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

                                    FORM 10-Q

(Mark one)

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

For the quarterly period ended                 September 30, 2001
                                ------------------------------------------------

                                       or

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

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

Commission File Number:                         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 October 31, 2001: 1,000 shares.

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


                                     Page 1
<PAGE>
                           GOLDEN STATE HOLDINGS INC.
                     THIRD QUARTER 2001 REPORT ON FORM 10-Q
                                TABLE OF CONTENTS


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

  Item 1.  Consolidated Financial Statements

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

           Unaudited Consolidated Statements of Income
           Nine Months Ended September 30, 2001 and 2000......................4

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

           Unaudited Consolidated Statements of Comprehensive Income
           Nine Months Ended September 30, 2001 and 2000......................6

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

           Unaudited Consolidated Statement of Stockholder's Equity
           Nine Months Ended September 30, 2001...............................8

           Unaudited Consolidated Statements of Cash Flows
           Nine Months Ended September 30, 2001 and 2000......................9

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

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

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


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

  Item 1.  Legal Proceedings.................................................44

  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.................................................45

  Item 6.  Exhibits and Reports on Form 8-K..................................45

  Glossary of Defined Terms..................................................46

  Signatures.................................................................48

* 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 September 30,
  2001.


                                     Page 2
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
                                   (Unaudited)
                  (dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                             September 30,      December 31,
                 Assets                                                          2001               2000
                 ------                                                      -------------      ------------
<S>                                                                          <C>                <C>
    Cash and due from banks                                                  $   783,020        $   697,441
    Interest-bearing deposits in other banks                                     125,115                123
    Short-term investments                                                        84,740             85,510
                                                                             -----------        -----------
           Cash and cash equivalents                                             992,875            783,074

    Securities available-for-sale, at fair value                                 118,350            637,070
    Securities held-to-maturity                                                  218,788            587,503
    Mortgage-backed securities available-for-sale, at fair value               8,243,194          9,866,823
    Mortgage-backed securities held-to-maturity                                1,473,946          2,886,612
    Loans held for sale, net                                                   2,109,071            845,763
    Loans receivable, net                                                     40,843,118         39,592,814
    Investment in FHLB System                                                  1,427,557          1,361,066
    Premises and equipment, net                                                  278,772            290,899
    Foreclosed real estate, net                                                   19,963             19,080
    Accrued interest receivable                                                  328,042            364,414
    Intangible assets (net of accumulated amortization of $290,971
         at September 30, 2001 and $246,150 at December 31, 2000)                646,467            691,288
    Mortgage servicing rights, net of valuation allowance                      1,318,298          1,559,323
    Derivative assets                                                            326,296                 --
    Other assets                                                               1,149,763          1,029,082
                                                                             -----------        -----------
             Total assets                                                    $59,494,500        $60,514,811
                                                                             ===========        ===========


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

    Deposits                                                                 $24,517,199        $23,462,372
    Securities sold under agreements to repurchase                             3,394,162          4,511,309
    Borrowings                                                                27,048,633         28,800,557
    Derivative liabilities                                                       284,224                 --
    Other liabilities                                                          1,262,000            942,397
                                                                             -----------        -----------
             Total liabilities                                                56,506,218         57,716,635
                                                                             -----------        -----------

    Commitments and contingencies                                                     --                 --

    Minority interest                                                            500,000            500,000

    Stockholder's equity:
         Common stock, $1.00 par value, 1,000 shares authorized,
             issued and outstanding                                                    1                  1
         Additional paid-in capital                                            1,569,454          1,564,821
         Accumulated other comprehensive loss                                    (86,939)           (91,405)
         Retained earnings (substantially restricted)                          1,005,766            824,759
                                                                             -----------        -----------
             Total stockholder's equity                                        2,488,282          2,298,176
                                                                             -----------        -----------
             Total liabilities, minority interest and stockholder's equity   $59,494,500        $60,514,811
                                                                             ===========        ===========
    See accompanying notes to unaudited consolidated financial statements.
</TABLE>


                                     Page 3
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                  NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                      Nine Months Ended September 30,
                                                                                      -------------------------------
                                                                                          2001               2000
                                                                                      ------------       ------------
<S>                                                                                    <C>                <C>
Interest income:
    Loans receivable                                                                   $2,286,425         $2,085,599
    Mortgage-backed securities available-for-sale                                         486,859            625,205
    Mortgage-backed securities held-to-maturity                                            99,401            149,265
    Loans held for sale                                                                    99,241             46,405
    Securities available-for-sale                                                          16,902             44,426
    Securities held-to-maturity                                                            22,058             19,628
    Interest-bearing deposits in other banks                                                  808              4,582
    Dividends on FHLB stock                                                                63,451             70,305
                                                                                       ----------         ----------
        Total interest income                                                           3,075,145          3,045,415
                                                                                       ----------         ----------

Interest expense:
    Deposits                                                                              666,343            679,138
    Securities sold under agreements to repurchase                                        166,858            267,622
    Borrowings                                                                          1,238,600          1,235,282
                                                                                       ----------         ----------
        Total interest expense                                                          2,071,801          2,182,042
                                                                                       ----------         ----------
        Net interest income                                                             1,003,344            863,373
Provision for loan losses                                                                      --                 --
                                                                                       ----------         ----------
        Net interest income after provision for loan losses                             1,003,344            863,373
                                                                                       ----------         ----------

Noninterest income:
    Loan servicing fees, net                                                              (35,652)           131,344
    Customer banking fees and service charges                                             160,991            147,284
    Gain on sale, settlement and transfer of loans, net                                    69,050             37,608
    Gain (loss) on sale of assets, net                                                     21,976            (15,348)
    Other income                                                                           43,974             25,108
                                                                                       ----------         ----------
        Total noninterest income                                                          260,339            325,996
                                                                                       ----------         ----------

Noninterest expense:
    Compensation and employee benefits                                                    345,993            323,201
    Occupancy and equipment                                                               119,135            114,238
    Professional fees                                                                      25,185             28,439
    Loan expense                                                                           12,683             13,745
    Foreclosed real estate operations, net                                                 (1,239)            (4,047)
    Amortization of intangible assets                                                      44,821             47,312
    Other expense                                                                         168,052            149,555
                                                                                       ----------         ----------
        Total noninterest expense                                                         714,630            672,443
                                                                                       ----------         ----------

Income before income taxes,  minority interest, extraordinary items and
    cumulative effect of change in accounting principle                                   549,053            516,926
Income tax expense                                                                        211,253             67,531
Minority interest                                                                          20,241             20,191
                                                                                       ----------         ----------
        Income before extraordinary items and cumulative effect of change in
           accounting principle                                                           317,559            429,204
Extraordinary items - gains on early extinguishment of debt,
    net of applicable taxes of $2,083 in 2000                                                  --              3,014
Cumulative effect of change in accounting principle, net of applicable taxes of
    $1,072 in 2001                                                                         (1,552)                --
                                                                                       ----------         ----------
        Net income                                                                     $  316,007         $  432,218
                                                                                       ==========         ==========
See accompanying notes to unaudited consolidated financial statements.
</TABLE>


                                     Page 4
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                 THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                            Three Months Ended September 30,
                                                                            --------------------------------
                                                                              2001                    2000
                                                                            --------                --------
<S>                                                                         <C>                   <C>
Interest income:
     Loans receivable                                                       $745,411              $  742,092
     Mortgage-backed securities available-for-sale                           141,882                 189,661
     Mortgage-backed securities held-to-maturity                              28,418                  58,428
     Loans held for sale                                                      46,565                  17,719
     Securities available-for-sale                                             2,327                  11,450
     Securities held-to-maturity                                               5,606                  10,147
     Interest-bearing deposits in other banks                                    269                   1,198
     Dividends on FHLB stock                                                  18,079                  25,195
                                                                            --------              ----------
         Total interest income                                               988,557               1,055,890
                                                                            --------              ----------

Interest expense:
     Deposits                                                                201,854                 235,992
     Securities sold under agreements to repurchase                           45,466                  94,888
     Borrowings                                                              384,753                 439,057
                                                                            --------              ----------
         Total interest expense                                              632,073                 769,937
                                                                            --------              ----------
         Net interest income                                                 356,484                 285,953
Provision for loan losses                                                         --                      --
                                                                            --------              ----------
         Net interest income after provision for loan losses                 356,484                 285,953
                                                                            --------              ----------

Noninterest income:
     Loan servicing fees, net                                                (28,746)                 45,521
     Customer banking fees and service charges                                55,171                  48,560
     Gain on sale, settlement and transfer of loans, net                      47,165                  10,546
     Gain on sale of assets, net                                               5,755                     688
     Other income                                                              7,534                   7,304
                                                                            --------              ----------
         Total noninterest income                                             86,879                 112,619
                                                                            --------              ----------

Noninterest expense:
     Compensation and employee benefits                                      114,796                 108,253
     Occupancy and equipment                                                  41,334                  40,730
     Professional fees                                                        10,535                  10,833
     Loan expense                                                              4,114                   4,511
     Foreclosed real estate operations, net                                     (386)                   (669)
     Amortization of intangible assets                                        14,941                  15,405
     Other expense                                                            56,888                  46,543
                                                                            --------              ----------
         Total noninterest expense                                           242,222                 225,606
                                                                            --------              ----------

Income before income taxes and  minority interest                            201,141                 172,966
Income tax expense                                                            87,544                  75,421
Minority interest                                                              6,747                   6,797
                                                                            --------              ----------
         Net income                                                         $106,850              $   90,748
                                                                            ========              ==========

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


                                     Page 5
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                  NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                             Nine Months Ended September 30,
                                                                            --------------------------------
                                                                              2001                    2000
                                                                            --------                --------
<S>                                                                         <C>                     <C>
     Net income                                                             $ 316,007               $432,218

     Other comprehensive income, net of tax:
         Unrealized holding gain on securities available-for-sale:
            Unrealized holding gain arising during the period                 148,627                 59,397
            Less: reclassification adjustment for (gain) loss
               included in net income                                         (15,483)                10,859
                                                                            ---------               --------
                                                                              133,144                 70,256
         Amortization of market adjustment for securities
            transferred from available-for-sale to held-to-maturity            17,912                  2,808

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

         Change in fair value of derivatives used for cash flow hedges,
            net of applicable taxes of $70,402                               (101,943)                    --
                                                                            ---------               --------

     Other comprehensive income                                                 4,466                 73,064
                                                                            ---------               --------

     Comprehensive income                                                   $ 320,473               $505,282
                                                                            =========               ========

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


                                     Page 6
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                 THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                            Three Months Ended September 30,
                                                                            --------------------------------
                                                                              2001                    2000
                                                                            --------                --------
<S>                                                                         <C>                     <C>
    Net income                                                              $106,850                $ 90,748

    Other comprehensive (loss) income, net of tax:
       Unrealized holding gain on securities available-for-sale:
           Unrealized holding gain arising during the period                  50,462                  79,068
           Less: reclassification adjustment for gain included
               in net income                                                  (5,911)                   (231)
                                                                            --------                --------
                                                                              44,551                  78,837
       Amortization of market adjustment for securities
           transferred from available-for-sale to held-to-maturity            14,446                   2,138

       Change in fair value of derivatives used for cash flow hedges,
           net of applicable taxes of $58,828                                (85,183)                     --
                                                                            --------                --------

    Other comprehensive (loss) income                                        (26,186)                 80,975
                                                                            --------                --------

    Comprehensive income                                                    $ 80,664                $171,723
                                                                            ========                ========

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


                                     Page 7
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
                      NINE MONTHS ENDED SEPTEMBER 30, 2001
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>

                                                               Additional     Accumulated Other Comprehensive (Loss) Income
                                                  Common        Paid-In       ---------------------------------------------
                                                   Stock        Capital        Securities       Derivatives         Total
                                                   -----        -------        ----------       -----------         -----
<S>                                                 <C>       <C>               <C>              <C>              <C>
Balance at December 31, 2000                        $1        $1,564,821        $(91,405)        $      --        $ (91,405)

Net income                                          --                --              --                --               --
Change in net unrealized holding gain (loss)
   on securities available-for-sale                 --                --         102,770                --          102,770
Change in net unrealized holding loss
   on derivatives                                   --                --              --          (101,943)        (101,943)
Amortization of unrealized holding
   loss on securities held-to-maturity              --                --          17,912                --           17,912
Unrealized loss on securities reclassified
   to available-for-sale, net of tax                --                --          30,374                --           30,374
Transition adjustment upon adoption
   of SFAS No. 133                                  --                --              --           (44,647)         (44,647)
Dividends to parent                                 --                --              --                --               --
Impact of Golden State restricted
   common stock                                     --             3,055              --                --               --
Tax benefits on exercise of stock options           --             1,578              --                --               --
                                                    --        ----------        --------         ---------        ---------

Balance at September 30, 2001                       $1        $1,569,454        $ 59,651         $(146,590)       $ (86,939)
                                                    ==        ==========        ========         =========        =========

                                                                                                                 (Continued)

See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
                      NINE MONTHS ENDED SEPTEMBER 30, 2001
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                         Retained
                                                         Earnings            Total
                                                      (Substantially     Stockholder's
                                                        Restricted)         Equity
                                                        -----------         ------
<S>                                                     <C>               <C>
Balance at December 31, 2000                            $  824,759        $2,298,176

Net income                                                 316,007           316,007
Change in net unrealized holding gain (loss)
   on securities available-for-sale                             --           102,770
Change in net unrealized holding loss
   on derivatives                                               --          (101,943)
Amortization of unrealized holding
   loss on securities held-to-maturity                          --            17,912
Unrealized loss on securities reclassified
   to available-for-sale, net of tax                            --            30,374
Transition adjustment upon adoption
   of SFAS No. 133                                              --           (44,647)
Dividends to parent                                       (135,000)         (135,000)
Impact of Golden State restricted
   common stock                                                 --             3,055
Tax benefits on exercise of stock options                       --             1,578
                                                        ----------        ----------

