(a)
    Goodwill                              --             --            --       876,890      (286,470)        590,420
                                  ----------    -----------    ----------    ----------   -----------      ----------
       Total amortizable
          intangible assets       $2,926,849    $(1,339,168)   $1,587,681    $3,675,497   $(1,410,707)     $2,264,790
                                  ==========    ===========    ==========    ==========   ===========      ==========
Unamortizable goodwill            $  851,030    $  (286,470)   $  564,560    $       --   $        --      $       --
                                  ==========    ===========    ==========    ==========   ===========      ==========

                                                                                                          (Continued)
</TABLE>


                                    Page 15
<PAGE>


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


------------
(a)  After  deducting  $280.5  million  and  $153.3  million  for the  valuation
     allowance at June 30, 2002 and December 31, 2001, respectively.

     As of June  30,  2002,  all of the  Company's  goodwill,  totalling  $564.6
million,  is included in the  community-banking  reporting  segment.  During the
second quarter of 2002, goodwill was reduced by the following:

     (a) $12.7 million representing  California state tax refunds and pre-merger
         interest related to Old Cal Fed
     (b) $12.6 million  related to  a reversal  of a portion of the deferred tax
         asset valuation  allowance related  to Old  Cal Fed and adjustments for
         sales and use tax related to Old Glen Fed and

     (c) $0.6 million  related to  the reversal  of a portion of the tax reserve
         based upon  the status of Glendale Federal tax  audits for 1991 through
         1997.

     Intangible acquisitions during the period were as follows:

<TABLE>
<CAPTION>
                                                                    Six Months Ended June 30,
                                            -------------------------------------------------------------------------
                                                           2002                                   2001
                                            ----------------------------------     ----------------------------------
                                              Gross             Weighted            Gross              Weighted
                                            Carrying            Average            Carrying            Average
                                              Value        Maturity (in years)      Value         Maturity (in years)
                                              -----        -------------------      -----         -------------------
                                                                    (dollars in thousands)
<S>                                         <C>                   <C>              <C>                   <C>
MSRs originated and purchased
     during the period                      $442,974              5.4              $259,578              6.6
</TABLE>

<TABLE>
<CAPTION>
                                                                   Three Months Ended June 30,
                                            --------------------------------------------------------------------------
                                                         2002                                    2001
                                            ----------------------------------     -----------------------------------
                                              Gross             Weighted             Gross             Weighted
                                            Carrying            Average            Carrying            Average
                                              Value        Maturity (in years)       Value         Maturity (in years)
                                              -----        -------------------       -----         -------------------
                                                                    (dollars in thousands)
<S>                                         <C>                   <C>              <C>                   <C>
MSRs originated and purchased
     during the period                      $198,615               5.4             $157,220              6.6
</TABLE>


                                    Page 16
<PAGE>


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


     In the first  quarter of 2002,  the Company  reviewed the expected  present
value of future cash flows for all reporting  units with  recorded  goodwill and
determined that the carrying value of the goodwill was not impaired.  Actual and
estimated future amortization expense is as follows:

<TABLE>
<CAPTION>
                                                Unidentifiable  Core Deposit
                                                 Intangibles    Intangibles      MSRS       Goodwill       Total
                                                 -----------    -----------      ----       --------       -----
                                                                           (in thousands)
<S>                                                 <C>            <C>         <C>          <C>          <C>
Amortization expense:
     Three months ended June 30, 2002               $1,076         $  91       $  98,271    $     --     $ 99,438
     Six months ended June 30, 2002                  2,152           182         212,596          --      214,930
     Three months ended June 30, 2001                1,076            91          88,598      13,773      103,538
     Six months ended June 30, 2001                  2,152           182         147,013      27,546      176,893

Estimated amortization expense:
     Six months ending December 31, 2002             2,152           182         173,575          --      175,909
     Year ending December 31,
         2003                                        4,304           364         263,019          --      267,687
         2004                                        4,304           364         214,247          --      218,915
         2005                                        4,304           364         173,447          --      178,115
         2006                                        4,304           364         138,259          --      142,927
         2007                                        4,304           364         109,249          --      113,917
</TABLE>

     The impact of the adoption of SFAS No. 142 on earnings was as follows:

<TABLE>
<CAPTION>
                                                      Six Months Ended June 30,         Three Months Ended June 30,
                                                      -------------------------         ---------------------------
                                                        2002             2001              2002             2001
                                                        ----             ----              ----             ----
                                                                             (in thousands)
<S>                                                   <C>              <C>               <C>              <C>
Reported net income before cumulative
    effect of change in accounting principle          $241,828         $210,709          $116,425         $115,074
Add back goodwill amortization, net of tax                  --           27,425                --           13,713
                                                      --------         --------          --------         --------
Adjusted net income before cumulative
    effect of change in accounting principle          $241,828         $238,134          $116,425         $128,787
                                                      ========         ========          ========         ========
</TABLE>

<TABLE>
<CAPTION>
                                                      Six Months Ended June 30,         Three Months Ended June 30,
                                                      -------------------------         ---------------------------
                                                        2002             2001              2002             2001
                                                        ----             ----              ----             ----
                                                                             (in thousands)
<S>                                                   <C>              <C>               <C>               <C>
Reported net income                                   $241,828         $209,157          $116,425          $113,522
Add back goodwill amortization, net of tax                  --           27,425                --            13,713
                                                      --------         --------          --------          --------
Adjusted net income                                   $241,828         $236,582          $116,425          $127,235
                                                      ========         ========          ========          ========
</TABLE>


                                    Page 17
<PAGE>


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


(9)  DEPOSITS
     --------

     A summary of the  carrying  value of  deposits  is as follows  (dollars  in
thousands):

<TABLE>
<CAPTION>
                                                                    June 30, 2002      December 31, 2001
                                                                    -------------      -----------------
<S>                                                                   <C>                 <C>
       Transaction Accounts:
            Non-interest checking                                     $ 2,238,712         $ 2,013,162
            Interest-bearing checking                                   2,252,180           2,139,674
                                                                      -----------         -----------
               Subtotal checking                                        4,490,892           4,152,836

            Money market                                                4,831,649           4,614,223
            Passbook savings                                            3,171,654           3,055,766
                                                                      -----------         -----------
               Total transaction accounts                              12,494,195          11,822,825

       Certificates of deposit                                         10,053,758          10,618,260
                                                                      -----------         -----------
               Total customer deposits                                 22,547,953          22,441,085

       Custodial accounts                                               1,705,080           2,512,684
       Accrued interest payable                                            37,721              46,184
       Purchase accounting                                                    150                 329
                                                                      -----------         ------------
               Total retail deposits                                   24,290,904          25,000,282

       Brokered Deposits                                                   91,087             146,545
                                                                      -----------         -----------
               Total deposits                                         $24,381,991         $25,146,827
                                                                      ===========         ===========

       Checking deposits (including custodials) as a %
            of retail deposits                                              25.5%                26.7%
       Transaction accounts (including custodials) as a %
            of retail deposits                                              58.5%                57.3%
       Checking deposits (excluding custodials) as a %
            of customer deposits                                            19.9%                18.5%
       Transaction accounts (excluding custodials) as a %
            of customer deposits                                            55.4%                52.7%
</TABLE>


                                    Page 18
<PAGE>


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


(10) ACCRUED TERMINATION AND FACILITIES COSTS
     ----------------------------------------

     In  connection  with the Golden  State  Acquisition,  the Company  recorded
liabilities resulting from:

     o branch consolidations due to duplicate facilities and

     o employee severance and termination benefits due to a planned reduction in
       force.

     The merger and  integration  plan relating 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  summarizes  the  activity in the  liability  for the costs
related to the plan (in thousands):

<TABLE>
<CAPTION>
                                                                         Severance and
                                                         Branch           Termination
                                                     Consolidations        Benefits             Total
                                                     --------------        --------             -----
<S>                                                     <C>                 <C>                <C>
      Balance at December 31, 2001                      $14,208             $12,500            $26,708
          Charges to liability account                   (2,492)                 --             (2,492)
                                                        -------             -------            -------
      Balance at June 30, 2002                          $11,716             $12,500            $24,216
                                                        =======             =======            =======
</TABLE>

(11) INCOME TAXES
     ------------

     During the six months  ended June 30,  2002,  GS  Holdings  recorded  gross
income tax expense of $150.7 million, which was offset by a tax benefit of $37.1
million,  for net income tax  expense of $113.6  million.  Based on the  current
status of Mafco Holdings' audits for the years 1991 through 1995 and anticipated
reversal of deferred tax assets with established valuation allowance, management
changed its  judgment  about the  realizability  of the  Company's  deferred tax
assets and  reduced  its  valuation  allowance  by $44  million.  As a result of
reducing  the  valuation  allowance,  income tax  expense  was  reduced by $31.4
million and goodwill was reduced by $12.6 million.

     In addition,  an accrued  liability had been established in prior years for
the purpose of satisfying assessments that may result from issues arising during
audits  with  various   state  taxing   authorities.   As  a  result  of  recent
documentation  received  pertaining to the California  audit of Glendale Federal
Bank for the years 1991 through 1997,  management  reduced its accrued state tax
liability  by $8.7 million  during the six months ended June 30, 2002.  Goodwill
was reduced by $0.6 million in  connection  with this  transaction.  The Company
also  recorded  additional  Federal  tax  expense  of  $3.1  million  due to the
reduction of the state tax expense.

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

     In  addition,  during the six months  ended  June 30,  2001,  an income tax
benefit was recorded for $3.2 million due to the  utilization  of net  operating
losses  of  a  subsidiary  made  available  as  a  result  of  the  subsidiary's
liquidation into California Federal Bank.

(12) STOCKHOLDER'S EQUITY
     --------------------

     At June 30,  2002,  there were 1,000  shares of GS  Holdings  common  stock
issued and outstanding.

     Dividends  on common  stock  during the six months  ended June 30, 2002 and
2001 totalled $80.0 million and $60.0 million, respectively.


                                    Page 19
<PAGE>


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


(13) EXECUTIVE AND STOCK COMPENSATION
     --------------------------------

     In the six months ended June 30, 2002,  Golden State  granted to certain of
the Company's employees non-qualified stock options equivalent to 884,000 shares
of common stock at a weighted  average price of $27.69 per share under the Stock
Plan, all within the first  quarter.  During the three and six months ended June
30,  2001,   Golden  State  granted  to  certain  of  the  Company's   employees
non-qualified   stock  options  equivalent  to  560,100  and  1,411,100  shares,
respectively,  of common stock at a weighted average price of $30.75 and $27.69,
respectively.  These  shares  generally  vest  over  three  years  in  one-third
increments on the anniversary of the grant date. The options generally expire 10
years from the date of grant. No compensation cost was recognized by the Company
for these stock options during the six months ended June 30, 2002, in accordance
with the intrinsic value  accounting  methodology  prescribed in APB Opinion No.
25,  whereby  compensation  expense to  employees is  determined  based upon the
excess,  if any,  of the  market  price  of the  Company's  common  stock at the
measurement date over the exercise price of the award.

     During the three and six months  ended June 30,  2002,  319,909 and 427,675
options were exercised,  and 9,917 and 42,597 options were cancelled or expired,
respectively,  under all plans.  During the three and six months  ended June 30,
2001,  91,101 and 154,617  options were exercised and 4,432 and 21,677  options,
respectively, were cancelled or expired under all plans.

     At June 30, 2002 and 2001,  options to acquire an  equivalent  of 5,129,449
and  4,906,205  shares and 675,583 and 966,166  LTWTMs,  respectively,  remained
outstanding under all plans.

     On  January  22,  2002 and 2001,  Golden  State  awarded  to certain of the
Company's employees 112,760 and 99,108 shares, respectively, of restricted stock
under the Golden State Bancorp Inc.  Omnibus Stock Plan. The market value on the
date of the award was $27.65 and $26.38 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.  During the three
and six months ended June 30, 2002,  152,299  restricted  shares were vested and
2,770  restricted  shares were cancelled.  During the three and six months ended
June 30, 2001, 5,911 and 115,045  restricted  shares were vested,  respectively,
and none was cancelled.  At June 30, 2002, a total of 160,056  restricted shares
was outstanding.  The compensation  expense based on the stock price on the date
of these awards was recognized on a straight-line  basis over the vesting period
for each service  period tranche of the award with a  corresponding  increase to
additional  paid-in  capital.  In addition,  dividends on  restricted  stock are
recorded as  compensation  expense with a  corresponding  increase to additional
paid-in  capital.  During the three and six months  ended  June 30,  2002,  $0.5
million and $0.9 million,  respectively,  in compensation expense was recognized
related to such  awards.  During the three and six months  ended June 30,  2001,
$0.5  million  and $1.0  million,  respectively,  in  compensation  expense  was
recognized related to such awards.  These restricted shares have full voting and
dividend rights.

(14) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
     ---------------------------------------------------

     On September 21, 2000, the EITF issued EITF No. 99-20. This document, which
was effective on April 1, 2001, establishes guidance for

     (a) recognizing  interest  income (including  amortization  of  premiums or
         discounts) on

         (i)  all credit-sensitive mortgage and asset-backed securities and
         (ii) certain prepayment-sensitive securities including agency interest-
              only strips and

     (b) determining when  these securities  must be written down  to fair value
         because of impairment.

     Existing GAAP did not provide interest  recognition and impairment guidance
for  securities on which cash flows change as a result of both  prepayments  and
credit losses and, in some cases, interest rate adjustments.


                                    Page 20
<PAGE>


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


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

(15) COMMITMENTS, CONTINGENCIES AND OTHER OFF-BALANCE SHEET ACTIVITIES
     -----------------------------------------------------------------

     CREDIT RELATED FINANCIAL INSTRUMENTS

     The  Company  is a party  to  credit  related  financial  instruments  with
off-balance  sheet risk in the normal  course of business to meet the  financing
needs of its  customers.  These  financial  instruments  include  commitments to
extend credit,  standby letters of credit and commercial letters of credit. Such
commitments  involve,  to varying degrees,  elements of credit and interest rate
risk in excess of the amount recognized in the consolidated balance sheets.

     The Company's  exposure to credit loss is  represented  by the  contractual
amount of these commitments. The Company uses the same credit policies in making
commitments as it does for on-balance sheet instruments.

     Listed below are unfunded  financial  instruments  whose  contract  amounts
represent credit risk (in thousands):

<TABLE>
<CAPTION>
                                                                    Contract Amounts at
                                                         ----------------------------------------
                                                         June 30, 2002          December 31, 2001
                                                         -------------          -----------------

              COMMITMENTS TO EXTEND CREDIT
              ----------------------------
<S>                                                        <C>                     <C>
      Unutilized consumer lines                            $1,722,420              $1,467,625
      Unutilized commercial lines of credit                   264,524                 263,682
      Commercial and standby letters of credit                 32,042                  24,953
</TABLE>

     The  contracts  for the  Company's  commitments  to extend credit expire as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                    June 30, 2002
                                   -------------------------------------------------------------------------------
                                                             Contract Amount Expiring in
                                   -------------------------------------------------------------------------------

Commitments to Extend Credit          Total    Less Than 1 Year    1 - 3 Years    4 - 5 Years    More Than 5 Years
----------------------------          -----    ----------------    -----------    -----------    -----------------
<S>                                <C>             <C>               <C>            <C>             <C>
Unutilized consumer lines          $1,722,420      $518,546          $13,634        $11,084         $1,179,156
Unutilized commercial
     lines of credit                  264,524       188,270           56,199          7,865             12,190
Commercial and standby
     letters of credit                 32,042        31,876              166             --                 --
</TABLE>

     The fair  value of  commitments  to extend  credit was not  significant  at
either June 30, 2002 or December 31, 2001.

