================================================================================

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

                                    FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

                                       OR

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

For the Transition period from __________ to __________


                        COMMISSION FILE NUMBER 001-08007

                           FREMONT GENERAL CORPORATION
             (Exact name of registrant as specified in its charter)


            NEVADA                                               95-2815260
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                             2425 Olympic Boulevard
                         Santa Monica, California 90404
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (310) 315-5500
              (Registrant's telephone number, including area code)

                                 NOT APPLICABLE
         (Former Name or Former Address, if Changed Since Last Report)

     Indicate by check mark  whether the  registrant:  (1) has filed all reports
required 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. Yes [X] No _

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No _

     Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes _  No [X]

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock:

                                                          SHARES OUTSTANDING
           CLASS                                           OCTOBER 31, 2005
Common Stock, $1.00 par value                                 77,875,000


================================================================================



<PAGE>


                           FREMONT GENERAL CORPORATION

                                      INDEX

                         PART I - FINANCIAL INFORMATION


                                                                        PAGE NO.
                                                                        -------
Item  1.  Financial Statements

            Consolidated Balance Sheets
              September 30, 2005 (Unaudited) and December 31, 2004 .....       3

            Consolidated Statements of Income
              Three and Nine Months Ended September 30, 2005 and 2004
              (Unaudited) ..............................................       4

            Consolidated Statements of Changes in Stockholders' Equity
              September 30, 2005 and 2004 (Unaudited) ..................       5

            Consolidated Statements of Cash Flows
              Nine Months Ended September 30, 2005 and 2004 (Unaudited).       6

            Consolidated Statements of Comprehensive Income
              Three and Nine Months Ended September 30, 2005 and 2004
              (Unaudited) ..............................................       7

            Notes to Consolidated Financial Statements (Unaudited)......       8

Item  2.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations ..................................      36

Item  3.  Quantitative and Qualitative Disclosures About Market Risk ..       59


Item  4.  Controls and Procedures .....................................       60



                           PART II - OTHER INFORMATION




Item     1.   Legal Proceedings ........................................      61

Item     2.   Unregistered Sales of Equity Securities and Use of
              Proceeds ................................. ...............      62

Item  3 -5.   Not applicable.

Item     6.   Exhibits..................................................      63

Signatures      ........................................................      65


                                       2

<PAGE>

                  FREMONT GENERAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                SEPTEMBER 30,     DECEMBER 31,
                                                                                    2005             2004
                                                                                ------------      ------------
                                                                                 (UNAUDITED)
                                                                                    (THOUSANDS OF DOLLARS)
                                     ASSETS

<S>                                                                             <C>               <C>
Cash and cash equivalents ...................................................   $    764,920      $    904,975
Investment securities classified as available for sale at fair value ........            941             1,236
Federal Home Loan Bank ("FHLB") stock at cost ...............................        131,553            77,127
Loans held for sale - net ...................................................      5,767,480         5,454,692
Loans held for investment - net .............................................      3,960,383         3,313,089
Mortgage servicing rights - net .............................................         28,005            18,002
Residual interests in securitized loans at fair value .......................         28,221            15,774
Accrued interest receivable .................................................         36,216            34,121
Real estate owned ...........................................................         27,936            23,922
Premises and equipment - net ................................................         61,073            54,347
Deferred income taxes .......................................................        116,952           155,529
Other assets ................................................................         77,736            53,182
                                                                                ------------      ------------
  TOTAL ASSETS ..............................................................   $ 11,001,416      $ 10,105,996
                                                                                ============      ============

                                   LIABILITIES

Deposits:
  Savings accounts ..........................................................   $  1,174,900      $  1,283,223
  Money market deposit accounts .............................................        438,732           508,227
  Certificates of deposit ...................................................      6,827,080         5,755,530
                                                                                ------------      ------------
                                                                                   8,440,712         7,546,980

Warehouse lines of credit ...................................................              -                 -
Federal Home Loan Bank advances .............................................        639,000           900,000
Senior Notes due 2009 .......................................................        180,368           180,133
Liquid Yield Option Notes due 2013 ("LYONs") ................................              -               611
Junior Subordinated Debentures ..............................................        103,093           103,093
Other liabilities ...........................................................        342,103           361,531
                                                                                ------------      ------------
  TOTAL LIABILITIES .........................................................      9,705,276         9,092,348

Commitments and contingencies ...............................................              -                 -


                              STOCKHOLDERS' EQUITY

Preferred stock, par value $ .01 per share -- Authorized: 2,000,000
  shares; none issued .......................................................              -                 -
Common stock, par value $1 per share -- Authorized: 150,000,000 shares;
  Issued and outstanding: (2005 - 77,875,000 and 2004 - 77,241,000) .........         77,875            77,241
Additional paid-in capital ..................................................        342,245           330,328
Retained earnings ...........................................................        919,327           663,580
Deferred compensation .......................................................        (51,303)          (58,916)
Accumulated other comprehensive income ......................................          7,996             1,415
                                                                                ------------      ------------
  TOTAL STOCKHOLDERS' EQUITY ................................................      1,296,140         1,013,648
                                                                                ------------      ------------
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................   $ 11,001,416      $ 10,105,996
                                                                                ============      ============



         The accompanying notes are an integral part of these statements.

</TABLE>


                                       3


<PAGE>

                  FREMONT GENERAL CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>



                                                                         THREE MONTHS ENDED             NINE MONTHS ENDED
                                                                             SEPTEMBER 30,                SEPTEMBER 30,
                                                                       ------------------------     -------------------------
                                                                          2005           2004          2005            2004
                                                                       ---------      ---------     ---------       ---------
                                                                            (THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

<S>                                                                    <C>            <C>            <C>            <C>
INTEREST INCOME:
  Interest and fee income on loans:
    Residential ....................................................   $ 115,007      $  86,223      $ 351,781      $ 269,316
    Commercial .....................................................      81,242         72,405        224,091        221,796
    Other ..........................................................        (342)           111           (158)           385
                                                                       ---------      ---------      ---------      ---------
                                                                         195,907        158,739        575,714        491,497
  Interest income - other ..........................................      12,107          4,165         25,174          9,143
                                                                       ---------      ---------      ---------      ---------
                                                                         208,014        162,904        600,888        500,640

INTEREST EXPENSE:
  Deposits .........................................................      70,265         38,037        181,921        108,095
  FHLB advances ....................................................      10,411          4,787         30,130         20,535
  Warehouse lines of credit ........................................         929            501          3,485            751
  Senior Notes .....................................................       3,650          3,691         10,951         11,664
  Junior Subordinated Debentures ...................................       2,320          2,320          6,959          6,959
  Other ............................................................          91             64            380            164
                                                                       ---------      ---------      ---------      ----------
                                                                          87,666         49,400        233,826        148,168

Net interest income ................................................     120,348        113,504        367,062        352,472
Provision for loan losses ..........................................      (4,071)       (10,309)        (7,251)         6,236
                                                                       ---------      ---------      ---------      ---------
Net interest income after provision for loan losses ................     124,419        123,813        374,313        346,236

NON-INTEREST INCOME:
  Net gain on whole loan sales and securitizations
    of residential real estate loans ...............................     116,044         89,366        316,368        338,612
  Loan servicing income ............................................      20,155         11,712         49,841         25,881
  Mortgage servicing rights amortization and impairment provision ..      (6,588)        (3,126)       (16,299)        (9,010)
  Impairment on residual assets ....................................           -              -         (1,790)             -
  Other ............................................................       4,602          2,961         14,569         16,066
                                                                       ---------      ---------      ---------      ---------
                                                                         134,213        100,913        362,689        371,549

NON-INTEREST EXPENSE:
  Compensation and related .........................................      61,851         50,950        176,785        186,180
  Occupancy ........................................................       7,412          4,404         21,289         11,482
  Other ............................................................      33,334         24,474         81,682         70,483
                                                                       ---------      ---------      ---------      ---------
                                                                         102,597         79,828        279,756        268,145

INCOME BEFORE INCOME TAXES .........................................     156,035        144,898        457,246        449,640
INCOME TAX EXPENSE .................................................      63,470         59,778        183,809        186,479
                                                                       ---------      ---------      ---------      ---------
NET INCOME                                                             $  92,565      $  85,120      $ 273,437      $ 263,161
                                                                       =========      =========      =========      =========


EARNINGS PER SHARE:
  Basic ............................................................   $    1.27      $    1.18      $    3.77      $    3.66
  Diluted ..........................................................        1.23           1.15           3.65           3.58

CASH DIVIDENDS DECLARED PER COMMON SHARE ...........................   $    0.08      $    0.06      $    0.23      $    0.17


        The accompanying notes are an integral part of these statements.

</TABLE>
                                       4

<PAGE>


                  FREMONT GENERAL CORPORATION AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                        ACCUMULATED
                                                             ADDITIONAL                                    OTHER
                                                  COMMON       PAID-IN     RETAINED      DEFERRED      COMPREHENSIVE
                                                   STOCK       CAPITAL     EARNINGS    COMPENSATION        INCOME         TOTAL
                                                 --------    ----------   ----------   ------------    -------------   -----------
                                                                            (THOUSANDS OF DOLLARS)

<S>                                              <C>        <C>          <C>          <C>             <C>             <C>
BALANCE AT DECEMBER 31, 2003 .................   $ 75,990    $  296,000   $ 328,044    $    (35,889)   $         587   $   664,732
  Net income .................................          -             -     263,161               -               -        263,161
  Cash dividends declared ....................          -             -     (12,892)              -               -        (12,892)
  Conversion of LYONs ........................          3            47           -               -               -             50
  Stock options exercised ....................        792        14,828           -               -               -         15,620
  Retirement of common stock .................       (138)         (698)          -             836               -              -
  Shares issued, acquired or allocated
    for employee benefit plans ...............        418         8,706           -         (36,907)              -        (27,783)
  Amortization of restricted stock ...........          -             -           -          10,466               -         10,466
  Shares allocated to ESOP ...................          -         4,829           -          15,215               -         20,044
  Other adjustments ..........................          -         2,110           -          (1,070)              -          1,040
  Net change in unrealized gain on
    investments and residual interests,
    net of deferred taxes ....................          -             -           -               -           2,199          2,199
                                                 --------    ----------   ---------    ------------    ------------    -----------
BALANCE AT SEPTEMBER 30, 2004 ................   $ 77,065    $  325,822   $ 578,313    $    (47,349)   $      2,786    $   936,637
                                                 ========    ==========   =========    ============    ============    ===========

BALANCE AT DECEMBER 31, 2004 .................   $ 77,241    $  330,328   $ 663,580    $    (58,916)   $      1,415    $ 1,013,648
  Net income .................................          -             -     273,437               -               -        273,437
  Cash dividends declared ....................          -             -     (17,690)              -               -        (17,690)
  Conversion of LYONs ........................         35           560           -               -               -            595
  Retirement of common stock .................        (95)         (936)          -           1,031               -              -
  Shares issued, acquired or allocated
    for employee benefit plans ...............        694        14,994           -         (32,429)              -        (16,741)
  Amortization of restricted stock ...........          -             -           -          14,507               -         14,507
  Shares allocated to ESOP ...................          -        (1,368)          -          25,832               -         24,464
  Change in cost of common stock
    held in trust ............................          -             -           -          (5,043)              -         (5,043)
  Other adjustments ..........................          -        (1,333)          -           3,715               -          2,382
  Net change in unrealized gain on
    investments and residual interests,
    net of deferred taxes ....................          -             -           -               -           6,581          6,581
                                                 --------    ----------   ---------    ------------    ------------    -----------
BALANCE AT SEPTEMBER 30, 2005 ................   $ 77,875    $  342,245   $ 919,327    $    (51,303)   $      7,996    $ 1,296,140
                                                 ========    ==========   =========    ============    ============    ===========



        The accompanying notes are an integral part of these statements.
</TABLE>


                                       5

<PAGE>


                  FREMONT GENERAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                        NINE MONTHS ENDED
                                                                                           SEPTEMBER 30,
                                                                                ---------------------------------
                                                                                    2005                2004
                                                                                -------------       -------------
                                                                                      (THOUSANDS OF DOLLARS)

<S>                                                                             <C>                 <C>
OPERATING ACTIVITIES
  Net income ................................................................   $     273,437       $     263,161
  Adjustments to reconcile net income to net cash provided by
   (used in) operating activities:
    Provision for loan losses ...............................................          (7,251)              6,236
    Provision for premium recapture, repurchase and valuation reserves
      of residential real estate loans held for sale ........................          40,744              34,505
    Premium refunds .........................................................         (18,537)            (10,131)
    Increase in mortgage servicing rights ...................................         (26,302)            (18,440)
    Increase in residual interests in securitized loans .....................          (8,052)             (4,686)
    Cash from residual interests in securitized loans .......................          13,362                   -
    Deferred income tax expense .............................................          34,189              62,204
    Depreciation, amortization and impairment of retained interests .........          34,307              22,244
    Compensation expense (income) related to deferred compensation
      obligation ............................................................          (4,070)                  -
    (Increase) decrease in accrued interest .................................          (2,095)              4,673
    Increase in other assets ................................................          (9,995)             (9,276)
    Increase (decrease) in federal and state income taxes payable ...........         (43,935)              8,669
    Increase in accrued Employee Stock Ownership Plan .......................          19,658              30,676
    Decrease in accrued incentive compensation ..............................         (27,888)             (1,407)
    Increase in accounts payable and other liabilities ......................          25,180              23,757
                                                                                -------------       -------------
       NET CASH PROVIDED BY OPERATING ACTIVITIES BEFORE LOANS HELD FOR
         SALE ACTIVITY ......................................................         292,752             412,185
    Originations of residential real estate loans held for sale .............     (26,616,133)        (16,869,573)
    Sale and securitization of residential real estate loans held for sale ..      26,086,153          16,604,615
    Loan payments received for residential real estate loans held for sale ..         210,639             124,587
                                                                                -------------       -------------
       NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ..................         (26,589)            271,814

INVESTING ACTIVITIES
  Originations and advances funded for loans held for investment ............      (2,630,208)         (1,623,833)
  Payments received from and sales of loans held for investment .............       1,991,056           1,941,773
  Decrease in investment securities available for sale ......................             284                 571
  Net purchases of FHLB stock ...............................................         (54,426)              9,345
  Purchases of premises and equipment .......................................         (19,266)            (19,109)
                                                                                -------------       -------------
       NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ..................        (712,560)            308,747

FINANCING ACTIVITIES
  Deposits accepted, net of repayments ......................................         893,732             617,972
  FHLB advances, net of repayments ..........................................        (261,000)           (923,000)
  Extinguishment of LYONs and Senior Notes ..................................             (30)            (29,574)
  Dividends paid ............................................................         (16,867)            (12,068)
  Stock options exercised ...................................................               -              11,602
  Increase in deferred compensation plans ...................................         (16,741)            (27,194)
                                                                                -------------       -------------
       NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ..................         599,094            (362,262)

Increase (decrease) in cash and cash equivalents ............................        (140,055)            218,299
  Cash and cash equivalents at beginning of period ..........................         904,975             835,651
                                                                                -------------       -------------
Cash and cash equivalents at end of period ..................................   $     764,920       $   1,053,950
                                                                                =============       =============



        The accompanying notes are an integral part of these statements.

</TABLE>


                                       6

<PAGE>

                  FREMONT GENERAL CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

<TABLE>
<CAPTION>



                                                                          THREE MONTHS ENDED             NINE MONTHS ENDED
                                                                             SEPTEMBER 30,                 SEPTEMBER 30,
                                                                        -----------------------      ------------------------
                                                                          2005           2004           2005           2004
                                                                        --------       --------      ---------      ---------
                                                                                        (THOUSANDS OF DOLLARS)

<S>                                                                     <C>            <C>           <C>            <C>
Net income ..........................................................   $ 92,565       $ 85,120      $ 273,437      $ 263,161
Other comprehensive income:
  Unrealized gains (losses) during the period:
    Residual interests in securitized loans .........................      6,346          4,277         10,978          3,699
    Investment securities ...........................................         (2)             7            (11)           (34)
                                                                        --------       --------      ----------     ---------
                                                                           6,344          4,284         10,967          3,665
  Less income tax expense ...........................................      2,538          1,714          4,386          1,466
                                                                        --------       --------      ---------      ---------
      Other comprehensive net income ................................      3,806          2,570          6,581          2,199
                                                                        --------       --------      ---------      ---------
TOTAL COMPREHENSIVE NET INCOME ......................................   $ 96,371       $ 87,690      $ 280,018      $ 265,360
                                                                        ========       ========      =========      =========
</TABLE>






        The accompanying notes are an integral part of these statements.