Balance at September 30, 2001                           $1,005,766        $2,488,282
                                                        ==========        ==========

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


                                     Page 8
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                             Nine Months Ended September 30,
                                                                            --------------------------------
                                                                                2001                 2000
                                                                            ------------         -----------
<S>                                                                         <C>                  <C>
  Cash flows from operating activities:

  Net income                                                                $    316,007         $   432,218
  Adjustments to reconcile net income to net cash provided by
     operating activities:
     Amortization of intangible assets                                            44,821              47,312
     Amortization (accretion) of purchase accounting premiums and
        discounts, net                                                             8,125                 (27)
     Accretion of discount on borrowings                                             818                 813
     Amortization of mortgage servicing rights                                   219,793             149,037
     (Gain) loss on sale of assets, net                                          (21,976)             15,348
     Gain on sale of foreclosed real estate, net                                  (2,438)             (7,591)
     Loss on sale, settlement and transfer of loans, net                         184,371              52,213
     Capitalization of originated mortgage servicing rights                     (253,421)            (89,821)
     Extraordinary items - gains on early extinguishment of debt, net                 --              (3,014)
     Depreciation and amortization of premises and equipment                      39,903              38,866
     Amortization of deferred debt issuance costs                                  5,283               5,511
     FHLB stock dividends                                                        (63,451)            (70,305)
     Purchases and originations of loans held for sale                       (12,205,482)         (3,789,358)
     Net proceeds from the sale of loans held for sale                        10,933,006           3,522,307
     Net MSR hedge ineffectiveness                                               (29,491)                 --
     MSR valuation provision                                                     158,000                  --
     Increase in other assets                                                   (292,998)            (30,764)
     Decrease (increase) in accrued interest receivable                           36,372             (29,255)
     Increase in other liabilities                                               485,580             240,588
     Amortization of deferred compensation expense - Golden State
        restricted common stock                                                    1,379               1,500
     Gain on non-monetary exchange of Star Systems common stock                  (20,671)                 --
     Reduction in accrued liability for state income taxes                       (25,805)                 --
     Minority interest                                                            20,241              20,191
     Dividends on Golden State restricted common stock                                49                  --
                                                                            ------------         -----------
        Net cash (used) provided by operating activities                    $   (461,985)        $   505,769
                                                                            ------------         -----------

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


                                     Page 9
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                  NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                             Nine Months Ended September 30,
                                                                            ---------------------------------
                                                                                2001                 2000
                                                                            ------------         ------------
<S>                                                                         <C>                  <C>
Cash flows from investing activities:
    Downey Acquisition                                                      $         --         $   (379,314)
    Purchases of securities available-for-sale                                   (45,616)             (33,388)
    Proceeds from maturities of securities available-for-sale                    654,157               35,469
    Purchases of securities held-to-maturity                                      (7,541)              (2,849)
    Principal payments and proceeds from maturities
       of securities held-to-maturity                                            321,555               41,747
    Purchases of mortgage-backed securities available-for-sale                  (120,809)             (58,340)
    Principal payments on mortgage-backed securities available-for-sale        2,263,091            1,438,573
    Proceeds from sales of mortgage-backed securities available-for-sale         777,265              666,924
    Principal payments on mortgage-backed securities held-to-maturity            344,727              315,554
    Proceeds from sales of loans                                                  72,064               62,360
    Net decrease (increase) in loans receivable                                1,630,891           (3,671,238)
    Purchases of loans receivable                                             (3,138,329)          (1,213,023)
    Purchases of FHLB stock, net                                                 (23,193)            (107,570)
    Purchases of premises and equipment                                          (29,217)             (34,958)
    Proceeds from disposal of premises and equipment                              10,806                2,977
    Proceeds from sales of foreclosed real estate                                 24,622               63,947
    Proceeds from sale of Concord EFS common stock                                29,948                   --
    Purchases of mortgage servicing rights                                      (233,332)            (277,248)
    Hedge receipts                                                                14,542               (2,800)
    Purchases of derivatives                                                    (354,017)             (42,072)
    Proceeds from sales and settlements of derivatives                           408,377               19,059
    Proceeds from sales of mortgage servicing rights                                  --                  765
                                                                            ------------         ------------
        Net cash provided (used) by investing activities                       2,599,991           (3,175,425)
                                                                            ------------         ------------

Cash flows from financing activities:
     Net increase in deposits                                                  1,055,445              210,435
     Proceeds from additional borrowings                                      87,843,153           29,518,911
     Principal payments on borrowings                                        (89,205,993)         (26,779,900)
     Net decrease in securities sold under agreements to repurchase           (1,117,147)            (143,692)
     Principal payment on GS Holdings Notes                                     (350,000)                  --
     Dividends on common stock                                                  (135,000)             (71,000)
     Dividends paid to minority stockholders of subsidiary, net of taxes         (20,241)             (20,191)
       Tax benefit on exercise of stock options                                    1,578                  132
     Capital contribution from parent                                                 --               19,000
                                                                            ------------         ------------
        Net cash (used) provided by financing activities                      (1,928,205)           2,733,695
                                                                            ------------         ------------

Net change in cash and cash equivalents                                          209,801               64,039
Cash and cash equivalents at beginning of period                                 783,074              592,878
                                                                            ------------         ------------
Cash and cash equivalents at end of period                                  $    992,875         $    656,917
                                                                            ============         ============

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


                                    Page 10
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


(1)    BASIS OF PRESENTATION
       ---------------------

       The  accompanying   unaudited   consolidated  financial  statements  were
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America for interim financial  information and the requirements
of  Regulation  S-X,  Article 10 and  therefore  do not include all  disclosures
necessary for complete financial statements.  In the opinion of management,  all
adjustments  have been made that are  necessary for a fair  presentation  of the
financial  position and results of  operations  and cash flows as of and for the
periods  presented.  All such adjustments are of a normal recurring nature.  The
results of operations for the three and nine months ended September 30, 2001 are
not  necessarily  indicative  of the results that may be expected for the entire
fiscal  year or any other  interim  period.  Certain  amounts  for the three and
nine-month  periods in the prior year have been  reclassified  to conform to the
current period's presentation.

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

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

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

       All  significant   intercompany   balances  and  transactions  have  been
eliminated  in  consolidation.  These  financial  statements  should  be read in
conjunction with the consolidated  financial  statements of GS Holdings included
in the  Company's  Annual  Report on Form 10-K for the year ended  December  31,
2000. A glossary of defined terms begins on page 46 of this document.  All terms
used but not  defined  elsewhere  herein have  meanings  ascribed to them in the
Company's Annual Report on Form 10-K.

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

(2)    RECLASSIFICATION OF SECURITIES
       ------------------------------

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

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


                                    Page 11
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


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

       Cash paid  (including  interest  credited)  for  interest on deposits and
other  interest-bearing  liabilities  during  each  of  the  nine  months  ended
September  30, 2001 and 2000 was $2.2  billion.  Net cash paid for income  taxes
during the nine months ended  September 30, 2001 and 2000 was $164.5 million and
$33.4 million, respectively.

       During  the nine  months  ended  September  30,  2001,  noncash  activity
consisted  of  the  reclassification  of  $1.1  billion  and  $85.0  million  of
mortgage-backed   securities  and  U.  S.  government  and  agency   securities,
respectively,    from   securities    held-to-maturity   to   their   respective
available-for-sale  portfolios,  as permitted upon the adoption of SFAS No. 133,
the  reclassification  of  $164.8  million  from  mortgage  servicing  rights to
derivative  assets ($173.6  million) and derivative  liabilities  ($8.8 million)
related to the adoption of SFAS No. 133, the  reclassification of $161.1 million
from loans  receivable to loans  held-for-sale,  transfers of $23.0 million from
loans receivable to foreclosed real estate, transfers of $6.5 million from loans
held-for-sale  (at lower of cost or market) to loans receivable and $0.2 million
of loans made to facilitate sales of real estate owned.

       Noncash  activity  during the nine months ended  September  30, 2001 also
included an increase of $3.1 million in additional  paid-in  capital  reflecting
the impact of Golden State restricted common stock outstanding under an employee
incentive plan.

       During  the nine  months  ended  September  30,  2000,  noncash  activity
consisted  of the  reclassification  of  $1.1  billion  and  $445.0  million  of
mortgage-backed   securities  and  U.S.   government   and  agency   securities,
respectively,   from   securities   available-for-sale   to   their   respective
held-to-maturity  portfolios,  transfers of $113.2 million from loans receivable
to  mortgage-backed  securities upon the securitization of certain of the Bank's
single-family  loans,  transfers of $54.7 million from loans  held-for-sale  (at
lower of cost or market) to loans  receivable,  transfers of $41.1  million from
loans  receivable  to  foreclosed  real estate and $5.4 million of loans made to
facilitate sales of real estate owned.

       Noncash  activity  during the nine months ended  September  30, 2000 also
included a $211.7 million reduction of the valuation  allowance of the Company's
deferred tax asset representing pre-merger tax benefits, of which $161.7 million
was  retained  by the  previous  owners of FN  Holdings  and an increase of $2.7
million in  additional  paid-in  capital  reflecting  the impact of Golden State
restricted common stock outstanding under an employee incentive plan.


                                    Page 12
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


(4)    SEGMENT REPORTING
       -----------------

       Since the Company  derives a  significant  portion of its  revenues  from
interest  income,  and interest  expense is the most  significant  expense,  the
segments are reported below using net interest income.  Because the Company also
evaluates performance based on noninterest income and noninterest expense goals,
these measures of segment profit and loss are also  presented.  The Company does
not allocate income taxes to the segments.
<TABLE>
<CAPTION>
                                     Nine Months Ended September 30,           Three Months Ended September 30,
                                   -----------------------------------       ------------------------------------
                                   Community     Mortgage                    Community     Mortgage
                                    Banking       Banking        Total        Banking       Banking       Total
                                    -------       -------        -----        -------       -------       -----
                                                                    (in thousands)
<S>                                <C>           <C>          <C>             <C>           <C>          <C>
Net interest income: (a)
2001                               $1,036,087    $ 73,592     $1,109,679      $357,105      $37,132      $394,237
2000                                  937,624       7,331        944,955       312,292        5,235       317,527

Noninterest income: (b)
2001                               $  271,592    $ 18,572     $  290,164      $104,743      $(3,571)     $101,172
2000                                  181,517     188,763        370,280        63,292       64,345       127,637

Noninterest expense: (c)
2001                               $  601,934    $116,176     $  718,110      $202,475      $40,907      $243,382
2000                                  562,640     120,683        683,323       189,501       39,896       229,397

Pre-tax contribution:
2001                               $  705,745    $(24,012)    $  681,733      $259,373      $(7,346)     $252,027
2000                                  556,501      75,411        631,912       186,083       29,684       215,767
</TABLE>
_____________
(a)    Includes  $106.3  million and $81.6  million  for the nine  months  ended
       September 30, 2001 and 2000, respectively, in earnings credit provided to
       FNMC by the Bank, primarily for custodial bank account balances generated
       by FNMC.  Also includes  $217.0  million and $192.8  million for the nine
       months  ended  September  30,  2001 and 2000,  respectively,  in interest
       income and expense on intercompany loans.

       Includes  $37.8  million  and $31.6  million for the three  months  ended
       September 30, 2001 and 2000, respectively, in earnings credit provided to
       FNMC by the Bank, primarily for custodial bank account balances generated
       by FNMC.  Also  includes  $82.9  million and $70.5  million for the three
       months  ended  September  30,  2001 and 2000,  respectively,  in interest
       income and expense on intercompany loans.

(b)    Includes  $29.8  million  and $44.3  million  for the nine  months  ended
       September  30, 2001 and 2000,  respectively,  in  intercompany  servicing
       fees. Includes $14.3 million and $15.0 million for the three months ended
       September  30, 2001 and 2000,  respectively,  in  intercompany  servicing
       fees.

(c)    Includes  $3.5  million  and  $10.9  million  for the nine  months  ended
       September 30, 2001 and 2000,  respectively,  in intercompany  noninterest
       expense.  Includes  $1.2  million and $3.8  million for the three  months
       ended  September  30,  2001  and  2000,  respectively,   in  intercompany
       noninterest expense.