     Unutilized consumer lines of credit are commitments to extend credit. These
lines are either  secured or  nonsecured  and may be cancelled by the Company if
certain  conditions  of the contract are not met.  Many  consumer line of credit
customers  are not  expected to fully draw down their total lines of credit and,
therefore,  the total  contractual  amount of these  lines does not  necessarily
represent future cash requirements.

     Unutilized commitments under commercial lines of credit are commitments for
possible  future  extensions  of credit to  existing  customers.  These lines of
credit are  uncollateralized,  usually do not contain a specified  maturity date
and may not be drawn upon to the total extent to which the Company is committed.


                                    Page 21
<PAGE>


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


     Commercial and standby letters of credit are conditional commitments issued
by the Company to  guarantee  the  performance  of a customer to a third  party.
Those  letters of credit are  primarily  issued to  support  public and  private
borrowing  arrangements.  All  letters of credit  issued have  expiration  dates
within three  years.  The credit risk  involved in issuing  letters of credit is
essentially the same as that involved in extending loan facilities to customers.
The Company generally holds collateral supporting those commitments in an amount
deemed to be necessary.

     OFF-BALANCE SHEET COMMITMENTS TO ORIGINATE, PURCHASE AND SELL LOANS

     The  following is a summary of the  Company's  pipeline of loans in process
and mandatory  forward  commitments to sell loans that have not been recorded in
the Company's  balance sheet as they do not meet the  definition of a derivative
financial  instrument.  These amounts exclude commitments to extend credit which
are summarized above. For more information on derivative  instruments,  see note
16.

<TABLE>
<CAPTION>
                                                                    Contract Amounts at
                                                           --------------------------------------
                                                           June 30, 2002        December 31, 2001
                                                           -------------        -----------------
                                                                      (in thousands)
<S>                                                         <C>                    <C>
     Commitments to originate loans                         $2,770,634             $3,937,422
     Commitments to purchase loans                             995,883              3,791,436
     Mandatory commitments to sell loans                       317,569                679,182
</TABLE>

     The Company's  pipeline of loans in process includes loan  applications for
both portfolio and  non-portfolio  loans in various stages of processing that do
not meet the definition of a derivative financial instrument. Until all required
documentation  is  provided  and  underwritten,  there is no credit  risk to the
Company.  There is no interest rate risk until a rate  commitment is extended by
the Company to a borrower.  Some of these  commitments will ultimately be denied
by the Company or declined by the borrower and therefore the commitment  amounts
do not necessarily represent future cash requirements.

     Mandatory and optional delivery forward  commitments to sell loans are used
by the Company to hedge its interest  rate  exposure  from the time a loan has a
committed rate to the time the loan is sold. These  instruments  involve varying
degrees of credit risk. Credit risk on these  instruments is controlled  through
credit  approvals,   limits  and  monitoring  procedures.  To  the  extent  that
counterparties  are not able to fulfill forward  commitments,  the Company is at
risk for any  fluctuations  in the market value of the mortgage loans and locked
pipeline.

     OFF-BALANCE SHEET EMBEDDED DERIVATIVE OPTIONS

     The Company also has  off-balance  sheet embedded  options in borrowings as
shown in the table below (in thousands):

<TABLE>
<CAPTION>
                                                June 30, 2002                            December 31, 2001
                                    --------------------------------------     -------------------------------------
     Instruments                    Notional Amount   Estimated Fair Value     Notional Amount  Estimated Fair Value
     -----------                    ---------------   --------------------     ---------------  --------------------
<S>                                   <C>                   <C>                  <C>                  <C>
     Interest rate caps               $2,000,000            $34,913              $2,000,000           $52,163
     Interest rate swaptions           1,250,000              1,750               1,250,000             9,448
</TABLE>


                                    Page 22
<PAGE>


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


     The off-balance  sheet embedded  options in borrowings at June 30, 2002 are
scheduled to expire as shown in the table below (in thousands):

<TABLE>
<CAPTION>
                                                           Contract Amount Expiring in
                                           ------------------------------------------------------------
     Instruments                             2003             2004             2005             TOTAL
     -----------                             ----             ----             ----             -----
<S>                                        <C>              <C>             <C>              <C>
     Interest rate caps                    $400,000         $350,000        $1,250,000       $2,000,000
     Interest rate swaptions                150,000               --         1,100,000        1,250,000
</TABLE>

     COMMITMENTS AND CONTINGENCIES

     At June 30, 2002,  the Bank had pledged as  collateral  the  securities  as
detailed below (in thousands):

<TABLE>
<CAPTION>
                                                 Securities       Mortgage-backed    Mortgage-backed      Commercial
                                               Available for         Securities         Securities           Paper
                                                    Sale         Available for Sale  Held to Maturity     Investments
                                                    ----         ------------------  ----------------     -----------
<S>                                               <C>                <C>                 <C>                <C>
  Provide credit enhancements for certain
     bond-financed real estate projects
     originated by Old FNB                        $25,582            $   10,516          $  6,961           $    --

  Pledged securities for principal and
     interest on Bank loan securitization              --               265,144             6,844                --

  Guarantee credit enhancements on
     multi-family bond issues and loans
     securitized by FNMA and FHLMC                  1,027               124,948            27,779                --

  Guarantee credit enhancements on
     loans transferred as part of
     securitization transactions by the Bank           --                    --                --            29,260

  Guarantee state and local agency
     deposits, and certain deposits with the
     Federal Reserve Bank                           2,678               311,569            50,220                --

  Secure various other obligations                     --             1,968,602           752,127                --
</TABLE>

     At June 30,  2002,  $25.2  billion in  residential  loans,  $3.8 billion in
multifamily  loans and $1.6 billion in commercial real estate loans were pledged
as collateral for FHLB advances.

     At June 30, 2002, loans receivable  included  approximately $4.6 billion of
loans that had the potential to experience negative amortization.


                                    Page 23
<PAGE>


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


(16) ON-BALANCE SHEET DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
     --------------------------------------------------------------

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

     The  Company  monitors  the  sensitivity  of its NPV and net  income  under
various  interest rate scenarios and manages this risk.  Quarterly,  the Company
simulates  the NPV and net income  expected  to be earned  over the next  twelve
months.  Market  interest  rates are projected at various levels to estimate the
impact on  interest-earning  assets,  interest-bearing  liabilities and mortgage
prepayment speeds (which affect the MSR asset).  The Company may use derivatives
to  reduce  the  volatility  of NPV and net  income  within  certain  ranges  of
projected  changes in interest rates. The Company evaluates the effectiveness of
a  derivative  by  measuring  the cost of such an  agreement  in relation to the
reduction in NPV and net income  volatility  within an assumed range of interest
rates.

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

     OBJECTIVES AND CONTEXT
     ----------------------

     The Company uses  variable-rate debt including FHLB advances and Repos as a
source of funds for lending and investment activities and other general business
purposes. Interest payments on this debt may change if interest rates change. If
interest rates increase,  interest expense  increases.  Conversely,  if interest
rates decrease, interest expense decreases.

     Management  hedges a  significant  portion  of its  variable-rate  interest
payments to limit the effect of changing interest rates.

     STRATEGIES
     ----------

     Management  enters  into  derivative   instruments   agreements  to  manage
fluctuations in cash flows resulting from interest rate risk. These  instruments
include interest rate swaps.

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

     RESULTS
     -------

     Hedges of FHLB advances and Repos were 100% effective for the three and six
months ended June 30, 2002.  The Company  hedges the entire amount of the change
in fair value of the  liabilities  with the entire  amount of the change in fair
value of the derivative instruments.

     Fair value  changes in interest rate swap hedging  instruments  relating to
cash flows  associated  with FHLB advances and Repos are reported in OCI.  These
amounts are then reclassified into interest expense as a yield adjustment in the
same period in which the related interest on the FHLB advances and Repos affects
earnings.  The net amount of OCI  reclassified  into interest expense during the
three and six months  ended June 30, 2002 was $45.1  million and $86.9  million,
respectively,  while $14.7 million and $20.1 million was reclassified during the
three and six months ended June 30, 2001, respectively.

     As of June 30, 2002 and 2001, approximately $96.6 million and $30.4 million
of losses reported in OCI related to the interest rate swaps were expected to be
reclassified  into  interest  expense as a yield  adjustment  of the hedged FHLB
advances and Repos during the twelve month period ending June 30, 2003 and 2002,
respectively.


                                    Page 24
<PAGE>


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


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

     OBJECTIVES AND CONTEXT
     ----------------------

     The Company  purchases and originates MSRs as a source of fee income.  MSRs
expose the Company to the  variability of their fair value due to changes in the
assumed level of prepayments and other variables. The carrying value of MSRs are
first  adjusted  by the  calculated  change in the fair  value of the MSRs being
hedged  and are then  recorded  at the  lesser of their  amortized  cost or fair
value.

     Management limits the variability in the fair value of a portion of its MSR
asset by  hedging  the  change  in fair  value  of the  servicing  rights  asset
associated  with  fixed-rate,  non-prepayment  penalty  loans  for  which it has
recorded  MSRs.  The  Company  determines  appropriate  coverage  levels,  given
anticipated or existing interest rate levels and other market considerations, as
well as the relationship of change in this asset to other assets of the Company.

     STRATEGIES
     ----------

     The Company utilizes  interest rate swaps, PO swaps,  interest rate floors,
and swaptions to hedge the change in value of the mortgage  servicing  portfolio
due to expected prepayment risk assumption changes.  Although the Company hedges
the change in value of its MSRs,  its hedge  coverage ratio does not equal 100%.
The Company keeps hedge  coverage  ratios at acceptable  risk levels,  which may
vary depending on current and expected interest rate movement.

     Interest  rate swap  agreements  are  contracts  to exchange  quarterly  or
semi-annual floating rate payments for fixed-rate payments.  The notional amount
of the  contracts,  on which the  payments  are based,  are not  exchanged.  The
primary  risks  associated  with  interest  rate  swaps are the  ability  of the
counterparties  to meet the terms of the contract and the possibility  that swap
rates may not move in an inverse  manner or in an amount equal to mortgage  rate
movements.

     PO swap agreements simulate the ownership of a PO strip, the value of which
is affected  directly by prepayment rates themselves in an inverse manner to the
servicing  rights,  which act in a manner similar to IO strips.  Under a PO swap
agreement,  the counterparty to the transaction  purchases a PO strip and places
the PO strip in a trust. The contracts  executed prior to December 31, 1998 call
for the Company to pay floating interest to the counterparty based on:

     (a) an index tied to one month LIBOR and

     (b) the amortized notional balance of the swap.

     The  contracts  call for the Company to receive cash from the  counterparty
based on the cash  flows  received  from the PO  strip.  For PO swap  agreements
executed  after December 31, 1998, the agreement also requires the PO swap to be
marked to market  value.  A decrease in the market value of the PO swap requires
the Company to increase the amount paid to the  counterparty  and an increase in
the market  value  requires  the  counterparty  to  increase  its payment to the
Company. The amounts to be paid and to be received are then netted together each
month.  The  nature of this  instrument  results  in  increased  cash  flows and
positive  changes in the value of the PO swap during a declining  interest  rate
environment.  This  positive  change  in the  value  of the PO  swap  is  highly
correlated to prepayment  activity.  PO swap agreements present yield curve risk
to the extent that short term interest  rates (which impact the cash amount that
the Company pays on the PO swap to the counterparty)  rise while long term rates
(which drive  prepayment  rates) stay the same. A third type of risk  associated
with PO swaps is the  ability  of the  counterparties  to meet the  terms of the
contract.

     Interest rate floors are interest rate protection  instruments that involve
payment  from  the  seller  to  the  buyer  of an  interest  differential.  This
differential is the difference between a long-term rate (E.G.,  10-year Constant
Maturity  Swaps in 2002 and 2001) and an  agreed-upon  rate,  the  strike  rate,
applied to a notional  principal amount. By purchasing a floor, the Company will
be paid the differential on a monthly basis by a counterparty,  when the current
long-term rate falls below the strike level of the agreement.  The fair value of
interest rate floor agreements is


                                    Page 25
<PAGE>


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


included in derivative  assets or liabilities.  Interest rate floors are subject
to basis risk because of  differences  in movements of mortgage and LIBOR rates,
market  volatility and the impact of changes in the yield curve. In addition,  a
credit risk  associated  with  purchased  interest rate floor  agreements is the
ability of the counterparties to meet the terms of the contract.

     A swaption is an  over-the-counter  option that provides the right, but not
the obligation,  to enter into an interest rate swap agreement at  predetermined
terms at a  specified  time in the future.  Swaptions  are subject to basis risk
because  of  differences  in  movements  of  mortgage  and LIBOR  rates,  market
volatility  and the impact of changes in the yield curve.  In  addition,  credit
risk associated with swaptions is the ability of the  counterparties to meet the
terms of the contract.

     RESULTS
     -------

     Risk management results related to the hedging of MSRs are summarized below
and are  included in the caption  entitled  "Loan  servicing  fees,  net" in the
accompanying  consolidated statements of income (in thousands).  The net gain or
loss represents the ineffectiveness of the hedges.

<TABLE>
<CAPTION>
                                                         Six Months Ended June 30,      Three Months Ended June 30,
                                                         -------------------------      ---------------------------
                                                            2002            2001           2002             2001
                                                            ----            ----           ----             ----
<S>                                                      <C>             <C>            <C>              <C>
Gain (loss) on designated derivative contracts           $ 191,565       $(74,601)      $ 224,062        $(108,198)
(Decrease) increase in value of designated MSRs           (187,626)        83,558        (239,403)         114,750
                                                         ---------       --------       ---------        ---------

Net gain (loss) on derivatives used to hedge MSRs        $   3,939       $  8,957       $ (15,341)       $   6,552
                                                         =========       ========       =========        =========
</TABLE>

     INTEREST RATE RISK MANAGEMENT - FAIR VALUE HEDGING  INSTRUMENTS - WAREHOUSE
     LOANS

     OBJECTIVES AND CONTEXT
     ----------------------

     The Company,  as part of its  traditional  real estate lending  activities,
originates  fixed-rate  1-4 unit  residential  loans  for sale in the  secondary
market.  At the time of  origination,  management  identifies  loans it plans to
sell.  These  warehoused loans have been classified as loans held for sale, net,
in the consolidated balance sheet and are carried at fair market value, less the
values  associated  with  servicing (for those loans which are hedged) or at the
lower of  aggregate  amortized  cost or fair market value (for those loans which
are not hedged). These loans expose the Company to the variability of their fair
value due to changes in interest rates. If interest rates increase, the value of
the loans decreases.  Conversely,  if interest rates decrease,  the value of the
loans increases.

     Management  limits the variability of a major portion of the change in fair
value of its loans held for sale by hedging  substantially all of its warehoused
loans held for sale to third parties.

     STRATEGIES
     ----------

     Management  employs  forward loan sale hedging  techniques  to minimize the
interest rate and pricing risks associated with the origination and sale of such
warehoused loans.