                                       7

<PAGE>

                  FREMONT GENERAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)




NOTE 1:    BASIS OF PRESENTATION

     The accompanying consolidated financial statements include the accounts of
Fremont General Corporation ("Fremont General") and its subsidiaries (together
the "Company"), including the Company's principal operating subsidiary, Fremont
Investment & Loan ("FIL"), a California chartered industrial bank which is
engaged in commercial and residential real estate lending on a nationwide basis.
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
("GAAP"). All intercompany balances and transactions have been eliminated in
consolidation.

     The preparation of the financial statements in conformity with GAAP
requires management to make estimates and assumptions that materially affect the
reported amounts of assets and liabilities and the disclosure of contingent
liabilities at the date of the financial statements and revenues and expenses
during the reporting period. Actual results could differ from those estimates.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for the fair presentation of the interim
financial statements have been included. The operating results for the three and
nine month periods ended September 30, 2005 are not necessarily indicative of
the results that may be expected for the year ended December 31, 2005.

     The unaudited interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2004. Certain prior period amounts have been reclassified to conform to the
current period presentation.


NOTE 2:    NEW ACCOUNTING STANDARDS

     In March 2005, the United States Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 107 ("SAB 107") to provide public companies
additional guidance in applying the provisions of Statement of Financial
Accounting Standards No. 123(R), Share-Based Payment ("SFAS No. 123R"). SAB 107
expresses the SEC staff's views regarding the interaction between SFAS No. 123R
and certain SEC rules and regulations and provides further information regarding
the valuation of share-based payment arrangements for public companies.
Subsequent to issuing SAB 107, in April 2005, the SEC adopted a new rule that
allows companies to implement SFAS No. 123R at the beginning of their next
fiscal year. Prior to the adoption of this new rule, calendar year-end companies
would have been required to implement SFAS No. 123R as of the beginning of the
third quarter of 2005. The Company does not believe that the adoption of SFAS
No. 123R or the application of the guidance in SAB 107 will have a significant


                                       8

<PAGE>

impact on the Company's financial position or results of operations.

     In March 2005, the Financial Accounting Standards Board ("FASB") issued
FASB Staff Position ("FSP") FIN 46(R)-5: Implicit Variable Interests under FASB
Interpretation No. 46 (Revised December 2003), Consolidation of Variable
Interest Entities ("FIN 46(R)-5"). This FSP was issued to address whether a
reporting enterprise should consider whether it holds an implicit variable
interest in a variable interest entity ("VIE") or potential VIE when specific
conditions exist. FIN 46(R)-5 also provides additional guidance defining
implicit variable interests as implied financial interests in an entity that
change with changes in the fair value of the entity's net assets exclusive of
variable interests. The Company adopted FIN 46(R)-5 effective July 1, 2005
without a significant impact on the Company's financial position or results of
operations.


NOTE 3:    CASH AND CASH EQUIVALENTS

     Cash and cash equivalents, as of the dates indicated, are summarized in the
following table:

<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,     DECEMBER 31,
                                                                                    2005             2004
                                                                                ------------      -----------
                                                                                   (THOUSANDS OF DOLLARS)

<S>                                                                             <C>               <C>
Cash on hand ................................................................   $        264      $       257
FHLB shareholder transaction account ........................................        505,797          710,354
Federal Reserve account .....................................................          2,984            2,030
Short-term money market fund ................................................        101,536          147,297
Market interest rate account ................................................             24               13
Non-interest bearing deposits in other financial institutions ...............        154,315           45,024
                                                                                ------------       ----------
Cash and cash equivalents ...................................................   $    764,920       $  904,975
                                                                                ============       ==========
</TABLE>

     The FHLB shareholder transaction account represents a short-term
interest-bearing transaction account with the Federal Home Loan Bank of San
Francisco. The Company's cash and cash equivalent balances were unrestricted as
of September 30, 2005 and December 31, 2004.


                                       9

<PAGE>

NOTE 4:    LOANS HELD FOR SALE

     Loans held for sale consist solely of residential real estate loans
(primarily first trust deeds, but also second trust deeds) which are aggregated
prior to their sale and are carried at the lower of aggregate cost, or estimated
fair value. Estimated fair values are based upon current secondary market prices
for loans with similar coupons, maturities and credit quality.

     The Company's residential real estate loans have loan terms for up to
thirty years and are typically secured by first deeds of trust on single-family
residences. The Company's residential real estate loans held for sale typically
have a significant concentration (generally 80% or higher) of "hybrid" loans
which have a fixed rate of interest for an initial period (generally two years)
after origination, after which the interest rate is adjusted to a rate equal to
the sum of six-month LIBOR and a margin as set forth in the mortgage note. The
interest rate then adjusts at each six-month interval thereafter, subject to
various initial, periodic and lifetime rate caps and floors. The loans are
generally made to borrowers who do not satisfy all of the credit, documentation
and other underwriting standards prescribed by conventional mortgage lenders and
loan buyers, such as Fannie Mae and Freddie Mac, and are commonly referred to as
"sub-prime" or "non-prime" loans.

     A valuation reserve is maintained for certain non-performing loans and
other loans held for sale based upon the Company's estimate of inherent losses.
Provisions for the valuation reserve are charged against gain on sale of loans.
The following table details the loans held for sale as of the dates indicated:

<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,     DECEMBER 31,
                                                                                    2005             2004
                                                                                ------------      -----------
                                                                                    (THOUSANDS OF DOLLARS)

<S>                                                                             <C>               <C>
Loan principal balance:
  1st trust deeds ...........................................................   $  5,119,708      $ 5,036,724
  2nd trust deeds ...........................................................        617,822          383,039
                                                                                ------------      -----------
                                                                                   5,737,530        5,419,763
Basis adjustment for fair value hedge accounting ............................              -           (1,327)
Net deferred direct origination costs .......................................         65,298           74,514
                                                                                ------------      -----------
                                                                                   5,802,828        5,492,950
Less:  Valuation reserve ....................................................        (35,348)         (38,258)
                                                                                ------------      -----------
Loans held for sale - net ...................................................   $  5,767,480      $ 5,454,692
                                                                                ============      ===========

Loans held for sale on non-accrual status ...................................   $     15,081      $    11,874
                                                                                ============      ===========
</TABLE>


                                       10

<PAGE>

     Since most of the loans that are held for sale are sold within 60 days, the
amount of loans held for sale that are classified as non-accrual or become real
estate owned, is generally small. Loans held for sale may include loans
repurchased from previous whole loan sale transactions and securitizations. In
the ordinary course of business, as the loans held for sale are sold, the
Company makes standard industry representations and warranties about the loans.
The Company may have to subsequently repurchase certain loans due to defects
that occurred in the origination of the loan. Such defects are categorized as
documentation errors, underwriting errors, or fraud. In addition, the Company is
generally required to repurchase loans that experience first payment defaults
(and in limited cases, second payment defaults). If there are no such defects or
early payment defaults, the Company has no commitment to repurchase loans sold.
During the third quarter of 2005, the Company repurchased a total of $126.7
million in loans, as compared to $75.9 million in the third quarter of 2004. The
increase in loans repurchased is primarily a result of an increase in loan
origination and sales volumes. The Company maintains a reserve for the effect of
loans estimated to be repurchased from previously completed loan sales; this
reserve is included in other liabilities and totaled $23.7 million and $4.8
million as of September 30, 2005 and December 31, 2004, respectively. During the
third quarter of 2005, the Company updated its loss estimates and
stratifications for both of its valuation and repurchase reserves; the net
result included a shifting of a certain amount of the valuation reserve into the
repurchase reserve, thus increasing the repurchase reserve during the third
quarter of 2005. Provisions for the repurchase reserve are charged against gain
on sale of loans.

     The Company also maintains a reserve for premium recapture that represents
the estimate of potential refunds of premiums received on previously completed
loan sales (due to early loan prepayments or for certain loans repurchased from
prior sales) that may occur under the provisions of the various agreements
entered into for the sale of loans held for sale; this reserve totaled $10.6
million and $7.5 million as of September 30, 2005 and December 31, 2004,
respectively, and is included in other liabilities. Provisions for the premium
recapture reserve are charged against gain on sale of loans.


NOTE 5:    LOANS HELD FOR INVESTMENT

     Loans held for investment consist of the Company's commercial real estate
loans. Commercial real estate loans, which are primarily variable rate
(generally based upon six-month LIBOR and a margin), represent loans secured
primarily by first mortgages on properties such as multi-family (condominium),
office, retail, industrial, land development, mixed-use and lodging. The
commercial real estate loans are comprised of permanent, bridge and construction
loans of relatively short duration (rarely more than five years in length of
term and typically shorter, such as two to three years).


                                       11

<PAGE>

     As of September 30, 2005, the Company had $2.84 billion in unfunded
commitments for existing loans and $685.1 million in unfunded commitments for
loans not yet booked, as compared to $1.84 billion and $218.8 million,
respectively, as of December 31, 2004. The increase in unfunded loan commitments
is a result of an increase in loan commitments originated during 2005 but with
lower average levels of fundings as a percentage of the total loan commitment
(primarily from transactions involving condominiums as the underlying property
type). Due to the variability in the timing of the funding of these unfunded
commitments, and the extent to which they are ultimately funded, these amounts
should not generally be used as a basis for predicting future outstanding loan
balances.

     Commercial real estate loans are reported net of participations to other
financial institutions or investors in the amount of $149.4 million and $131.6
million as of September 30, 2005 and December 31, 2004, respectively. The
Company's commercial real estate loans also include mezzanine loans (second
mortgage loans, which are subordinate to the senior or first mortgage loans) in
the amounts of $8.5 million and $48.3 million as of September 30, 2005 and
December 31, 2004, respectively.

     The Company currently does not carry any residential real estate loans held
for investment as it has done in prior periods. The following tables further
detail the net loans held for investment for the periods indicated:


                                       12

<PAGE>
<TABLE>
<CAPTION>
                                                                                            SEPTEMBER 30, 2005
                                                                                -------------------------------------------
                                                                                 COMMERCIAL
                                                                                REAL ESTATE        OTHER           TOTAL
                                                                                -----------       -------       -----------
                                                                                           (THOUSANDS OF DOLLARS)

<S>                                                                             <C>               <C>           <C>
Loans outstanding ...........................................................   $ 4,303,891       $ 6,242       $ 4,310,133
Participations sold .........................................................      (149,434)            -          (149,434)
                                                                                -----------       -------       -----------
Loans outstanding, net of participations sold ...............................     4,154,457         6,242         4,160,699
Unamortized deferred origination fees and costs .............................       (41,603)            -           (41,603)
                                                                                -----------       -------       -----------
Loans outstanding before allowance for loan losses ..........................     4,112,854         6,242         4,119,096
Allowance for loan losses ...................................................      (158,654)          (59)         (158,713)
                                                                                -----------       -------       -----------
Loans held for investment - net .............................................   $ 3,954,200       $ 6,183       $ 3,960,383
                                                                                ===========       =======       ============

</TABLE>
<TABLE>
<CAPTION>
                                                                                             DECEMBER 31, 2004
                                                                                -------------------------------------------
                                                                                 COMMERCIAL
                                                                                REAL ESTATE        OTHER           TOTAL
                                                                                -----------       -------       -----------
                                                                                           (THOUSANDS OF DOLLARS)

<S>                                                                             <C>               <C>           <C>
Loans outstanding ...........................................................   $ 3,647,490       $ 4,526       $ 3,652,016
Participations sold .........................................................      (131,635)            -          (131,635)
                                                                                -----------       -------       -----------
Loans outstanding, net of participations sold ...............................     3,515,855         4,526         3,520,381
Unamortized deferred origination fees and costs .............................       (35,767)            -           (35,767)
                                                                                -----------       -------       -----------
Loans outstanding before allowance for loan losses ..........................     3,480,088         4,526         3,484,614
Allowance for loan losses ...................................................      (171,471)          (54)         (171,525)
                                                                                -----------       -------       -----------
Loans held for investment - net .............................................   $ 3,308,617       $ 4,472       $ 3,313,089
                                                                                ===========       =======       ===========

</TABLE>

     The following table sets forth information regarding the Company's
commercial real estate loans on non-accrual status and restructured loans on
accrual status. In cases where a borrower experiences financial difficulties and
the Company makes certain concessionary modifications to contractual terms
(typically a reduction of the interest rate charged), the loan is classified as
a restructured (accruing) loan if the loan is performing in accordance with the
agreed upon modified loan terms and projected cash proceeds are deemed
sufficient to repay both principal and interest. Restructured loans are
presented as such in the period of restructure and the three subsequent
quarters.

<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,    DECEMBER 31,
                                                                                    2005             2004
                                                                                ------------     -----------
                                                                                   (THOUSANDS OF DOLLARS)

<S>                                                                             <C>              <C>
Non-accrual commercial real estate loans held for investment .................. $     21,926     $    82,289
                                                                                ============     ===========

Restructured commercial real estate loans on accrual status ................... $     12,350     $     9,302
                                                                                ============     ===========
</TABLE>

                                       13


<PAGE>

     The Company employs a documented and systematic methodology in determining
the adequacy of its allowance for loan losses, which assesses the risk of losses
inherent in the portfolio, and represents the Company's estimate of probable
inherent losses in the loan portfolio as of the date of the financial
statements. The allowance for loan losses methodology incorporates management's
judgment concerning the effect of recent economic events on portfolio
performance, as well as concentration factors (such as property types,
geographic regions and loan sizes). Activity in the allowance for loan losses is
summarized in the following tables:

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED             NINE MONTHS ENDED
                                                             SEPTEMBER 30,                  SEPTEMBER 30,
                                                       -------------------------      -------------------------
                                                          2005           2004            2005           2004
                                                       ---------       ---------      ---------       ---------
                                                                        (THOUSANDS OF DOLLARS)


<S>                                                    <C>             <C>            <C>             <C>
Beginning balance ..................................   $ 159,956       $ 214,726      $ 171,525       $ 213,591
Provision for loan losses ..........................      (4,071)        (10,309)        (7,251)          6,236
Charge-offs ........................................           -          (5,374)       (12,180)        (21,158)
Fair value adjustment (1) ..........................           -          (9,856)             -          (9,856)
Recoveries .........................................       2,828             435          6,619             809
                                                       ---------       ---------      ---------       ---------
Ending balance .....................................   $ 158,713       $ 189,622      $ 158,713       $ 189,622
                                                       =========       =========      =========       =========


Net charge-offs ....................................   $   2,828       $ (14,795)     $  (5,561)      $ (30,205)
                                                       =========       =========      =========       =========

<FN>

(1)  Resulting from the transfer of $910.0 million in residential real estate loans from held for investment to held for sale
     during the third quarter of 2004.
</FN>
</TABLE>

     In addition to its allowance for loan losses, the Company maintains an
allowance for unfunded commercial real estate loan commitments on existing loans
and, to a lesser degree, loans not yet funded; this allowance totaled $12.2
million and $7.1 million as of September 30, 2005 and December 31, 2004,
respectively, and is included in other liabilities.