                                    Page 13
<PAGE>
                   GOLDEN STATE BANCORP INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


       The  following  reconciles  the above table to the  amounts  shown on the
consolidated  financial statements for the nine and three months ended September
30, 2001 and 2000 (in thousands):
<TABLE>
<CAPTION>
                                                     Nine Months Ended September 30,     Three Months Ended September 30,
                                                     -------------------------------     --------------------------------
                                                          2001             2000               2001             2000
                                                          ----             ----               ----             ----
<S>                                                     <C>              <C>               <C>               <C>
Net interest income:
Total net interest income for reportable segments       $1,109,679       $944,955          $394,237          $317,527
Elimination of intersegment net interest income           (106,335)       (81,582)          (37,753)          (31,574)
                                                        ----------       --------          --------          --------
Total                                                   $1,003,344       $863,373          $356,484          $285,953
                                                        ==========       ========          ========          ========

Noninterest income:
Total noninterest income for reportable segments        $  290,164       $370,280          $101,172          $127,637
Elimination of intersegment servicing fees                 (29,825)       (44,284)          (14,293)          (15,018)
                                                        ----------       --------          --------          --------
Total                                                   $  260,339       $325,996          $ 86,879          $112,619
                                                        ==========       ========          ========          ========

Noninterest expense:
Total noninterest expense for reportable segments       $  718,110       $683,323          $243,382          $229,397
Elimination of intersegment expense                         (3,480)       (10,880)           (1,160)           (3,791)
                                                        ----------       --------          --------          --------
Total                                                   $  714,630       $672,443          $242,222          $225,606
                                                        ==========       ========          ========          ========

Pre-tax contribution:
Total contributions for reportable segments             $  681,733       $631,912          $252,027          $215,767
Elimination of intersegment contributions                 (132,680)      (114,986)          (50,886)          (42,801)
                                                        ----------       --------          --------          --------
Total                                                   $  549,053       $516,926          $201,141          $172,966
                                                        ==========       ========          ========          ========
</TABLE>
(5)    LOANS RECEIVABLE, NET
       ---------------------

     The following details the components of loans receivable, net, at September
30, 2001 and December 31, 2000 (in thousands):
<TABLE>
<CAPTION>
                                                                       September 30, 2001    December 31, 2000
                                                                       ------------------    -----------------
<S>                                                                       <C>                   <C>
       Loan Portfolio:
            1-4 unit residential                                          $31,117,993           $30,828,368
            Multi-family residential                                        4,058,460             3,569,228
            Commercial real estate                                          2,417,708             2,487,093
            Land                                                               14,908                22,384
            Construction                                                        6,407                 7,416
                                                                          -----------           -----------
               Total real estate loans                                     37,615,476            36,914,489
                                                                          -----------           -----------

            Equity-line                                                       596,368               538,524
            Other consumer loans                                              301,685               302,559
            Auto loans, net (a)                                             1,918,270             1,567,257
            Commercial loans                                                  665,273               557,796
                                                                          -----------           -----------
               Total loans receivable                                      41,097,072            39,880,625
                                                                          -----------           -----------

            Deferred loan fees, costs, discounts and premiums, net            248,583               229,962
            Allowance for loan losses                                        (510,885)             (526,308)
            Purchase accounting adjustments, net                                8,348                 8,535
                                                                          -----------           -----------
               Loans receivable, net                                      $40,843,118           $39,592,814
                                                                          ===========           ===========
</TABLE>
________________
(a)    $772.8  million,  or 40% and $632.4  million,  or 40% of this  portfolio,
       represents  prime product as of September 30, 2001 and December 31, 2000,
       respectively.


                                    Page 14
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


(6)    DEPOSITS
       --------

       Deposits at September 30, 2001 and December 31, 2000 are comprised of the
following (dollars in thousands):
<TABLE>
<CAPTION>
                                                                       September 30, 2001    December 31, 2000
                                                                       ------------------    -----------------
<S>                                                                       <C>                   <C>
       Transaction Accounts:
            Non-interest checking                                         $ 1,943,763           $ 1,749,359
            Interest-bearing checking                                       2,052,288             2,063,185
                                                                          -----------           -----------
               Subtotal checking                                            3,996,051             3,812,544

            Money market                                                    4,338,713             2,948,853
            Passbook savings                                                3,012,186             3,086,851
                                                                          -----------           -----------
               Total transaction accounts                                  11,346,950             9,848,248

       Certificates of deposit                                             11,203,258            12,241,809
                                                                          -----------           -----------
               Subtotal retail deposits                                    22,550,208            22,090,057

       Custodial accounts                                                   1,730,561               825,438
       Accrued interest payable                                                58,331                80,225
       Purchase accounting                                                        482                 1,009
                                                                          -----------           -----------
               Total retail deposits                                       24,339,582            22,996,729

       Brokered deposits                                                      177,617               465,643
                                                                          -----------           -----------
               Total deposits                                             $24,517,199           $23,462,372
                                                                          ===========           ===========

            Demand deposits as a % of retail deposits
               (including custodials)                                            23.6%                 20.2%
            Transaction accounts as a % of retail deposits
               (including custodials)                                            53.9%                 46.6%
</TABLE>

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

       In connection  with the Golden State  Acquisition,  the Company  recorded
liabilities resulting from (a) branch consolidations due to duplicate facilities
and (b) employee  severance and termination  benefits due to a planned reduction
in  force.  The  merger  and  integration  plan  relative  to the  Golden  State
Acquisition  was in place on  September  11,  1998.  Certain of these costs were
included in the allocation of purchase  price and others were  recognized in net
income.  The table below reflects a summary of the activity in the liability for
the costs related to such plan since December 31, 2000 (in thousands):

<TABLE>
<CAPTION>
                                                                     Severance and
                                                       Branch         Termination
                                                   Consolidations       Benefits           Total
                                                   --------------       --------           -----
<S>                                                    <C>              <C>               <C>
      Balance at December 31, 2000                     $16,044          $12,529           $28,573
          Additional liabilities recorded                   --               --                --
          Charges to liability account                  (2,195)             (29)           (2,224)
                                                       -------          -------           -------
      Balance at September 30, 2001                    $13,849          $12,500           $26,349
                                                       =======          =======           =======
</TABLE>


                                    Page 15
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


(8)    INCOME TAXES
       ------------

       During the nine months ended September 30, 2001, GS Holdings recorded net
income tax expense of $211.3  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 of $3.2  million was recorded due to
the  utilization  of net operating  losses of a subsidiary  made  available as a
result of the subsidiary's liquidation into California Federal Bank.

       During the nine months ended September 30, 2000, GS Holdings recorded net
income tax  expense of $67.5  million,  which  included a tax  benefit of $161.7
million.  Based on  favorable  resolutions  of federal  income tax audits of Old
California  Federal  and  Glendale  Federal,  and  based on the  status of Mafco
Holdings',  including  the  Company's,  audits for the years 1991 through  1995,
management  changed  its  judgment  about  the  realizability  of the  Company's
deferred tax asset and reduced its valuation  allowance by $211.7 million during
the  nine-month  period ended  September  30, 2000.  As a result of reducing the
valuation  allowance,  income tax  expense  was  reduced by $161.7  million  and
goodwill was reduced by $50.0 million.

(9)    STOCKHOLDER'S EQUITY
       --------------------

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

       Dividends on common stock during the nine months ended September 30, 2001
and 2000 totalled $135.0 million and $71.0 million, respectively.

(10)   EXECUTIVE AND STOCK COMPENSATION
       --------------------------------

       In the first  quarter  of 2001,  Golden  State  granted to certain of the
Company's employees  non-qualified stock options equivalent to 851,000 shares of
common  stock at a weighted  average  price of $25.67 per share under the Golden
State Bancorp Inc.  Omnibus Stock Plan.  In the second  quarter of 2001,  Golden
State granted an additional  560,100  non-qualified  stock options at a weighted
average price of $30.75 per share.  Golden State did not grant any non-qualified
stock options in the third  quarter of 2001.  These shares  generally  vest over
three years in one-third  increments on the  anniversary  of the grant date. The
options  generally expire 10 years from the date of grant. No compensation  cost
was  recognized  by the Company for these stock  options  during the nine months
ended  September  30, 2001, in accordance  with the intrinsic  value  accounting
methodology  prescribed in APB Opinion No. 25, whereby  compensation  expense to
employees is  determined  based upon the excess,  if any, of the market price of
Golden State's common stock at the  measurement  date over the exercise price of
the award.

       During the three months ended  September 30, 2001,  159,526  options were
exercised and 28,247 options were  cancelled or expired under all plans.  During
the nine months ended  September 30, 2001,  314,143  options were  exercised and
49,924 options were  cancelled or expired under all plans.  During the three and
nine months ended  September  30,  2000,  a total of 36,893 and 51,200  options,
respectively,  were exercised and 18,584 and 82,950 options, respectively,  were
cancelled or expired under all plans.

       At  September  30,  2001 and 2000,  options to acquire an  equivalent  of
4,718,433 and 3,777,782 shares and 861,916 and 1,129,382 LTW(TM)s, respectively,
remained outstanding under all plans.


                                    Page 16
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


       On January 22,  2001,  Golden State  awarded to certain of the  Company's
employees  99,108 shares of restricted stock under the Golden State Bancorp Inc.
Executive  Compensation  Plan.  The  market  value on the date of the awards was
$26.38  per  share.  These  shares  generally  vest over two  years in  one-half
increments  on the  anniversary  of the grant  date,  based  upon the  continued
service of the  employee.  During the three and nine months ended  September 30,
2001, 28,454 and 143,499  restricted  shares were vested.  During both the three
and nine months ended September 30, 2000,  28,454 restricted shares were vested.
At September 30, 2001, a total of 202,365  restricted  shares were  outstanding.
The  compensation  expense  based on the stock price on the date of these awards
was recognized on a straight-line basis over the vesting period for each tranche
of the award with a corresponding increase to additional paid-in capital. During
the three and nine  months  ended  September  30,  2001,  $0.4  million and $1.4
million,  respectively,  in compensation  expense was recognized related to such
awards.  During the three and nine months ended September 30, 2000, $0.4 million
and $1.5 million,  respectively,  in compensation expense was recognized related
to such awards. These restricted shares have full voting and dividend rights.

(11)   EXTRAORDINARY ITEMS
       -------------------

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

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

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

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

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

       On April 1, 2001, the Company identified a portfolio of securities with a
total book value of $80.7 million which are subject to the impairment provisions
of EITF No.  99-20.  All of these  securities  had  previously  been reported as
available-for-sale securities, with changes in fair value reflected in OCI. As a
result of its  implementation  of EITF No. 99-20, the Company recorded a loss of
$1.6  million,  net of income tax  credits  of $1.1  million,  representing  the
cumulative  effect of change in  accounting  principle  during the quarter ended
June 30, 2001. During the quarter ended September 30, 2001, the Company recorded
a pre-tax  loss of $3.6  million in order to record the decline in fair value of
these securities.


                                    Page 17
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


(13)   DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
       ---------------------------------------------

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

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

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

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

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

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

       STRATEGIES
       ----------

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

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

       RESULTS
       -------

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

       Changes in the fair value of interest  rate swaps  designated  as hedging
instruments of the  variability of cash flows  associated with FHLB advances and
Repos are reported in OCI.  These amounts  subsequently  are  reclassified  into
interest  expense as a yield  adjustment in the same period in which the related
interest on the FHLB advances and Repos affects earnings.  The net amount of OCI
reclassified  into  interest  expense  during  the three and nine  months  ended
September 30, 2001 was $22.8 million and $43.0 million, respectively.


                                    Page 18
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


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

       As of September 30, 2001,  approximately $82.0 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 September 30, 2002.

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

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

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

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

       STRATEGIES
       ----------

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

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

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

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


                                    Page 19
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


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

       RESULTS
       -------

       Risk  management  results  related to the hedging of  mortgage  servicing
rights are  summarized  below and are  included  in the caption  entitled  "Loan
servicing fees, net" in the accompanying  consolidated  statements of income (in
thousands):

<TABLE>
<CAPTION>
                                                                          Nine Months            Three Months
                                                                          -----------            ------------
                                                                               Ended September 30, 2001
                                                                         ------------------------------------
<S>                                                                        <C>                     <C>
      Gain on designated derivative contracts                              $ 214,708               $ 289,309
      Decrease in value of designated mortgage servicing rights             (185,217)               (268,775)
                                                                           ---------               ---------

      Net hedge ineffectiveness                                            $  29,491               $  20,534
                                                                           =========               =========
</TABLE>

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

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

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

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

       STRATEGIES
       ----------

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

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

       RESULTS
       -------

       Risk  management  results  related to the hedging of warehouse  loans 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>
                                                                       Nine Months           Three Months
                                                                       -----------           ------------
                                                                            Ended September 30, 2001
                                                                       ----------------------------------
<S>                                                                     <C>                    <C>
        Loss on designated forward loan sale commitments                $(18,141)              $(28,541)
        Increase in value of warehouse loans                              19,203                 28,241
                                                                        --------               --------

        Net hedge ineffectiveness                                       $  1,062               $   (300)
                                                                        ========               ========
</TABLE>


                                    Page 20
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


       DERIVATIVE INSTRUMENTS NOT DESIGNATED AS HEDGING INSTRUMENTS

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

       The  Company  enters  into rate  lock  commitments  to  extend  credit to
borrowers for  generally a 30-day  period.  Some of these rate lock  commitments
will  ultimately  expire without being  completed.  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>
                                                                                   Nine Months       Three Months
                                                                                   -----------       ------------
                                                                                      Ended September 30,2001
                                                                                   ------------------------------
<S>                                                                                  <C>               <C>
Loss on undesignated forward loan sale commitments recognized to income              $(10,394)         $(20,514)
Gain on undesignated interest rate loan commitments recognized to income               10,648            19,628
                                                                                     --------          --------

Net gain (loss) on derivatives                                                       $    254          $   (886)
                                                                                     ========          ========
</TABLE>

(14)   RECENT ACCOUNTING PRONOUNCEMENTS
       --------------------------------

       ACCOUNTING   FOR   TRANSFERS   AND   SERVICING   FINANCIAL   ASSETS   AND
       EXTINGUISHMENTS OF LIABILITIES

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

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

       BUSINESS COMBINATIONS

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

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


                                    Page 21
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


       The accounting, disclosure and financial statement provisions of SFAS No.
141 are effective for business  combinations  initiated after June 30, 2001, and
as such, the implementation of SFAS No. 141 is not expected to materially impact
the Company's current financial condition or operating results.

       GOODWILL AND OTHER INTANGIBLE ASSETS

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

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

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

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

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

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

       Management   has  reviewed  the  records  from  the   Company's   various
acquisitions.  At September 30, 2001,  $645.4  million of the  Company's  $646.5
million  intangible asset represents  goodwill and will cease to be amortized as
of January 1, 2002  pursuant to SFAS No. 142.  As a result,  management  expects
GAAP earnings to increase by $14.8 million per quarter in 2002.