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


                                    Page 26
<PAGE>


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


     RESULTS
     -------

     Risk  management  results  related to the  hedging of  warehouse  loans are
summarized  below  and are  included  in the  caption  entitled  "Gain  on sale,
settlement  and  transfer  of  loans,  net"  in  the  accompanying  consolidated
statements of income (in thousands):

<TABLE>
<CAPTION>
                                                            Six Months Ended June 30,    Three Months Ended June 30,
                                                            -------------------------    ---------------------------
                                                               2002           2001           2002           2001
                                                               ----           ----           ----           ----
<S>                                                         <C>             <C>            <C>            <C>
Transition adjustment upon adoption of SFAS No. 133         $     --        $ 3,834        $     --       $     --
Unrealized (loss) gain on designated forward loan
     sale commitments recognized                             (38,538)        10,400         (25,020)        12,080
Increase (decrease) in value of warehouse loans               43,381         (9,038)         24,671        (10,443)
                                                            --------        -------        --------       --------

Net gain (loss) on derivatives used to hedge
     warehouse loans                                        $  4,843        $ 5,196        $   (349)      $  1,637
                                                            ========        =======        ========       ========
</TABLE>

     DERIVATIVE INSTRUMENTS NOT DESIGNATED AS HEDGING INSTRUMENTS

     PURPOSE - INTEREST RATE LOCK COMMITMENTS AND FORWARD LOAN SALE COMMITMENTS
     --------------------------------------------------------------------------

     The Company enters into rate lock commitments to extend credit to borrowers
for generally a 30-day period for the origination and/or purchase of loans. Some
of these rate lock commitments  will ultimately  expire without being completed.
To the extent  that a loan is  ultimately  granted and the  borrower  ultimately
accepts the terms of the loan, these rate lock commitments expose the Company to
variability  in their fair value due to changes in interest  rates.  If interest
rates increase, the value of these rate lock commitments decreases.  Conversely,
if interest rates decrease, the value of these rate lock commitments increases.

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

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

<TABLE>
<CAPTION>
                                                            Six Months Ended June 30,    Three Months Ended June 30,
                                                            -------------------------    ---------------------------
                                                               2002           2001           2002           2001
                                                               ----           ----           ----           ----
<S>                                                         <C>             <C>            <C>            <C>
Transition adjustment upon adoption of SFAS No. 133         $     --        $(2,785)       $     --       $     --
Unrealized (loss) gain on undesignated forward loan
     sale commitments recognized to income                   (19,048)        10,120         (17,288)        11,096
Gain (loss) on undesignated interest rate loan
     commitments recognized to income                         21,464         (8,980)         16,025         (9,093)
                                                            --------        -------        --------       --------

Net gain (loss) on derivatives                              $  2,416        $(1,645)       $ (1,263)      $  2,003
                                                            ========        =======        ========       ========
</TABLE>


                                    Page 27
<PAGE>


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


     NOTIONAL AMOUNTS OF DERIVATIVES

     Information  pertaining to the notional amounts of the Company's derivative
financial  instruments  utilized  in both MSR and  balance  sheet  hedging is as
follows  (in  thousands).   The  fair  values  of  these  derivative   financial
instruments were recorded in the Company's balance sheet in accordance with SFAS
No. 133.

<TABLE>
<CAPTION>
                                                             June 30, 2002                     December 31, 2001
                                                    ------------------------------       ------------------------------
                                                     Notional                             Notional
                                                      Amount      Credit Risk (1)          Amount      Credit Risk (1)
                                                      -------     ---------------          ------      ---------------
<S>                                                 <C>              <C>                 <C>              <C>
  Interest rate swaps -  borrowings                 $ 4,509,670      $      --           $ 4,089,670      $     --
  Interest rate swaps hedging MSRs                    2,840,000         43,080             2,462,000         7,561
  PO swaps                                              391,800             --               378,928         6,411
  Interest rate floors                                1,021,000         26,286             3,054,000        78,917
  Interest rate swaptions                             4,621,000        137,058             4,111,000       183,641
  Forward loan sale commitments                       1,940,749             --             3,980,863        36,879
  Interest rate lock commitments                      1,038,866             --             1,870,852            --
  Other                                                  75,000            744                                  --
                                                    -----------       --------           -----------      --------
       Total                                        $16,438,085       $207,168           $19,947,313      $313,409
                                                    ===========       ========           ===========      ========
</TABLE>
-------------
  (1)  Credit  risk  represents  the  amount  of  unrealized  gain  included  in
       derivative  assets  which is  subject to  counterparty  credit  risk.  It
       reflects the effect of master  netting  agreements  and  excludes  $187.2
       million and $95.2  million cash  collateral  held by the Bank at June 30,
       2002 and December 31, 2001, respectively.

       Derivative financial instruments used for  other-than-trading purposes at
  June 30, 2002 are scheduled to mature as follows (in thousands):

<TABLE>
<CAPTION>
                                                                  Notional Amounts
                           ----------------------------------------------------------------------------------------------
                           Six Months Ending
                           December 31, 2002     2003         2004         2005         2006      Thereafter     Total
                           -----------------     ----         ----         ----         ----      ----------     -----
<S>                           <C>             <C>          <C>          <C>           <C>         <C>         <C>
  Interest rate swaps -
     borrowings               $  300,000      $  700,000   $1,670,000   $  819,670    $900,000    $  120,000  $ 4,509,670
  Interest rate swaps
     hedging MSRs                     --              --           --           --          --     2,840,000    2,840,000
  PO swaps                        96,002          70,920       81,451           --          --       143,427      391,800
  Interest rate floors                --              --           --           --          --     1,021,000    1,021,000
  Interest rate swaptions             --       3,451,000      464,000      706,000          --            --    4,621,000
  Forward loan sale
     commitments               1,940,749              --           --           --          --            --    1,940,749
  Interest rate lock
     commitments               1,038,866              --           --           --          --            --    1,038,866
  Other                           75,000              --           --           --          --            --       75,000
                              ----------      ----------   ----------   ----------    --------    ----------  -----------
        Total                 $3,450,617      $4,221,920   $2,215,451   $1,525,670    $900,000    $4,124,427  $16,438,085
                              ==========      ==========   ==========   ==========    ========    ==========  ===========
</TABLE>


                                    Page 28
<PAGE>


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


(17) RECENT ACCOUNTING PRONOUNCEMENTS
     --------------------------------

     GOODWILL AND OTHER INTANGIBLE ASSETS

     On  January  1,  2002,  the  Company  adopted  SFAS No.  142.  SFAS No. 142
supersedes APB Opinion No. 17 and establishes new accounting  standards for both
identifiable  and  unidentifiable  intangible  assets  acquired  in  a  business
combination,  including  goodwill,  but does not  address  internally  developed
intangible assets. It requires  recognition of goodwill as an asset but does not
permit  amortization  of goodwill as previously  required by APB Opinion No. 17.
Instead, goodwill is tested for impairment at a level referred to as a reporting
unit. A reporting  unit is the same level as, or one level  below,  an operating
segment (as that term is used in SFAS No. 131).

     Goodwill is tested for  impairment  annually and on an interim  basis if an
event or  circumstance  occurs  between  annual tests that might reduce the fair
value of a reporting unit below its carrying  value. An example of such an event
or circumstance may include an adverse change in the business climate or market,
a legal factor,  an action by regulators,  an introduction of competition,  or a
loss of key  personnel.  Goodwill  would  also be tested  for  impairment  on an
interim basis when:

     (a) a  more-likely-than-not  expectation  exists that a reporting unit or a
         significant portion  of a  reporting unit  will  be  sold or  otherwise
         disposed of,

     (b) a  significant  asset  group  within a  reporting  unit is  tested  for
         recoverability under SFAS No. 121, or

     (c) a  subsidiary  of  that  reporting  unit   has  recognized  a  goodwill
         impairment loss.

     The fair value of each reporting unit would not have to be recomputed every
year if the  components of the reporting unit had not changed since the previous
fair value  computation,  the previous  fair value amount  exceeded the carrying
amount of the reporting  unit by a substantial  margin,  and no evidence  exists
indicating  that the current fair value of the  reporting  unit may be less than
its current carrying amount.

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

     Acquired  intangible  assets other than goodwill are  amortized  over their
useful  economic life and reviewed for  impairment  in accordance  with SFAS No.
144.

     The impact of the adoption of SFAS No. 142 increases GAAP earnings by $13.7
million per quarter in 2002.

     ACCOUNTING BY CERTAIN ENTITIES  (INCLUDING ENTITIES WITH TRADE RECEIVABLES)
     THAT LEND TO OR FINANCE THE ACTIVITIES OF OTHERS

     In December  2001,  the AICPA issued SOP 01-6.  SOP 01-6 is  effective  for
annual and interim financial  statements issued for fiscal years beginning after
December 15, 2001. SOP 01-6 reconciles the specialized  accounting and financial
reporting  guidance  established in the existing Banks and Savings  Institutions
Guide, Audits of Credit Unions Guide, and Audits of Finance Companies Guide. The
SOP  eliminates  differences  in accounting  and  disclosure  established by the
respective  guides and carries  forward  accounting  guidance  for  transactions
determined to be unique to certain financial institutions.  The adoption of this
pronouncement  has  not  had a  material  impact  on the  Company's  results  of
operations or financial condition.


                                    Page 29
<PAGE>


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


     RESCISSION  OF SFAS NO.  4, 44,  AND 64,  AMENDMENT  OF SFAS  NO.  13,  AND
     TECHNICAL CORRECTIONS

     SFAS No. 145 rescinds SFAS No. 4, which  required all gains and losses from
extinguishment  of debt to be  aggregated  and, if  material,  classified  as an
extraordinary  item, net of related income tax effect. As a result, the criteria
in Opinion No. 30 will now be used to classify those gains and losses.  SFAS No.
64 amended  SFAS No. 4, and is no longer  necessary  because SFAS No. 4 has been
rescinded.

     The accounting,  disclosure and financial statement  provisions of SFAS No.
145 are effective for financial  statements in fiscal years  beginning after May
15, 2002. Any gain or loss on  extinguishment  of debt that was classified as an
extraordinary item in prior periods presented that does not meet the criteria in
Opinion  No.  30  for   classification   as  an  extraordinary   item  shall  be
reclassified.

     The  implementation of SFAS No. 145 is not expected to impact the Company's
financial condition or operating results.


                                    Page 30
<PAGE>


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

FORWARD-LOOKING  STATEMENTS.  THIS  QUARTERLY  REPORT  CONTAINS  FORWARD-LOOKING
STATEMENTS,  WITHIN THE MEANING OF THE PRIVATE SECURITIES  LITIGATION REFORM ACT
OF  1995,  THAT  PERTAIN  TO  OUR  FUTURE  OPERATING  RESULTS.   WORDS  SUCH  AS
"ANTICIPATE,"  "BELIEVE,"  "EXPECT," "INTEND" AND OTHER SIMILAR  EXPRESSIONS ARE
INTENDED  TO  IDENTIFY  THESE  STATEMENTS.  FORWARD-LOOKING  STATEMENTS  ARE NOT
HISTORICAL FACTS AND ARE INHERENTLY  SUBJECT TO SIGNIFICANT  BUSINESS,  ECONOMIC
AND COMPETITIVE  UNCERTAINTIES AND  CONTINGENCIES,  MANY OF WHICH ARE BEYOND OUR
CONTROL.   OUR  ACTUAL  RESULTS  COULD  DIFFER  MATERIALLY  FROM  THOSE  IN  THE
FORWARD-LOOKING  STATEMENTS DUE TO SUCH FACTORS AS (I) PORTFOLIO CONCENTRATIONS;
(II) INTEREST RATE CHANGES,  INCLUDING CHANGES IN SHORT-TERM INTEREST RATES, THE
SHAPE OF THE YIELD CURVE AND THE  TREASURY-EURODOLLAR  SPREAD;  (III) CHANGES IN
ASSET  PREPAYMENT  SPEEDS;  (IV)  CHANGES  IN  OUR  COMPETITIVE  AND  REGULATORY
ENVIRONMENTS;  AND  (V)  CHANGES  IN  THE  AVAILABILITY  OF NET  OPERATING  LOSS
CARRYOVERS AND DEFERRED TAX LIABILITIES.  SEE "BUSINESS--FACTORS THAT MAY AFFECT
FUTURE  RESULTS" IN THE COMPANY'S  ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2001 FOR A DISCUSSION OF THESE FACTORS IN GREATER DETAIL. WE ASSUME
NO OBLIGATION TO UPDATE ANY OF OUR FORWARD-LOOKING STATEMENTS.

CRITICAL ACCOUNTING POLICIES

     In preparing its consolidated financial statements, the Company is required
to make  judgments  and estimates  that may have a  significant  impact upon its
financial results.  The Company's valuation of its MSRs and its determination of
the  adequacy  of its  allowance  for loan  losses are  particularly  subject to
management's judgment and estimates. The Company's accounting policies for these
two areas are discussed at length in notes 2(m) and 2(e) of the Company's  Notes
to  Consolidated  Financial  Statements  included in the  Company's  2001 Annual
Report on Form 10-K.

OVERVIEW

     GS Holdings,  formerly FN Holdings,  a wholly  owned  subsidiary  of Golden
State,  is a holding company whose only  significant  asset is all of the common
and preferred stock of the Bank.

     The  Company,   headquartered  in  San  Francisco,   California,   provides
diversified  financial  services to consumers and small businesses in California
and Nevada, primarily:

     (a)  retail  branches  that  provide  deposit   products  such  as  demand,
          transaction and  savings accounts,  and investment  products  such  as
          mutual funds, annuities and insurance; and

     (b) mortgage banking activities,  including  originating and purchasing 1-4
         unit residential  loans for  sale  or  retention,  servicing  loans for
         itself  and  others  and,  to  a  lesser  extent,  originating   and/or
         purchasing commercial  real estate,  commercial and  consumer loans for
         investment.

     The Company's revenues are derived from:

     (a) interest earned on loans and securities;

     (b) gains on  sales  of loans  and  other  investments,  fees  received  in
         connection with loan servicing and securities brokerage; and

     (c) other customer service transactions.

     Expenses  primarily  consist of interest on customer  deposit  accounts and
borrowings,  and general and administrative  expenses including compensation and
benefits,   occupancy  and  equipment,   professional  fees  and  other  general
administrative expenses.


                                    Page 31
<PAGE>


     PENDING MERGER

     On May  21,  2002,  Citigroup  and  Mercury  Merger  Sub,  a  wholly  owned
subsidiary  of  Citigroup,  entered  into a merger  agreement  with the  Company
whereby  the  Company  will be merged with and into  Mercury  Merger  Sub,  with
Mercury Merger Sub as the surviving  company.  The Merger,  which is expected to
close in the third quarter of 2002,  is subject to  regulatory  and Golden State
stockholder  approvals.   See  note  2  of  the  Company's  Notes  to  Unaudited
Consolidated Financial Statements.