NOTE 6:    REAL ESTATE OWNED

     The Company's real estate owned ("REO") consists of property acquired
through or in lieu of foreclosure on loans secured by real estate. REO is
reported in the financial statements at the lower of cost or estimated
realizable value (net of estimated costs to sell). REO consisted of the
following types of property as of the periods indicated:


                                       14


<PAGE>
<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,      DECEMBER 31,
                                                                                    2005               2004
                                                                                ------------       -----------
                                                                                    (THOUSANDS OF DOLLARS)

<S>                                                                             <C>                <C>
Commercial real estate ......................................................   $     24,712       $    21,344
Residential real estate .....................................................          3,224             2,578
                                                                                ------------       -----------
Real estate owned ...........................................................   $     27,936       $    23,922
                                                                                ============       ===========
</TABLE>


NOTE 7:    MORTGAGE SERVICING RIGHTS

     At the time of securitization or sale of loans on a whole loan basis with
servicing rights retained, the Company analyzes whether the benefits of
servicing are greater than or less than adequate compensation and, as a result,
records a mortgage servicing rights asset or liability ("MSR"), respectively.
The estimated fair value of the Company's mortgage servicing rights at September
30, 2005 and December 31, 2004 was $28.0 million and $18.0 million,
respectively. The following tables summarize the activity in the Company's
mortgage servicing rights asset as of the periods indicated:

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED             NINE MONTHS ENDED
                                                              SEPTEMBER 30,                 SEPTEMBER 30,
                                                         ----------------------       ------------------------
                                                           2005          2004            2005           2004
                                                         --------      --------       ---------       --------
                                                                        (THOUSANDS OF DOLLARS)

<S>                                                      <C>           <C>            <C>            <C>
Beginning balance ....................................   $ 24,525      $ 15,209       $  20,044       $  6,898
  Additions from securitization transactions .........     12,275         6,722          26,303         18,440
  Amortization .......................................     (5,574)       (3,186)        (15,121)        (6,593)
                                                         --------      --------       ---------       --------
Ending balance before valuation allowance ............     31,226        18,745          31,226         18,745
Valuation allowance
  Beginning balance ..................................     (2,207)       (2,477)         (2,043)             -
  Provision for temporary impairment .................     (1,014)           60          (1,178)        (2,417)
                                                         --------      --------       ---------       --------
  Ending balance .....................................     (3,221)       (2,417)         (3,221)        (2,417)
                                                         --------      --------       ---------       --------
Mortgage servicing rights - net ......................   $ 28,005      $ 16,328       $  28,005       $ 16,328
                                                         ========      ========       =========       ========
</TABLE>

     As servicer, the Company is required to make certain advances on specific
loans it is servicing, to the extent such advances are deemed collectible by the
Company from collections related to the individual loan. The total amount
outstanding of such servicing advances was $11.8 million and $5.3 million at
September 30, 2005 and December 31, 2004, respectively, and is included in other
assets.

     The fair value of the MSRs is derived from the net positive cash flows
associated with the servicing agreements. The Company determines the fair value
of the MSRs at the time of securitization and at each reporting date by the use
of a cash flow model that incorporates prepayment speeds, discount rate and
other key assumptions management believes are consistent with assumptions other
major market

                                       15

<PAGE>

participants use in valuing the MSRs. The Company determined, as part of its
on-going assessment of the assumptions used to value its MSRs, to increase the
discount rate utilized to 15.0% during the first quarter of 2005. The key
economic assumptions used in subsequently measuring the fair value of the
Company's MSRs as of the periods indicated are as follows:

<TABLE>
<CAPTION>

                                                                                SEPTEMBER 30,      DECEMBER 31,
                                                                                    2005               2004
                                                                                ------------       -----------

<S>                                                                             <C>               <C>
Weighted-average life (years) ...............................................            1.5               1.5
Weighted-average annual prepayment speed (CPR) ..............................           47.8%             48.5%
Weighted-average annual discount rate .......................................           15.0%             10.0%

</TABLE>


NOTE 8:    RESIDUAL INTERESTS IN SECURITIZED LOANS

     Residual interests in loan securitizations are recorded as a result of the
sale of residential real estate loans through a securitization transaction and
the subsequent issuance of net interest margin securities ("NIMs") to monetize
the residual interest from the original securitization transaction.

     Residual interests represent the discounted expected future residual cash
flows from the securitizations that inure to the Company's benefit subject to
prepayment, net lifetime credit losses and other factors. The following tables
summarize the activity of the Company's residual interests:

<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED            NINE MONTHS ENDED
                                                                             SEPTEMBER 30,                SEPTEMBER 30,
                                                                        ----------------------      ------------------------
                                                                          2005          2004           2005           2004
                                                                        --------      --------      ---------       --------
                                                                                       (THOUSANDS OF DOLLARS)

<S>                                                                     <C>           <C>           <C>             <C>
Beginning balance at fair value .....................................   $ 16,784      $ 12,139      $  15,774       $  6,530
Additions to residual interests .....................................      4,300            94          8,052          4,686
Interest accretion ..................................................      4,262           856          8,569          2,451
Cash received .......................................................     (3,470)            -        (13,362)             -
Fair value adjustment ...............................................      6,345         4,276         10,978          3,698
Permanent impairment ................................................          -             -         (1,790)             -
                                                                        --------      --------      ---------       --------
Residual interests in securitized loans at fair value ...............   $ 28,221      $ 17,365      $  28,221       $ 17,365
                                                                        ========      ========      =========       ========
</TABLE>


     Loans sold through securitization transactions are done so on a
non-recourse basis to off-balance sheet qualified special purpose entities
("QSPEs"), except for representations and warranties customary within the
mortgage banking industry. In a NIM transaction, the certificates representing
the residual interest in certain excess cash flows from the original
securitization transaction are transferred to a QSPE,


                                       16

<PAGE>

which issues interest-bearing securities. The net proceeds from the sale of
these NIM securities, along with a residual interest certificate, represents the
consideration received by the Company. The residual interest certificate
retained from a NIM transaction is subordinate to the NIM securities issued
until the NIM securities are paid in full. The residual interests retained from
the NIM transactions are classified as "available-for-sale" securities and are
measured at fair value; any unrealized gains or losses from adjustments to the
estimated fair value, net of taxes, are reported as part of accumulated other
comprehensive income, which is a separate component of stockholders' equity. In
the original securitizations and NIM transactions, a two-tier structure is
utilized in which the loans are first sold to a special purpose corporation
(referred to as the Depositor), which then transfers the loans to the QSPE. The
Company's only ownership interest from its securitization transactions is
reflected in the retained residual interests from the NIM transactions of $28.2
million as detailed above.

     As of September 30, 2005, a total of $4.85 billion in loan principal was
outstanding from the Company's securitization transactions. The total amount of
loan principal originally securitized in these transactions was $7.38 billion.

     The Company determines the estimated fair values of the residual interests
retained from the NIM transactions by discounting the expected net cash flows to
be received utilizing the cash-out method. The Company uses the forward LIBOR
curve for estimating interest rates on the adjustable rate loans and the
variable rate securities, and utilizes other assumptions (primarily for losses,
prepayment speeds and delinquencies) that management believes are consistent
with assumptions other major market participants would use to estimate the fair
value of similar residual interests. The Company continually evaluates the
various assumptions utilized in estimating the fair value of the retained
residual interests and updates them as deemed necessary based upon the
development of historical vintage data. Key economic assumptions used in
subsequently measuring the fair value of the Company's residual interests as of
the periods indicated are as follows:

<TABLE>
<CAPTION>

                                                                                SEPTEMBER 30,      DECEMBER 31,
                                                                                    2005               2004
                                                                                ------------       -----------

<S>                                                                             <C>               <C>
Weighted-average life (years) ...............................................            1.5               1.6
Weighted-average annual prepayment speed (CPR) ..............................           47.3%             45.7%
Weighted-average lifetime credit losses .....................................            4.5%              4.5%
Weighted-average annual discount rate .......................................           20.0%             20.0%

</TABLE>


                                       17

<PAGE>

NOTE 9:    DERIVATIVE FINANCIAL INSTRUMENTS

     The Company utilizes derivative financial instruments in connection with
its interest rate risk management activities. In accordance with its interest
rate risk strategy, the Company currently utilizes a combination of forward
sales commitments and Eurodollar futures contracts to hedge its residential real
estate loans held for sale and a certain portion of its unfunded pipeline of
interest rate lock commitments. These derivatives are intended to reduce the
risk of adverse fair value changes in certain interest rate environments. The
Company's forward sales commitments represent obligations to sell loans at a
specific price and date in the future; therefore, the value of these commitments
increase as interest rates increase. Short Eurodollar futures contracts are
standardized exchange-traded contracts, the values of which are tied to spot
Eurodollar rates at specified future dates. The value of these futures contracts
increase when interest rates rise. Conversely, the value of the forward sales
commitments and the short Eurodollar positions decrease when interest rates
decrease, while the related loans are expected to increase in value. The values
of the loans, the forward sales commitments and the Eurodollar positions may not
move in corresponding amounts and time frames and may result in a negative or
positive impact on earnings in any given period. In accordance with Statement of
Financial Accounting Standards No. 133, Accounting for Derivatives and Hedging
Activities, as amended and interpreted ("SFAS No. 133"), the derivative
financial instruments are reported at their fair value.

     At September 30, 2005, the Company's commitments to sell forward its
residential real estate loans to third party investors in whole loan sales
transactions were approximately $3.68 billion at various rates and terms. The
Company distinguishes commitments to sell forward loans in two categories,
allocated and unallocated. At September 30, 2005, allocated and unallocated
forward sale commitments notional amounts were $2.58 billion and $1.10 billion,
respectively. Allocated forward sales commitments are contractual sales
agreements whereby a specific pool of loans is agreed upon to be sold to
specific buyers at a contractually agreed upon date and price. In accordance
with SFAS No. 133, the Company generally designates and accounts for its
allocated forward sales commitments as fair value hedges designated to specific
pools of loans that have been contractually agreed upon for sale; however, as of
September 30, 2005, no hedges were designated as such. Unallocated forward sales
commitments are agreements that provide a fixed price on a pool of loans not yet
specified. These commitments are treated as economic hedges (and are not
currently designated as accounting hedges) and are classified as free-standing
derivatives. Changes in the fair value of both the unallocated and allocated
forward sales commitments are reported as a component of gain on sale of
residential real estate loans and as either other assets or liabilities, as
applicable.

                                       18


<PAGE>

     At September 30, 2005, the Company had a pipeline of loans in process of
approximately $2.35 billion in new residential real estate loans. Because these
loans are generally subject to the potential borrower accepting and meeting the
conditions of the loan approval the Company estimates its effective net pipeline
position at $1.50 billion, as adjusted for loan fallout. The Company
conditionally quotes interest rates to potential borrowers, which are then
subject to adjustment by the Company if any such conditions are not satisfied.
Since the Company generally funds the loans at the rates conditionally approved,
the quotes are considered to constitute interest rate locks. These interest rate
lock commitments, which generally are for 30 days, are treated as free-standing
derivatives and are carried at their estimated fair value with any changes
recorded as a component of gain on sale of residential real estate loans. Fair
value is estimated based upon the change in the fair value of the underlying
mortgage loans as adjusted for the probability of a certain amount of loans in
the pipeline not funding within the terms of the initial rate lock. The change
in fair value is measured from the date of the interest rate lock and,
therefore, at the time of issuance, the value of the interest rate lock is zero.

     The Company's Eurodollar futures contracts are currently treated as
economic hedges and are not currently designated as accounting hedges and are
classified as free-standing derivatives. As of September 30, 2005, the Company
had in place short Eurodollar futures positions covering loan principal of $1.99
billion and $427.8 million for its loans held for sale and its unfunded loan
pipeline, respectively. Eurodollar futures are utilized in an effort to offset
the changes in value related to the loan inventory and pipeline without the
necessity of restricting certain loan inventory or pipeline loans to a specific
forward sale commitment. Eurodollar futures are carried at their fair value with
any changes recorded as a component of gain on sale of residential real estate
loans. Gains or losses on Eurodollar futures are recognized when such positions
are closed out, typically when a forward sale commitment is entered into. The
Company's Eurodollar futures contracts are collateralized by maintenance of a
margin account which had a balance of $2.8 million as of September 30, 2005.

     The estimated fair values of the Company's derivatives were as follows
(included in other assets or liabilities, as applicable, in the consolidated
balance sheets) as of the periods indicated:


                                       19

<PAGE>
<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,      DECEMBER 31,
                                                                                    2005               2004
                                                                                ------------       -----------
                                                                                    (THOUSANDS OF DOLLARS)


<S>                                                                             <C>                <C>
Forward sale commitments ....................................................   $       (156)      $     2,739
Eurodollar futures ..........................................................          5,813               (22)
Interest rate lock commitments ..............................................          3,647            (1,100)
                                                                                ------------       -----------
                                                                                $      9,304       $     1,617
                                                                                ============       ===========
</TABLE>


NOTE 10:   GAIN ON SALE AND SECURITIZATION OF RESIDENTIAL REAL ESTATE LOANS

     The Company routinely sells and securitizes residential mortgage loans into
the secondary market. Gains or losses are recognized at the date of settlement
and when the Company has transferred control over the loans to either a
transaction-specific securitization trust or to a third-party purchaser. The
amount of gain or loss for loan sales or securitizations is based upon the
difference between the net sales proceeds received, including any retained
interests, and the allocated carrying amount of the loans (which includes the
costs directly incurred with the origination of the loans, net of origination
points and fees received, which are deferred and recognized when the loans are
sold). The following tables present the detailed components of the net gain on
whole loan sales and securitizations (net gain on sale):

<TABLE>
<CAPTION>

                                                                        THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                           SEPTEMBER 30,                     SEPTEMBER 30,
                                                                  -----------------------------      ------------------------------
                                                                       2005            2004              2005             2004
                                                                  ------------      -----------      ------------     -------------
                                                                                        (THOUSANDS OF DOLLARS)

<S>                                                                <C>              <C>              <C>               <C>
Whole loan sales of residential real estate loans ..............   $ 8,236,360      $ 6,245,154      $ 22,861,862      $ 14,426,043
Securitizations of residential real estate loans ...............     1,032,725          555,814         3,224,291         2,178,572
                                                                   -----------      -----------      ------------      ------------
Total loan sales and securitizations - net of repurchases ......   $ 9,269,085      $ 6,800,968      $ 26,086,153      $ 16,604,615
                                                                   ===========      ===========      ============      ============

Gross premium recognized on loan sales and securitizations .....   $   208,687      $   204,820      $    678,503      $    612,897
Net gain (loss) on derivative instruments ......................        24,218           (6,552)           15,833            (2,923)
Direct costs of loan originations - net ........................      (111,712)         (90,321)         (333,369)         (230,474)
Provision for premium recapture and reversal ...................        (9,096)          (9,191)          (26,690)          (22,133)
                                                                   -----------      -----------      ------------      ------------
                                                                       112,097           98,756           334,277           357,367
Provision for valuation and repurchase reserves ................         3,947           (9,390)          (17,909)          (18,755)
                                                                   -----------      -----------      ------------      ------------
     Net gain on sale ..........................................   $   116,044      $    89,366      $    316,368      $    338,612
                                                                   ===========      ===========      ============      ============
</TABLE>


                                       20

<PAGE>

     The net gain or (loss) on derivative instruments included in the net gain
on sale of residential real estate loans consists of the following items:

<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                               SEPTEMBER 30,               SEPTEMBER 30,
                                                                        ----------------------       -----------------------
                                                                          2005          2004           2005           2004
                                                                        --------      --------       --------       --------
                                                                                       (THOUSANDS OF DOLLARS)

<S>                                                                     <C>           <C>            <C>            <C>
Eurodollar futures:
  Change in fair value ..............................................   $  5,250      $      -       $  5,835       $      -
  Net realized gain .................................................     16,084             -         14,245              -
  Transaction expenses and other ....................................       (465)            -         (1,507)             -
                                                                        --------      --------       --------       --------
                                                                          20,869             -         18,573              -
Change in fair value of:
  Interest rate lock commitments ....................................     (3,086)       (2,509)        (2,548)        (1,092)
  Forward sales commitments .........................................      6,435        (1,658)        (2,895)           836
  Interest rate cap contracts .......................................          -        (2,385)             -         (2,667)
  Loans held for sale subject to fair value hedges ..................          -             -          2,703              -
                                                                        --------      --------       --------       --------
    Net gain (loss) on derivative instruments .......................   $ 24,218      $ (6,552)      $ 15,833       $ (2,923)
                                                                        ========      ========       ========       ========
</TABLE>


NOTE 11:   LOAN SERVICING INCOME

     In addition to the securitized loans that it services, the Company also
services loans sold to other financial institutions on an interim basis (until
servicing is transferred to another party) and on a to maturity basis (servicing
retained). The following tables present the components of loan servicing income
for the Company:


                                       21

<PAGE>
<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED          NINE MONTHS ENDED
                                                                             SEPTEMBER 30,               SEPTEMBER 30,
                                                                        ----------------------      ----------------------
                                                                          2005          2004          2005          2004
                                                                        --------      --------      --------      --------
                                                                                      (THOUSANDS OF DOLLARS)