                                    Page 22
<PAGE>
                   GOLDEN STATE HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


       ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS

       On  October  3,  2001,  the FASB  issued  SFAS  No.  144.  SFAS  No.  144
establishes a single accounting model for the financial accounting and reporting
for  impairment  or disposal of  long-lived  assets.  The reason for issuing the
Statement stemmed from the failure of SFAS No. 121 to address the accounting for
the  disposal  of a  segment  of a  business  accounted  for  as a  discontinued
operation under APB Opinion No. 30. Thus, two accounting  models existed for the
disposal  of  long-lived  assets.  SFAS  No.  144  is  based  on  the  framework
established in SFAS No. 121.

       The accounting, disclosure and financial statement provisions of SFAS No.
144 are  effective for financial  statements  issued for fiscal years  beginning
after  December 15, 2001.  The  provisions of the Statement  generally are to be
applied prospectively.

       The  implementation  of SFAS No. 144 is not expected to materially impact
the Company's financial condition or operating results.


                                    Page 23
<PAGE>
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

       FORWARD-LOOKING    STATEMENTS.    THIS    QUARTERLY    REPORT    CONTAINS
FORWARD-LOOKING  STATEMENTS,  WITHIN  THE  MEANING  OF  THE  PRIVATE  SECURITIES
LITIGATION  REFORM ACT OF 1995,  THAT PERTAIN TO OUR FUTURE  OPERATING  RESULTS.
WORDS SUCH AS  "ANTICIPATE,"  "BELIEVE,"  "EXPECT,"  "INTEND" AND OTHER  SIMILAR
EXPRESSIONS   ARE  INTENDED  TO  IDENTIFY  THESE   STATEMENTS.   FORWARD-LOOKING
STATEMENTS  ARE NOT HISTORICAL  FACTS AND ARE INHERENTLY  SUBJECT TO SIGNIFICANT
BUSINESS,  ECONOMIC AND COMPETITIVE  UNCERTAINTIES  AND  CONTINGENCIES,  MANY OF
WHICH ARE BEYOND OUR CONTROL.  OUR ACTUAL RESULTS COULD DIFFER  MATERIALLY  FROM
THOSE IN THE  FORWARD-LOOKING  STATEMENTS  DUE TO SUCH FACTORS AS (I)  PORTFOLIO
CONCENTRATIONS;  (II)  INTEREST RATE  CHANGES,  INCLUDING  CHANGES IN SHORT-TERM
INTEREST RATES, THE SHAPE OF THE YIELD CURVE AND THE TREASURY-EURODOLLAR SPREAD;
(III) CHANGES IN ASSET  PREPAYMENT  SPEEDS;  (IV) CHANGES IN OUR COMPETITIVE AND
REGULATORY  ENVIRONMENTS;  AND (V) CHANGES IN THE  AVAILABILITY OF NET OPERATING
LOSS  CARRYOVERS  AND DEFERRED TAX  LIABILITIES.  IN OCTOBER 2001,  GOLDEN STATE
BANCORP INC.  FILED AN S-3  REGISTRATION  STATEMENT  WITH THE SEC THAT DISCUSSES
THESE  FACTORS IN GREATER  DETAIL.  WE ASSUME NO OBLIGATION TO UPDATE ANY OF OUR
FORWARD-LOOKING STATEMENTS.

OVERVIEW

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

       NET INCOME

       GS Holdings  reported  income before the  cumulative  effect of change in
accounting  principle of $317.6 million for the nine months ended  September 30,
2001. Income before  extraordinary  items was $429.2 million for the nine months
ended  September  30, 2000.  Net income for the nine months ended  September 30,
2001 was  $316.0  million  compared  with net income of $432.2  million  for the
corresponding period in 2000. Net income for the nine months ended September 30,
2001 includes a loss of $1.6 million,  net of tax, from the cumulative effect of
change in accounting  principle.  Net income for the nine months ended September
30, 2000 includes gains on the early extinguishment of debt, net of tax, of $3.0
million.  The  Bank's  efficiency  ratio was 48.73%  for the nine  months  ended
September 30, 2001, compared to 47.91% for the comparable period in 2000.

       GS Holdings  reported net income for the three months ended September 30,
2001 of  $106.9  million  compared  with net  income  of $90.7  million  for the
corresponding  period in 2000.  The Bank's  efficiency  ratio was 47.66% for the
third quarter of 2001, compared to 48.03% for the comparable period in 2000.


                                    Page 24
<PAGE>
       FINANCIAL CONDITION

       During the nine months  ended  September  30,  2001,  consolidated  total
assets  decreased  $1.0 billion from  December 31, 2000, to $59.5  billion,  and
total liabilities decreased from $57.7 billion to $56.5 billion.  Loans held for
sale  and  loans   receivable   increased   $1.26  billion  and  $1.25  billion,
respectively, during the nine month period, while mortgage-backed securities and
securities declined $3.0 billion and $0.9 billion, respectively, during the same
period. This shift represents strong loan production by the Company coupled with
high  repayment  rates for both  loans and  securities  in light of the  current
declining interest rate environment.  Deposits increased $1.1 billion during the
nine months ended  September  30, 2001,  including  increases of $1.5 billion in
transaction  accounts and $0.9 billion in custodial  accounts,  offset by a $1.0
billion  decline  in  certificates  of  deposit  and a $0.3  billion  decline in
brokered  deposits - part of management's goal to become more "bank-like" and to
lower its cost of funds.  Custodial accounts increased $905.1 million,  or 110%,
over December 31, 2000  balances,  a direct result of the increase in repayments
in the loan servicing  portfolio.  Total borrowings,  including  securities sold
under  agreements to repurchase,  FHLB advances and other  borrowings,  declined
$2.9 billion during the nine months ended September 30, 2001 due in part to $350
million of the GS Holdings Notes which matured,  and was paid in full, on August
1, 2001.

       During the nine months ended  September  30, 2001,  stockholders'  equity
increased $190.1 million to $2.5 billion.  The increase in stockholders'  equity
is principally the net result of $316.0 million in net income for the period,  a
$102.8 million improvement in net unrealized gain/loss, after tax, on securities
available-for-sale, a $30.4 million improvement in unrealized loss on securities
upon  reclassification  from  the  held-to-maturity  to  the  available-for-sale
portfolio and $17.9 million of  amortization  on the unrealized  holding loss on
securities  held-to-maturity.  These  amounts  are  offset,  in part,  by $135.0
million in common stock  dividends,  $101.9  million in net  unrealized  losses,
after tax, on derivatives  and a $44.6 million  transition  adjustment  recorded
upon the adoption of SFAS No. 133.

       GS Holdings'  non-performing assets,  consisting of non-performing loans,
net of  purchase  accounting  adjustments,  foreclosed  real  estate,  net,  and
repossessed  assets,  decreased to $130.8 million at September 30, 2001 compared
with $140.9  million at December  31,  2000.  Total  non-performing  assets as a
percentage  of the Bank's total assets  decreased to 0.22% at September 30, 2001
from 0.23% at December 31, 2000.


                                    Page 25
<PAGE>
RESULTS OF OPERATIONS

       NINE MONTHS ENDED  SEPTEMBER 30, 2001 VERSUS NINE MONTHS ENDED  SEPTEMBER
       30, 2000

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

<TABLE>
<CAPTION>
                                                                    Nine Months Ended September 30, 2001
                                                                  ----------------------------------------
                                                                   Average                        Average
                                                                   Balance        Interest          Rate
                                                                   -------        --------          ----
                                                                             (dollars in millions)
<S>                                                                <C>             <C>              <C>
ASSETS

Interest-earning assets (1):
     Securities and interest-bearing deposits in banks (2)         $   890         $   40            5.96%
     Mortgage-backed securities available-for-sale                   9,887            487            6.57
     Mortgage-backed securities held-to-maturity                     1,626             99            8.15
     Loans held for sale, net                                        1,989             99            6.65
     Loans receivable, net:
         Residential                                                31,657          1,655            6.97
         Commercial real estate                                      6,221            384            8.23
         Commercial banking                                            596             37            8.22
         Consumer                                                      886             59            8.86
         Auto                                                        1,758            152           11.58
                                                                   -------         ------
     Total loans receivable, net                                    41,118          2,287            7.42
      FHLB stock                                                     1,402             63            6.05
                                                                   -------         ------
         Total interest-earning assets                              56,912          3,075            7.21%
                                                                                   ------
Noninterest-earning assets                                           3,717
                                                                   -------
         Total assets                                              $60,629
                                                                   =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                      $24,198            667            3.68%
     Securities sold under agreements to repurchase (3)              3,872            167            5.69
     Borrowings (3)                                                 28,513          1,238            5.79
                                                                   -------         ------
         Total interest-bearing liabilities                         56,583          2,072            4.88%
                                                                                   ------
Noninterest-bearing liabilities                                      1,198
Minority interest                                                      496
Stockholder's equity                                                 2,352
                                                                   -------
          Total liabilities, minority interest
                and stockholder's equity                           $60,629
                                                                   =======
Net interest income                                                                $1,003
                                                                                   ======
Interest rate spread                                                                                 2.33%
                                                                                                    =====
Net interest margin                                                                                  2.35%
                                                                                                    =====

Return on average assets                                                                             0.70%
                                                                                                    =====
Return on average equity                                                                            17.91%
                                                                                                    =====
Return on tangible common equity                                                                    28.57%
                                                                                                    =====
Average equity to average assets                                                                     3.88%
                                                                                                    =====
</TABLE>


                                    Page 26
<PAGE>

<TABLE>
<CAPTION>
                                                                    Nine Months Ended September 30, 2000
                                                                  ----------------------------------------
                                                                   Average                        Average
                                                                   Balance        Interest          Rate
                                                                   -------        --------          ----
                                                                             (dollars in millions)
ASSETS
<S>                                                                <C>             <C>              <C>
Interest-earning assets (1):
     Securities and interest-bearing deposits in banks (2)         $ 1,429         $   69            6.39%
     Mortgage-backed securities available-for-sale                  12,514            625            6.66
     Mortgage-backed securities held-to-maturity                     2,640            149            7.54
     Loans held for sale, net                                          832             46            7.44
     Loans receivable, net:
         Residential                                                29,310          1,544            7.03
         Commercial real estate                                      5,623            340            8.06
         Commercial banking                                            514             38            9.93
         Consumer                                                      737             57           10.27
         Auto                                                        1,213            107           11.73
                                                                   -------         ------
     Total loans receivable, net                                    37,397          2,086            7.44
     FHLB stock                                                      1,278             70            7.35
                                                                   -------         ------
         Total interest-earning assets                              56,090          3,045            7.24%
                                                                                   ------
Noninterest-earning assets                                           2,985
                                                                   -------
         Total assets                                              $59,075
                                                                   =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
     Deposits                                                      $23,066            679            3.93%
     Securities sold under agreements to repurchase (3)              5,551            268            6.34
     Borrowings (3)                                                 27,148          1,235            6.05
                                                                   -------         ------
         Total interest-bearing liabilities                         55,765          2,182            5.20%
                                                                                   ------
Noninterest-bearing liabilities                                        994
Minority interest                                                      496
Stockholder's equity                                                 1,820
                                                                   -------
         Total liabilities, minority interest
              and stockholder's equity                             $59,075
                                                                   =======
Net interest income                                                                $  863
                                                                                   ======
Interest rate spread                                                                                 2.04%
                                                                                                    =====
Net interest margin                                                                                  2.07%
                                                                                                    =====

 Return on average assets                                                                            0.98%
                                                                                                    =====
 Return on average equity                                                                           31.66%
                                                                                                    =====
 Return on tangible common equity                                                                   60.43%
                                                                                                    =====
 Average equity to average assets                                                                    3.08%
                                                                                                    =====
</TABLE>
____________
(1)    Non-performing  assets  are  included  in the  average  balances  for the
       periods indicated.

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

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


                                    Page 27
<PAGE>
       The following  table shows what portion of the changes in interest income
and interest  expense were due to changes in rate and volume.  For each category
of  interest-earning  assets and  interest-bearing  liabilities,  information is
provided  on changes  attributable  to volume  (change  in  average  outstanding
balance  multiplied  by the prior  period's  rate) and rate  (change  in average
interest rate multiplied by the prior period's volume).  Changes attributable to
both volume and rate have been allocated proportionately.

<TABLE>
<CAPTION>
                                                                   Nine Months Ended September 30, 2001 vs. 2000
                                                                            Increase (Decrease) Due to
                                                                   ---------------------------------------------
                                                                      Volume             Rate             Net
                                                                      ------             ----             ---
INTEREST INCOME:                                                                   (in millions)
<S>                                                                   <C>               <C>              <C>
       Securities and interest-bearing deposits in banks              $ (24)            $  (5)           $ (29)
       Mortgage-backed securities available-for-sale                   (129)               (9)            (138)
       Mortgage-backed securities held-to-maturity                      (63)               13              (50)
       Loans held for sale, net                                          57                (4)              53
       Loans receivable, net                                            206                (5)             201
       FHLB stock                                                         8               (15)              (7)
                                                                      -----             -----            -----
          Total                                                          55               (25)              30
                                                                      -----             -----            -----

INTEREST EXPENSE:

       Deposits                                                          40               (52)             (12)
       Securities sold under agreements to repurchase                   (75)              (26)            (101)
       Borrowings                                                        26               (23)               3
                                                                      -----             -----            -----
          Total                                                          (9)             (101)            (110)
                                                                      -----             -----            -----
                  Change in net interest income                       $  64             $  76            $ 140
                                                                      =====             =====            =====
</TABLE>

       INTEREST  INCOME.  Total  interest  income was $3.1  billion for the nine
months  ended  September  30, 2001,  an increase of $29.7  million from the nine
months ended  September  30, 2000.  Total  interest-earning  assets for the nine
months  ended  September  30, 2001  averaged  $56.9  billion,  compared to $56.1
billion for the corresponding period in 2000, primarily as a result of increased
loan volume,  partially offset by a decline in mortgage-backed  securities.  The
yield on total  interest-earning  assets during the nine months ended  September
30, 2001  decreased to 7.21% from 7.24% for the nine months ended  September 30,
2000,  primarily  due to the  repricing of loans and  securities at lower rates,
partially offset by a higher  percentage of loans to total earning assets during
the nine months ended  September  30, 2001.  At September  30, 2001,  13% of the
Company's  portfolio  loans  were tied to COFI  indices,  12% to  Treasury-based
indices  and 45% were  "hybrid"  ARMS - fixed  for  three to ten  years and then
adjusting annually. Twenty-five percent of the portfolio is fixed. The remaining
5% of the portfolio is in other adjustable-rate products.