     NET INCOME

     GS Holdings  reported net income of $241.8 million for the six months ended
June 30, 2002,  compared with net income of $209.2 million for the corresponding
period in 2001.  Net income for the six months  ended June 30,  2001  includes a
loss of $1.6  million,  net of tax,  from the  cumulative  effect  of  change in
accounting  principle.  Net  income  before the  cumulative  effect of change in
accounting  principle for the six months ended June 30, 2001 was $210.7 million.
The Bank's  efficiency  ratio was 47.34% for the six months ended June 30, 2002,
compared to 49.30% for the comparable period in 2001.

     Net interest income  increased $91.1 million during the first six months of
2002 as compared to the  year-ago  period,  primarily  as a result of  declining
market  interest  rates  reducing the costs of liabilities at a faster rate than
the decline in the yield on assets. Lower-costing liabilities were the result of
the   replacement  of  higher-rate   borrowings  and  deposits  with  lower-rate
borrowings  and  deposits  as  these  instruments  came due or were  repaid.  In
addition,  during the six months ended June 30, 2002,  $11.2 million of interest
income was received in  connection  with a California  income tax refund.  Total
noninterest income declined by $85.5 million,  primarily in loan servicing fees,
net due to higher MSR  amortization  and an increased MSR  valuation  provision.
Total  noninterest  expense  declined $15.4 million and includes a $27.5 million
decrease due to the adoption of SFAS No. 142 on January 1, 2002.

     GS Holdings  reported  net income of $116.4  million  for the three  months
ended  June 30,  2002,  compared  with net  income  of  $113.5  million  for the
corresponding  period in 2001.  Net income for the three  months  ended June 30,
2001 includes a loss of $1.6 million,  net of tax, from the cumulative effect of
change in  accounting  principle.  Net income  before the  cumulative  effect of
change in  accounting  principle  for the three  months  ended June 30, 2001 was
$115.1  million.  The Bank's  efficiency  ratio was 47.06% for the three  months
ended June 30, 2002, compared to 46.27% for the comparable period in 2001.

     Net interest  income  increased $33.9 million during the three months ended
June 30, 2002 as compared to the same period in 2001,  primarily  as a result of
declining  market  interest  rates reducing the costs of liabilities at a faster
rate than the decline in the yield on assets. Lower-costing liabilities were the
result of the replacement of higher-rate borrowings and deposits with lower-rate
borrowings  and  deposits  as  these  instruments  came due or were  repaid.  In
addition, during the three months ended June 30, 2002, $11.2 million of interest
income was received in  connection  with a California  income tax refund.  Total
noninterest income declined by $114.6 million, primarily in loan servicing fees,
net due to higher MSR  amortization  and an increased MSR  valuation  provision.
Total  noninterest  expense  declined $16.8 million and includes a $13.8 million
decrease due to the adoption of SFAS No. 142 on January 1, 2002.

     As noted above, the Company adopted SFAS No. 142 effective January 1, 2002,
which requires that goodwill no longer be amortized.  The effect of the adoption
was to reduce  goodwill  amortization by $13.8 million and $27.5 million for the
three and six months  ended June 30,  2002,  respectively,  compared to the same
period a year ago.  Excluding  the effect of the  adoption of SFAS No. 142,  net
income for the three and six months  ended June 30, 2001 was $127.2  million and
$236.6 million,  respectively.  Excluding the effect of the adoption of SFAS No.
142, income before the cumulative  effect of change in accounting  principle for
the three and six months  ended  June 30,  2001 was  $128.8  million  and $238.1
million, respectively.


                                    Page 32
<PAGE>


     FINANCIAL CONDITION

     During  the six months  ended  June 30,  2002,  consolidated  total  assets
decreased to $51.9 billion from $56.5 billion and total liabilities decreased to
$48.6  billion  from  $53.4  billion  at  December  31,  2001.   Mortgage-backed
securities, loans held for sale and loans receivable declined $2.4 billion, $1.3
billion and $0.7 billion, respectively,  during the six month period. This shift
in mortgage-backed securities and loans is primarily due to high repayment rates
in light of the declining  interest rate environment.  Deposits decreased $764.8
million during the six months ended June 30, 2002, including decreases of $807.6
million  in  custodial  accounts,  $564.5  million  in CDs and $55.5  million in
Brokered Deposits,  offset by a $671.4 million increase in transaction accounts.
Total borrowings, including securities sold under agreements to repurchase, FHLB
advances and other borrowings, declined $4.0 billion during the six months ended
June 30, 2002.

     During the six months ended June 30, 2002,  stockholder's  equity increased
$147.3  million  to $2.8  billion.  The  increase  in  stockholder's  equity  is
principally  the result of $241.8  million in net  income for the  period,  $3.1
million from the exercise of stock options and $2.6 million due to the impact of
Golden State  restricted  common stock.  These  amounts are partially  offset by
$80.0 million in dividends to parent,  $16.9 million in net  unrealized  losses,
after tax, on derivatives and $3.4 million in net unrealized losses,  after tax,
on securities available for sale.

     GS Holdings' non-performing assets, consisting of non-performing loans, net
of purchase accounting adjustments, foreclosed real estate, net, and repossessed
assets,  decreased  to $104.6  million at June 30,  2002  compared  with  $124.1
million at December 31, 2001. Total non-performing assets as a percentage of the
Bank's total assets was 0.20% at June 30, 2002  compared  with 0.22% at December
31, 2001.


                                    Page 33
<PAGE>


RESULTS OF OPERATIONS

     SIX MONTHS ENDED JUNE 30, 2002 VERSUS SIX MONTHS ENDED JUNE 30, 2001

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

<TABLE>
<CAPTION>
                                                                                  Six Months Ended June 30, 2002
                                                                               ------------------------------------
                                                                               Average                      Average
                                                                               Balance       Interest        Rate
                                                                               -------       --------        ----
                                                                                       (dollars in millions)
ASSETS
<S>                                                                            <C>            <C>            <C>
Interest-earning assets (1):
     Securities, interest-bearing deposits in banks  and other (2)             $   351        $   16          8.99%
     Mortgage-backed securities available for sale                               5,598           168          6.02
     Mortgage-backed securities held to maturity                                 1,266            40          6.28
     Loans held for sale, net                                                    2,226            71          6.35
     Loans receivable, net:
         Residential                                                            28,732           883          6.15
         Commercial real estate                                                  6,552           233          7.10
         Consumer                                                                  978            30          6.18
         Automobile                                                              1,986           124         12.65
         Commercial banking                                                        733            21          5.74
                                                                               -------        ------
     Loans receivable, net                                                      38,981         1,291          6.63
     FHLB stock                                                                  1,318            41          6.24
                                                                               -------        ------
         Total interest-earning assets                                          49,740         1,627          6.55%
Noninterest-earning assets                                                       4,149        ------
                                                                               -------
         Total assets                                                          $53,889
                                                                               =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                                  $24,756           261          2.12%
     Securities sold under agreements to repurchase (3)                          2,189            42          3.85
     Borrowings (3)                                                             22,474           584          5.22
     Other                                                                         165             2          1.76
                                                                               -------        ------
         Total interest-bearing liabilities                                     49,584           889          3.60%
Noninterest-bearing liabilities                                                  1,151        ------
Minority interest                                                                  497
Stockholder's equity                                                             2,657
                                                                               -------
         Total liabilities, minority interest
             and stockholder's equity                                          $53,889
                                                                               =======
Net interest income                                                                           $  738
                                                                                              ======
Interest rate spread (4)                                                                                      2.95%
                                                                                                             =====
Net interest margin                                                                                           2.96
                                                                                                             =====

Return on average assets                                                                                      0.90%
                                                                                                             =====
Return on average common equity                                                                              18.21%
                                                                                                             =====
Return on tangible common equity                                                                             24.14%
                                                                                                             =====
Average equity to average assets                                                                              4.93%
                                                                                                             =====
</TABLE>


                                    Page 34
<PAGE>

<TABLE>
<CAPTION>
                                                                                  Six Months Ended June 30, 2001
                                                                               ------------------------------------
                                                                               Average                      Average
                                                                               Balance       Interest        Rate
                                                                               -------       --------        ----
                                                                                       (dollars in millions)
ASSETS
<S>                                                                            <C>            <C>            <C>
Interest-earning assets (1):
     Securities and interest-bearing deposits in banks (2)                     $ 1,051        $   32          6.01%
     Mortgage-backed securities available for sale                              10,385           345          6.64
     Mortgage-backed securities held to maturity                                 1,685            71          8.43
     Loans held for sale, net                                                    1,523            53          6.92
     Loans receivable, net:
         Residential                                                            31,803         1,124          7.07
         Commercial real estate                                                  6,130           256          8.36
         Consumer                                                                  875            40          9.31
         Automobile                                                              1,700            96         11.38
         Commercial banking                                                        570            25          8.69
                                                                               -------        ------
     Total loans receivable, net                                                41,078         1,541          7.51
      FHLB stock                                                                 1,391            45          6.58
                                                                               -------        ------
         Total interest-earning assets                                          57,113         2,087          7.31%
Noninterest-earning assets                                                       3,593        ------
                                                                               -------
         Total assets                                                          $60,706
                                                                               =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                                  $23,997           465          3.90%
     Securities sold under agreements to repurchase (3)                          3,992           121          6.05
     Borrowings (3)                                                             28,784           854          5.96
     Other                                                                           1            --            --
                                                                               -------        ------
         Total interest-bearing liabilities                                     56,774         1,440          5.09%
Noninterest-bearing liabilities                                                  1,121        ------
Minority interest                                                                  497
Stockholder's equity                                                             2,314
                                                                               -------
          Total liabilities, minority interest
                and stockholder's equity                                       $60,706
                                                                               =======
Net interest income                                                                           $  647
                                                                                              ======
Interest rate spread (4)                                                                                      2.22%
                                                                                                             =====
Net interest margin                                                                                           2.25%
                                                                                                             =====

Return on average assets                                                                                      0.69%
                                                                                                             =====
Return on average common equity                                                                              18.08%
                                                                                                             =====
Return on tangible common equity                                                                             29.19%
                                                                                                             =====
Average equity to average assets                                                                              3.81%
                                                                                                             =====
</TABLE>
----------------
(1)  Non-performing assets are included in the average balances  for the periods
     indicated.

(2)  Includes securities, interest-bearing  deposits in other banks,  securities
     purchased under agreements to resell, interest income on California  income
     tax refund and other interest income.

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

(4)  Interest rate spread represents the difference between the average rates of
     total interest-earning assets and total interest-bearing liabilities.


                                    Page 35
<PAGE>


     The following table shows the changes in interest income and expense due to
changes in rate and volume.  For each  category of  interest-earning  assets and
interest-bearing liabilities, information is provided on changes attributable to
volume (change in average  outstanding  balance multiplied by the prior period's
rate) and rate (change in average interest rate multiplied by the prior period's
volume).  Changes  attributable  to both  volume  and rate have  been  allocated
proportionately.

<TABLE>
<CAPTION>
                                                                        Six Months Ended June 30, 2002 vs. 2001
                                                                              Increase (Decrease) Due to
                                                                  ------------------------------------------------
                                                                          VOLUME          RATE             NET
                                                                          ------          ----             ---
INTEREST INCOME:                                                                           (in millions)
<S>                                                                       <C>            <C>             <C>
       Securities, interest-bearing deposits in banks and other           $ (13)         $  (3)          $ (16)
       Mortgage-backed securities available for sale                       (147)           (30)           (177)
       Mortgage-backed securities held to maturity                          (15)           (16)            (31)
       Loans held for sale, net                                              22             (4)             18
       Loans receivable, net                                                (40)          (210)           (250)
       FHLB stock                                                            (2)            (2)             (4)
                                                                          -----          -----           -----
          Total                                                            (195)          (265)           (460)
                                                                          -----          -----           -----

INTEREST EXPENSE:

       Deposits                                                              30           (234)           (204)
       Securities sold under agreements to repurchase                       (46)           (33)            (79)
       Borrowings                                                          (161)          (109)           (270)
       Other                                                                  1              1               2
                                                                          -----          -----           -----
          Total                                                            (176)          (375)           (551)
                                                                          -----          -----           -----
                 Change in net interest income                            $ (19)         $ 110           $  91
                                                                          =====          =====           =====
</TABLE>

     INTEREST INCOME.  Total interest income was $1.6 billion for the six months
ended June 30, 2002, a decrease of $460.1 million from the six months ended June
30, 2001. Total  interest-earning  assets for the six months ended June 30, 2002
averaged $49.7 billion,  compared to $57.1 billion for the corresponding  period
in 2001.  The  decrease in  interest-earning  assets is  primarily a result of a
decline in mortgage-backed securities,  principally due to management's decision
to  sharply  reduce  purchases,  and net  loan  run  off,  as well as  decreased
securities volume. These decreases were partially offset by an increase in loans
held for sale due to heightened borrower  refinancing  activity in the declining
interest rate environment. The yield on total interest-earning assets during the
six months ended June 30, 2002  decreased to 6.55% from 7.31% for the six months
ended June 30, 2001, primarily due to the repricing of loans and mortgage-backed
securities  available  for sale at lower  rates.  At June 30,  2002,  11% of the
Company's  portfolio  loans  were tied to COFI  indices,  12% to  Treasury-based
indices  and 49% were  "hybrid"  ARMs - fixed  for  three to ten  years and then
adjusting  annually.  Twenty-three  percent  of the  portfolio  was  fixed.  The
remaining 5% of the portfolio was in other adjustable-rate products.

     GS Holdings earned $1.3 billion of interest income on loans  receivable for
the six months ended June 30,  2002,  a decrease of $250.0  million from the six
months ended June 30, 2001.  The average  balance of loans  receivable was $39.0
billion for six months  ended June 30, 2002,  compared to $41.1  billion for the
same period in 2001. The weighted average yield on loans receivable decreased to
6.63% for the six months ended June 30, 2002 from 7.51% for the six months ended
June 30, 2001. The decrease in the average balance reflects the sharp run off of
residential loans during a period of high refinancing activity.  The decrease in
the weighted  average yield  reflects the repricing of  variable-rate  loans,  a
decrease in the prime rate on commercial  banking loans and comparatively  lower
market  interest  rates  during the six months  ended June 30,  2002,  partially
offset by a higher yield on auto loans purchased  after July 1, 2001,  which are
recorded on a gross-coupon basis, rather than a credit-adjusted yield basis. The
impact of this change on net  interest  income  during the six months ended June
30, 2002 was to increase interest income by $20.7 million.


                                    Page 36
<PAGE>


     Loan production is detailed in the table below (in thousands):

<TABLE>
<CAPTION>
                                                                Six Months Ended June 30,
                                                                -------------------------
                                                                2002                 2001
                                                                ----                 ----
<S>                                                          <C>                 <C>
           Loans funded:
               Residential real estate loans:
                   Adjustable-rate                           $ 3,455,177         $ 3,854,221
                   Fixed-rate                                 10,369,569           7,459,609
                                                             -----------         -----------
                       Total residential real estate loans    13,824,746          11,313,830
               Commercial real estate loans                      903,169             886,836
               Commercial loans                                  648,287             523,254
               Consumer nonmortgage loans                        526,246             393,648
               Auto loans (a)                                    619,694             635,466
                                                             -----------         -----------
                       Total loans funded                    $16,522,142         $13,753,034
                                                             ===========         ===========

               Residential real estate loans purchased       $ 2,207,946         $ 1,723,576
                                                             ===========         ===========
</TABLE>
     ------------
     (a) Approximately 50% and 41% of this volume was in prime product;  50% and
         59% in sub-prime  product for the six  months  ended June 30,  2002 and
         2001, respectively.