<S>                                                                     <C>           <C>           <C>           <C>
Servicing fee income:
  Securitization transactions .......................................   $  6,108      $  3,249      $ 15,701      $  7,600
  Interim ...........................................................      9,807         6,261        24,083        14,233
  Loans sold - servicing retained ...................................        897           672         2,369           672
Ancillary income (1):
  Securitization transactions .......................................      1,269           590         3,043         1,296
  Interim ...........................................................        889           756         2,326         2,279
  Loans sold - servicing retained ...................................        156           137           476           137
Other:
  Securitization transactions .......................................        906            47         1,657          (336)
  Loans sold - servicing retained ...................................        123             -           186             -
                                                                        --------      --------      --------      --------
Loan servicing income ...............................................   $ 20,155      $ 11,712      $ 49,841      $ 25,881
                                                                        ========      ========      ========      ========
<FN>

(1)  Ancillary income represents all service-related contractual fees retained
     by the Company and consists primarily of late payment charges.
</FN>
</TABLE>


NOTE 12:   INCOME TAXES

     The major components of income tax expense are summarized in the following
tables:

<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                             SEPTEMBER 30,               SEPTEMBER 30,
                                                                        ----------------------      ------------------------
                                                                          2005          2004          2005           2004
                                                                        --------      --------      ---------      ---------
                                                                                      (THOUSANDS OF DOLLARS)

<S>                                                                     <C>           <C>           <C>            <C>
Federal:
  Current ...........................................................   $ 42,141      $ 23,151      $ 122,114      $ 101,512
  Deferred ..........................................................     10,134        35,089         29,190         56,045
                                                                        --------      --------      ---------      ---------
                                                                          52,275        58,240        151,304        157,557
                                                                        --------      --------      ---------      ---------
State:
  Current ...........................................................      8,488        (1,848)        27,506         22,763
  Deferred ..........................................................      2,707         3,386          4,999          6,159
                                                                        --------      --------      ---------      ---------
                                                                          11,195         1,538         32,505         28,922
                                                                        --------      --------      ---------      ---------
Total tax provision .................................................   $ 63,470      $ 59,778      $ 183,809      $ 186,479
                                                                        ========      ========      =========      =========
</TABLE>

     The deferred income tax balance includes the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and for income tax purposes. The components of the Company's
deferred tax assets are summarized in the following table:


                                       22

<PAGE>
<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,     DECEMBER 31,
                                                                                    2005             2004
                                                                                ------------      -----------
                                                                                    (THOUSANDS OF DOLLARS)

<S>                                                                             <C>               <C>
Deferred tax assets:
  Mark-to-market on loans held for sale .....................................   $     57,540      $    77,758
  Allowance for loan losses .................................................         72,559           79,029
  Compensation related items ................................................         19,943           28,459
  State income and franchise taxes ..........................................         11,243           20,982
  Other - net ...............................................................              -               70
                                                                                ------------      -----------
    Total deferred tax assets ...............................................        161,285          206,298

Deferred tax liabilities:
  Loan origination costs ....................................................        (33,851)         (45,559)
  Mortgage servicing ........................................................         (9,387)          (5,210)
  Other - net ...............................................................         (1,095)               -
                                                                                ------------      -----------
    Total deferred tax liabilities ..........................................        (44,333)         (50,769)
                                                                                ------------      -----------
   Net deferred tax asset ...................................................   $    116,952      $   155,529
                                                                                ============      ===========
</TABLE>

     In assessing the realization of deferred income tax assets, the Company
considers whether it is more likely than not that the deferred income tax assets
will be realized. The ultimate realization of deferred income tax assets depends
in part upon the generation of future taxable income during the periods in which
temporary differences become deductible. In the Company's opinion, the deferred
tax assets will be fully realized and no valuation allowance is necessary as the
Company has the ability to generate sufficient future taxable income to realize
the tax benefits.

     The Company has accrued the expected maximum tax and interest exposure for
tax matters that are either in the process of resolution or have been identified
as having the potential for adjustment. These matters primarily consist of
issues relating to the discontinued insurance operations, the apportionment of
income to various states and the deduction of certain expenses.


NOTE 13:   DEBT - FREMONT GENERAL CORPORATION

     The debt of Fremont General is detailed in the following table; none of the
Fremont General debt is guaranteed by FIL:


                                       23

<PAGE>
<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,      DECEMBER 31,
                                                                                     2005             2004
                                                                                ------------      ------------
                                                                                    (THOUSANDS OF DOLLARS)

<S>                                                                             <C>               <C>
Senior Notes due 2009, less discount  (2005 - $1,082; 2004 - $1,317) ........   $    180,368      $    180,133
Liquid Yield Option Notes due 2013, ("LYONs") less discount (2004 - $339) ...              -               611
Junior Subordinated Debentures ..............................................        103,093           103,093
                                                                                ------------      ------------
                                                                                $    283,461      $    283,837
                                                                                ============      ============
</TABLE>

     Fremont General's 9% Junior Subordinated Debentures are the sole asset of
Fremont General Financing I, a statutory business trust (the "Trust")
wholly-owned by Fremont General. The Trust issued, and has outstanding, $100
million of 9% Trust Originated Preferred SecuritiesSM (the "Preferred
Securities") which represent preferred undivided beneficial interests in the
Trust.


NOTE 14:   DEPOSITS, FHLB ADVANCES AND WAREHOUSE LINES OF CREDIT - FREMONT
           INVESTMENT & LOAN

     FIL utilizes the issuance of deposits, which are insured up to the maximum
legal limit by the Federal Deposit Insurance Corporation, Federal Home Loan Bank
("FHLB") advances and warehouse lines of credit in funding its operations.

     As of September 30, 2005, the weighted-average interest rate for savings
and money market deposit accounts was 3.13% and for certificates of deposit it
was 3.72%. The weighted-average interest rate for all deposits at September 30,
2005 was 3.61%.

     Certificates of deposit as of September 30, 2005 are detailed by maturity
and rates as follows:

<TABLE>


                                     MATURING BY           WEIGHTED
                     AMOUNT         SEPTEMBER 30,        AVERAGE RATE
                   -----------      ------------        -------------
                   (THOUSANDS
                   OF DOLLARS)

                   <C>              <C>                 <C>
                   $ 6,738,505           2006                    3.71%
                        35,055           2007                    3.82%
                         3,755           2008                    4.32%
                        48,960           2009                    5.87%
                           805           2010                    2.58%
                   -----------                          -------------
                   $ 6,827,080                                   3.72%
                   ===========                          =============

</TABLE>


                                       24

<PAGE>

     Of the total certificates of deposit outstanding at September 30, 2005,
$1.36 billion were obtained through brokers.

     Interest expense on deposits is summarized as follows:

<TABLE>
<CAPTION>
                                                                                   THREE MONTHS ENDED
                                                                                      SEPTEMBER 30,
                                                                                ------------------------
                                                                                   2005          2004
                                                                                ---------      ---------
                                                                                 (THOUSANDS OF DOLLARS)


<S>                                                                             <C>            <C>
Savings and money market deposit accounts ..................................    $  11,910      $   9,124
Certificates of deposit ....................................................       58,486         28,975
Penalties for early withdrawal .............................................         (131)           (62)
                                                                                ---------      ---------
                                                                                $  70,265      $  38,037
                                                                                =========      =========
</TABLE>
<TABLE>
<CAPTION>
                                                                                    NINE MONTHS ENDED
                                                                                      SEPTEMBER 30,
                                                                                ------------------------
                                                                                   2005           2004
                                                                                ---------      ---------
                                                                                 (THOUSANDS OF DOLLARS)

<S>                                                                             <C>            <C>
Savings and money market deposit accounts ..................................    $  32,678      $  25,998
Certificates of deposit ....................................................      149,602         82,267
Penalties for early withdrawal .............................................         (359)          (170)
                                                                                ---------      ---------
                                                                                $ 181,921      $ 108,095
                                                                                =========      =========
</TABLE>

     Total interest payments on deposits were $71.0 million and $37.2 million,
for the three month periods ended September 30, 2005 and 2004, respectively, and
$179.4 million and $109.2 million, for the nine months ended September 30, 2005
and 2004, respectively.

     FIL is a member of the Federal Home Loan Bank system and, as such,
maintains a credit line with the FHLB of San Francisco that is based upon a
percentage of its total regulatory assets, subject to collateralization
requirements and certain collateral sub-limits. Advances are primarily
collateralized by residential loans held for sale, and to a lesser extent, by
certain commercial loans held for investment. The maximum amount of credit which
the FHLB will extend varies from time to time in accordance with their policies.
FIL's maximum financing availability, based upon its level of regulatory assets
and subject to the amount and type of collateral pledged and their respective
advance rates, was $3.79 billion as of September 30, 2005. At September 30, 2005
and December 31, 2004, FIL had an approximate maximum borrowing capacity based
upon its pledged loan collateral of $2.47 billion and $2.11 billion,
respectively, with outstanding borrowings of $639.0 million and $900.0 million,
respectively. All borrowings mature within one year. FIL pledged loans with a
carrying value of $2.73 billion and $2.37 billion at September 30, 2005

                                       25

<PAGE>

and December 31, 2004, respectively, to secure the current and any future
borrowings. FIL's borrowing capacity can be used to borrow under various FHLB
loan programs, including adjustable and fixed-rate financing, for periods
ranging from one day to 30 years, with a variety of interest rate structures
available. The weighted-average interest rate on the amount outstanding at
September 30, 2005 was 2.80%. The borrowing capacity has no commitment fees or
cost, requires minimum levels of investment in FHLB stock (FIL receives dividend
income on its investment in FHLB stock), can be withdrawn by the FHLB if there
is any significant change in the financial or operating condition of FIL and is
conditional upon FIL's compliance with certain agreements covering advances,
collateral maintenance, eligibility and documentation requirements. At September
30, 2005, FIL was in compliance with all requirements of its FHLB credit
facility.

     Total interest payments on advances from the FHLB were $10.4 million and
$4.8 million, for the three month periods ended September 30, 2005 and 2004,
respectively, and $30.1 million and $20.6 million, for the nine months ended
September 30, 2005 and 2004, respectively.

     FIL has a line of credit with the Federal Reserve Bank of San Francisco
("Federal Reserve") and, at September 30, 2005 and December 31, 2004, had a
borrowing capacity, based upon collateral pledged, of $435.5 million and $159.0
million respectively, with no outstanding borrowings at September 30, 2005 or
December 31, 2004. FIL pledged loans with a carrying value of $580.6 million and
$212.1 million at September 30, 2005 and December 31, 2004, respectively to the
Federal Reserve. This line of credit may be utilized when all other sources of
funds are not reasonably available and any such advances are made with the
expectation that they will be repaid when the availability of the usual source
of funds is restored, usually the next business day.

     During 2003, FIL established three separate warehouse lines of credit to
facilitate the funding of residential real estate loans prior to their sale or
securitization. The total funding capacity available at September 30, 2005 under
the three facilities was $2.50 billion, of which $1.25 billion was committed.
There were no amounts outstanding on these facilities at September 30, 2005.
Borrowings, if any, under each of the facilities are secured by loans held for
sale as pledged by FIL. Each of the facilities is subject to certain conditions,
including, but not limited to, financial and other covenants including the
maintenance of certain capital and liquidity levels. At September 30, 2005, FIL
was in compliance with all financial and other covenants related to these
facilities.


                                       26



<PAGE>

NOTE 15:   OTHER LIABILITIES

     The following table details the composition of the Company's other
liabilities as of the dates indicated:

<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,     DECEMBER 31,
                                                                                    2005             2004
                                                                                ------------      -----------
                                                                                    (THOUSANDS OF DOLLARS)


<S>                                                                             <C>               <C>
Deferred compensation obligation ...........................................    $     47,687      $    33,495
Accrued incentive compensation .............................................          46,783           74,671
Borrower escrow collections payable ........................................          35,481           23,091
Premium recapture and repurchase reserve ...................................          34,344           12,310
State income tax liability .................................................          33,978           50,887
Accrued Employer Stock Ownership Plan expense ..............................          25,086           29,892
Accounts payable ...........................................................          21,625           22,950
Federal income tax liability ...............................................          21,244           50,652
Borrower principal and interest due investors ..............................          18,914           11,591
Interest payable ...........................................................          12,292           12,755
Allowance for unfunded loan commitments ....................................          12,159            7,087
Other ......................................................................          32,510           32,150
                                                                                ------------      -----------
     Other liabilities .....................................................    $    342,103      $   361,531
                                                                                ============      ===========
</TABLE>


NOTE 16:   DEFERRED COMPENSATION

     Stock award plans are provided for the benefit of certain key members of
management that authorize shares of either stock rights or stock options to be
allocable to participants. Restricted stock awards are amortized to compensation
expense over the service period of the awards that vary from two to ten years.
Unamortized amounts are reported as deferred compensation.

     The Company periodically contributes cash to a grantor stock ownership
trust ("GSOP") in order to pre-fund contributions to various employee benefit
plans (e.g., 401(K) match, Employee Stock Ownership Plan contribution, etc.).
The Company consolidates the GSOP under the provisions of Financial Accounting
Standards Board Interpretation No. 46R, Consolidation of Variable Interest
Entities. The GSOP uses the contributed cash to acquire shares of the Company's
common stock and the shares held by the GSOP are recorded at fair value and
treated as treasury stock for purposes of calculating the Company's basic and
diluted earnings per share.

     The Company also maintains a Supplemental Executive Retirement Plan
("SERP") and Excess Benefit Plan ("EBP"); both of which are deferred
compensation plans designed to provide certain


                                       27

<PAGE>

employees the ability to receive benefits that would be otherwise lost under the
Company's qualified retirement plans due to statutory or other limits on salary
deferral and matching contributions.

     The following table details the composition of the Company's deferred
compensation balance (which is reported as a component of stockholders' equity)
as of the periods indicated:

<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,      DECEMBER 31,
                                                                                    2005               2004
                                                                                ------------       -----------
                                                                                    (THOUSANDS OF DOLLARS)

<S>                                                                             <C>                <C>
Unamortized restricted stock awards ........................................    $     26,595       $    26,183
SERP and EBP ...............................................................          16,907            11,865
GSOP .......................................................................           7,801            20,868
                                                                                ------------       -----------
     Deferred compensation .................................................    $     51,303       $    58,916
                                                                                ============       ===========
</TABLE>


NOTE 17:   INDUSTRIAL BANK REGULATORY CAPITAL

     FIL is subject to various regulatory capital requirements under California
and Federal regulations. Failure to meet minimum capital requirements can result
in regulatory agencies initiating certain mandatory and possibly additional
discretionary actions that, if undertaken, could have a direct material effect
on the consolidated financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, FIL must meet specific
capital guidelines that involve quantitative measures of its assets, liabilities
and certain off-balance sheet items as calculated under regulatory accounting
practices. FIL's capital amounts, requirements and classifications are also
subject to qualitative judgments by its regulators about components, risk
weightings and other factors. Banking institutions that are experiencing or
anticipating significant growth are generally expected to maintain capital
ratios above minimum levels.

     As of September 30, 2005, FIL's regulatory capital exceeded all minimum
requirements to which it is subject and the most recent notification from the
FDIC categorized FIL as "well-capitalized". To be categorized as
"well-capitalized", the institution must maintain capital ratios as set forth in
the following table; the FDIC and FIL, however, have agreed that FIL will
maintain a Tier-1 Leverage Ratio of at least 8.5%. There have been no conditions
or events since that notification that management believes have changed FIL's
categorization as "well-capitalized". As of September 30, 2005, FIL's Tier-1
Leverage Ratio was 13.37%. Management does not anticipate any difficulties in
maintaining a Tier-1 Leverage Ratio of at least 8.5%. FIL's actual regulatory
amounts and the related standard regulatory minimum ratios required to qualify
as well capitalized are detailed in the table below.