       GS Holdings  earned $2.3 billion of interest  income on loans  receivable
for the nine months ended September 30, 2001, an increase of $200.8 million from
the  nine  months  ended  September  30,  2000.  The  average  balance  of loans
receivable  was $41.1  billion for the nine months  ended  September  30,  2001,
compared  to $37.4  billion for the same period in 2000.  The  weighted  average
yield on loans receivable decreased to 7.42% for the nine months ended September
30, 2001 from 7.44% for the nine months ended  September 30, 2000.  The increase
in the average  balance  reflects a net increase in  residential  and commercial
real estate loan  origination  activities and new auto loan  production from the
Downey  Acquisition.  On July 1, 2001, the Company began accounting for interest
income on newly originated  automobile loans on a gross coupon basis rather than
based on  credit-adjusted  yield.  The impact on the nine months ended September
30, 2001 was immaterial,  but in future periods,  interest income is expected to
increase.


                                    Page 28
<PAGE>
       Loan production  during the nine months ended September 30, 2001 and 2000
is detailed in the table below (in thousands):

<TABLE>
<CAPTION>
                                                        Nine Months Ended September 30,
                                                        -------------------------------
                                                             2001            2000
                                                             ----            ----
<S>                                                       <C>             <C>
        Loans funded:
            Residential real estate loans:
               Adjustable-rate                            $ 5,476,707     $ 6,200,698
               Fixed-rate                                  12,838,798       4,102,757
                                                          -----------     -----------
                   Total residential real estate loans     18,315,505      10,303,455
            Commercial real estate loans                    1,302,697         961,551
            Commercial loans                                  764,795         500,142
            Consumer nonmortgage loans                        613,218         553,592
            Other                                                  --             124
                                                          -----------     -----------
                   Total loans funded                     $20,996,215     $12,318,864
                                                          ===========     ===========

        Loans purchased:
            Residential real estate loans                 $ 2,198,742     $   434,820
            Auto loans (a)                                    939,587         778,203
                                                          -----------     -----------
                   Total loans purchased                  $ 3,138,329     $ 1,213,023
                                                          ===========     ===========
</TABLE>
_____________
(a)    Approximately  41% and 42% of this volume was in prime  product;  59% and
       58% in sub-prime product for the nine months ended September 30, 2001 and
       2000, respectively.

       The  decrease  in the  weighted  average  yield is  primarily  due to the
repricing of variable-rate loans and the origination of loans at lower rates and
new purchases of auto loans at lower rates during 2001.

       GS Holdings  earned  $99.2  million of interest  income on loans held for
sale for the nine months ended  September 30, 2001, an increase of $52.8 million
from the nine months ended September 30, 2000. The average balance of loans held
for sale was $2.0  billion for the nine months  ended  September  30,  2001,  an
increase  of  $1.2  billion  from  the  comparable  period  in  2000,  primarily
attributed  to increased  originations  of  residential,  fixed-rate  loans as a
result of  heightened  borrower  refinancing  activity in the current  declining
interest rate environment. Fixed-rate production for sale totalled $12.8 billion
during the nine months ended  September  30, 2001, an increase of more than 213%
over the $4.1  billion  originated  during the  comparable  period in 2000.  The
weighted  average  yield on loans held for sale  decreased to 6.65% for the nine
months ended  September 30, 2001 from 7.44% for the nine months ended  September
30, 2000, primarily due to declining market interest rates.

       Interest  income on  mortgage-backed  securities  available-for-sale  was
$486.9  million for the nine months  ended  September  30,  2001,  a decrease of
$138.3  million  from the nine months  ended  September  30,  2000.  The average
portfolio balance decreased $2.6 billion,  to $9.9 billion,  for the nine months
ended  September  30, 2001  compared to the same  period in 2000.  The  weighted
average  yield on these  assets  decreased  from 6.66% for the nine months ended
September 30, 2000 to 6.57% for the nine months ended  September  30, 2001.  The
decrease  in the  volume  is  primarily  attributed  to  payments  and  sales of
mortgage-backed  securities,  partially offset by the  reclassification  of $1.1
billion in mortgage-backed  securities from the held-to-maturity  portfolio,  as
permitted  upon the adoption of SFAS No. 133 on January 1, 2001. The decrease in
the weighted  average yield  primarily  reflects the repricing of  variable-rate
securities at lower rates.

       Interest income on mortgage-backed securities  held-to-maturity was $99.4
million  for the nine  months  ended  September  30,  2001,  a decrease of $49.9
million from the nine months ended  September  30, 2000.  The average  portfolio
balance  decreased  $1.0  billion,  to $1.6  billion,  for the nine months ended
September  30, 2001  compared to the same period in 2000,  primarily  due to the
$1.1   billion   reclassification   in   mortgage-backed   securities   to   the
available-for-sale  portfolio, as permitted upon the adoption of SFAS No. 133 on
January 1, 2001. The weighted average yields for the nine months ended September
30,  2001 and 2000 were  8.15% and  7.54%,  respectively.  The  increase  in the
weighted  average  yield is  primarily  the  result of the  aforementioned  $1.1
billion reclassification of securities with a weighted average rate of 6.84%.


                                    Page 29
<PAGE>
       Interest  income on  securities  and  interest-bearing  deposits in other
banks was $39.8 million for the nine months ended September 30, 2001, a decrease
of $28.9  million from the nine months  ended  September  30, 2000.  The average
portfolio  balance was $0.9  billion and $1.4  billion for the nine months ended
September  30,  2001 and  2000,  respectively.  The  decrease  in the  volume is
primarily  attributed  to  payments  and  maturities  of  securities.  The lower
weighted  average  yield of 5.96% for the nine months ended  September  30, 2001
compared to 6.39% for the nine months ended  September 30, 2000 is primarily due
to the $2.4 million in interest income on a federal income tax refund related to
Old California  Federal,  received in the first half of 2000 (for which there is
no corresponding  earning asset), and the repricing of securities at lower rates
during the nine months of 2001.

       Dividends  on FHLB stock were $63.5  million  for the nine  months  ended
September  30,  2001,  a decrease of $6.9  million  from the nine  months  ended
September 30, 2000. The average balance outstanding during the nine months ended
September 30, 2001 and 2000 was $1.4 billion and $1.3 billion, respectively. The
weighted  average  dividend on FHLB stock  declined to 6.05% for the nine months
ended  September  30, 2001 from 7.35% for the nine months  ended  September  30,
2000.  The  increase  in the  average  balance is due to an overall  increase in
average  borrowings  from the FHLB while the  decrease in the  weighted  average
yield is the result of a reduction in the dividend rate on FHLB stock.

       INTEREST  EXPENSE.  Total interest  expense was $2.1 billion for the nine
months ended  September  30,  2001,  a decrease of $110.2  million from the nine
months  ended  September  30, 2000.  The decrease is primarily  due to declining
market  interest  rates and a  reduction  in higher rate  securities  sold under
agreements to repurchase,  partially offset by additional borrowings under lower
rate FHLB advances and deposits used to fund total assets.

       Interest expense on deposits,  including  Brokered  Deposits,  was $666.3
million  for the nine  months  ended  September  30,  2001,  a decrease of $12.8
million from the nine months ended  September 30, 2000.  The average  balance of
deposits  outstanding  increased  from $23.1  billion for the nine months  ended
September  30, 2000 to $24.2  billion for the nine months  ended  September  30,
2001. The increase in the average  balance is primarily  attributed to increases
in the average balances of custodial accounts,  money market accounts and retail
customer  checking  accounts,  partially  offset by declines in savings  account
balances  and  certificates  of deposit.  The overall  weighted  average cost of
deposits  decreased to 3.68% for the nine months ended  September  30, 2001 from
3.93% for the nine months ended  September  30, 2000,  primarily  due to a lower
average  balance of higher rate  certificates  of deposit  and a higher  average
balance of lower rate checking, money market and custodial accounts in 2001.

       Interest  expense on  securities  sold  under  agreements  to  repurchase
totalled $166.9 million for the nine months ended September 30, 2001, a decrease
of $100.8  million from the nine months ended  September  30, 2000.  The average
balance of such borrowings for the nine months ended September 30, 2001 and 2000
was $3.9  billion and $5.6  billion,  respectively.  The decrease in the average
balance is primarily  the result of  maturities  during the nine months of 2001.
The weighted average interest rate on these  instruments  decreased to 5.69% for
the nine months  ended  September  30, 2001 from 6.34% for the nine months ended
September  30,  2000,  primarily  due to  maturities  of higher rate  fixed-rate
borrowings and the repricing of  variable-rate  borrowings at lower rates during
the nine months of 2001.

       Interest expense on borrowings  totalled $1.2 billion for the nine months
ended September 30, 2001, an increase of $3.3 million from the nine months ended
September 30, 2000. The average  balance  outstanding  for the nine months ended
September 30, 2001 and 2000 was $28.5 billion and $27.1  billion,  respectively.
The weighted average interest rate on these  instruments  decreased to 5.79% for
the nine months  ended  September  30, 2001 from 6.05% for the nine months ended
September  30,  2000.  The  increase  in the  average  volume  is the  result of
additional FHLB borrowings used to fund total assets,  while the decrease in the
weighted average rate is primarily due to declining market interest rates.


                                    Page 30
<PAGE>
       NET INTEREST  INCOME.  Net interest  income was $1.0 billion for the nine
months ended  September  30, 2001,  an increase of $140.0  million from the nine
months ended September 30, 2000. The interest rate spread increased to 2.33% for
the nine months  ended  September  30, 2001 from 2.04% for the nine months ended
September 30, 2000,  primarily as a result of declining  market  interest  rates
reducing cost 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
2.35% for the nine months ended  September 30, 2001, up 28 basis points from the
2.07% reported during the first nine months of 2000.

       NONINTEREST  INCOME.  Total noninterest income,  consisting  primarily of
loan  servicing  fees,  customer  banking  fees,  gain on sale,  settlement  and
transfer of loans, net, gain on sale of assets,  net and other income was $260.3
million for the nine months ended September 30, 2001, representing a decrease of
$65.7 million from the nine months ended September 30, 2000.

       Loan  servicing fees for the Company,  were $(35.7)  million for the nine
months ended September 30, 2001,  compared to $131.3 million for the nine months
ended  September 30, 2000.  The following  table details the  components of loan
servicing fees, net (in thousands):

<TABLE>
<CAPTION>
                                                                   Nine Months Ended September 30,
                                                                   -------------------------------
                                                                      2001                 2000
                                                                      ----                 ----

       Components of loan servicing fees, net:
<S>                                                                <C>                  <C>
           Loan servicing fees                                     $ 337,026            $ 287,781
           Amortization of mortgage servicing rights                (219,793)            (149,037)
           Pass-through interest expense                             (24,376)              (7,400)
           Net gain on MSRs/MSR derivatives                           29,491                   --
           MSR valuation provision                                  (158,000)                  --
                                                                   ---------            ---------
              Total loan servicing fees, net                       $ (35,652)           $ 131,344
                                                                   =========            =========
</TABLE>

       As the table  reflects,  loan servicing fees increased $49.2 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
$83.0 billion at September 30, 2000 to $86.3 billion at September 30, 2001.  The
recent decline in long-term  interest rates has resulted in the  acceleration of
mortgage loan prepayments. The annualized runoff rate on the Company's portfolio
of mortgages  serviced for others was 26.1% for the nine months ended  September
30, 2001 compared to 12.2% for the nine months ended September 30, 2000.  Higher
levels of prepayments  generally  accelerate  amortization of MSRs and generally
will result in a reduction in the market value of MSRs and servicing fee income.
MSR  amortization  increased $70.8 million in the first nine months of 2001 over
the same period in 2000; the MSR  amortization  rate averaged 19.9% for the nine
months  ended  September  30, 2001  compared to 13.7%  during the same period in
2000. MSR amortization was also affected by a higher average MSR balance for the
nine  months  ended  September  30,  2001  compared  to the same period in 2000.
Pass-through  interest  expense  increased  $17.0 million (229%) year over year,
also influenced by higher runoff rates.

       Servicing fee income also includes a $29.5 million  pre-tax gain from the
impact of SFAS No. 133  pertaining to the MSR fair value  hedges.  To reduce the
sensitivity of its earnings to interest rate and market value fluctuations,  the
Company  hedges the  change in value of its MSRs  based on  changes in  interest
rates.  Although the Company  hedges the change in value of its MSRs,  its hedge
coverage  ratio  does not equate to 100%.  The  Company  does not hedge  certain
components of its portfolio,  notably ARMs and loans with prepayment  penalties.
In addition,  the Company hedges only certain components of risk, which have not
generally  included the mortgage rate spread to other market  interest  rates. A
$158.0 million pre-tax  valuation  provision on the MSRs was recorded during the
nine months ended  September 30, 2001. On an aggregate  basis,  at September 30,
2001,  the estimated  fair value of the MSRs was $18.8 million  higher than book
value (net of a valuation  allowance  of $158  million).  To the extent there is
recovery  of fair  values  of the  impaired  tranches  in future  quarters,  the
valuation allowance will be reduced.