     GS Holdings  earned $70.7 million of interest income on loans held for sale
for the six months  ended June 30, 2002,  an increase of $18.0  million from the
six months ended June 30, 2001.  The average  balance of loans held for sale was
$2.2 billion for the six months ended June 30, 2002, an increase of $0.7 billion
from  the  comparable  period  in  2001,   primarily   attributed  to  increased
originations of residential  fixed-rate loans as a result of heightened borrower
refinancing  activity in the  declining  interest rate  environment.  Fixed-rate
production  for sale totalled $10.2 billion during the six months ended June 30,
2002,  an  increase  of 46.5%  over  the  $6.9  billion  originated  during  the
comparable  period in 2001.  The weighted  average  yield on loans held for sale
decreased to 6.35% for the six months ended June 30, 2002 from 6.92% for the six
months ended June 30, 2001, primarily due to declining market interest rates.

     Interest income on mortgage-backed securities available for sale was $168.5
million for the six months  ended June 30,  2002,  a decrease of $176.5  million
from the six months ended June 30, 2001. The average portfolio balance decreased
$4.8 billion, to $5.6 billion for the six months ended June 30, 2002 compared to
the same period in 2001.  The weighted  average yield on these assets  decreased
from  6.64% for the six months  ended June 30,  2001 to 6.02% for the six months
ended June 30,  2002.  The  decrease in the volume is  primarily  attributed  to
management's decision to sharply reduce purchases,  coupled with high repayments
and sales of  mortgage-backed  securities.  The decrease in the weighted average
yield  primarily  reflects the  repricing of  variable-rate  securities at lower
rates.

     Interest  income on  mortgage-backed  securities held to maturity was $39.7
million for the six months ended June 30, 2002, a decrease of $31.3 million from
the six months ended June 30, 2001. The average portfolio balance decreased $0.4
billion,  to $1.3 billion for the six months ended June 30, 2002 compared to the
same period in 2001,  primarily due to repayments.  The weighted  average yields
for the six  months  ended  June  30,  2002  and  2001  were  6.28%  and  8.43%,
respectively. The decrease in the weighted average yield is primarily the result
of the repricing of variable-rate securities at lower rates.

     Interest income on securities, interest-bearing deposits in banks and other
was $15.8  million for the six months  ended June 30,  2002, a decrease of $15.8
million from the six months ended June 30, 2001. The average  portfolio  balance
was $0.4  billion and $1.1  billion  for the six months  ended June 30, 2002 and
2001,  respectively.  The  weighted  average  yield was 8.99% for the six months
ended June 30, 2002  compared to 6.01% for the six months  ended June 30,  2001.
The decrease in the volume is primarily attributed to payments and maturities of
securities. The increase in the weighted average yield reflects $11.2 million of
interest income related to a California  income tax refund for which there is no
corresponding  earning asset; if this amount is excluded,  the weighted  average
yield for the six  months  ended  June 30,  2002  would be 2.61%.  The  weighted
average yield also


                                    Page 37
<PAGE>


reflects a shift in the mix of securities, with lower average balances of higher
rate securities held to maturity during the first six months of 2002.

     Dividends  on FHLB stock were $40.8  million for the six months  ended June
30,  2002,  a decrease of $4.6  million from the six months ended June 30, 2001.
The average  balance  outstanding  was $1.3 billion and $1.4 billion for the six
months ended June 30, 2002 and 2001, respectively. The weighted average dividend
on FHLB  stock  declined  to 6.24% for the six months  ended June 30,  2002 from
6.58% for the six months ended June 30, 2001.

     INTEREST  EXPENSE.  Total  interest  expense was $888.5 million for the six
months  ended June 30,  2002,  a decrease of $551.2  million from the six months
ended June 30, 2001. The decrease is primarily due to declining  market interest
rates and a reduction in  borrowings  under FHLB  advances and  securities  sold
under agreements to repurchase, partially offset by additional deposits.

     Interest  expense on  deposits,  including  Brokered  Deposits,  was $260.9
million for the six months  ended June 30,  2002,  a decrease of $203.6  million
from the six months  ended  June 30,  2001.  The  average  balance  of  deposits
outstanding  increased from $24.0 billion for the six months ended June 30, 2001
to $24.8  billion for the six months  ended June 30,  2002.  The increase in the
average balance is primarily  attributed to increases in the average balances of
money market accounts, retail customer checking accounts, custodial accounts and
savings  account  balances,  partially  offset by a decline in CDs.  The overall
weighted  average  cost of deposits  decreased to 2.12% for the six months ended
June 30, 2002 from 3.90% for the six months ended June 30, 2001,  primarily  due
to declining  market  interest  rates and a shift in the mix of  deposits,  with
higher  average  balances of lower rate money  market,  checking,  custodial and
savings  accounts,  and a lower  average  balance of higher  rate CDs during the
first half of 2002.

     Interest expense on securities sold under agreements to repurchase totalled
$42.4  million  for the six months  ended  June 30,  2002,  a decrease  of $79.0
million  from the six months ended June 30,  2001.  The average  balance of such
borrowings  for the six months ended June 30, 2002 and 2001 was $2.2 billion and
$4.0 billion, respectively. The decrease in the average balance is primarily the
result  of  maturities,  which  were not  renewed  in light  of the  decline  in
interest-earning assets. The weighted average interest rate on these instruments
decreased to 3.85% for the six months ended June 30, 2002 from 6.05% for the six
months ended June 30, 2001,  primarily due to  maturities  of higher  fixed-rate
borrowings and the repricing of variable-rate borrowings at lower rates.

     Interest  expense on borrowings  totalled $583.8 million for the six months
ended June 30, 2002, a decrease of $270.0 million from the six months ended June
30, 2001. The average balance outstanding for the six months ended June 30, 2002
and 2001 was $22.5 billion and $28.8 billion, respectively. The weighted average
interest rate on these  instruments  decreased to 5.22% for the six months ended
June 30, 2002 from 5.96% for the six months ended June 30, 2001. The decrease in
the average volume is primarily the result of maturities, which were not renewed
in light of the decline in  interest-earning  assets,  while the decrease in the
weighted average rate is primarily due to declining market interest rates.

     NET INTEREST  INCOME.  Net interest  income was $738.0  million for the six
months  ended June 30,  2002,  an increase of $91.1  million from the six months
ended June 30,  2001.  The interest  rate spread  increased to 2.95% for the six
months  ended June 30, 2002 from 2.22% for the six months  ended June 30,  2001,
primarily as a result of  declining  market  interest  rates  reducing  costs of
liabilities  at a  faster  rate  than  the  decline  in  the  yield  on  assets.
Lower-costing  liabilities  were the result of the  replacement  of  higher-rate
borrowings  and  deposits  with  lower-rate  borrowings  and  deposits  as these
instruments came due or were repaid.  The net interest margin increased to 2.96%
for the six months ended June 30, 2002, up 71 bps from the 2.25% reported during
the first half of 2001.  Excluding the $11.2 million  interest on the California
income tax refund,  the interest rate spread and net interest margin for the six
months ended June 30, 2002 would be 2.90% and 2.91%, respectively.

     NONINTEREST INCOME. Total noninterest income,  consisting primarily of loan
servicing fees, customer banking fees, gain on sale,  settlement and transfer of
loans, net, gain on sale of assets,  net and other income, was $88.0 million for
the six months ended June 30,  2002,  representing  a decrease of $85.5  million
from the six months ended June 30, 2001.


                                    Page 38
<PAGE>


       Loan  servicing fees for the Company,  were $(106.6)  million for the six
months ended June 30, 2002, compared to $(6.9) million the six months ended June
30, 2001. The following table details the components of loan servicing fees, net
(in thousands):

<TABLE>
<CAPTION>
                                                                        Six Months Ended June 30,
                                                                        -------------------------
                                                                         2002               2001
                                                                         ----               ----
<S>                                                                    <C>               <C>
     Components of loan servicing fees, net:
        Loan servicing fees                                            $ 249,676         $ 224,292
        Amortization of MSRs                                            (212,596)         (147,013)
        Pass-through Interest Expense                                    (20,498)          (16,142)
        Net gain on MSRs/MSR derivatives (SFAS No. 133)                    3,939             8,957
        MSR valuation provision                                         (127,107)          (77,000)
                                                                       ---------         ---------
              Total loan servicing fees, net                           $(106,586)        $  (6,906)
                                                                       =========         =========

     Portfolio run off rate (residential portfolio only)                    30.0%             25.6%
     MSR value run off rate (residential portfolio only)                    21.8              21.2
     MSR amortization rate (residential portfolio only)                     22.9              20.3
</TABLE>

     As the table  reflects,  gross loan servicing fees increased  $25.4 million
from  year-ago  levels,  which is  primarily  attributable  to the growth of the
Company's  servicing  portfolio and higher  ancillary  fees.  The  single-family
residential  loan servicing  portfolio,  excluding  loans serviced for the Bank,
increased from $83.3 billion at June 30, 2001 to $90.7 billion at June 30, 2002.
The  portfolio  runoff rate,  representing  the  percentage  of the  residential
portfolio that has been paid off during the year,  influences MSR  amortization,
which  increased  $65.6  million in the six months  ended June 30, 2002 over the
same period in 2001. MSR  amortization was also affected by a higher average MSR
balance for the six months  ended June 30,  2002  compared to the same period in
2001.  Pass-through  Interest Expense  increased $4.4 million or 27.0% year over
year, also influenced by higher runoff rates. Total loan servicing fees, net for
the six months ended June 30, 2002 and 2001  includes net pre-tax  gains of $3.9
million  and $9.0  million,  respectively,  from  the  impact  of SFAS  No.  133
pertaining  to the MSR  fair  value  hedges.  After  recording  these  gains  in
accordance with SFAS No. 133, the Company  determined that the fair value of the
MSR asset was less  than its  carrying  value  and  recorded  pre-tax  valuation
provisions on the MSRs of $127.1 million and $77.0 million during the six months
ended June 30, 2002 and 2001, respectively.

     Customer banking fees were $119.0 million for the six months ended June 30,
2002  compared to $105.8  million for the six months  ended June 30,  2001.  The
following  table  details the  components  of customer  banking fees and service
charges (in thousands):

<TABLE>
<CAPTION>
                                                                        Six Months Ended June 30,
                                                                        -------------------------
                                                                          2002              2001
                                                                          ----              ----
<S>                                                                     <C>               <C>
     Components of customer banking fees and service charges:

        Customer and electronic banking fees                            $ 77,602          $ 68,501
        Other customer fees                                                1,517             1,298
        Investment sales income                                           35,199            30,730
        Insurance commissions                                              4,702             5,291
                                                                        --------          --------
                Total customer banking fees and service charges         $119,020          $105,820
                                                                        ========          ========
</TABLE>

     The increase is primarily attributed to increased emphasis by management on
transaction  account  growth and higher fee income on mutual  fund,  annuity and
other  investment and insurance  product sales through CFI. 2002 also includes a
$1.6 million  reclassification  to reflect gross  revenues  from customer  check
printing  fees  rather than net  revenues.  The offset is included in the "other
expense" line of the income statement. Transaction accounts (including custodial
accounts)  as a  percentage  of retail  deposits  increased to 58.5% at June 30,
2002, from 53.3% at June 30, 2001.


                                    Page 39
<PAGE>


     Gain on sale,  settlement and transfer of loans, net totalled $55.5 million
for the six months  ended June 30, 2002,  an increase of $33.6  million from the
six months ended June 30, 2001.  During the six months ended June 30, 2002,  the
Company sold $11.9 billion in single-family mortgage loans with servicing rights
retained as part of its ongoing  mortgage  banking  operations at gains of $43.7
million compared to $5.6 billion of such sales for the  corresponding  period in
2001 at gains of $14.1 million. The overall increase in the volume of loans sold
and the related gain is a result of the significant  increase in fixed-rate loan
originations  due to the overall  decline in market interest rates and increased
mortgage  refinancing.  The results in 2002 and 2001 include unrealized gains of
$7.3  million and $3.6  million,  respectively,  on the  derivative  rate locks,
forward loan sale  commitments and closed loan inventory from the application of
SFAS No. 133.

     Gain on sale of assets,  net totalled $8.4 million for the six months ended
June 30, 2002,  compared to a net gain of $16.2 million for the six months ended
June 30, 2001.  The gain during the first half of 2002  includes a $14.2 million
gain on the sale of a real estate partnership  interest,  a $3.4 million gain on
the sale of the Santa  Barbara  branch  and a $2.0  million  gain on the sale of
$62.3  million  in  mortgage-backed  securities,  partially  offset  by an $11.3
million loss on the  mark-to-market  of the Company's  portfolio of IO strip and
"B" tranche mortgage securities pursuant to EITF No. 99-20. The gain during 2001
is primarily  attributed  to a $9.3  million  gain on the sale of the  Company's
Concord  EFS stock and a gain of $6.6  million  on the sale of $298  million  in
mortgage-backed securities.

     Other noninterest  income for the six months ended June 30, 2001 included a
gain of $20.7 million on the non-monetary  exchange of Star Systems common stock
for  634,520  shares  of  Concord  EFS  common  stock as a result  of  Concord's
acquisition of Star Systems in February 2001.

     NONINTEREST  EXPENSE.  Total noninterest expense was $457.0 million for the
six months ended June 30, 2002, a decrease of $15.4 million  compared to the six
months ended June 30, 2001.  Excluding  the  amortization  of goodwill and other
intangible  assets,  noninterest  expense for the six months ended June 30, 2002
was $454.7  million,  an increase of $12.2  million  over the same period in the
prior year.  Noninterest expense for the six months ended June 30, 2002 included
decreases of $27.5 million in amortization of intangible assets, $3.0 million in
other noninterest expense and $1.0 million in loan expense. These decreases were
partially  offset by increases of $11.4 million in  compensation  expense,  $3.2
million in occupancy  and  equipment  expense and $1.4  million in  professional
fees.

     Compensation  and employee  benefits expense was $242.6 million for the six
months  ended June 30,  2002,  an increase of $11.4  million from the six months
ended June 30,  2001.  The increase is  primarily  attributed  to an increase in
staff (from 8,015 FTE at June 30, 2001 to 8,185 at June 30, 2002) and  temporary
personnel,  primarily  in  volume-related  operating  groups,  as well as normal
salary adjustments.

     Professional  fees were $16.1  million  for the six  months  ended June 30,
2002,  an  increase of $1.4  million  from the six months  ended June 30,  2001,
primarily  due to an overall  increase  in legal fees  related to various  legal
cases.

     Amortization of intangible assets was $2.3 million for the six months ended
June 30,  2002,  a decrease of $27.5  million from the six months ended June 30,
2001,  due to the  adoption of SFAS No. 142 on January 1, 2002,  which  requires
that goodwill no longer be amortized.

     Other noninterest  expense was $108.2 million for the six months ended June
30, 2002 compared to $111.2  million in the same period of 2001. The decrease in
expenses  relates to  decreases  in a number of  operating  expense  categories,
including retail back office operations,  marketing,  judgments and settlements,
employee travel expense and telephone.