                                       28

<PAGE>
<TABLE>
<CAPTION>
                                                            SEPTEMBER 30, 2005
                                                           --------------------
                                                           MINIMUM       ACTUAL
                                                           REQUIRED      RATIO
                                                           --------     -------

<S>                                                        <C>          <C>
Tier-1 Leverage Capital ................................       5.00%      13.37%
Risk-Based Capital:
  Tier-1 ...............................................       6.00%      15.34%
  Total ................................................      10.00%      16.59%
</TABLE>
<TABLE>
<CAPTION>
                                                             DECEMBER 31, 2004
                                                           --------------------
                                                           MINIMUM       ACTUAL
                                                           REQUIRED      RATIO
                                                           --------     -------

<S>                                                        <C>          <C>
Tier-1 Leverage Capital ................................       5.00%      12.71%
Risk-Based Capital:
  Tier-1 ...............................................       6.00%      15.19%
  Total ................................................      10.00%      16.46%
</TABLE>

     Regulatory capital is assessed for adequacy by three measures: Tier-1
Leverage Capital, Tier-1 Risk-Based Capital and Total Risk-Based Capital. FIL's
Tier-1 Leverage Capital includes common stockholder's equity, a certain portion
of its mortgage servicing rights not includable in regulatory capital and other
adjustments. Tier-1 Leverage Capital is measured with respect to average assets
during the quarter. The Tier-1 Risk-Based Capital ratio is calculated as a
percent of risk-weighted assets at the end of the quarter. FIL's Total
Risk-Based Capital includes the allowable amount of its allowance for loan
losses (the allowable amount includable is limited to 1.25% of gross
risk-weighted assets). The Total Risk-Based Capital ratio is calculated as a
percent of risk-weighted assets at the end of the quarter.

     During the third quarter of 2005, the Company identified that its
interpretation for the calculation of risk-weighted assets was not complete.
Previously, the Company had not incorporated the unfunded portion of its
commercial real estate loan commitments into its risk-weighted assets
calculation. As of September 30, 2005, and for all prior periods presented, the
Company has included the risk-weighted effect of these unfunded commitments into
its Tier-1 Risk-Based and Total Risk-Based Capital ratios. Included in these
unfunded commitments are amounts for loan transactions for which the unfunded
portion is not currently available to the borrower based upon the level of
progress of the underlying commercial real estate project. The impact upon the
Tier-1 Risk-Based and Total Risk-Based Capital ratios in prior periods did not
change FIL's categorization as "well-capitalized" and there is no impact upon
the Tier-1 Leverage ratio.


                                       29


<PAGE>

     The following table details the calculation of the respective capital
amounts at FIL at the dates indicated:

<TABLE>
<CAPTION>
                                                                                 SEPTEMBER 30,      DECEMBER 31,
                                                                                    2005               2004
                                                                                -------------       -----------
                                                                                     (THOUSANDS OF DOLLARS)


<S>                                                                             <C>                 <C>
Common stockholder's equity at FIL ..........................................   $   1,501,067       $ 1,239,701
Less:
  Disallowed portion of mortgage servicing rights ...........................          (2,800)           (1,800)
  Unrealized gains on available-for-sale securities .........................              (9)           (1,413)
                                                                                -------------       -----------
Total Tier-1 Capital ........................................................       1,498,258         1,236,488
Add:
  Allowable portion of the allowance for loan losses ........................         122,685           104,183
                                                                                -------------       -----------
Total Risk-Based Capital (Tier-1 and Tier-2) ................................   $   1,620,943       $ 1,340,671
                                                                                =============       ===========
</TABLE>


NOTE 18 :  COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ACTIVITIES

     The Company is a defendant in a number of legal actions arising in the
ordinary course of business and from the discontinuance of the insurance
operations. Management and its legal counsel are of the opinion that the
settlement of these actions, individually or in the aggregate, will not have a
material effect on the Company's business, financial position or results of
operations.

     On June 2, 2004, the State of California Insurance Commissioner John
Garamendi (the "Commissioner"), as statutory liquidator of Fremont Indemnity
Company ("Fremont Indemnity"), filed suit in Los Angeles Superior Court against
Fremont General alleging the improper utilization by Fremont General of certain
net operating loss deductions ("NOLs") allegedly belonging to its Fremont
Indemnity subsidiary (the "Fremont Indemnity case"). This complaint involves
issues that Fremont General considers were resolved in an agreement among the
California Department of Insurance, Fremont Indemnity and Fremont General (the
"Letter Agreement"). The Letter Agreement, dated July 2, 2002, was executed on
behalf of the California Department of Insurance by the Honorable Harry Low, the
State of California Insurance Commissioner at that time. Fremont General has
honored all of its obligations under the Letter Agreement. On July 16, 2004, the
Commissioner filed a First Amended Complaint ("FAC") adding a cause of action
for concealment of an alleged reinsurance dispute and is seeking to rescind the
Letter Agreement.

     On January 25, 2005, the Company's motions to dismiss the lawsuit brought
by the Commissioner, on behalf of Fremont Indemnity, against the Company were
argued and heard before the Superior Court of the State of California (the
"Court"). On January 26, 2005 the Court issued its rulings dismissing all the


                                       30

<PAGE>

causes of action in the FAC without leave to amend, except for the cause of
action for alleged concealment by Fremont General of a potential reinsurance
dispute, which was dismissed with leave to amend. The Court also found that the
Company had properly utilized the NOLs in accordance with the Letter Agreement.
In addition, the Court rejected the Commissioner's request for findings that the
Company's use of the NOLs and worthless stock deduction were voidable
preferences and/or fraudulent transfers. The Court also rejected the
Commissioner's request for injunctive relief to force the Company to amend its
prior consolidated income tax returns to remove and forgo the worthless stock
deduction for its investment in Fremont Indemnity.

     On May 2, 2005 the Commissioner filed a Second Amended Complaint ("SAC")
with regard to the 7th cause of action on behalf of Fremont Indemnity against
the Company alleging intentional misrepresentation, concealment and promissory
fraud, which induced the Commissioner to first enter into the Letter Agreement.
On July 15, 2005, the Court dismissed the SAC with 20 days leave to amend. On
August 4, 2005, the Commissioner filed a Third Amended Complaint ("TAC") again
alleging intentional misrepresentation, concealment and promissory fraud. The
Company continues to believe that the lawsuit lacks merit and has filed its
opposition papers seeking to dismiss the TAC. The hearing is currently scheduled
for November 22, 2005.

     The Commissioner filed an additional and separate complaint against Fremont
General on behalf of Fremont Indemnity as successor in interest to Comstock
Insurance Company ("Comstock"), a former affiliate of Fremont Indemnity, which
was subsequently merged into Fremont Indemnity. This case alleged similar causes
of action regarding the usage of the NOLs as in the Fremont Indemnity case as
well as improper transactions with other insurance subsidiaries and affiliates
of Fremont Indemnity. This matter was deemed a related case to the Fremont
Indemnity case. On April 22, 2005, the Court dismissed, without leave to amend,
the entire complaint. This ruling does not address or necessarily have legal
effect on the related Fremont Indemnity case. On July 22, 2005, the Company
received a Notice of Appeal to the Court's dismissal of the complaint. The
Company continues to believe that this litigation is without merit.

     The Company, in relation to one of its commercial real estate lending
transactions, has participated in a standby letter of credit which represents a
conditional obligation of the Company; this letter of credit guarantees the
performance of a borrower to a third party in the amount of approximately $17.5
million.


                                       31

<PAGE>


NOTE 19:   OPERATIONS BY REPORTABLE SEGMENT

     The Company manages its operations based on the types of products and
services offered by each of its strategic business units. Based on that approach
the Company has grouped its products and services into two reportable segments
-- Commercial and Residential Real Estate.

     The Commercial Real Estate segment originates commercial real estate loans
on a nationwide basis marketed through the use of trade advertising, direct
marketing, newsletters and trade shows. Loans originated consist primarily of
bridge, construction and permanent loans. Substantially all of the loans
originated are held in the Company's loan portfolio.

     The Residential Real Estate segment originates non-prime or sub-prime loans
nationally through independent brokers on a wholesale basis. These loans are
then primarily sold to third party investors on a servicing-released basis, or,
to a lesser extent, securitized. Net interest income is recognized on these
loans during the period that the Company holds them for sale. In addition,
servicing income is realized on the loans sold into the Company's
securitizations and on loans sold to other parties on an interim basis.

     Management measures and evaluates each of these segments based on total
revenues generated, net interest income and pre-tax operating results. The
results of operations include certain allocated corporate expenses as well as
interest expense charged back to the segments for the use of funds generated by
the Company's corporate and retail banking operations. Interest expense is
allocated among the residential and commercial segments using treasury rates
matched to the terms of the respective loans plus a spread to cover the expenses
of the retail banking operations.

     Certain expenses that are centrally managed at the corporate level such as
provision for income taxes and other general corporate expenses are excluded
from the measure of segment profitability reviewed by management. Therefore, the
Company has included these expenses along with the results of the Company's
retail banking operation, which does not meet the definition of a reportable
segment, in the Other category. Historical periods have been restated to conform
to this presentation.

     Intersegment eliminations shown in the table below relate to the credit
allocated to the retail banking operations for operating funds provided to the
two reportable segments.

                                       32

<PAGE>
<TABLE>
<CAPTION>
                                                      RESIDENTIAL       COMMERCIAL                   INTERSEGMENT      TOTAL
                                                      REAL ESTATE      REAL ESTATE       OTHER       ELIMINATIONS   CONSOLIDATED
                                                      -----------      -----------     ----------    ------------   ------------
                                                                                (THOUSANDS OF DOLLARS)

<S>                                                   <C>              <C>             <C>           <C>            <C>
Three Months ended September 30, 2005
  Total revenues ..................................   $   249,544      $    84,520     $   86,752    $    (78,589)  $    342,227
  Net interest income .............................        60,847           45,812         13,689               -        120,348
  Provision for loan losses .......................            (5)          (4,077)            11               -         (4,071)
  Net gain on whole loan sales and securitizations
    of residential real estate loans ..............       116,044                -              -               -        116,044
  Mortgage servicing rights amortization ..........        (5,574)               -              -               -         (5,574)
  Compensation ....................................        26,809           11,473         23,569               -         61,851
  Other non-interest expense ......................        11,433            5,871         16,030               -         33,334
  Income before income taxes ......................       135,803           34,144        (13,912)              -        156,035
  Total consolidated assets .......................     5,819,746        4,000,487      1,181,183               -     11,001,416

Three Months ended September 30, 2004
  Total revenues ..................................   $   184,906      $    75,517     $   47,549    $    (44,155)  $    263,817
  Net interest income .............................        60,933           49,621          2,950               -        113,504
  Provision for loan losses .......................       (11,713)           1,707           (303)              -        (10,309)
  Net gain on whole loan sales and securitizations
    of residential real estate loans ..............        89,366                -              -               -         89,366
  Mortgage servicing rights amortization ..........        (3,186)               -              -               -         (3,186)
  Compensation ....................................        24,280            8,713          17,957              -         50,950
  Other non-interest expense ......................         9,825            4,450          10,199              -         24,474
  Income before income taxes ......................       130,833           37,526         (23,461)             -        144,898
  Total consolidated assets .......................     4,415,017        3,708,529       1,394,898              -      9,518,444

</TABLE>


                                       33

<PAGE>
<TABLE>
<CAPTION>

                                                      RESIDENTIAL       COMMERCIAL                   INTERSEGMENT      TOTAL
                                                      REAL ESTATE      REAL ESTATE       OTHER       ELIMINATIONS   CONSOLIDATED
                                                      -----------      -----------     ----------    ------------   ------------
                                                                                (THOUSANDS OF DOLLARS)

<S>                                                   <C>              <C>             <C>           <C>            <C>
Nine Months ended September 30, 2005
  Total revenues ..................................   $   711,095      $   235,148     $  223,724    $   (206,390)  $    963,577
  Net interest income .............................       202,535          132,680         31,847               -        367,062
  Provision for loan losses .......................            (6)          (7,250)             5               -         (7,251)
  Net gain on whole loan sales and securitizations
    of residential real estate loans ..............       316,368                -              -               -        316,368
  Mortgage servicing rights amortization ..........       (15,121)               -              -               -        (15,121)
  Compensation ....................................        87,285           24,034         65,466               -        176,785
  Other non-interest expense ......................        34,195            6,914         40,573               -         81,682
  Income before income taxes ......................       384,780          114,715        (42,249)              -        457,246
  Total consolidated assets .......................     5,819,746        4,000,487      1,181,183               -     11,001,416

Nine Months ended September 30, 2004
  Total revenues ..................................   $   631,965      $   229,716     $  135,974    $   (125,466)  $    872,189
  Net interest income .............................       193,307          152,604          6,561               -        352,472
  Provision for loan losses .......................        (5,422)          12,255           (597)              -          6,236
  Net gain on whole loan sales and securitizations
    of residential real estate loans ..............       338,612                -              -               -        338,612
  Mortgage servicing rights amortization ..........        (6,593)               -              -               -         (6,593)
  Compensation ....................................       104,054           26,431         55,695               -        186,180
  Other non-interest expense ......................        26,826           11,164         32,493               -         70,483
  Income before income taxes ......................       412,961          109,398        (72,719)              -        449,640
  Total consolidated assets .......................     4,415,017        3,708,529      1,394,898               -      9,518,444

</TABLE>


                                       34

<PAGE>

NOTE 20:   EARNINGS PER SHARE

     Earnings per share have been computed based on the weighted-average number
of shares. The following tables set forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                                   SEPTEMBER 30,               SEPTEMBER 30,
                                                                              ----------------------      ------------------------
                                                                                2005          2004          2005           2004
                                                                              --------      --------      ---------      ---------
                                                                                        (THOUSANDS OF SHARES AND DOLLARS,
                                                                                             EXCEPT PER SHARE DATA)

<S>                                                                           <C>           <C>           <C>            <C>
Net income
  (numerator for basic earnings per share) .................................  $ 92,565      $ 85,120      $ 273,437      $ 263,161
Effect of dilutive securities:
  LYONs ....................................................................         -             4              8             14
                                                                              --------      --------      ---------      ---------
Net income available to common stockholders after assumed
  conversions (numerator for diluted earnings per share) ...................  $ 92,565      $ 85,124      $ 273,445      $ 263,175
                                                                              ========      ========      =========      =========

Weighted-average shares
  (denominator for basic earnings per share) ...............................    72,962        72,231         72,509         71,833
Effect of dilutive securities using the treasury stock method
  for restricted stock and stock options:
    Restricted stock .......................................................     1,311         1,489          1,120          1,432
    Employee benefit plans .................................................     1,154             -          1,107              -
    Stock options ..........................................................       101            98             98            118
    LYONs ..................................................................         -            38             22             40
                                                                              --------       -------      ---------      ---------
Dilutive potential common shares ...........................................     2,566         1,625          2,347          1,590
                                                                              --------       -------      ---------      ---------
Adjusted weighted-average shares and assumed conversions
  (denominator for diluted earnings per share) .............................    75,528        73,856         74,856         73,423
                                                                              ========       =======      =========      =========

Basic earnings per share ...................................................  $   1.27       $  1.18      $    3.77      $    3.66
                                                                              ========       =======      =========      =========
Diluted earnings per share .................................................  $   1.23       $  1.15      $    3.65      $    3.58
                                                                              ========       =======      =========      =========

</TABLE>

                                       35


<PAGE>

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


     This report may contain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, and are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements and the currently reported results are based upon the current
expectations and beliefs of Fremont General Corporation ("Fremont") and its
subsidiaries (combined "the Company") concerning future developments and their
potential effects upon the Company. These statements and the Company's results
reported herein are not guarantees of future performance or results and there
can be no assurance that actual developments and economic performance will be as
anticipated by the Company. Actual developments and/or results may differ
significantly and adversely from the Company's expected or currently reported
results as a result of significant risks, uncertainties and factors, often
beyond the Company's control (as well as the various assumptions utilized in
determining the Company's expectations), and which include, but are not limited
to, the following:

o    the variability of general and specific economic conditions and trends, and
     changes in, and the level of, interest rates;

o    the impact of competition in the non-prime residential lending market and
     in the commercial real estate lending market on the Company's ability to
     adequately price, underwrite and originate its loans;

o    the impact of competition and pricing environments on loan and deposit
     products and the resulting effect upon the Company's net interest margin
     and net gain on sale;

o    changes in the Company's ability to originate loans, and any changes in the
     cost and volume of loans originated as a result thereof;

o    the effectiveness of the Company's interest rate risk management, including
     hedging, of its funded and unfunded loans;

o    the ability to access the necessary capital resources in a cost-effective
     manner to fund loan originations, the condition of the whole loan sale and
     securitization markets and the timing of sales and securitizations;

o    the ability of the Company to sell or securitize the residential real
     estate loans it originates, the pricing of existing and future loans, and
     the net premiums realized upon the sale of such loans;

o    the ability of the Company to sell certain of the commercial real estate
     loans and foreclosed real estate in its portfolio and the net proceeds
     realized upon the sale of such;

o    the impact of changes in the commercial and residential real estate
     markets, and changes in the fair values of the Company's assets and loans,
     including the value of the underlying real estate collateral;

o    the ability to effectively manage the Company's growth in assets and
     volume, including its lending concentrations, and to maintain acceptable
     levels of credit quality;

o    the ability to collect and realize the amounts outstanding, and the timing
     thereof, of loans and foreclosed real estate;

o    the ability to appropriately estimate an adequate level for the allowance
     for loan losses, the valuation reserve for loans held for sale, the loan
     repurchase reserve and the premium recapture reserve, as well as the fair
     value of the retained mortgage servicing rights and residual interests in
     securitizations;


                                       36

<PAGE>

o    the effect of certain determinations or actions taken by, or the inability
     to secure regulatory approvals from, the Federal Deposit Insurance
     Corporation, the Department of Financial Institutions of the State of
     California or other regulatory bodies on various matters;

o    the ability of the Company to maintain cash flow sufficient for it to meet
     its debt service and other obligations;

o    the ability to maintain effective compliance with laws and regulations and
     control expenses, particularly in periods of significant growth for the
     Company;

o    the impact and cost of adverse state and federal legislation and
     regulations, litigation, court decisions and changes in the judicial
     climate;

o    the impact of changes in federal and state tax laws and interpretations,
     including tax rate changes, and the effect of any adverse outcomes from the
     resolution of issues with taxing authorities;

o    the ability to maintain an effective system of internal and financial
     disclosure controls, and to identify and remediate any control
     deficiencies, under the requirements of Section 404 of the Sarbanes-Oxley
     Act of 2002; and

o    other events, risks and uncertainties discussed elsewhere in this Form
     10-Q, the Company's Annual Report on Form 10-K for the fiscal year ended
     December 31, 2004, and from time to time in Fremont's other reports, press
     releases and filings with the Securities and Exchange Commission.