                                    Page 31
<PAGE>
       Customer  banking  fees were $161.0  million  for the nine  months  ended
September  30,  2001  compared  to  $147.3  million  for the nine  months  ended
September 30, 2000. The increase is primarily  attributed to increased  emphasis
by management on transaction  account growth.  Transaction  accounts  (including
custodial  accounts) as a percentage  of retail  deposits  increased to 53.9% at
September  30, 2001,  from 46.6% at  September  30, 2000.  The  following  table
details the components of customer banking fees (in thousands):

<TABLE>
<CAPTION>
                                                                   Nine Months Ended September 30,
                                                                   -------------------------------
                                                                      2001                 2000
                                                                      ----                 ----

       Components of customer banking fees and service charges:
<S>                                                                 <C>                  <C>
           Customer and electronic banking fees                     $104,876             $ 88,717
           Other customer fees                                         1,903                2,440
           Investment sales income                                    46,424               43,387
           Insurance commissions                                       7,788               12,740
                                                                    --------             --------
               Total customer banking fees and service charges      $160,991             $147,284
                                                                    ========             ========
</TABLE>

       Gain on sale,  settlement  and  transfer  of loans,  net  totalled  $69.1
million for the nine  months  ended  September  30,  2001,  an increase of $31.4
million from the nine months ended  September  30, 2000.  During the nine months
ended  September  30, 2001 and 2000,  the  Company  recorded  reductions  in its
recourse  liability  of $24.5  million  and $14.5  million,  respectively.  This
liability is a life-of-loan accrual which has experienced  favorable performance
over the past several years.  The Company's  revised loss estimate is lower than
previously expected, primarily for three reasons:

       (a)    The historical performance of these loans since they were acquired
              has been better than initial estimates and expectations, with only
              minimal losses experienced over the past four years.

       (b)    These loans are generally  over 10 years old.  This  seasoning has
              contributed to lower LTVs, and hence, lower loss exposure.

       (c)    Interest  rates have been  relatively low over the past few years,
              and have continued to decline.  Because substantially all of these
              loans are  adjustable-rate  loans,  borrowers  have enjoyed  lower
              payments. The lag associated with adjustable-rate  indices assures
              that borrowers' payments will continue to decline.

     During the nine months ended  September 30, 2001,  California  Federal sold
$11.2 billion in single-family mortgage loans originated for sale with servicing
rights retained as part of its ongoing mortgage  banking  operations at gains of
$33.8  million  compared  to $3.7  billion of such  sales for the  corresponding
period in 2000 at gains of $13.8  million.  The  results  in 2001  include  $4.2
million  related  to the gain on sale of $136.2  million  in  government-insured
loans that were previously  seriously delinquent and had become performing (GNMA
reperformers). The overall increase in the volume of loans sold and related gain
is the significant  increase in fixed-rate loan  originations as a result of the
overall  decline in market  interest rates and increased  mortgage  refinancing.
Gain on sale also includes a $2.4 million  unrealized  gain on forward loan sale
commitments related to SFAS No. 133.

       Gain on sale of assets,  net totalled  $22.0  million for the nine months
ended  September 30, 2001,  compared to a net loss of $15.3 million for the nine
months  ended  September  30,  2000.  The gain  during  the nine  months of 2001
includes a $16.6 million gain on the sale of $761.8  million in  mortgage-backed
securities  and a gain of $9.3 million on the sale of the Company's  Concord EFS
stock,  partially  offset by a $4.1  million loss on the  mark-to-market  of the
Company's  portfolio of IO strip  securities.  The loss during 2000 is primarily
attributed to an $18.7 million loss from the sale of approximately  $500 million
of  mortgage-backed  securities with an average yield of 6.64% during the second
quarter  and  a  $0.9  million   loss  from  the  sale  of  $187.6   million  of
mortgage-backed  securities  with an  average  yield of 6.59%  during  the third
quarter,  partially offset by a $1.3 million gain from the sale of interest rate
swaps with a notional amount of $284.0 million in August 2000.

       Other income  totalled $44.0 million for the nine months ended  September
30,  2001,  an  increase  of $18.9  million  over the same  period in 2000.  The
increase relates to a gain of $20.7 million on the non-monetary exchange of Star
Systems  common  stock for  634,520  shares of Concord  EFS common  stock  which
occurred in the first  quarter of 2001 as a result of Concord's  acquisition  of
Star.


                                    Page 32
<PAGE>
       NONINTEREST EXPENSE. Total noninterest expense was $714.6 million for the
nine months ended  September 30, 2001, an increase of $42.2 million  compared to
the nine months  ended  September  30,  2000.  Noninterest  expense for the nine
months  ended  September  30,  2001  included  increases  of  $22.8  million  in
compensation and employee benefit  expense,  $18.5 million in other  noninterest
expense and $4.9 million in occupancy and equipment expense.  These changes were
partially  offset by  decreases of $3.3  million in  professional  fees and $2.5
million in amortization of intangible assets.

       Compensation  and employee  benefits  expense was $346.0  million for the
nine months ended September 30, 2001, an increase of $22.8 million from the nine
months ended  September  30, 2000.  The increase is primarily  attributed  to an
increase in staff (from 7,811 at September  30, 2000 to 8,095 at  September  30,
2001),  primarily in  volume-related  operating groups, as well as normal salary
adjustments.  In  addition,  the  Company has  experienced  an increase in group
insurance  and other  benefit  costs that it has  elected  not to pass on to its
employees.

       Occupancy  and equipment  expense was $119.1  million for the nine months
ended September 30, 2001, an increase of $4.9 million from the nine months ended
September 30, 2000,  primarily due to an increase in  depreciation  expense,  as
well as increased utility costs and higher contract maintenance and repair fees.

       Professional  fees were $25.2 million for the nine months ended September
30, 2001, a decrease of $3.3  million from the nine months ended  September  30,
2000,  primarily  due to a decrease in  consulting  fees related to various data
processing systems projects.

       Amortization  of intangible  assets was $44.8 million for the nine months
ended  September 30, 2001, a decrease of $2.5 million from the nine months ended
September 30, 2000,  primarily  attributed  to a December 2000  reduction in the
goodwill  balance due to the reversal of Old  California  Federal state deferred
taxes.

       Other  noninterest  expense was $168.1  million for the nine months ended
September 30, 2001 compared to $149.6 million  during the  comparable  period in
2000.  The  increase in expenses  relates to  increases in a number of operating
expense categories, including retail back office operations,  telephone, courier
service, postage and marketing.

       PROVISION  FOR INCOME TAX.  During the nine months  ended  September  30,
2001,  GS  Holdings  recorded  net income tax expense of $211.3  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 of $3.2  million was recorded due to
the  utilization  of net operating  losses of a subsidiary  made  available as a
result of the subsidiary's liquidation into California Federal.

       During the nine months ended September 30, 2000, GS Holdings recorded net
income  tax  expense of $67.5  million  which  included a tax  benefit of $161.7
million.  Based on  favorable  resolutions  of federal  income tax audits of Old
California  Federal  and  Glendale  Federal,  and the  current  status  of Mafco
Holdings',  including  the  Company's,  audits for the years 1991 through  1995,
management  changed  its  judgment  about  the  realizability  of the  Company's
deferred tax asset and reduced its valuation  allowance by $211.7 million during
the  nine-month  period ended  September  30, 2000.  As a result of reducing the
valuation  allowance,  income tax  expense  was  reduced by $161.7  million  and
goodwill was reduced by $50.0 million.


                                    Page 33
<PAGE>
       GS  Holdings'  effective  federal tax rate was 39% and 7% during the nine
months  ended  September  30,  2001 and 2000,  respectively,  while its  federal
statutory tax rate was 35% during both periods.  In 2001, the difference between
the effective and statutory  rate was primarily the result of a reduction in the
accrued state tax liability and nondeductible goodwill  amortization,  partially
offset by an adjustment to net operating losses from prior periods. In 2000, the
difference  between  the  effective  and  statutory  rates was the result of the
reduction in the deferred tax asset  valuation  allowance,  partially  offset by
nondeductible goodwill  amortization.  GS Holdings' effective state tax rate was
(1)%  and 6%  during  the  nine  months  ended  September  30,  2001  and  2000,
respectively. The effective state tax rate declined during 2001 as a result of a
reduction in the accrued state tax liability previously discussed.

       MINORITY INTEREST.  Dividends on the REIT Preferred Stock totalling $34.2
million were  recorded  during each of the nine months ended  September 30, 2001
and 2000 and were  recorded as minority  interest on an after-tax  basis for the
respective periods.

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

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


                                    Page 34
<PAGE>
       IMPACT OF SFAS NO. 133. On January 1, 2001, the Company  adopted SFAS No.
133.  In  connection  with  the  adoption  of this  pronouncement,  the  Company
reclassified   $1.2   billion   in   securities   from    held-to-maturity    to
available-for-sale,  which had the  effect of  improving  the OCI  component  of
stockholder's equity by $30.4 million. The pronouncement  impacted several other
areas of the financial  statements on a year-to-date  basis, as summarized below
(debit/(credit); in thousands):

<TABLE>
<CAPTION>
                                             Assets                      Liabilities and Equity             Pre-tax Earnings
                                ---------------------------------    -------------------------------     -----------------------
                                 Loans                                              Taxes-                  Loan     (Gain)/Loss
                                  Held    Residential  Derivative    Derivative      Other                Servicing   on Sale of
                                for Sale     MSRs        Assets      Liabilities  Liabilities    OCI      Fees, net     Loans
                                --------     ----        ------      -----------  -----------    ---      ---------     -----
<S>                             <C>       <C>          <C>            <C>          <C>        <C>         <C>         <C>
Transfer hedge component
    of MSR balance              $    --   $ (95,013)   $  95,013      $      --    $     --   $     --    $     --    $     --

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

Fair value adjustments:
    MSRs and MSR hedges              --    (185,217)     195,025         19,683          --         --     (29,491)         --
    Warehouse loans              19,203          --           --             --          --         --          --     (19,203)
    Interest rate locks              --          --       10,648             --          --         --          --     (10,648)
    FLSC hedges                      --          --           --        (28,535)         --         --          --      28,535
    Cash flow hedges - swaps         --          --           --       (172,345)     70,402    101,943          --          --
                                -------   ---------    ---------      ----------   --------   --------    --------    --------
FAIR VALUE ADJUSTMENTS -
    NINE MONTHS ENDED
    SEPTEMBER 30, 2001           19,203    (185,217)     205,673       (181,197)     70,402    101,943     (29,491)     (1,316)

Other Activity - Nine Months
    ended September 30, 2001:
    MSR hedge additions              --          --      354,016             --          --         --          --          --
    MSR hedge sales and
       maturities                    --          --     (408,378)            --          --         --          --          --
    Hedge receipts and
       payments                      --        (121)      (1,549)       (12,993)         --         --          --          --
                                -------   ---------    ---------      ---------    --------   --------    --------    --------
TOTAL OTHER ACTIVITY -
    NINE MONTHS ENDED
    SEPTEMBER 30, 2001               --        (121)     (55,911)       (12,993)         --         --          --          --
                                -------   ---------    ---------      ---------    --------   --------    --------    --------

TOTAL IMPACT FROM
    SFAS NO. 133 -
    NINE MONTHS ENDED
    SEPTEMBER 30, 2001          $23,037   $(350,105)   $ 326,296      $(284,224)   $101,237   $146,590    $(29,491)   $ (2,365)
                                =======   =========    =========      =========    ========   ========    ========    ========
</TABLE>


                                    Page 35
<PAGE>
RESULTS OF OPERATIONS

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

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

<TABLE>
<CAPTION>
                                                                     Three Months Ended September 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)        $   571          $  8            5.73%
       Mortgage-backed securities available-for-sale                  8,909           142            6.37
       Mortgage-backed securities held-to-maturity                    1,510            28            7.53
       Loans held for sale, net                                       2,825            46            6.59
       Loans receivable, net:
          Residential                                                31,453           531            6.75
          Commercial real estate                                      6,399           128            7.98
          Commercial banking                                            647            12            7.41
          Consumer                                                      908            19            7.99
          Auto                                                        1,871            56           11.95
                                                                    -------          ----
       Total loans receivable, net                                   41,278           746            7.22
       FHLB stock                                                     1,423            18            5.04
                                                                    -------          ----
          Total interest-earning assets                              56,516           988            6.99%
                                                                                     ----
Noninterest-earning assets                                            3,962
                                                                    -------
          Total assets                                              $60,478
                                                                    =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

Interest-bearing liabilities:
       Deposits                                                     $24,596           202            3.26%
       Securities sold under agreements to repurchase (3)             3,635            46            4.91
       Borrowings (3)                                                27,980           384            5.45
                                                                    -------          ----
          Total interest-bearing liabilities                         56,211           632            4.46%
                                                                                     ----
Noninterest-bearing liabilities                                       1,344
Minority interest                                                       495
Stockholder's equity                                                  2,428
                                                                    -------
          Total liabilities, minority interest
               and stockholder's equity                             $60,478
                                                                    =======
Net interest income                                                                  $356
                                                                                     ====
Interest rate spread                                                                                 2.53%
                                                                                                    =====
Net interest margin                                                                                  2.56%
                                                                                                    =====

Return on average assets                                                                             0.71%
                                                                                                    =====
Return on average equity                                                                            17.61%
                                                                                                    =====
Return on tangible common equity                                                                    27.46%
                                                                                                    =====
Average equity to average assets                                                                     4.01%
                                                                                                    =====
</TABLE>


                                    Page 36
<PAGE>

<TABLE>
<CAPTION>
                                                                     Three Months Ended September 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)          $ 1,429         $   23           6.36%
     Mortgage-backed securities available-for-sale                   11,278            190           6.73
     Mortgage-backed securities held-to-maturity                      3,096             58           7.55
     Loans held for sale, net                                           926             18           7.65
     Loans receivable, net:
         Residential                                                 30,601            545           7.13
         Commercial real estate                                       5,784            119           8.25
         Commercial banking                                             531             14          10.50
         Consumer                                                       782             21          10.49
         Auto                                                         1,386             43          12.24
                                                                    -------         ------
     Total loans receivable, net                                     39,084            742           7.59
     FHLB stock                                                       1,334             25           7.51
                                                                    -------         ------
         Total interest-earning assets                               57,147          1,056           7.39%
                                                                                    ------
Noninterest-earning assets                                            3,279
                                                                    -------
         Total assets                                               $60,426
                                                                    =======

LIABILITIES, MINORITY INTEREST
AND STOCKHOLDER'S EQUITY

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

Return on average assets                                                                             0.60%
                                                                                                    =====
Return on average equity                                                                            18.21%
                                                                                                    =====
Return on tangible common equity                                                                    33.73%
                                                                                                    =====
Average equity to average assets                                                                     3.30%
                                                                                                    =====
</TABLE>

(1)    Non-performing  assets  are  included  in the  average  balances  for the
       periods indicated.