     PROVISION  FOR INCOME TAX.  During the six months ended June 30,  2002,  GS
Holdings  recorded gross income tax expense of $150.7 million,  which was offset
by a tax benefit of $37.1 million, for net income tax expense of $113.6 million.
Based on the current status of Mafco Holdings' audits for the years 1991 through
1995 and anticipated reversal of deferred tax assets with established  valuation
allowance,  management  changed  its  judgment  about the  realizability  of the
Company's  deferred  tax assets  and  reduced  its  valuation  allowance  by $44
million. As a result of reducing the valuation allowance, income tax expense was
reduced by $31.4 million and goodwill was reduced by $12.6 million.


                                    Page 40
<PAGE>


     In addition,  an accrued  liability had been established in prior years for
the purpose of satisfying assessments that may result from issues arising during
audits  with  various   state  taxing   authorities.   As  a  result  of  recent
documentation  received  pertaining to the California  audit of Glendale Federal
Bank for the years 1991 through 1997,  management  reduced its accrued state tax
liability  by $8.7 million  during the six months ended June 30, 2002.  Goodwill
was reduced by $0.6 million in  connection  with this  transaction.  The Company
also  recorded  additional  Federal  tax  expense  of  $3.1  million  due to the
reduction of the state tax expense.

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

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

     GS Holdings' effective gross federal tax rate was 27% during the six months
ended June 30, 2002 and 41% during the six months ended June 30, 2001, while its
federal statutory tax rate was 35% during both periods.  In 2002, the difference
between  the  effective  and  statutory  rates  was  primarily  the  result of a
reduction of the valuation allowance, partially offset by an increase in federal
tax  recorded  in  conjunction  with the  reduction  in the  accrued  state  tax
liability. In 2001, the difference between the effective and statutory rates was
primarily the result of  non-deductible  goodwill  amortization  and  additional
federal tax liability  recorded in  conjunction  with a reduction in the accrued
state  tax  liability.  GS  Holdings'  effective  state tax rate was 3% and (5)%
during  the six  months  ended  June 30,  2002 and 2001,  respectively.  The low
effective  state tax rate during 2002 and 2001 was the result of the  previously
discussed reduction in the accrued state tax liability.

     MINORITY  INTEREST.  During each of the six months  ended June 30, 2002 and
2001,  dividends  on the REIT  Preferred  Stock were  recorded  totalling  $13.5
million, net of income tax benefit,  which will inure to the Company as a result
of the deductibility of such dividends for income tax purposes.

     CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING  PRINCIPLE.  Cumulative effect of
change in accounting principle for the six months ended June 30, 2001 includes a
write-down  of $1.6  million,  net of income taxes of $1.1  million,  on certain
securities  as a result of the  Company's  implementation  of EITF No.  99-20 on
April 1, 2001.  See note 14 of the  Company's  Notes to  Unaudited  Consolidated
Financial Statements.


                                    Page 41
<PAGE>


     IMPACT OF SFAS NO. 133. On January 1, 2001,  the Company  adopted  SFAS No.
133. The pronouncement impacted several other areas of the financial statements.
The table  summarizes the activity during the six months ended June 30, 2002 and
2001 below (debit/(credit); in thousands):

<TABLE>
<CAPTION>
                                             Assets                     Liabilities and Equity           Pre-tax Earnings
                                --------------------------------    ------------------------------    ----------------------
                                 Loans                                             Taxes-                Loan    (Gain)/Loss
                                  Held    Residential Derivative    Derivative     Other              Servicing   on Sale of
                                For Sale     MSRS       Assets      Liabilities  Liabilities   OCI    Fees, Net     Loans
                                --------     ----       ------      -----------  -----------   ---    ---------     -----
<S>                             <C>       <C>        <C>             <C>           <C>       <C>       <C>         <C>
Fair value adjustments:
   MSRs and MSR hedges          $    --   $(187,626) $   180,458     $  11,107     $    --   $    --   $(3,939)    $    --
   Warehouse loans and
      pipeline hedges            43,381          --      (28,685)       (7,437)         --        --        --      (7,259)
   Cash flow (balance sheet)
      hedges - swaps                 --          --           --       (28,500)     11,642    16,858        --          --
                                -------   ---------  -----------     ---------     -------   -------   -------     -------
Fair Value Adjustments - Six
   Months Ended June 30, 2002    43,381    (187,626)     151,773       (24,830)     11,642    16,858    (3,939)     (7,259)

Other Activity - Six Months
   Ended June 30, 2002:
   MSR hedge additions               --          --      833,385            --          --        --        --          --
   MSR hedge sales and
          maturities                 --          --   (1,078,131)       32,393          --        --        --          --
   MSR hedge receipts
      and payments                   --          --      (32,053)      (19,014)         --        --        --          --
                                -------   ---------  -----------     ---------     -------   -------   -------     -------
Total Other Activity -  Six
   Months Ended June 30, 2002        --          --     (276,799)       13,379          --        --        --          --
                                -------   ---------  -----------     ---------     -------   -------   -------     -------

Total Impact from
   SFAS No. 133 - Six Months
   Ended June 30, 2002          $43,381   $(187,626) $  (125,026)    $ (11,451)    $11,642   $16,858   $(3,939)    $(7,259)
                                =======   =========  ===========     =========     =======   =======   =======     =======

Total Impact from
   SFAS No. 133 - Six Months
   Ended June 30,  2001         $(5,204)  $ (81,330) $   193,430     $(126,624)    $42,409   $61,407   $(8,957)    $(3,551)
                                =======   =========  ===========     =========     =======   =======   =======     =======
</TABLE>


                                    Page 42
<PAGE>


RESULTS OF OPERATIONS

     THREE MONTHS ENDED JUNE 30, 2002 VERSUS THREE MONTHS ENDED JUNE 30, 2001

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

<TABLE>
<CAPTION>
                                                                               Three Months Ended June 30, 2002
                                                                           ---------------------------------------
                                                                           Average                         Average
                                                                           Balance         Interest          Rate
                                                                           -------         --------          ----
                                                                                    (dollars in millions)
ASSETS
<S>                                                                        <C>               <C>            <C>
Interest-earning assets (1):
     Securities, interest-bearing deposits in banks and other (2)          $   439           $ 14           12.65%
     Mortgage-backed securities available for-sale                           5,093             76            5.96
     Mortgage-backed securities held-to-maturity                             1,204             18            6.08
     Loans held for sale, net                                                1,758             29            6.57
     Loans receivable, net:
         Residential                                                        28,453            435            6.11
         Commercial real estate                                              6,634            116            7.00
         Consumer                                                            1,011             15            6.06
         Automobile                                                          2,032             65           12.74
         Commercial banking                                                    765             11            5.75
                                                                           -------           ----
     Total loans receivable, net                                            38,895            642            6.60
     FHLB stock                                                              1,247             20            6.42
                                                                           -------           ----
         Total interest-earning assets                                      48,636            799            6.57%
                                                                                             ----
Noninterest-earning assets                                                   4,040
                                                                           -------
         Total assets                                                      $52,676
                                                                           =======


LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                              $24,702            126            2.04%
     Securities sold under agreements to repurchase (3)                      2,143             21            3.89
     Borrowings (3)                                                         21,341            281            5.27
     Other                                                                     168              1            1.77
                                                                           -------           ----
         Total interest-bearing liabilities                                 48,354            429            3.55%
                                                                                             ----
Noninterest-bearing liabilities                                              1,127
Minority interest                                                              499
Stockholder's equity                                                         2,696
                                                                           -------
         Total liabilities, minority interest
             and stockholder's equity                                      $52,676
                                                                           =======
Net interest income                                                                          $370
                                                                                             ====
Interest rate spread (4)                                                                                    3.02%
                                                                                                           =====
Net interest margin                                                                                         3.04%
                                                                                                           =====

Return on average assets                                                                                    0.88%
                                                                                                           =====
Return on average common equity                                                                            17.27%
                                                                                                           =====
Return on tangible common equity                                                                           22.74%
                                                                                                           =====
Average equity to average assets                                                                            5.12%
                                                                                                           =====
</TABLE>


                                     Page 43
<PAGE>


<TABLE>
<CAPTION>
                                                                               Three Months Ended June 30, 2001
                                                                           ---------------------------------------
                                                                           Average                         Average
                                                                           Balance         Interest          Rate
                                                                           -------         --------          ----
                                                                                    (dollars in millions)
ASSETS
<S>                                                                        <C>              <C>            <C>
Interest-earning assets (1):
     Securities and interest-bearing deposits in banks (2)                 $   811          $   12          5.85%
     Mortgage-backed securities available for sale                          10,005             164          6.56
     Mortgage-backed securities held to maturity                             1,631              34          8.24
     Loans held for sale, net                                                1,927              33          6.76
     Loans receivable, net:
         Residential                                                        31,939             554          6.94
         Commercial real estate                                              6,225             128          8.22
         Consumer                                                              890              19          8.70
         Automobile                                                          1,762              50         11.36
         Commercial banking                                                    590              12          8.24
                                                                           -------          ------
     Total loans receivable, net                                            41,406             763          7.38
     FHLB stock                                                              1,402              22          6.39
                                                                           -------          ------
         Total interest-earning assets                                      57,182           1,028          7.19%
Noninterest-earning assets                                                   3,722          ------
                                                                           -------
         Total assets                                                      $60,904
                                                                           =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                              $24,334             224          3.69%
     Securities sold under agreements to repurchase (3)                      3,819              53          5.55
     Borrowings (3)                                                         28,755             415          5.75
     Other                                                                       3              --            --
                                                                           -------          ------
         Total interest-bearing liabilities                                 56,911             692          4.86%
Noninterest-bearing liabilities                                              1,143          ------
Minority interest                                                              499
Stockholder's equity                                                         2,351
                                                                           -------
         Total liabilities, minority interest
             and stockholder's equity                                      $60,904
                                                                           =======
Net interest income                                                                         $  336
                                                                                            ======
Interest rate spread (4)                                                                                    2.33%
                                                                                                           =====
Net interest margin                                                                                         2.36%
                                                                                                           =====

Return on average assets                                                                                    0.75%
                                                                                                           =====
Return on average common equity                                                                            19.31%
                                                                                                           =====
Return on tangible common equity                                                                           30.54%
                                                                                                           =====
Average equity to average assets                                                                            3.86%
                                                                                                           =====
</TABLE>
----------
(1)  Non-performing assets are included in the average balances  for the periods
     indicated.

(2)  Includes securities,  interest-bearing deposits in other banks,  securities
     purchased under agreements to resell, interest income on California  income
     tax refund and other interest income.

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

(4)  Interest rate spread represents the difference between the average rates of
     total interest-earning assets and total interest-bearing liabilities.



                                    Page 44
<PAGE>


     The  following  table shows what portion of the changes in interest  income
and interest  expense were due to changes in rate and volume.  For each category
of  interest-earning  assets and  interest-bearing  liabilities,  information is
provided  on changes  attributable  to volume  (change  in  average  outstanding
balance  multiplied  by the prior  period's  rate) and rate  (change  in average
interest rate multiplied by the prior period's volume).  Changes attributable to
both volume and rate have been allocated proportionately.

<TABLE>
<CAPTION>
                                                                        Three Months Ended June 30, 2002 vs. 2001
                                                                               Increase (Decrease) Due to
                                                                    -------------------------------------------------
                                                                          Volume            Rate            Net
                                                                          ------            ----            ---
INTEREST INCOME:                                                                      (in millions)
<S>                                                                       <C>              <C>             <C>
     Securities, interest-bearing deposits in banks and other             $  (4)           $   6           $   2
     Mortgage-backed securities available for sale                          (74)             (14)            (88)
     Mortgage-backed securities held to maturity                             (8)              (7)            (15)
     Loans held for sale, net                                                (3)              (1)             (4)
     Loans receivable, net                                                   24             (146)           (122)
     FHLB stock                                                              (2)              --              (2)
                                                                          -----            -----           -----
         Total                                                              (67)            (162)           (229)
                                                                          -----            -----           -----

INTEREST EXPENSE:
     Deposits                                                                 2             (100)            (98)
     Securities sold under agreements to repurchase                         (20)             (13)            (33)
     Borrowings                                                             (89)             (44)           (133)
     Other                                                                   --                1               1
                                                                          -----            -----           -----
         Total                                                             (107)            (156)           (263)
                                                                          -----            -----           -----
               Change in net interest income                              $  40            $  (6)          $  34
                                                                          =====            =====           =====
</TABLE>

     INTEREST  INCOME.  Total  interest  income was $798.8 million for the three
months ended June 30,  2002, a decrease of $228.7  million from the three months
ended June 30, 2001.  Total  interest-earning  assets for the three months ended
June  30,  2002  averaged  $48.6  billion,  compared  to $57.2  billion  for the
corresponding  period  in 2001.  The  decrease  in  interest-earning  assets  is
primarily a result of a decline in mortgage-backed  securities,  principally due
to management's  decision to sharply reduce purchases,  and net loan run off, as
well as decreased  securities volume and loans held for sale. The yield on total
interest-earning assets during the three months ended June 30, 2002 decreased to
6.57% from 7.19% for the three months ended June 30, 2001,  primarily due to the
repricing of loans and  mortgage-backed  securities  available for sale at lower
rates.

     GS Holdings  earned $641.8 million of interest  income on loans  receivable
for the three months ended June 30, 2002, a decrease of $121.4  million from the
three months ended June 30, 2001.  The average  balance of loans  receivable was
$38.9  billion for three months ended June 30, 2002,  compared to $41.4  billion
for the same period in 2001.  The  weighted  average  yield on loans  receivable
decreased  to 6.60% for the three  months ended June 30, 2002 from 7.38% for the
three months ended June 30, 2001. The decrease in the average  balance  reflects
the  sharp run off of  residential  loans  during a period  of high  refinancing
activity  resulting in a shift in the mix of loans,  with a higher percentage of
higher  rate loans  during  the second  quarter  of 2002.  The  decrease  in the
weighted average yield reflects the repricing of variable-rate loans, a decrease
in the prime rate on  commercial  banking loans and  comparatively  lower market
interest rates during the three months ended June 30, 2002,  partially offset by
a higher yield on auto loans purchased after July 1, 2001, which are recorded on
a gross-coupon basis,  rather than a credit-adjusted  yield basis. The impact of
this change on net interest  income  during the three months ended June 30, 2002
was to increase interest income by $11.9 million.


                                    Page 45
<PAGE>


     Loan production is detailed in the table below (in thousands):

<TABLE>
<CAPTION>
                                                               Three Months Ended June 30,
                                                               ---------------------------
                                                                 2002               2001
                                                                 ----               ----
<S>                                                           <C>                <C>
           Loans funded:
               Residential real estate loans:
                   Adjustable-rate                            $1,525,246         $2,253,890
                   Fixed-rate                                  4,073,907          4,968,232
                                                              ----------         ----------
                       Total residential real estate loans     5,599,153          7,222,122
               Commercial real estate loans                      462,597            555,456
               Commercial loans                                  352,402            297,011
               Consumer nonmortgage loans                        289,429            215,374
               Auto loans (a)                                    339,191            310,038
                                                              ----------         ----------
                       Total loans funded                     $7,042,772         $8,600,001
                                                              ==========         ==========

               Residential real estate loans purchased        $1,080,339         $  558,081
                                                              ==========         ==========
</TABLE>
     ------------
     (a) Approximately 49% and 36% of this  volume was in prime product; 51% and
         64% in sub-prime product for the  three months  ended June 30, 2002 and
         2001, respectively.