     The Company undertakes no obligation to publicly update such
forward-looking statements.


OVERVIEW

     Fremont General Corporation ("Fremont General" or when combined with its
subsidiaries "the Company") is a holding company which is engaged in lending
operations through its indirectly wholly-owned subsidiary, Fremont Investment &
Loan ("FIL"). FIL is a California state-chartered industrial bank. Fremont
General is not a "bank holding company" as defined for regulatory purposes.

     FIL has two primary lending operations, residential and commercial real
estate, both of which are engaged in on a nationwide basis. FIL's residential
real estate lending platform originated loans from 46 states through its five
regional loan production centers during the third quarter of 2005. The
commercial real estate lending operation includes nine regional offices and, as
of September 30, 2005, had loans outstanding in 33 states. FIL funds its lending
operations primarily through retail and brokered deposits that are insured up to
the maximum legal limit by the Federal Deposit Insurance Corporation ("FDIC")
and, to a lesser extent, advances from the Federal Home Loan Bank of San
Francisco ("FHLB"). FIL raises its retail deposits in California (predominately
Southern California) through a network of 21 branches and a centralized call
center. FIL is regulated by the FDIC and the Department of Financial
Institutions of the State of California ("DFI"). FIL will also utilize its
warehouse lines of credit from time to time to fund part of its residential real
estate loan production.

     FIL's residential real estate lending operation originates first and, to a
lesser degree, second mortgage loans on a wholesale basis through a network of
independent mortgage brokers. FIL offers

                                       37

<PAGE>

mortgage products that are designed for borrowers who do not generally satisfy
the credit, documentation or other underwriting standards prescribed by
conventional mortgage lenders, such as Fannie Mae and Freddie Mac and are
commonly referred to as "non-prime" or "sub-prime". These borrowers generally
have considerable equity in the properties securing their loans, but have
impaired or limited credit profiles or higher debt-to-income ratios than
conventional mortgage lenders allow. The borrowers also include individuals who,
due to self-employment or other circumstances, have difficulty documenting their
income through conventional means. FIL seeks to mitigate its exposure to credit
risk through underwriting standards that strive to ensure appropriate loan to
collateral valuations. All of the residential real estate loans that FIL
originates are currently either sold in whole loan sales to various financial
institutions or, to a lesser extent, securitized and sold to various investors.
The Company has retained some of these loans as held for investment in prior
periods and may do so again in the future.

     FIL's commercial real estate lending operation provides first mortgage
financing on various types of income producing properties. The commercial real
estate loans that FIL originates are all held for investment, with some loans
participated out to limit credit exposures. Loans are originated through
broker and borrower relationships and the borrowers are typically mid-size
developers and owners seeking a loan structure that provides limited recourse
and is short-term, providing bridge or construction financing for comprehensive
construction, renovation, conversion, repositioning and lease-up of existing or
new properties. To manage the credit risk involved in this lending, FIL is
focused on the value and quality of the collateral and the quality and
experience of the parties with whom it does business. The size of loan
commitments originated generally range from $10 million to $60 million, with
some loans for larger amounts.

     The Company's two operating lines of business are generally designed to be
somewhat counter-cyclical and to provide balance in varying economic cycles;
however, this balance may not be achieved as both of the Company's operating
businesses are influenced by the overall condition of the economy, in particular
the interest rate environment and, as a result, experience cyclicality in
volume, loan losses and earnings. The Company strives to manage its operations
so as to optimize operational efficiency and to maintain risks within acceptable
parameters. The Company's lending operations generate income as follows:

o    All of the residential real estate loans originated are currently sold for
     varying levels of gain through whole loan sales to other financial
     institutions, and to a lesser degree, to various investors through
     securitization transactions. A held for sale valuation reserve, a loan
     repurchase reserve and a premium recapture reserve are maintained and
     adjusted through provisions (which are either an expense or a credit to
     income) that are recognized in the consolidated statements of income. Net
     interest income is recognized on these loans during the period that the
     Company holds them for sale. Servicing income is realized on the loans sold
     into the Company's securitizations and on whole loan sales when servicing
     is retained, as well as on an interim basis for loans sold on a servicing
     released basis to other financial institutions.

                                       38

<PAGE>

o    Commercial real estate loans, which are held for investment, generate net
     interest income on the difference between the rates charged on the loans
     and the cost of borrowed funds. An allowance for loan losses is maintained
     and adjusted through provisions (which are either an expense or a credit to
     income) that are recognized in the consolidated statements of income.

     Principal among the various market risks the Company faces are interest
rate risk, which is the risk that the valuation of the Company's
interest-sensitive loans and liabilities and its net interest income will change
due to changes in interest rates, and liquidity risk, which is the ability of
the Company to access the necessary funding and capital resources, in a
cost-effective manner, to fund its loan originations or to sell its loans held
for sale. The Company endeavors to mitigate interest rate risk by attempting to
match the rate reset (or repricing) characteristics of its assets with its
liabilities. The Company utilizes forward loan sale commitments to provide
liquidity and to hedge its loans held for sale as well as Eurodollar futures to
hedge its loan pipeline and a portion of its loans held for sale. The objective
of the Company's interest rate and liquidity risk management activities is to
reduce the risk of operational disruption and to reduce the volatility in income
caused by changes in interest rates; however, the mortgage banking industry is
inherently subject to income volatility due to the effect of interest rate
variations on loan production volume, premiums realized on loan sales and
securitizations, as well as loan pre-payment patterns, which in turn affects the
valuation of the Company's residual interests and mortgage servicing rights, as
well as the amount of loan servicing income realized.

     This discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and notes thereto presented under Item 1, and
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2004.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The Company's discussion and analysis of its financial condition and
results of operations are based upon its consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America ("GAAP"). The preparation of these
financial statements requires the Company to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses. On an
on-going basis, the Company evaluates its estimates, which are based on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

     The Company has identified four accounting policies as being critical
because they require more significant judgment and estimates about matters that
may differ from the estimates determined under


                                       39

<PAGE>

different assumptions or conditions. These critical accounting policies relate
to the gain on whole loan sales and securitizations, allowance for loan losses,
derivatives and income taxes. The critical accounting policies and estimates are
further discussed in Management's Discussion and Analysis in the Annual Report
on Form 10-K for the fiscal year ended December 31, 2004.


EARNINGS PERFORMANCE

     The Company reported income before income taxes of $156.0 million for the
third quarter of 2005 as compared to $144.9 million for the third quarter of
2004. For the first nine months of 2005, income before income taxes totaled
$457.2 million, as compared to $449.6 million for the first nine months of 2004.
The increase in income before income taxes for the third quarter and first nine
months of 2005 represent increases of 7.7% and 1.7% over the results for the
third quarter and first nine months of 2004, respectively. This is primarily a
result of increased levels of net interest income and loan servicing income,
partially offset by higher non-interest expenses. During the third quarter and
first nine months of 2005, the Company recorded credits to income for its
provision for loan losses as a result of lower net charge-offs, non-accrual
loans and restructured loans. This is compared to a larger credit to income for
the provision during the third quarter of 2004 and a provision expense for the
first nine months of 2004. The net gain on whole loan sales and securitizations
was higher during the third quarter of 2005 as compared to the third quarter of
2004; however, the level of gain for the first nine months of 2005 was lower
than during the same period of 2004.

     The Company reported net income of $92.6 million for the third quarter of
2005. This is compared to net income of $85.1 million for the third quarter of
2004. For the first nine months of 2005, net income totaled $273.4 million, as
compared to $263.1 million for the first nine months of 2004.


NET INTEREST INCOME

     The Company recorded net interest income for the third quarter and first
nine months of 2005 of $120.3 million and $367.1 million as compared to $113.5
million and $352.5 million for the third quarter and first nine months of 2004,
respectively. The increase in net interest income is primarily a result of an
increase in the average interest-earning assets, primarily the residential real
estate loans held for sale. Total average interest-earning assets increased
18.1% to $11.00 billion during the third quarter of 2005, as compared to $9.32
billion during the third quarter of 2004. The net interest income margin as a
percentage of average interest-earning assets decreased to an annualized 4.34%
for the third quarter of 2005 from 4.85% for the third quarter of 2004. Total
average interest-earning assets increased 14.6% to $10.99 billion for the first
nine months of 2005, as compared to $9.59 billion during the first nine months
of 2004. The net interest income margin decreased to an annualized 4.47% for the
first nine months of 2005 from 4.91% for the first nine months of 2004. Net
interest income is impacted by the volume, mix and rate of interest-earning
assets and interest-bearing liabilities. The decrease in the Company's net
interest margin is due


                                       40

<PAGE>

primarily to higher funding costs relative to the yields realized on loans
outstanding during the third quarter and first nine months of 2005. In
particular, yields on the Company's residential real estate loans held for sale
have increased at a slower rate during the first nine months of 2005 than the
underlying cost of funds during the same period.

     The following tables identify the consolidated interest income, interest
expense, average interest-earning assets and interest-bearing liabilities, and
net interest margins, as well as an analysis of changes in net interest income
due to volume and rate changes, for the third quarter and first nine months of
2005 and 2004:

<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED SEPTEMBER 30,
                                                       ----------------------------------------------------------------------------
                                                                       2005                                   2004
                                                       -----------------------------------     ------------------------------------
                                                          AVERAGE                   YIELD/        AVERAGE                    YIELD/
                                                          BALANCE       INTEREST     COST         BALANCE      INTEREST       COST
                                                       ------------     ---------   ------     ------------    ---------     ------
                                                                             (THOUSANDS OF DOLLARS, EXCEPT PERCENTS)

<S>                                                    <C>              <C>         <C>        <C>             <C>           <C>
Interest-earning assets (1):
  Commercial real estate loans ....................    $  3,939,714     $  81,242     8.18%    $  3,819,339    $  72,405      7.54%
  Residential real estate loans (2) ...............       6,203,624       114,665     7.33%       4,763,213       86,334      7.21%
  Syndicated commercial loans .....................               -             -        -            3,075            -         -
  Residual interests in securitized loans .........          32,570         4,262    51.92%          19,446          856     17.51%
  Cash equivalents and investment securities ......         822,940         7,845     3.78%         711,122        3,309      1.85%
                                                       ------------     ---------   ------     ------------    ---------     -----
     Total interest-earning assets ................    $ 10,998,848     $ 208,014     7.50%    $  9,316,195    $ 162,904      6.96%
                                                       ============     =========   ======     ============    =========     =====


Interest-bearing liabilities:
  Time deposits ...................................    $  6,537,140     $  58,384     3.54%    $  5,325,285    $  29,000      2.17%
  Savings deposits ................................       1,613,204        11,881     2.92%       1,774,230        9,038      2.03%
  FHLB advances ...................................       1,351,626        10,411     3.06%         931,239        4,787      2.05%
  Warehouse lines of credit .......................          59,870           929     6.16%               -          501         -
  Senior Notes due 2004 ...........................               -             -        -                -            -         -
  Senior Notes due 2009 ...........................         181,450         3,650     8.05%         183,450        3,691      8.05%
  LYONs ...........................................               -             -        -              628            7      4.43%
  Junior Subordinated Debentures ..................         103,093         2,320     9.00%         103,093        2,320      9.00%
  Other ...........................................          30,019            91     1.20%          11,204           56      1.99%
                                                       ------------     ---------   ------     ------------    ---------     ------
     Total interest-bearing liabilities ...........    $  9,876,402     $  87,666     3.52%    $  8,329,129    $  49,400      2.36%
                                                       ============     =========   ======     ============    =========     =====


Net interest income ...............................                     $ 120,348                              $ 113,504
                                                                        =========                              =========


Percent of average interest-earning assets:
  Interest income .................................                                   7.50%                                   6.96%
  Interest expense ................................                                   3.16%                                   2.11%
                                                                                    ------                                   -----
  Net interest margin .............................                                   4.34%                                   4.85%
                                                                                    ======                                   =====
<FN>

(1)   Average loan balances include non-accrual loan balances.
(2)   Includes loans held for sale and other.
</FN>
</TABLE>


                                       41

<PAGE>
<TABLE>
<CAPTION>
                                                                                NINE MONTHS ENDED SEPTEMBER 30,
                                                       ----------------------------------------------------------------------------
                                                                       2005                                   2004
                                                       -----------------------------------     ------------------------------------

                                                          AVERAGE                   YIELD/        AVERAGE                   YIELD/
                                                          BALANCE       INTEREST     COST         BALANCE      INTEREST      COST
                                                       ------------     --------    ------     ------------    ---------     -----
                                                                             (THOUSANDS OF DOLLARS, EXCEPT PERCENTS)

<S>                                                    <C>              <C>           <C>      <C>             <C>            <C>
Interest-earning assets (1):
  Commercial real estate loans .....................   $  3,801,336     $ 224,091     7.88%    $  3,921,667    $ 221,796      7.55%
  Residential real estate loans (2) ................      6,467,422       351,623     7.27%       5,158,118      269,622      6.98%
  Syndicated commercial loans ......................              -             -        -            4,491           78      2.32%
  Residual interests in securitized loans ..........         22,280         8,569    51.42%          12,477        2,451     26.24%
  Cash equivalents and investment securities .......        702,837        16,605     3.16%         496,492        6,693      1.80%
                                                       ------------     ---------   ------     ------------    ---------     -----
    Total interest-earning assets ..................   $ 10,993,875     $ 600,888     7.31%    $  9,593,245    $ 500,640      6.97%
                                                       ============     =========   ======     ============    =========     =====


Interest-bearing liabilities:
  Time deposits ....................................   $  6,316,905     $ 149,347     3.16%    $  5,240,056    $  82,184      2.09%
  Savings deposits .................................      1,667,349        32,574     2.61%       1,764,570       25,911      1.96%
  FHLB advances ....................................      1,507,165        30,130     2.67%       1,435,697       20,535      1.91%
  Warehouse lines of credit ........................         97,187         3,485     4.79%               -          751         -
  Senior Notes due 2004 ............................              -             -        -            6,291          372      7.88%
  Senior Notes due 2009 ............................        181,450        10,950     8.05%         186,943       11,293      8.05%
  LYONs ............................................            320            15     6.27%             644           24      4.98%
  Junior Subordinated Debentures ...................        103,093         6,960     9.00%         103,093        6,959      9.00%
  Other ............................................         28,524           365     1.71%           9,282          139      2.00%
                                                       ------------     ---------   ------     ------------    ---------    ------
    Total interest-bearing liabilities .............   $  9,901,993     $ 233,826     3.16%    $  8,746,576    $ 148,168      2.26%
                                                       ============     =========   ======     ============    =========    ======