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

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


                                    Page 37
<PAGE>
       The following  table shows what portion of the changes in interest income
and interest  expense were due to changes in rate and volume.  For each category
of  interest-earning  assets and  interest-bearing  liabilities,  information is
provided  on changes  attributable  to volume  (change  in  average  outstanding
balance  multiplied  by the prior  period's  rate) and rate  (change  in average
interest rate multiplied by the prior period's volume).  Changes attributable to
both volume and rate have been allocated proportionately.

<TABLE>
<CAPTION>
                                                                   Three Months Ended September 30, 2001 vs. 2000
                                                                             Increase (Decrease) Due to
                                                                   ----------------------------------------------
                                                                      Volume             Rate             Net
                                                                      ------             ----             ---
INTEREST INCOME:                                                                   (in millions)
<S>                                                                   <C>               <C>              <C>
       Securities and interest-bearing deposits in banks              $(13)             $  (2)           $ (15)
       Mortgage-backed securities available-for-sale                   (38)               (10)             (48)
       Mortgage-backed securities held-to-maturity                     (30)                --              (30)
       Loans held for sale, net                                         30                 (2)              28
       Loans receivable, net                                            29                (25)               4
       FHLB stock                                                        2                 (9)              (7)
                                                                      ----              -----            -----
           Total                                                       (20)               (48)             (68)
                                                                      ----              -----            -----

INTEREST EXPENSE:

       Deposits                                                         14                (48)             (34)
       Securities sold under agreements to repurchase                  (26)               (23)             (49)
       Borrowings                                                       --                (55)             (55)
                                                                      ----              -----            -----
           Total                                                       (12)              (126)            (138)
                                                                      ----              -----            -----
                Change in net interest income                         $ (8)             $  78            $  70
                                                                      ====              =====            =====
</TABLE>

       INTEREST  INCOME.  Total interest income was $988.6 million for the three
months ended  September  30,  2001,  a decrease of $67.3  million from the three
months ended  September 30, 2000.  Total  interest-earning  assets for the three
months  ended  September  30, 2001  averaged  $56.5  billion,  compared to $57.1
billion for the corresponding period in 2000, primarily as a result of a decline
in mortgage-backed  securities,  partially offset by an increase in loan volume.
The  yield on total  interest-earning  assets  during  the  three  months  ended
September  30, 2001  decreased  to 6.99% from 7.39% for the three  months  ended
September 30, 2000,  primarily  due to the repricing of loans and  securities at
lower rates,  partially offset by a higher  percentage of loans to total earning
assets during 2001.

       GS Holdings earned $745.4 million of interest income on loans  receivable
for the three months ended  September 30, 2001, an increase of $3.3 million from
the three  months  ended  September  30,  2000.  The  average  balance  of loans
receivable  was $41.3  billion for the three  months ended  September  30, 2001,
compared  to $39.1  billion for the same period in 2000.  The  weighted  average
yield  on loans  receivable  decreased  to  7.22%  for the  three  months  ended
September 30, 2001 from 7.59% for the three months ended September 30, 2000. The
increase in the average  balance  reflects a net  increase  in  residential  and
commercial real estate loan origination activities. On July 1, 2001, the Company
began accounting for interest income on newly  originated  automobile loans on a
gross coupon basis rather than based on credit-adjusted yield. The impact on the
current  quarter  was  immaterial,  but in future  periods,  interest  income is
expected to increase.


                                    Page 38
<PAGE>
       Loan production during the three months ended September 30, 2001 and 2000
is detailed in the table below (in thousands):

<TABLE>
<CAPTION>
                                                        Three Months Ended September 30,
                                                        --------------------------------
                                                             2001            2000
                                                             ----            ----
<S>                                                       <C>             <C>
        Loans funded:
            Residential real estate loans:
               Adjustable-rate                            $1,622,486      $1,261,312
               Fixed-rate                                  5,379,189       1,655,078
                                                          ----------      ----------
                  Total residential real estate loans      7,001,675       2,916,390
            Commercial real estate loans                     415,861         337,595
            Commercial loans                                 241,541         157,086
            Consumer nonmortgage loans                       209,672         199,475
                                                          ----------      ----------
                  Total loans funded                      $7,868,749      $3,610,546
                                                          ==========      ==========

        Loans purchased:
            Residential real estate loans                 $  475,166      $   98,975
            Auto loans (a)                                   314,019         302,308
                                                          ----------      ----------
                  Total loans purchased                   $  789,185      $  401,283
                                                          ==========      ==========
</TABLE>
_____________
(a)    Approximately  41% and 47% of this volume was in prime  product;  59% and
       53% in sub-prime  product for the three months ended  September  30, 2001
       and 2000, respectively.

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

       GS Holdings  earned  $46.6  million of interest  income on loans held for
sale for the three months ended September 30, 2001, an increase of $28.8 million
from the three months ended  September  30, 2000.  The average  balance of loans
held for sale was $2.8 billion for the three months ended September 30, 2001, an
increase  of  $1.9  billion  from  the  comparable  period  in  2000,  primarily
attributed  to increased  originations  of  residential,  fixed-rate  loans as a
result of  heightened  borrower  refinancing  activity in the current  declining
interest rate environment.  Fixed-rate production for sale totalled $5.4 billion
during the quarter ended September 30, 2001 compared to $1.7 billion  originated
during the comparable  period in 2000. The weighted  average yield on loans held
for sale  decreased to 6.59% for the three months ended  September 30, 2001 from
7.65% for the three months ended September 30, 2000,  primarily due to declining
market interest rates.

       Interest  income on  mortgage-backed  securities  available-for-sale  was
$141.9  million for the three  months  ended  September  30, 2001, a decrease of
$47.8  million  from the three  months ended  September  30,  2000.  The average
portfolio balance decreased $2.4 billion, to $8.9 billion,  for the three months
ended  September  30, 2001  compared to the same  period in 2000.  The  weighted
average  yield on these assets  decreased  from 6.73% for the three months ended
September 30, 2000 to 6.37% for the three months ended  September 30, 2001.  The
decrease  in the  volume  is  primarily  attributed  to  payments  and  sales of
mortgage-backed  securities,  partially offset by the  reclassification  of $1.1
billion in mortgage-backed  securities from the held-to-maturity  portfolio,  as
permitted  upon the adoption of SFAS No. 133 on January 1, 2001. The decrease in
the weighted  average yield  primarily  reflects the repricing of  variable-rate
securities at lower rates.

       Interest income on mortgage-backed securities  held-to-maturity was $28.4
million for the three  months  ended  September  30,  2001,  a decrease of $30.0
million from the three months ended  September 30, 2000.  The average  portfolio
balance  decreased  $1.6 billion,  to $1.5  billion,  for the three months ended
September 30, 2001 compared to the same period in 2000,  primarily attributed to
the  $1.1  billion   reclassification  in  mortgage-backed   securities  to  the
available-for-sale  portfolio, as permitted upon the adoption of SFAS No. 133 on
January  1,  2001.  The  weighted  average  yields  for the three  months  ended
September 30, 2001 and 2000 were 7.53% and 7.55%, respectively.  The decrease in
the weighted  average yield is primarily  due to the repricing of  variable-rate
securities at lower rates,  partially offset by the aforementioned  $1.1 billion
reclassification of securities with a weighted average rate of 6.84%.


                                    Page 39
<PAGE>
       Interest  income on  securities  and  interest-bearing  deposits in other
banks was $8.2 million for the three months ended September 30, 2001, a decrease
of $14.6  million from the three months ended  September  30, 2000.  The average
portfolio  balance was $0.6  billion and $1.4 billion for the three months ended
September  30,  2001 and  2000,  respectively.  The  decrease  in the  volume is
primarily  attributed  to  payments  and  maturities  of  securities.  The lower
weighted  average  yield of 5.73% for the three months ended  September 30, 2001
compared to 6.36% for the three months  ended  September  30, 2000  reflects the
repricing of securities at lower rates during 2001.

       Dividends  on FHLB stock were $18.1  million for the three  months  ended
September  30,  2001,  a decrease of $7.1  million  from the three  months ended
September  30, 2000.  The average  balance  outstanding  during the three months
ended   September  30,  2001  and  2000  was  $1.4  billion  and  $1.3  billion,
respectively. The weighted average dividend on FHLB stock decreased to 5.04% for
the three months ended  September 30, 2001 from 7.51% for the three months ended
September 30, 2000. The increase in the average balance is due to an increase in
average  borrowings  from the FHLB while the  decrease in the  weighted  average
yield is the result of a reduction in the dividend rate on FHLB stock.

       INTEREST EXPENSE. Total interest expense was $632.1 million for the three
months ended  September  30,  2001, a decrease of $137.9  million from the three
months  ended  September  30, 2000.  The decrease is primarily  due to declining
market  interest  rates and a  reduction  in higher rate  securities  sold under
agreements to repurchase,  partially offset by additional borrowings under lower
rate FHLB advances and deposits used to fund total assets.

       Interest expense on deposits,  including  Brokered  Deposits,  was $201.9
million for the three  months  ended  September  30,  2001,  a decrease of $34.1
million from the three months ended  September 30, 2000. The average  balance of
deposits  outstanding  increased  from $23.4  billion for the three months ended
September  30, 2000 to $24.6  billion for the three months ended  September  30,
2001. The increase in the average  balance is primarily  attributed to increases
in the average balances of money market accounts,  custodial accounts and retail
customer  checking  accounts,  partially  offset by declines in  certificates of
deposit and savings  account  balances.  The overall  weighted  average  cost of
deposits  decreased to 3.26% for the three months ended  September 30, 2001 from
4.02% for the three months ended  September  30, 2000,  primarily due to a lower
average  balance of higher rate  certificates  of deposit  and a higher  average
balance of lower-rate checking, money market and custodial accounts during 2001.

       Interest  expense on  securities  sold  under  agreements  to  repurchase
totalled $45.5 million for the three months ended September 30, 2001, a decrease
of $49.4  million from the three months ended  September  30, 2000.  The average
balance of such  borrowings  for the three months ended  September  30, 2001 and
2000 was $3.6  billion  and $5.4  billion,  respectively.  The  decrease  in the
average  balance is primarily the result of maturities  during the third quarter
of 2001. The weighted  average interest rate on these  instruments  decreased to
4.91% for the three  months  ended  September  30, 2001 from 6.83% for the three
months ended  September  30, 2000,  primarily  due to  maturities of higher rate
fixed-rate  borrowings  and the repricing of  variable-rate  borrowings at lower
rates in 2001.

       Interest  expense on  borrowings  totalled  $384.8  million for the three
months ended  September  30,  2001,  a decrease of $54.3  million from the three
months ended  September 30, 2000. The average  balance  outstanding for both the
three months ended  September 30, 2001 and 2000 was $28.0 billion.  The weighted
average  interest  rate on these  instruments  decreased  to 5.45% for the three
months ended  September 30, 2001 from 6.23% for the three months ended September
30, 2000. The decrease in the weighted average rate primarily reflects declining
market interest rates.

       NET INTEREST INCOME. Net interest income was $356.5 million for the three
months ended  September  30, 2001,  an increase of $70.5  million from the three
months ended September 30, 2000. The interest rate spread increased to 2.53% for
the three months ended  September 30, 2001 from 2.01% for the three months ended
September 30, 2000,  primarily as a result of declining  market  interest  rates
reducing the cost 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
2.56% for the three months ended September 30, 2001, up 52 basis points from the
2.04% reported during the third quarter of 2000.


                                    Page 40
<PAGE>
       NONINTEREST  INCOME.  Total noninterest income,  consisting  primarily of
loan  servicing  fees,  customer  banking  fees,  gain on sale,  settlement  and
transfer of loans,  net, and gain on sale of assets,  net was $86.9  million for
the three months ended  September  30,  2001,  representing  a decrease of $25.7
million from the three months ended September 30, 2000.