     GS Holdings  earned $28.9 million of interest income on loans held for sale
for the three  months  ended June 30,  2002, a decrease of $3.7 million from the
three months ended June 30, 2001. The average balance of loans held for sale was
$1.8  billion  for the three  months  ended June 30,  2002,  a decrease  of $0.2
billion from the comparable  period in 2001,  primarily  attributed to increased
originations of residential  fixed-rate loans as a result of heightened borrower
refinancing  activity in the  declining  interest rate  environment.  Fixed-rate
production for sale totalled $4.0 billion during the three months ended June 30,
2002, a decline of 14.7% over the $4.7 billion  originated during the comparable
period in 2001.  The weighted  average yield on loans held for sale decreased to
6.57% for the three  months  ended June 30, 2002 from 6.76% for the three months
ended June 30, 2001, primarily due to declining market interest rates.

     Interest income on mortgage-backed  securities available for sale was $75.9
million for the three months  ended June 30,  2002, a decrease of $88.1  million
from the three  months  ended  June 30,  2001.  The  average  portfolio  balance
decreased $4.9 billion, to $5.1 billion for the three months ended June 30, 2002
compared to the same period in 2001. The weighted  average yield on these assets
decreased  from 6.56% for the three  months ended June 30, 2001 to 5.96% for the
three  months  ended June 30,  2002.  The  decrease  in the volume is  primarily
attributed to management's  decision to sharply reduce  purchases,  coupled with
high  repayments and sales of  mortgage-backed  securities.  The decrease in the
weighted  average  yield  primarily  reflects  the  repricing  of  variable-rate
securities at lower rates.

     Interest  income on  mortgage-backed  securities held to maturity was $18.3
million for the three months  ended June 30,  2002, a decrease of $15.3  million
from the three  months  ended  June 30,  2001.  The  average  portfolio  balance
decreased $0.4 billion, to $1.2 billion for the three months ended June 30, 2002
compared to the same period in 2001,  primarily due to repayments.  The weighted
average  yields for the three months ended June 30, 2002 and 2001 were 6.08% and
8.24%, respectively. The decrease in the weighted average yield is primarily the
result of the repricing of variable-rate securities at lower rates.

     Interest income on securities, interest-bearing deposits in banks and other
was $13.9  million for the three months ended June 30, 2002, an increase of $2.0
million from the three months ended June 30, 2001. The average portfolio balance
was $0.4  billion and $0.8  billion for the three months ended June 30, 2002 and
2001,  respectively.  The weighted  average yield of 12.65% for the three months
ended June 30, 2002  compared to 5.85% for the three months ended June 30, 2001.
The decrease in the volume is primarily attributed to payments and maturities of
securities.  The increase in weighted  average yield  reflects  $11.2 million of
interest income related to a California  income tax refund for which there is no
corresponding  earning asset; if this amount is excluded,  the weighted  average
yield for the three  months  ended June 30,  2002 would be 2.44%.  The  weighted
average yield also reflects a


                                    Page 46
<PAGE>


shift in the mix of  securities,  with lower  average  balances  of higher  rate
securities held to maturity during the second quarter of 2002.

     Dividends on FHLB stock were $20.0  million for the three months ended June
30,  2002, a decrease of $2.4 million from the three months ended June 30, 2001.
The average balance  outstanding was $1.2 billion and $1.4 billion for the three
months ended June 30, 2002 and 2001, respectively. The weighted average dividend
on FHLB stock  increased  to 6.42% for the three months ended June 30, 2002 from
6.39% for the three months ended June 30, 2001.

     INTEREST  EXPENSE.  Total interest expense was $428.5 million for the three
months ended June 30,  2002, a decrease of $262.6  million from the three months
ended June 30, 2001. The decrease is primarily due to declining  market interest
rates and a reduction in  borrowings  under FHLB  advances and  securities  sold
under agreements to repurchase, partially offset by a slight increase in average
deposits.

     Interest  expense on  deposits,  including  Brokered  Deposits,  was $125.7
million for the three months  ended June 30,  2002, a decrease of $97.9  million
from the three  months  ended June 30,  2001.  The  average  balance of deposits
outstanding  increased  from $24.3  billion for the three  months ended June 30,
2001 to $24.7 billion for the three months ended June 30, 2002.  The increase in
the average balance is primarily attributed to increases in the average balances
of money  market  accounts,  retail  customer  checking  and  savings  accounts,
partially  offset  by a  decline  in CDs and  custodial  accounts.  The  overall
weighted average cost of deposits  decreased to 2.04% for the three months ended
June 30, 2002 from 3.69% for the three months ended June 30, 2001, primarily due
to declining  market  interest  rates and a shift in the mix of  deposits,  with
higher  average  balances  of lower  rate money  market,  checking  and  savings
accounts,  and a lower  average  balance  of higher  rate CDs  during the second
quarter of 2002.

     Interest expense on securities sold under agreements to repurchase totalled
$21.0  million for the three  months  ended June 30,  2002,  a decrease of $32.4
million from the three months ended June 30, 2001.  The average  balance of such
borrowings  for the three  months  ended June 30, 2002 and 2001 was $2.1 billion
and $3.8 billion, respectively. The decrease in the average balance is primarily
the  result of  maturities,  which were not  renewed in light of the  decline in
interest-earning assets. The weighted average interest rate on these instruments
decreased  to 3.89% for the three  months ended June 30, 2002 from 5.55% for the
three  months  ended  June 30,  2001,  primarily  due to  maturities  of  higher
fixed-rate  borrowings  and the repricing of  variable-rate  borrowings at lower
rates.

     Interest expense on borrowings totalled $281.0 million for the three months
ended June 30,  2002,  a decrease of $133.0  million from the three months ended
June 30, 2001. The average  balance  outstanding for the three months ended June
30,  2002 and 2001 was  $21.3  billion  and  $28.8  billion,  respectively.  The
weighted average interest rate on these  instruments  decreased to 5.27% for the
three  months ended June 30, 2002 from 5.75% for the three months ended June 30,
2001.  The decrease in the average volume is primarily the result of maturities,
which were not renewed in light of the decline in interest-earning assets, while
the decrease in the weighted  average rate is primarily due to declining  market
interest rates.

     NET INTEREST  INCOME.  Net interest income was $370.3 million for the three
months ended June 30, 2002,  an increase of $33.9  million from the three months
ended June 30, 2001.  The interest rate spread  increased to 3.02% for the three
months  ended June 30, 2002 from 2.33% for the three months ended June 30, 2001,
primarily as a result of  declining  market  interest  rates  reducing  costs of
liabilities  at a  faster  rate  than  the  decline  in  the  yield  on  assets.
Lower-costing  liabilities  were the result of the  replacement  of  higher-rate
borrowings  and  deposits  with  lower-rate  borrowings  and  deposits  as these
instruments came due or were repaid.  The net interest margin increased to 3.04%
for the three  months  ended June 30,  2002,  up 68 bps from the 2.36%  reported
during the second quarter of 2001.  Excluding the $11.2 million  interest on the
California  income tax refund,  the interest rate spread and net interest margin
for the three months ended June 30, 2002 would be 2.93% and 2.95%, respectively.

     NONINTEREST INCOME. Total noninterest income,  consisting primarily of loan
servicing fees, customer banking fees, gain on sale,  settlement and transfer of
loans, net, gain on sale of assets, net and other income, was $(0.3) million for
the three months ended June 30, 2002,  representing a decrease of $114.6 million
from the three months ended June 30, 2001.


                                    Page 47
<PAGE>


     Loan  servicing  fees for the Company,  were $(97.8)  million for the three
months  ended June 30,  2002,  compared to $19.7  million the three months ended
June 30, 2001.  The  following  table details the  components of loan  servicing
fees, net (in thousands):

<TABLE>
<CAPTION>
                                                                              Three Months Ended June 30,
                                                                              ---------------------------
                                                                                2002               2001
                                                                                ----               ----
<S>                                                                          <C>                 <C>
     Components of loan servicing fees, net:
        Loan servicing fees                                                  $ 124,304           $111,050
        Amortization of MSRs                                                   (98,271)           (88,598)
        Pass-through Interest Expense                                           (8,463)            (9,258)
        Net (loss) gain on MSRs/MSR derivatives (SFAS No. 133)                 (15,341)             6,552
        MSR valuation provision                                               (100,000)                --
                                                                             ---------           --------
              Total loan servicing fees, net                                 $ (97,771)          $ 19,746
                                                                             =========           ========

     Portfolio run off rate (residential portfolio only)                          26.4%              30.5%
     MSR value run off rate (residential portfolio only)                          19.8               25.5
     MSR amortization rate (residential portfolio only)                           20.7               23.5
</TABLE>

     As the table  reflects,  gross loan servicing fees increased  $13.3 million
from  year-ago  levels,  which is  primarily  attributable  to the growth of the
Company's  servicing  portfolio and higher  ancillary  fees.  The  single-family
residential  loan servicing  portfolio,  excluding  loans serviced for the Bank,
increased  from  $88.5  billion at March 31,  2002 to $90.7  billion at June 30,
2002. MSR  amortization,  which  increased $9.7 million in the second quarter of
2002 over the same period in 2001,  is affected by a higher  average MSR balance
for the three months ended June 30, 2002 over the same period in 2001, partially
offset by a lower  portfolio  runoff rate,  representing  the  percentage of the
residential  portfolio  that has been paid off  during  the  year.  Pass-through
Interest Expense decreased $0.8 million or 9% year over year, also influenced by
lower runoff rates.  Total loan  servicing  fees,  net for the second quarter of
2002 and 2001  includes  net  pre-tax  (loss)  gain of $(15.3)  million and $6.6
million,  respectively,  from the impact of SFAS No. 133  pertaining  to the MSR
fair value hedges.  After recording these (losses) gains in accordance with SFAS
No. 133,  the Company  determined  that the fair value of the MSR asset was less
than its carrying value and recorded a pre-tax  valuation  provision on the MSRs
of $100.0 million during the three months ended June 30, 2002.

       Customer  banking fees were $60.9 million for the three months ended June
30, 2002 compared to $54.6 million for the three months ended June 30, 2001. The
following  table  details the  components  of customer  banking fees and service
charges (in thousands):

<TABLE>
<CAPTION>
                                                                              Three Months Ended June 30,
                                                                              ---------------------------
                                                                                2002               2001
                                                                                ----               ----
<S>                                                                           <C>                <C>
     Components of customer banking fees and service charges:
         Customer and electronic banking fees                                 $40,019            $35,392
         Other customer fees                                                      805                678
         Investment sales income                                               17,819             15,968
         Insurance commissions                                                  2,229              2,521
                                                                              -------            -------
             Total customer banking fees and service charges                  $60,872            $54,559
                                                                              =======            =======
</TABLE>

     The increase is primarily attributed to increased emphasis by management on
transaction  account  growth and higher fee income on mutual  fund,  annuity and
other  investment and insurance  product sales through CFI.  Second quarter 2002
also includes a $0.8 million  reclassification  to reflect  gross  revenues from
customer check printing fees rather than net revenues. The offset is included in
the "other expense" line of the income statement.


                                    Page 48
<PAGE>


     Gain on sale,  settlement and transfer of loans, net totalled $20.9 million
for the three months  ended June 30, 2002,  an increase of $3.9 million from the
three months  ended June 30, 2001.  During the three months ended June 30, 2002,
California  Federal  sold $5.0  billion  in  single-family  mortgage  loans with
servicing rights retained as part of its ongoing mortgage banking  operations at
gains  of  $22.1  million  compared  to  $4.2  billion  of  such  sales  for the
corresponding  period in 2001 at gains of $10.5 million. The overall increase in
the volume of loans  sold and the  related  gain is a result of the  significant
increase in fixed-rate  loan  originations  due to the overall decline in market
interest rates and increased mortgage refinancing.  The results in 2002 and 2001
include a $1.6  million  unrealized  loss and a $3.6  million  unrealized  gain,
respectively,  on the derivative rate locks,  forward loan sale  commitments and
closed loan inventory from the application of SFAS No. 133.

     Gain on sale of assets,  net  totalled  $10.3  million for the three months
ended  June 30,  2002,  compared  to a net gain of $15.8  million  for the three
months ended June 30, 2001.  The gain during the second quarter of 2002 includes
a $14.2  million  gain on the sale of a real estate  partnership  interest and a
$3.4 million gain on the sale of the Santa Barbara branch,  partially  offset by
an $8.1  million loss on the  mark-to-market  of the  Company's  portfolio of IO
strip and "B" tranche mortgage  securities  pursuant to EITF No. 99-20. The gain
during 2001 is  primarily  attributed  to a $9.3 million gain on the sale of the
Company's  Concord  EFS  stock  and a gain of $6.6  million  on the sale of $298
million in mortgage-backed securities.

     NONINTEREST  EXPENSE.  Total noninterest expense was $224.5 million for the
three months ended June 30,  2002, a decrease of $16.8  million  compared to the
three months ended June 30, 2001.  Excluding  the  amortization  of goodwill and
other intangible assets, noninterest expense for the three months ended June 30,
2002 was $223.3 million,  a decrease of $3.0 million over the same period in the
prior  year.  Noninterest  expense  for the three  months  ended  June 30,  2002
included decreases of $13.8 million in amortization of intangible  assets,  $6.7
million in other expense,  $1.1 million in professional fees and $1.0 million in
loan expense. These decreases were partially offset by increases of $4.3 million
in compensation  and employee  benefits  expense,  $0.8 million in occupancy and
equipment expense and $0.6 million in foreclosed real estate operations, net.

     Compensation and employee benefits expense was $117.8 million for the three
months  ended June 30,  2002,  an increase of $4.3 million from the three months
ended June 30,  2001.  The increase is  primarily  attributed  to an increase in
staff (from 8,015 FTE at June 30, 2001 to 8,185 at June 30, 2002) and  temporary
personnel,  primarily in  volume-related  operating  groups,  and normal  salary
adjustments.

     Professional  fees were $8.7  million for the three  months  ended June 30,
2002,  a decrease of $1.1  million  from the three  months  ended June 30, 2001,
primarily  due to an overall  decrease  in legal fees  related to various  legal
cases.

     Amortization  of  intangible  assets was $1.2  million for the three months
ended June 30,  2002,  a decrease of $13.8  million  from the three months ended
June 30,  2001,  due to the  adoption of SFAS No. 142 on January 1, 2002,  which
requires that goodwill no longer be amortized.

     Other noninterest expense was $52.5 million for the three months ended June
30, 2002 compared to $59.2 million for the same period in 2001.  The decrease in
expenses  relates to  decreases  in a number of  operating  expense  categories,
including marketing,  retail back office operations,  judgments and settlements,
employee travel expense and telephone.

     PROVISION  FOR INCOME TAX.  During the three months ended June 30, 2002 and
2001,  GS Holdings  recorded  net income tax expense of $22.3  million and $87.5
million,  respectively.  The expense recorded during the three months ended June
30, 2002 is net of income tax benefit of $31.4 million from the reduction of the
valuation allowance and $5.7 million from the reduction of the accrued state tax
liability.  The expense  recorded during the three months ended June 30, 2001 is
net of income tax benefit of $3.2 million  recognized due to the  utilization of
net  operating  losses  of a  subsidiary  made  available  as a  result  of  the
subsidiary's liquidation into California Federal Bank.