Net interest income ................................                    $ 367,062                              $ 352,472
                                                                        =========                               =========


Percent of average interest-earning assets:
  Interest income ..................................                         7.31%                                            6.97%
  Interest expense .................................                         2.84%                                            2.06%
                                                                        ---------                                            -----
  Net interest margin ..............................                         4.47%                                            4.91%
                                                                        =========                                            =====

<FN>

(1)  Average loan balances include non-accrual loan balances.
(2)  Includes loans held for sale and other.
</FN>
</TABLE>


                                       42

<PAGE>
<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED SEPTEMBER 30,            NINE MONTHS ENDED SEPTEMBER 30,
                                                         2005 COMPARED TO 2004                       2005 COMPARED TO 2004
                                                 ------------------------------------      -------------------------------------
                                                       CHANGE DUE TO                             CHANGE DUE TO
                                                 -------------------------                 ------------------------
                                                   VOLUME        RATE         TOTAL          VOLUME         RATE         TOTAL
                                                 ---------     ---------     --------      ----------     ---------    ---------
                                                                           (THOUSANDS OF DOLLARS)

<S>                                              <C>           <C>           <C>            <C>           <C>          <C>
 Cash equivalent and investment securities ..... $   1,049     $   3,487     $  4,536       $   4,709     $   5,203    $   9,912
 Loans:
   Commercial real estate ......................     2,482         6,355        8,837          (7,094)        9,389        2,295
   Residential real estate .....................    26,690         2,093       28,783          71,211        11,254       82,465
   Other .......................................     1,587         1,367        2,954           3,734         1,842        5,576
                                                 ---------     ---------     --------       ---------     ---------    ---------
   Total Loans .................................    30,759         9,815       40,574          67,851        22,485       90,336
                                                 ---------     ---------     --------       ---------     ---------    ---------
 Total increase in interest income .............    31,808        13,302       45,110          72,560        27,688      100,248
                                                 ---------     ---------     --------       ---------     ---------    ---------
 Time deposits .................................   (10,823)      (18,561)     (29,384)        (25,459)      (41,704)     (67,163)
 Savings deposits ..............................     1,186        (4,029)      (2,843)          1,899        (8,562)      (6,663)
 FHLB advances .................................    (3,238)       (2,386)      (5,624)         (1,429)       (8,166)      (9,595)
 Warehouse lines of credit .....................      (428)            -         (428)         (2,734)            -       (2,734)
 Senior Notes due 2004 and 2009 ................        41             -           41             715             -          715
 LYONs .........................................         7             -            7               9             -            9
 Junior Subordinated Debentures ................         -             -            -              (1)            -           (1)
 Other .........................................       (57)           22          (35)           (246)           20         (226)
                                                 ---------     ---------     ---------      ---------     ---------    ---------
 Total decrease in interest expense ............   (13,312)      (24,954)      (38,266)       (27,246)      (58,412)     (85,658)
                                                 ---------     ---------     ---------      ---------     ---------    ---------
 Increase (decrease) in net interest income .... $  18,496     $ (11,652)    $   6,844      $  45,314     $ (30,724)   $  14,590
                                                 =========     =========     =========      =========     =========    =========
</TABLE>


NON-INTEREST INCOME


WHOLE LOAN SALES AND SECURITIZATIONS OF RESIDENTIAL REAL ESTATE LOANS

     The gain on the sale of residential real estate loans increased from $89.4
million in the third quarter of 2004 to $116.0 million for the third quarter of
2005 due to a significant increase in the volume of loans sold and securitized
in the third quarter of 2005 as compared to the third quarter of 2004. For the
first nine months of 2005, the gain on the sale of residential real estate loans
decreased to $316.4 million, as compared to $338.6 million for the first nine
months of 2004. The decrease in gain on sale is primarily attributable to the
realization of lower gross premiums on loans sold and securitized during the
first nine months of 2005, as compared to the first nine months of 2004, as a
result of lower interest rate margins reflecting increased price competition in
the non-prime mortgage origination market.

     A total of $9.27 billion in loans were sold (including loans sold via
securitization) during the third quarter of 2005, as compared to loan sales and
securitizations of $6.80 billion during the third quarter of 2004. For the first
nine months of 2005, a total of $26.09 billion in loans were sold (including
loans sold via securitization), as compared to loan sales of $16.60 billion
during the first nine months of 2004. The average gross premium on loans sold
and securitized during the third quarter of 2005 was 2.25% as


                                       43

<PAGE>

compared to an average of 3.02% for the third quarter of 2004. For the first
nine months of 2005, the average gross premium on loans sold was 2.60% as
compared to an average of 3.68% for the first nine months of 2004.

     The Company realized a net gain on its derivative instruments utilized to
hedge the impact of interest rate volatility on its residential real estate
lending activities during the third quarter and first nine months of 2005. This
net gain primarily resulted from an increase in the underlying interest rate
indices (primarily the two-year swap rate) which conversely had a negative
impact upon the gross loan sale and securitization premiums realized during the
same period. Such premiums and the gain or loss on derivative instruments have
exhibited, and are expected to continue to exhibit, variability (often
significant) based on various economic and interest rate environments, as well
as on the Company's loan sale and hedging activity levels and their timing. The
Company reported provisions for valuation and repurchase reserves for the third
quarter and first nine months of 2005 of (0.05)% and 0.06% of total net loan
sales and securitizations, respectively, as compared to the similar periods in
2004 of 0.14% and 0.12%, respectively. During the third quarter of 2005, the
Company updated its loss estimates and stratifications for both of its valuation
and repurchase reserves. The estimates were based on an updated analysis of
historical loan collateral vintage data. The net result was a negative
provision, or credit to income, for the valuation and repurchase reserves during
the third quarter of 2005 (as represented by the (0.05)% noted above) and a
shifting of a certain amount of the valuation reserve into the repurchase
reserve. The Company continually evaluates the loss estimates utilized for its
valuation and repurchase reserves based upon its analysis of historical and
current data and the mix of loan characteristics. The net gain percentage (the
net gain after direct costs, net gains or losses on derivative instruments,
provisions for premium recapture and valuation and repurchase reserves, divided
by net loans sold) on these sales decreased to 1.26% in the third quarter of
2005 from 1.32% in the third quarter of 2004. For the first nine months of 2005,
the gain percentage on these sales decreased to 1.22% as compared to 2.02% in
the first nine months of 2004.


                                       44

<PAGE>

     The following table provides the amounts of loans sold during the
respective periods and additional detail on the net gain on whole loan sales and
securitizations (net gain on sale):

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                     SEPTEMBER 30,                     SEPTEMBER 30,
                                                              ----------------------------      -----------------------------
                                                                  2005            2004              2005             2004
                                                              -----------      -----------      ------------     ------------
                                                                                 (THOUSANDS OF DOLLARS)


<S>                                                           <C>              <C>              <C>              <C>
Whole loan sales of residential real estate loans .........   $ 8,236,360      $ 6,245,154      $ 22,861,862     $ 14,426,043
Securitizations of residential real estate loans ..........     1,032,725          555,814         3,224,291        2,178,572
                                                              -----------      -----------      ------------     ------------
Total loan sales and securitizations - net of repurchases .   $ 9,269,085      $ 6,800,968      $ 26,086,153     $ 16,604,615
                                                              ===========      ===========      ============     ============

Gross premium recognized on loan sales and securitizations.   $   208,687      $   204,820      $    678,503     $    612,897
Net gain (loss) on derivative instruments .................        24,218           (6,552)           15,833           (2,923)
Direct costs of loan originations - net ...................      (111,712)         (90,321)         (333,369)        (230,474)
Provision for premium recapture and reversal ..............        (9,096)          (9,191)          (26,690)         (22,133)
                                                              -----------      ------------     ------------     ------------
                                                                  112,097           98,756           334,277          357,367
Provision for valuation and repurchase reserves ...........         3,947           (9,390)          (17,909)         (18,755)
                                                              -----------      -----------      ------------     ------------
  Net gain on sale ........................................   $   116,044      $    89,366      $    316,368     $    338,612
                                                              ===========      ===========      ============     ============

Net gain on sale ..........................................   $   116,044      $    89,366      $    316,368     $    338,612
Origination expenses allocated during the period
  of origination ..........................................       (30,381)         (53,551)         (108,535)        (145,367)
                                                              -----------      -----------      ------------     ------------
    Net operating gain on sale ............................   $    85,663      $    35,815      $    207,833     $    193,245
                                                              ===========      ===========      ============     ============

Gross premium recognized on loan sales and securitizations.          2.25 %          3.02 %             2.60 %           3.68 %
Net gain (loss) on derivative instruments .................          0.26 %         (0.10)%             0.06 %          (0.02)%
Direct costs of loan originations .........................         (1.21)%         (1.32)%            (1.28)%          (1.39)%
Provision for premium recapture and reversal ..............         (0.10)%         (0.14)%            (0.10)%          (0.13)%
                                                              -----------      ----------       ------------     ------------
                                                                     1.20 %          1.46 %             1.28 %           2.14 %
Provision for valuation and repurchase reserves ...........          0.05 %         (0.14)%            (0.06)%          (0.12)%
                                                              -----------      ----------       ------------     ------------
  Net gain on sale ........................................          1.25 %          1.32 %             1.22 %           2.02 %
                                                              ===========      ==========       ============     ============

Net gain on sale ..........................................          1.25 %          1.32 %             1.22 %           2.02 %
Origination expenses allocated during the period
  of origination ..........................................         (0.33)%         (0.79)%            (0.42)%          (0.88)%
                                                              -----------      ----------       ------------     ------------
    Net operating gain on sale ............................          0.92 %          0.53 %             0.80 %           1.14 %
                                                              ===========      ==========       ============     ============

<FN>

o    Percentages are of total loan sales and securitizations, net of repurchases, during the period indicated.
o    Premium recapture and reversal is the reversal or recapture of premium on loans sold which either prepay early per the
     terms of each sales contract or for certain loans repurchased from prior sales; includes some interest adjustment on
     loans repurchased.
o    Provision for valuation and repurchase reserves represents adjustments to the valuation allowance for the Company's held
     for sale loans and adjustments to the Company's repurchase reserve for the effect of loans estimated to be repurchased.
o    Origination expenses allocated during the period of origination represent indirect expenses not directly attributable to
     specific loans but are related to the origination process of residential real estate loans during the period of origination
     and which are not deferred for GAAP. These expenses are included in non-interest expense in the consolidated statement
     of operations during the period incurred. There is no directly comparable GAAP financial measure to "Origination expenses
     allocated during the period of origination", the components of which are calculated in accordance with GAAP.
o    Net operating gain on sale is a supplement to, and not a substitute for, the information presented in the consolidated
     statement of income as prepared in accordance with GAAP. The Company utilizes this additional information as part of
     its management of the total costs and efficiency of its loan origination platform. Furthermore, our definition of the indirect
     origination expenses may not be comparable to similarly titled measures reported by other companies. Because these expenses
     are estimates that are based on loans sold during the current period utilizing actual costs from prior periods, these costs may
     fluctuate from period to period reflecting changes in the volume of loans sold, originated and the actual indirect expenses
     incurred during the period of loan origination. The net operating gain on sale amount does not include net interest income on
     residential real estate loans held for sale or any fair value adjustments on the Company's residual interests in securitized
     loans.
</FN>
</TABLE>


                                       45

<PAGE>

LOAN SERVICING AND OTHER NON-INTEREST INCOME

     The components of the Company's loan servicing and other non-interest
income for the third quarter and first nine months of 2005 and 2004 are
indicated in the following tables:

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED           NINE MONTHS ENDED
                                                            SEPTEMBER 30,               SEPTEMBER 30,
                                                       ----------------------     ------------------------
                                                         2005          2004          2005           2004
                                                       --------      --------     ---------      ----------
                                                                     (THOUSANDS OF DOLLARS)

<S>                                                    <C>           <C>          <C>            <C>
Loan Servicing Income:
  Servicing fee income:
    Securitization transactions ....................   $  6,108      $  3,249     $  15,701      $    7,600
      Interim ......................................      9,807         6,261        24,083          14,233
      Loans sold - servicing retained ..............        897           672         2,369             672
                                                       --------      --------     ---------      ----------
                                                         16,812        10,182        42,153          22,505
    Ancillary income ...............................      2,314         1,483         5,845           3,712
    Other ..........................................      1,029            47         1,843            (336)
                                                       --------      --------     ---------      ----------
                                                       $ 20,155      $ 11,712     $  49,841      $   25,881
                                                       ========      ========     =========      ==========

MSR Amortization and Impairment:
  MSR amortization .................................   $ (5,574)     $ (3,186)    $ (15,121)     $   (6,593)
  MSR impairment provision .........................     (1,014)           60        (1,178)         (2,417)
                                                       --------      --------     ---------      ----------
                                                       $ (6,588)     $ (3,126)    $ (16,299)     $   (9,010)
                                                       ========     =========     =========      ==========

Other Non-Interest Income:
  Prepayment fees:
    Commercial real estate .........................   $    467      $    923     $   1,848      $    4,134
    Residential real estate ........................        706           555         1,980           4,409
  Commercial real estate transaction fees ..........        973         1,287         6,809           3,432
  All other ........................................      2,456           196         3,932           4,091
                                                       --------      --------     ---------      ----------
                                                       $  4,602      $  2,961     $  14,569      $   16,066
                                                       ========      ========     =========      ==========
</TABLE>

     The Company's loan servicing income (which is all related to residential
real estate), before mortgage servicing rights amortization and impairment
provision, increased from $11.7 million in the third quarter of 2004 to $20.2
million for the third quarter of 2005. For the first nine months of 2005 loan
servicing income was $49.8 million versus $25.9 million for the first nine
months of 2004. These increases were due to increased residential real estate
loan origination volume, which resulted in an increase in loan securitization
activity and higher levels of interim servicing during the third quarter and
first nine months of 2005 as compared to the third quarter and first nine months
of 2004. The additional loan securitization activity also created a higher level
of MSRs, which resulted in an increase in the amortization (expense) of the MSRs
in 2005 versus 2004.

     The Company was servicing approximately $22.16 billion in principal balance
of loans as of September 30, 2005. The Company intends to continue to service
its loans held for sale and those loans it securitizes, and has begun to service
some loans sold to other parties for more than on an interim basis.


                                       46

<PAGE>

     The following is a breakdown of the principal balance of the loans being
serviced by categorization as of the periods indicated:

<TABLE>
<CAPTION>

                                                                                SEPTEMBER 30,      DECEMBER 31,
                                                                                    2005              2004
                                                                                ------------      -----------
                                                                                    (MILLIONS OF DOLLARS)

<S>                                                                             <C>               <C>
Loans in securitizations ....................................................   $      4,851      $     3,172
Loans held for sale .........................................................          5,738            5,420
Loans sold and servicing retained ...........................................          1,240              637
Loans sold and serviced on an interim basis .................................         10,321            5,727
Other .......................................................................              8                -
                                                                                ------------      -----------
                                                                                $     22,158      $    14,956
                                                                                ============      ===========
</TABLE>


PROVISION FOR LOSSES

     For the third quarter of 2005 the Company recognized a $4.1 million
negative provision for loan losses (credit to income) as compared to a $10.3
million credit to income for the third quarter of 2004. While both negative
provisions resulted from improved credit quality metrics, the negative provision
for the third quarter of 2004 also included the effect of the transfer during
that quarter of $910.0 million in residential real estate loans held for
investment to loans held for sale, which increased the amount credited to
income. For the first nine months of 2005, the provision for loan losses was a
$7.3 million credit to income versus a $6.2 million expense for the first nine
months of 2004. The change in the year-to-date provision was primarily a result
of a significant decrease in the net charge-offs and level of non-accrual loans
experienced for the commercial real estate loans held for investment during
2005. In addition, the Company has continued to reduce its exposure to
commercial real estate loans secured by hotel and lodging properties which have
been the majority of the non-accrual loans and net charge-offs in prior periods.
The provision for loan losses represents the current period expense (or credit
to income) associated with maintaining an appropriate allowance for loan losses.
The loan loss provision for each period is dependent upon many factors,
including loan growth, net charge-offs, changes in the composition and
concentrations of the loan portfolio, the number and balances of non-accrual
loans, delinquencies, the level of restructured loans, assessment by management
of the inherent risk in the portfolio, the value of the underlying collateral
and the general economic conditions in the commercial real estate markets in
which the Company lends. Periodic fluctuations in the provision for loan losses
and the allowance for loan losses result from management's on-going assessment
of their adequacy.