       Loan servicing fees for the Company,  were $(28.7)  million for the three
months ended September 30, 2001,  compared to $45.5 million for the three months
ended  September 30, 2000.  The following  table details the  components of loan
servicing fees, net (in thousands):

<TABLE>
<CAPTION>
                                                        Three Months Ended September 30,
                                                        --------------------------------
                                                              2001            2000
                                                              ----            ----
<S>                                                         <C>             <C>
       Components of loan servicing fees, net:

            Loan servicing fees                             $112,734        $ 99,953
            Amortization of mortgage servicing rights        (72,780)        (51,801)
            Pass-through interest expense                     (8,234)         (2,631)
            Net gain on MSRs/MSR derivatives                  20,534              --
            MSR valuation provision                          (81,000)             --
                                                            --------        --------
                Total loan servicing fees, net              $(28,746)       $ 45,521
                                                            ========        ========
</TABLE>

       As the table  reflects,  loan servicing fees increased $12.8 million from
year-ago levels, which is primarily  attributable to the growth of the Company's
servicing  portfolio and higher  ancillary fees. The  single-family  residential
loan servicing portfolio,  excluding loans serviced for the Bank, increased from
$83.3  billion at June 30, 2001 to $86.3  billion at  September  30,  2001.  The
annualized  runoff rate on the  Company's  portfolio of  mortgages  serviced for
others was 27.2% in the third  quarter of 2001 compared to 12.8% during the same
period  in 2000.  This  runoff  rate also  influences  MSR  amortization,  which
increased  $21.0  million in the third  quarter of 2001 over the same  period in
2000;  the MSR  amortization  rate  averaged  19.1%  during  the  quarter  ended
September  30,  2001  compared  to 13.3%  during  the same  period in 2000.  MSR
amortization  was also  affected  by a higher  average  MSR  balance  during the
quarter  ended  September  30,  2001  compared  to  the  same  period  in  2000.
Pass-through  interest  expense  increased $5.6 million  (213%)  compared to the
year-ago quarter, also influenced by higher run-off rates.  Servicing fee income
includes a $20.5 million  pre-tax gain for the three months ended  September 30,
2001 from the impact of SFAS No. 133  pertaining  to the MSR fair value  hedges.
See "--Results of  Operations--Nine  Months Ended September 30, 2001 versus Nine
Months Ended September 30,  2000--Noninterest  Income." An $81.0 million pre-tax
valuation  provision  on the MSRs was  recorded  during the three  months  ended
September 30, 2001,  which was due in large part to the  significant  decline in
interest   rates  since   September  11,  2001.   Hedging   activities   covered
approximately 70% of the total decline in value of the servicing  portfolio,  as
hedge  ratios were  maintained  at high levels  throughout  the  quarter.  On an
aggregate basis, at September 30, 2001, the estimated fair value of the MSRs was
$18.8  million  higher  than book value (net of a  valuation  allowance  of $158
million).  To the  extent  there is  recovery  of fair  values  of the  impaired
tranches in future quarters, the valuation allowance will be reduced.

       Customer  banking  fees were $55.2  million  for the three  months  ended
September  30,  2001  compared  to $48.6  million  for the  three  months  ended
September 30, 2000. The increase is primarily  attributed to increased  emphasis
by management on transaction account growth and higher fee income on mutual fund
and annuity  products.  The following  table details the  components of customer
banking fees (in thousands):

<TABLE>
<CAPTION>
                                                                         Three Months Ended September 30,
                                                                         --------------------------------
                                                                              2001               2000
                                                                              ----               ----
<S>                                                                          <C>               <C>
       Components of customer banking fees and service charges:
           Customer and electronic banking fees                              $36,375           $30,325
           Other customer fees                                                   605               848
           Investment sales income                                            15,694            13,516
           Insurance commissions                                               2,497             3,871
                                                                             -------           -------
               Total customer banking fees and service charges               $55,171           $48,560
                                                                             =======           =======
</TABLE>


                                    Page 41
<PAGE>
       Gain on sale,  settlement  and  transfer  of loans,  net  totalled  $47.2
million for the three months  ended  September  30,  2001,  an increase of $36.6
million from the three months ended September 30, 2000.  During the three months
ended September 30, 2001, the Company recorded a $24.5 million  reduction in its
recourse liability.  See "--Results of  Operations--Nine  Months Ended September
30, 2001  versus Nine Months  Ended  September  30,  2000--Noninterest  Income."
During the three months ended September 30, 2001,  California  Federal sold $5.5
billion in  single-family  mortgage  loans  originated  for sale with  servicing
rights retained as part of its ongoing mortgage  banking  operations at gains of
$19.7  million  compared  to $1.4  billion of such  sales for the  corresponding
period  in 2000 at gains of $4.7  million.  The  results  in 2001  include  $4.2
million  related  to the gain on sale of $136.2  million  in  government-insured
loans that were previously  seriously delinquent and had become performing (GNMA
reperformers). The overall increase in the volume of loans sold and related gain
is the significant  increase in fixed-rate loan  originations as a result of the
overall  decline in market  interest rates and increased  mortgage  refinancing.
Gain on sale also includes a $1.2 million  unrealized  loss on forward loan sale
commitments related to SFAS No. 133.

       Gain on sale of assets,  net  totalled  $5.8 million for the three months
ended  September  30, 2001,  compared to $0.7 million for the three months ended
September  30, 2000.  The gain during the third quarter of 2001 includes a $10.0
million  gain on the  sale of  $464.0  million  in  mortgage-backed  securities,
partially offset by a $4.1 million loss on the  mark-to-market  of the Company's
portfolio of IO strip securities.  The gain during 2000 is primarily  attributed
to a $1.3  million  gain from the sale of  interest  rate  swaps with a notional
amount of $284.0 million,  partially offset by a $0.9 million loss from the sale
of $187.6 million of mortgage-backed securities with an average yield of 6.59%.

       NONINTEREST EXPENSE. Total noninterest expense was $242.2 million for the
three months ended September 30, 2001, an increase of $16.6 million  compared to
the three months ended  September  30, 2000.  Noninterest  expense for the three
months ended  September  30, 2001  included  increases of $10.3 million in other
noninterest expense, $6.5 million in compensation and employee benefits and $0.6
million in occupancy and equipment expense.

       Compensation  and employee  benefits  expense was $114.8  million for the
three months  ended  September  30,  2001,  an increase of $6.5 million from the
three months ended  September 30, 2000. The increase is primarily  attributed to
an increase in staff (from 7,811 FTE at September 30, 2000 to 8,095 at September
30,  2001),  primarily in  volume-related  operating  groups,  and normal salary
adjustments.  In  addition,  the  Company has  experienced  an increase in group
insurance  and other  benefit  costs that it has  elected  not to pass on to its
employees.

       Occupancy  and  equipment  expense was $41.3 million for the three months
ended  September  30,  2001,  an increase of $0.6  million from the three months
ended September 30, 2000,  primarily due to increased rent expense as well as an
increase in operating equipment expense.

       Other  noninterest  expense was $56.9  million for the three months ended
September  30,  2001,  an increase of $10.3  million from the three months ended
September 30, 2000. The increase in expenses relates to increases in a number of
operating expense categories including retail back office operations, telephone,
marketing, courier service and charitable contributions.

       PROVISION  FOR INCOME TAX.  During the three months ended  September  30,
2001 and 2000, GS Holdings  recorded net income tax expense of $87.5 million and
$75.4 million, respectively.

       GS Holdings'  effective gross federal tax rate was 37% and 38% during the
three months ended September 30, 2001 and 2000, respectively,  while its federal
statutory tax rate was 35% during both periods. In 2001 and 2000, the difference
between  the  effective  and  statutory   rates  was  primarily  the  result  of
nondeductible goodwill  amortization.  GS Holdings' effective state tax rate was
6% during each of the three months ended September 30, 2001 and 2000.

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


                                    Page 42
<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
for  the  three  months  ended   September  30,  2001,   as   summarized   below
(debit/(credit); in thousands):

<TABLE>
<CAPTION>
                                             Assets                      Liabilities and Equity             Pre-tax Earnings
                                ---------------------------------    -------------------------------     -----------------------
                                 Loans                                              Taxes-                  Loan     (Gain)/Loss
                                  Held    Residential  Derivative    Derivative      Other                Servicing   on Sale of
                                for Sale     MSRs        Assets      Liabilities  Liabilities    OCI      Fees, net     Loans
                                --------     ----        ------      -----------  -----------    ---      ---------     -----
<S>                             <C>       <C>          <C>            <C>           <C>        <C>         <C>         <C>
Fair value adjustments:
    MSRs and MSR hedges         $    --   $(268,775)   $ 269,228      $  20,081     $    --    $    --    $(20,534)    $     --
    Warehouse loans              28,241          --           --             --          --         --          --      (28,241)
    Interest rate locks              --          --       13,559          6,069          --         --          --      (19,628)
    FLSC hedges                      --          --      (14,823)       (34,232)         --         --          --       49,055
    Cash  flow  hedges - swaps       --          --           --       (144,011)     58,828     85,183          --           --
                                -------   ---------    ---------      ---------     -------    -------    --------     --------
FAIR VALUE ADJUSTMENTS -
    THREE MONTHS ENDED
    SEPTEMBER 30, 2001           28,241    (268,775)     267,964       (152,093)     58,828     85,183     (20,534)       1,186

Other Activity - Three Months
    ended September 30, 2001:
    MSR hedge additions              --          --       81,428             --          --         --          --           --
    MSR hedge sales and
       maturities                    --          --     (192,958)            --          --         --          --           --
    Hedge receipts and
       payments                      --          --      (23,568)        (5,507)         --         --          --           --
                                -------   ---------    ---------      ---------     -------    -------    --------     --------
TOTAL OTHER ACTIVITY -
    THREE MONTHS ENDED
    SEPTEMBER 30, 2001               --          --     (135,098)        (5,507)         --         --          --           --
                                -------   ---------    ---------      ---------     -------    -------    --------     --------

TOTAL IMPACT FROM
    SFAS NO. 133 -
    THREE MONTHS ENDED
    SEPTEMBER 30, 2001          $28,241   $(268,775)   $ 132,866      $(157,600)    $58,828    $85,183    $(20,534)    $  1,186
                                =======   =========    =========      =========     =======    =======    ========     ========
</TABLE>


                                    Page 43
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

       CALIFORNIA FEDERAL GOODWILL LITIGATION

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

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

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

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

       GLENDALE GOODWILL LITIGATION

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

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

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


                                    Page 44
<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 Bank believes that it has additional meritorious defenses
to plaintiffs' claims and intends to continue to contest the remaining claims in
the lawsuit vigorously.

       OTHER LITIGATION

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

ITEM 5.  OTHER INFORMATION.

       None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

     (a) Exhibits:

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

              3.2    By-laws of the  Registrant,  as amended.  (Incorporated  by
                     reference  to  Exhibit  3.2 of the  Registrant's  Quarterly
                     Report on Form 10-Q for the  quarter  ended  September  30,
                     1998.)

     (b) Reports on Form 8-K:

         None.


                                    Page 45
<PAGE>
                            GLOSSARY OF DEFINED TERMS

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


                                    Page 46
<PAGE>
GLEN FED MERGER - Glendale Federal Bank merged with and into the Bank.
GOLDEN STATE - Golden State Bancorp Inc.
GOLDEN STATE  ACQUISITION - FN Holdings Asset Transfer,  Holding Company Mergers
    and Glen Fed Merger, collectively
GOLDEN STATE  MERGER - the merger,  completed on  September  11,  1998,  between
    Golden  State, the publicly traded parent company of Glendale  Federal,  and
    First Nationwide Holdings Inc. and Hunter's Glen/Ford, Ltd.
GOODWILL LITIGATION ASSETS -the California Federal Goodwill Litigation Asset and
    the Glendale Goodwill Litigation Asset, collectively
GOVERNMENT - United States Government
GS  ESCROW MERGER - GS  Escrow was merged with and into GS Holdings, pursuant to
    a  merger  agreement  by and between GS Escrow and GS Holdings in  September
    1998.
GS  HOLDINGS - Golden State Holdings Inc.
GS  HOLDINGS NOTES - On  August 6, 1998, GS Escrow,  which  subsequently  merged
    into  GS Holdings, issued $2 billion of fixed and floating rate notes.
GSB INVESTMENTS - GSB Investments Corp.
HOLDING  COMPANY  MERGERS - FN  Holdings  merged  with  and  into  Golden  State
    Financial Corporation,  which owned  all of  the common  stock  of  Glendale
    Federal.
IO - Interest only
LIBOR - London Interbank Offered Rate
LTV - Loan-to-value
LTW - Litigation Tracking Warrant
MAFCO HOLDINGS - Mafco Holdings Inc.
MSR - Mortgage servicing rights
NOL - Net operating loss
OCI - Other comprehensive income
OLD CALIFORNIA  FEDERAL - California Federal Bank, A  Federal Savings Bank prior
    to the Cal Fed Acquisition.
PO - Principal only
REIT - Real Estate Investment Trust
REIT PREFERRED STOCK - 9 1/8% Noncumulative Exchangeable Preferred Stock, Series
    A, issued  by California  Federal Preferred  Capital  Corporation in January
    1996.
REPOS - short-term securities sold under agreements to repurchase
SEC - Securities and Exchange Commission
SFAS - Statement of Financial Accounting Standards
SFAS NO. 114 - Accounting by Creditors for Impairment of a Loan
SFAS NO. 115 - Accounting for Certain Investments in Debt and Equity Securities
SFAS NO. 121 -  Accounting  for  the  Impairment  of  Long-lived  Assets and for
    Long-lived Assets to be Disposed of
SFAS NO. 125 - Accounting  for Transfers  and Servicing of Financial  Assets and
    Extinguishment of Liabilities
SFAS NO. 131  -  Disclosures  about  Segments  of  an  Enterprise  and   Related
    Information
SFAS NO. 133 - Accounting for Derivative Instruments and Hedging Activities
SFAS NO. 140 - Accounting  for Transfers  and Servicing of Financial  Assets and
    Extinguishments of Liabilities, a replacement of FASB Statement No. 125
SFAS NO. 141 - Accounting for Business Combinations
SFAS NO. 142 - Accounting for Goodwill and Intangible Assets
SFAS NO. 144 - Accounting for the Impairment or Disposal of Long-Lived Assets
STOCK PLAN - Golden State Bancorp Inc. Omnibus Stock Plan
VERDUGO - Verdugo Trustee Service Corporation


                                    Page 47
<PAGE>

                                   SIGNATURES

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





                             Golden State Holdings Inc.




                                  /s/ Richard H. Terzian
                             ---------------------------------------------------

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



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





November 7, 2001
                                    Page 48