                                    Page 49
<PAGE>


     GS Holdings'  effective  gross  federal tax rate was 15% and 36% during the
three  months  ended June 30,  2002 and 2001,  respectively,  while its  federal
statutory tax rate was 35% during both periods.  In 2002, the difference between
the effective and statutory rates was primarily the result of a reduction of the
valuation allowance,  partially offset by an increase in federal tax recorded in
conjunction with the reduction in the accrued state tax liability.  In 2001, the
difference between the effective and statutory rates was primarily the result of
nondeductible goodwill  amortization.  GS Holdings' effective state tax rate was
0% and 6% during the three  months  ended June 30, 2002 and 2001,  respectively.
The effective  state tax rate declined during 2002 as a result of a reduction of
the accrued state tax liability.

     MINORITY INTEREST.  During each of the three months ended June 30, 2002 and
2001,  dividends  on the REIT  Preferred  Stock  were  recorded  totalling  $6.7
million, net of income tax benefit,  which will inure to the Company as a result
of the deductibility of such dividends for income tax purposes.

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

     IMPACT OF SFAS NO. 133. On January 1, 2001,  the Company  adopted  SFAS No.
133. The pronouncement  impacted several other areas of the financial statements
for the  three  months  ended  June  30,  2002 and  2001,  as  summarized  below
(debit/(credit); in thousands):

<TABLE>
<CAPTION>
                                             Assets                     Liabilities and Equity           Pre-tax Earnings
                                --------------------------------    ------------------------------    ----------------------
                                 Loans                                             Taxes-                Loan    (Gain)/Loss
                                  Held    Residential Derivative    Derivative     Other              Servicing   on Sale of
                                For Sale     MSRS       Assets      Liabilities  Liabilities   OCI    Fees, Net     Loans
                                --------     ----       ------      -----------  -----------   ---    ---------     -----
<S>                             <C>        <C>        <C>            <C>          <C>       <C>        <C>         <C>
Fair value adjustments:
   MSRs and MSR hedges          $     --   $(239,403) $ 209,777      $  14,285    $     --  $     --   $15,341     $    --
   Warehouse loans and
       pipeline hedges            24,671          --    (13,407)       (12,876)         --        --        --       1,612
   Cash flow (balance sheet)
       hedges - swaps                 --          --         --        (89,349)     36,500    52,849        --          --
                                --------   ---------  ---------      ---------    --------  --------   -------     -------
Fair Value Adjustments - Three
   Months Ended June 30, 2002     24,671    (239,403)   196,370        (87,940)     36,500    52,849    15,341       1,612

Other Activity - Three Months
   Ended June 30, 2002:
   MSR hedge additions                --          --    416,498             --          --        --        --          --
   MSR hedge sales and
       maturities                     --          --   (569,501)        (1,229)         --        --        --          --
   MSR hedge receipts
       and payments                   --          --    (13,670)       (17,455)         --        --        --          --
                                --------   ---------  ---------      ---------    --------  --------   -------     -------
Total Other Activity - Three
   Months Ended June 30, 2002         --          --   (166,673)       (18,684)         --        --        --          --
                                --------   ---------  ---------      ---------    --------  --------   -------     -------

Total Impact from
   SFAS No. 133 - Three
   Months Ended June 30, 2002   $ 24,671   $(239,403) $  29,697      $(106,624)   $ 36,500  $ 52,849   $15,341     $ 1,612
                                ========   =========  =========      =========    ========  ========   =======     =======

Total Impact from
   SFAS No. 133 - Three
   Months Ended June 30,  2001  $(10,443)  $ 114,750  $ (11,233)     $  25,109    $(14,114) $(20,437)  $(6,552)    $(3,640)
                                ========   =========  =========      =========    ========  ========   =======     =======
</TABLE>


                                    Page 50
<PAGE>


                          PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

     CALIFORNIA FEDERAL GOODWILL LITIGATION

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

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

     On April 16,  1999,  the Claims  Court  issued its  decision on the damages
claim against the  Government in the  California  Federal  Goodwill  Litigation,
ruling that the Government must compensate the Bank in the sum of  approximately
$23 million.  The summary judgment  liability decision by the first Claims Court
Judge was appealed by the Government,  and the damage award by the second Claims
Court Judge was appealed by the Bank.

     On April 3, 2001,  the Court of Appeals for the Federal  Circuit upheld the
summary judgment  liability  decision and the  approximately  $23 million damage
award, but it also ruled that the Bank be allowed to present evidence  regarding
damages incurred under the lost profits theory.  The case has been remanded back
to the Claims Court for a damages trial under the lost profits theory, and trial
is  currently  expected  to  begin  in the  first  week of  September  2002.  In
preparation  for this trial,  the Bank has had  prepared a  supplemental  expert
report,  which  contains  alternate  damage  calculations  based upon  different
assumptions,  with the higher calculation being $587 million in lost profits and
the lower calculation being $288 million in lost profits. The Government has had
prepared  reports from four different  experts,  all of which  challenge,  for a
variety of  reasons,  the  calculations  in the Bank's  expert  report and which
essentially  contend that the Bank is not entitled to any damages other than the
approximately $23 million previously awarded by the Claims Court and affirmed by
the Federal Circuit.

     GLENDALE GOODWILL LITIGATION

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

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

     On February 16, 2001, the Court of Appeals for the Federal  Circuit vacated
the trial court's award of damages and remanded the case back to the trial court
for determination of total reliance damages to which the Bank might be entitled.
Oral argument  before the trial court took place on June 26, 2001, and on August
2, 2002,  the Claims  Court ruled that the Bank's  total  reliance  damages were
$380.8 million.


                                    Page 51
<PAGE>


     BARTOLD V. GLENDALE FEDERAL BANK ET AL.

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

     In  October  1997,  the  trial  court  granted  summary  judgment  for  the
defendants.  In September  2000, the California  Court of Appeals  reversed this
decision and remanded for further proceedings,  including further development of
class  certification  issues.  On March 2,  2001,  the trial  court  held that a
California class had been certified.  On June 7, 2001, the trial court dismissed
two of the  four  causes  of  action  against  the  Bank,  holding  that the OTS
pre-empted  the  California  courts from  regulating  the Bank's  procedures for
reconveying  deeds. The California Court of Appeal denied  plaintiff's  petition
for review of the trial court's decision.

     In September  2001, the California  state  legislature  amended  California
Civil Code Section 2941 (Assembly Bill 1090) clarifying the legislature's intent
that  loan  servicers  had 39 days  from  loan pay off to  deliver  reconveyance
documents  and  that  trustees  had 21  days  from  the  time of  receiving  the
reconveyance documents to record or cause to be recorded the reconveyance.  This
amendment  specifically  abrogated  the contrary  September  2000 holding of the
California Court of Appeal in this litigation.

     The  Bank  believes  that  it  has  additional   meritorious   defenses  to
plaintiffs'  claims and intends to continue to contest the  remaining  claims in
the lawsuit vigorously.

     OTHER LITIGATION

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

ITEM 5.  OTHER INFORMATION.

     None.


                                    Page 52
<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.)


         99.1 Certification of Periodic Report by Principal Executive Officer.

         99.2 Certification of Periodic Report by Principal Financial Officer.

     (b) Reports on Form 8-K:

         None.


                                    Page 53
<PAGE>


                            GLOSSARY OF DEFINED TERMS


AICPA - American Institute of Certified Public Accountants
APB - Accounting Principles Board
APB OPINION NO. 17 - Intangible Assets
APB OPINION NO. 25 - Accounting for Stock Issued to Employees
APB OPINION NO. 30 -  Reporting  the  Results  of  Operations  -  Reporting  the
    Effects of  Disposal of a Segment of a Business,  and Extraordinary, Unusual
    and Infrequently Occurring Events and Transactions
ARM - Adjustable-rate mortgage
BANK - California Federal Bank
BPS - basis points
BROKERED DEPOSITS - Issued CDs  through direct  placement  programs and national
    investment banking firms
CAL FED ACQUISITION - Agreement and  Plan of  Merger among  FN Holdings, Cal Fed
    Bancorp  Inc.  and  California  Federal  Bank,  A Federal  Savings  Bank. FN
    Holdings  acquired  100%  of  the  outstanding  stock  of  Cal  Fed  and Old
    California  Federal,  and  First  Nationwide  merged  with  and  into Old
    California Federal in January 1997.
CALIFORNIA FEDERAL - California Federal Bank
CALIFORNIA FEDERAL  GOODWILL  LITIGATION - California  Federal  Bank  v.  United
    States, Civil Action 92-138
CD - Certificate of deposit
CITIGROUP - Citigroup Inc.
CLAIMS COURT - United States Court of Federal Claims
COFI - Cost of Funds Index (tied to the FHLB's 11th District cost of funds)
COMPANY - Golden State Holdings Inc.
EITF - Emerging Issues Task Force
EITF NO. 99-20 - Recognition of  Interest  Income  and  Impairment on  Purchased
    and Retained Beneficial Interests in Securitized Financial Assets
EPS - earnings per share
FASB - Financial Accounting Standards Board
FDICIA - Federal Deposit Insurance Corporation Improvement Act
FEDERAL CIRCUIT - U.S. Court of Appeals for the Federal Circuit
FHLB - Federal Home Loan Bank of San Francisco
FHLB SYSTEM - Federal Home Loan Bank System
FIRREA - Financial Institutions Reform, Recovery and Enforcement Act of 1989 and
    its implementing regulations.
FN HOLDINGS - First Nationwide  Holdings Inc.
FN  HOLDINGS  ASSET  TRANSFER - FN  Holdings  contributed  all  of   its  assets
    (including all of the common stock of  the Bank) to GS Holdings in September
    1998.
FN HOLDINGS NOTES - FN Holdings  12 1/4%  Senior Notes,  the FN Holdings  9 1/8%
       Senior Sub Notes and the FN Holdings 10 5/8% Notes, collectively
FNMC - First Nationwide Mortgage Corporation
FTE - Full-time equivalent staff
GAAP -accounting  principles  generally accepted in the United States of America
GLEN FED MERGER - Glendale  Federal Bank merged with and into the Bank
GLENDALE FEDERAL - Glendale Federal Bank, Federal Savings Bank
GLENDALE GOODWILL LITIGATION - Glendale  Federal  Bank  v.  United  States,  No.
    90-772C
GNMA - Government National Mortgage Association
GOLDEN STATE - Golden State Bancorp Inc.
GOLDEN STATE ACQUISITION - FN Holdings  Asset Transfer,  Holding Company Mergers
    and Glen Fed Merger, collectively
GOVERNMENT - United States Government
GS HOLDINGS - Golden State Holdings Inc.
HOLDING COMPANY MERGERS - FN Holdings  merged  with  and  into  Golden  State
    Financial Corporation,  which  owned  all of  the common  stock of  Glendale
    Federal.
HUNTER'S GLEN - Hunter's Glen/Ford, Ltd.
IO - Interest only
IRS - Internal Revenue Service


                                     Page 54
<PAGE>


                      GLOSSARY OF DEFINED TERMS (CONTINUED)


LIBOR - London Interbank Offered Rate
LTW(TM) - Litigation Tracking Warrants(TM)
MERCURY MERGER SUB - Mercury Merger Sub, Inc., a subsidiary of Citigroup
MERGER - The  merger of Golden  State with and into  Mercury  Merger  Sub,  with
    Mercury Merger Sub as the surviving entity
MERGER AGREEMENT - the Agreement  and Plan  of Merger  that provides  for, among
    other things, the Merger
MSR - Mortgage servicing rights
notional amount - the amount on which calculations, payments, and the value of a
    derivative is  based.  Notional  amounts  do  not  represent  direct  credit
    exposures.
NPV - Net portfolio value
OCI - Other comprehensive income
OLD CALIFORNIA FEDERAL - California Federal  Bank, A  Federal Savings Bank prior
    to the Cal Fed Acquisition.
OTS - Office of Thrift Supervision
PASS-THROUGH  INTEREST EXPENSE - represents  interest  that  FNMC  pays  to  the
    investor(s)  for  loans  serviced  by  FNMC,  which  are  paid  off  by  the
    borrower(s) before  the end  of  the  month.  FNMC  pays  the  shortfall  of
    interest on  the respective  loans as a result of the  contractual agreement
    between the servicer (FNMC) and the investor(s) (I. E., GNMA)
PO - Principal only
PREFERRED CAPITAL CORPORATION - California Federal Preferred Capital Corporation
REIT - Real Estate Investment Trust
REIT  PREFERRED  STOCK - 9 1/8%   Noncumulative  Exchangeable  Preferred  Stock,
    Series A,  issued by  California Federal  Preferred Capital  Corporation  in
    January 1996.
REPOS - short-term securities sold under agreements to repurchase
SEC - United States Securities and Exchange Commission
SECURITYHOLDERS - consists  of  Mafco  Holdings  Inc.,  GSB  Investments  Corp.,
    MacAndrews & Forbes Holdings Inc., Hunter's Glen/Ford, Ltd.  and Gerald Ford
SECURITYHOLDERS AGREEMENT - dated as  of May 21, 2002,  by and  among  Citigroup
    Inc., Golden State Bancorp Inc., Mafco Holdings Inc., GSB Investments Corp.,
    MacAndrews & Forbes Holdings Inc., Hunter's Glen/Ford, Ltd. and Gerald Ford,
    pursuant to  which the  Securityholders, among other things,  have agreed to
    vote certain  shares of  Company Common  Stock beneficially  owned by  them,
    constituting approximately  31.5% of the outstanding  shares of Golden State
    Common  Stock,  in  favor  of  the  Merger and  against  competing  business
    combination proposals.
SFAS - Statement of Financial Accounting Standards
SFAS NO. 4 - Reporting Gains and Losses from Extinguishment of Debt
SFAS NO. 13 - Accounting for Leases
SFAS NO. 44 - Accounting for Intangible Assets of Motor Carriers
SFAS NO. 64 - Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements
SFAS NO. 115 - Accounting for Certain Investments in Debt and Equity Securities
SFAS NO. 121 - Accounting for the Impairment of Long-lived  Assets and for Long-
    lived Assets to be Disposed of
SFAS  NO.  131 - Disclosures  about  Segments   of  an  Enterprise  and  Related
    Information
SFAS NO. 133 - Accounting for Derivative Instruments and Hedging Activities
SFAS NO. 142 - Accounting for Goodwill and Intangible Assets
SFAS NO. 144 - Accounting for the Impairment or Disposal of Long-Lived Assets
SFAS NO. 145 - Rescission of  SFAS No. 4,  44, and 64, Amendment of SFAS No. 13,
    and Technical Corrections
SOP - Statement of Position
SOP 01-6 - Accounting  by  Certain  Entities   (Including  Entities  With  Trade
    Receivables) That Lend to or Finance the Activities of Others
STOCK PLAN - Golden State Bancorp Inc. Omnibus Stock Plan
THE MERGER - Mercury Merger  Sub merges with and into Golden State, with Mercury
    Merger Sub as the surviving entity
VERDUGO - Verdugo Trustee Service Corporation


                                    Page 55
<PAGE>


                                   SIGNATURES


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





                                     Golden State Holdings Inc.




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



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



August 9, 2002



                                    Page 56