NON-INTEREST EXPENSE

     Non-interest expense increased during the third quarter and first nine
months of 2005, as compared to the third quarter and first nine months of 2004.
Compensation expense increased from $51.0 million for the third quarter of 2004
to $61.9 million for the third quarter of 2005. The increase was primarily due
to an increase in accrued incentive compensation and increased compensation
expense related to the higher


                                       47

<PAGE>

residential real estate loan origination volume and an increase in the loan
servicing portfolio. For the first nine months of 2005, compensation expense
decreased to $176.8 million from $186.2 million for the first nine months of
2004. Compensation expense decreased on a year-over-year basis primarily due to
an increase in the capitalization level of direct loan origination costs during
2005. In addition, the Company decreased its internal commission costs related
to its residential real estate loan production during 2005 as compared to 2004,
thus limiting the amount of increase in compensation expense associated with the
increase in residential real estate loan production during 2005. Occupancy and
other non-interest expense increased during the third quarter and first nine
months of 2005 as compared to the same periods in 2004 reflecting the increase
in residential real estate loan origination volume and associated loan servicing
activities. Compensation and non-compensation related operating expenses are
detailed in the following tables:

<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED            NINE MONTHS ENDED
                                                                             SEPTEMBER 30,                SEPTEMBER 30,
                                                                       ------------------------      ------------------------
                                                                          2005           2004          2005           2004
                                                                       ---------      ---------      ---------      ---------
                                                                                       (THOUSANDS OF DOLLARS)

<S>                                                                    <C>            <C>            <C>            <C>
Compensation and related ...........................................   $  61,851      $  50,950      $ 176,785      $ 186,180
Occupancy ..........................................................       7,412          4,404         21,289         11,482
Other ..............................................................      33,334         24,474         81,682         70,483
                                                                       ---------      ---------      ---------      ---------
Total non-interest expense .........................................   $ 102,597      $  79,828      $ 279,756      $ 268,145
                                                                       =========      =========      =========      =========
</TABLE>
<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED            NINE MONTHS ENDED
                                                                             SEPTEMBER 30,                 SEPTEMBER 30,
                                                                       ------------------------      ------------------------
                                                                          2005           2004           2005           2004
                                                                       ---------      ---------      ---------      ---------
                                                                                       (THOUSANDS OF DOLLARS)

<S>                                                                    <C>            <C>            <C>            <C>
Total compensation and related .....................................   $ 133,665      $ 100,971      $ 384,018      $ 328,428
Deferral of loan origination costs (1) .............................     (71,814)       (50,021)      (207,233)      (142,248)
                                                                       ---------      ---------      ---------      ---------
Compensation and related ...........................................   $  61,851      $  50,950      $ 176,785      $ 186,180
                                                                       =========      =========      =========      =========
<FN>

(1) Incremental direct costs associated with the origination of loans are
    deferred when incurred. For residential real estate loans, when the related
    loan is sold, the deferred costs are included as a component of net gain on
    sale.
</FN>
</TABLE>


                                       48

<PAGE>

     Other non-interest expense for the third quarter and first nine months of
2005 and 2004 is summarized below:

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED            NINE MONTHS ENDED
                                                                             SEPTEMBER 30,               SEPTEMBER 30,
                                                                        ----------------------      ----------------------
                                                                          2005          2004          2005          2004
                                                                        --------      --------      --------      --------
                                                                                      (THOUSANDS OF DOLLARS)

<S>                                                                     <C>           <C>           <C>           <C>
Legal, professional and other outside services ......................   $  8,375      $  4,078      $ 21,150      $ 17,076
Information technology ..............................................      4,844         3,299        12,113         8,944
Printing, supplies and postage ......................................      4,131         2,563        11,726         8,197
Advertising and promotion ...........................................      2,915         2,221         8,357         6,408
Auto and travel .....................................................      2,178         1,937         6,445         5,902
Leasing and loan expense ............................................      1,945         1,269         5,249         4,304
Net real estate owned expenses ......................................       (389)        1,453        (5,024)        4,071
Telephone ...........................................................      1,142           984         3,299         2,778
All other ...........................................................      8,193         6,670        18,367        12,803
                                                                        --------      --------      --------      --------
Other expenses ......................................................   $ 33,334      $ 24,474      $ 81,682      $ 70,483
                                                                        ========      ========      ========      ========

</TABLE>


INCOME TAXES

     Income tax expense of $63.5 million and $59.8 million for the quarters
ended September 30, 2005 and 2004, represent effective tax rates of 40.7% and
41.3%, respectively, on income before income taxes of $156.0 million and $144.9
million for the same respective periods. For the nine month periods ended
September 30, 2005 and 2004, income tax expense of $183.8 million and $186.5
million, represent effective tax rates of 40.2% and 41.5%, respectively, on
income before income taxes of $457.2 million and $449.6 million for the same
respective periods. The decreases in effective tax rates during 2005 are
primarily a result of the changing geographic mix of the Company's operations
which has resulted in more of the Company's taxable income being subject to tax
in states with lower tax rates. The effective tax rates for all periods
presented are different than the Federal enacted tax rate of 35.0%, due mainly
to various apportioned state income tax provisions resulting from the Company's
nationwide lending operations.


REVIEW OF FINANCIAL CONDITION

LOANS HELD FOR SALE

     The Company's residential real estate loans held for sale have increased to
$5.77 billion at September 30, 2005 from $5.45 billion at December 31, 2004.
During the third quarter of 2005, residential real estate loan originations
totaled $9.61 billion as compared to $5.88 billion for the third quarter of
2004. During the first nine months of 2005, residential real estate loan
originations totaled $26.62 billion as compared to $16.87 billion for the first
nine months of 2004. The following table details the loans held for sale as of
the dates indicated:

                                       49

<PAGE>
<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,     DECEMBER 31,
                                                                                    2005             2004
                                                                                ------------      -----------
                                                                                    (THOUSANDS OF DOLLARS)

<S>                                                                             <C>               <C>
Loan principal balance:
  1st trust deeds ...........................................................   $  5,119,708      $ 5,036,724
  2nd trust deeds ...........................................................        617,822          383,039
                                                                                ------------      -----------
                                                                                   5,737,530        5,419,763
Basis adjustment for fair value hedge accounting ............................              -           (1,327)
Net deferred direct origination costs .......................................         65,298           74,514
Less:  Valuation reserve ....................................................        (35,348)         (38,258)
                                                                                ------------      -----------
Loans held for sale - net ...................................................   $  5,767,480      $ 5,454,692
                                                                                ============      ===========
</TABLE>


The following tables profile the loan origination volume for the periods
indicated:

<TABLE>
<CAPTION>


                                                                      THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                         SEPTEMBER 30,                     SEPTEMBER 30,
                                                                 -----------------------------      ------------------------------
                                                                     2005             2004             2005              2004
                                                                 ------------      -----------      ------------      ------------
                                                                           (THOUSANDS OF DOLLARS, EXCEPT PERCENTS)

<S>                                                              <C>               <C>              <C>               <C>
Loan origination volume by lien position:
  Firsts .....................................................   $  8,710,006      $ 5,515,901      $ 24,303,516      $ 15,951,462
  Seconds ....................................................        900,777          369,076         2,312,618           918,111
                                                                 ------------      -----------      ------------      ------------
                                                                 $  9,610,783      $ 5,884,977      $ 26,616,134      $ 16,869,573
                                                                 ============      ===========      ============      ============

For First Mortgages origination volume only:
  Average loan size ..........................................   $    251,371      $   210,515      $    242,511      $    209,869
  Weighted-average coupon ....................................           7.32%            7.23%             7.18%             6.99%
  Average bureau credit score (FICO) .........................            622              614               622               619
  Average loan-to-value (LTV) ................................           80.5%            80.4%             80.8%             81.0%
  Percentage of interest-only loan volume ....................           25.7%            13.3%             26.1%             15.5%

  Product Mix:
  ARM - 2/28 .................................................           90.4%            83.9%             87.6%             78.1%
  ARM - 3/27 .................................................            2.2%             3.7%              2.7%              4.0%
  ARM - 5/25 .................................................            0.7%             1.4%              0.8%              0.5%
  Fixed ......................................................            6.7%            11.0%              8.9%             17.4%
                                                                 ------------      -----------      ------------      ------------
                                                                        100.0%           100.0%            100.0%            100.0%
                                                                 ============      ===========      ============      ============

  Loan purpose:
  Purchase ...................................................           51.0%            45.7%             48.8%             42.3%
  Refinance ..................................................           49.0%            54.3%             51.2%             57.7%
                                                                 ------------      -----------      ------------      ------------
                                                                        100.0%           100.0%            100.0%            100.0%
                                                                 ============      ===========      ============      ============

For Second Mortgages origination volume only:
  Average loan size ..........................................   $     55,279         $ 39,681      $     51,337          $ 39,425
  Weighted-average coupon ....................................          10.18%           10.73%            10.09%            10.64%
  Average bureau credit score (FICO) .........................            648              643               649               646

First & Second Mortgages - Origination by
 geographic dispersion:
  California .................................................           26.8%            31.9%             28.2%             35.6%
  New York ...................................................           11.2%            11.5%             11.1%             11.3%
  Florida ....................................................           11.6%             7.2%             10.7%              7.6%
  New Jersey .................................................            6.8%             7.6%              6.8%              6.0%
  Maryland ...................................................            6.6%             4.8%              5.8%              4.1%
  All other states ...........................................           37.0%            37.0%             37.4%             35.4%
                                                                 ------------      -----------      ------------      ------------
                                                                        100.0%           100.0%            100.0%            100.0%
                                                                 ============      ===========      ============      ============
</TABLE>


                                       50

<PAGE>


LOANS HELD FOR INVESTMENT

     The Company's net loans held for investment before the allowance for loan
losses was approximately $4.12 billion at September 30, 2005, as compared to
$3.48 billion at December 31, 2004. The following tables show the total
commercial real estate new loan commitment volume for the periods indicated:

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED               NINE MONTHS ENDED
                                                                          SEPTEMBER 30,                     SEPTEMBER 30,
                                                                  -----------------------------      ----------------------------
                                                                      2005             2004              2005            2004
                                                                  -----------       -----------      -----------      -----------
                                                                                     (THOUSANDS OF DOLLARS)


<S>                                                               <C>               <C>              <C>              <C>
Senior  loans .................................................   $ 1,556,154       $   875,479      $ 3,773,889      $ 1,905,837
Mezzanine loans ...............................................             -             5,701                -           17,051
                                                                  -----------       -----------      -----------      -----------
                                                                  $ 1,556,154       $   881,180      $ 3,773,889      $ 1,922,888
                                                                  ===========       ===========      ===========      ===========

Average senior loan size originated ...........................   $    37,051       $    35,019      $    32,534      $    26,470
                                                                  ===========       ===========      ===========      ===========

</TABLE>

     The following table shows detail for the Company's loans held for
investment outstanding as of the dates indicated:

<TABLE>
<CAPTION>
                                                                          SEPTEMBER 30, 2005              DECEMBER 31, 2004
                                                                     --------------------------       -------------------------
                                                                        AMOUNT       % OF TOTAL         AMOUNT       % OF TOTAL
                                                                     -----------     ----------       -----------    ----------
                                                                              (THOUSANDS OF DOLLARS, EXCEPT PERCENTS)

<S>                                                                  <C>             <C>              <C>            <C>
Commercial real estate loans:
  Bridge .........................................................   $ 2,030,701             49 %     $ 1,512,532            43 %
  Construction ...................................................     1,391,419             33 %       1,020,370            29 %
  Permanent ......................................................       644,706             16 %         805,760            23 %
  Single tenant credit ...........................................        87,631              2 %         177,193             5 %
                                                                     -----------     ----------       -----------    ----------
                                                                       4,154,457            100 %       3,515,855           100 %
Other ............................................................         6,242              - %           4,526             - %
                                                                     -----------     ----------       -----------    ----------
                                                                       4,160,699            100 %       3,520,381           100 %
Net deferred loan fees and origination costs .....................       (41,603)            (1)%         (35,767)           (1)%
                                                                     -----------     ----------       -----------    ----------
                                                                       4,119,096             99 %       3,484,614            99 %
Allowance for loan losses ........................................      (158,713)            (4)%        (171,525)           (5)%
                                                                     -----------     ----------       -----------    ----------
Loans held for investment - net ..................................   $ 3,960,383             95 %     $ 3,313,089            94 %
                                                                     ===========      =========       ===========    ==========
</TABLE>

     As of September 30, 2005, approximately 29.9%, 13.3% and 13.1% of the
Company's commercial real estate loans outstanding were secured by properties
located within California, Florida and New York, respectively; no other state
represented greater than 10% of the loan portfolio. The real estate securing
these loans includes a wide variety of property types including multi-family,
office, retail, industrial, land


                                       51

<PAGE>

development, lodging and mixed-use properties. The loans in the portfolio were
distributed by property type as follows as of the dates indicated:

<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,      DECEMBER 31,
                                                                                    2005              2004
                                                                                ------------       -----------

<S>                                                                             <C>               <C>
Multi-family - Condominiums .................................................             36%               25%
Office ......................................................................             15%               18%
Land Development ............................................................             17%               12%
Commercial Mixed-Use ........................................................              9%               12%
Industrial ..................................................................              6%               11%
Retail ......................................................................              6%                7%
Multi-family - Other ........................................................              5%                5%
Hotels & Lodging ............................................................              3%                5%
Special Purpose .............................................................              3%                5%
                                                                                ------------       -----------
                                                                                         100%              100%
                                                                                ============       ===========
</TABLE>

     The following table stratifies the commercial real estate loans held for
investment by loan amounts outstanding as of September 30, 2005:

<TABLE>
<CAPTION>
                                              NUMBER       TOTAL LOANS
       LOAN SIZE RANGE                       OF LOANS      OUTSTANDING       %
------------------------------               --------      -----------     -----
                                                            (THOUSANDS
                                                            OF DOLLARS)

<S>                                          <C>           <C>             <C>
   $0           - $ 1 million ............         69      $     3,912         0%
> $1 million    - $ 5 million ............         78          251,193         6%
> $5 million    - $10 million ............         93          680,012        16%
> $10 million   - $15 million ............         43          523,894        13%
> $15 million   - $20 million ............         28          487,873        12%
> $20 million   - $30 million ............         17          406,829        10%
> $30 million   - $40 million ............         17          585,776        14%
> $40 million   - $50 million ............          6          263,915         6%
> $50 million ............................         14          951,053        23%
                                             --------      -----------    ------
                                                  365      $ 4,154,457       100%
                                             ========      ===========    ======
</TABLE>

     As of September 30, 2005, the average loan size was $11.4 million (or $14.0
million when loans under $1 million are excluded) and the average loan-to-value
ratio was approximately 73%, using the most current available appraised values
and current loan balances outstanding.

     The Company's largest single individual commercial real estate loan
outstanding (net of participation) at September 30, 2005 was $94.2 million with
a total loan commitment of $135.0 million. The Company's largest net commitment
for a single loan at September 30, 2005 was $135.0 million; this represents the
maximum potential loan amount to the borrower; however, the amount available to
borrow is generally subject to certain levels of completion or other factors on
the underlying property. As of September 30, 2005, the largest concentration of
loans (separate loans on different properties) which have


                                       52

<PAGE>

a common investor or equity sponsor totaled $220.9 million in loan principal
outstanding and $284.0 million in total loan commitment and is comprised of
three separate loans, all of which were performing as of September 30, 2005.

     The following tables provide additional information related to the
Company's commercial real estate non-accrual loans, foreclosed assets ("REO"),
restructured loans on accrual status and accruing loans past due 90 days or
more, as well as reflect the related net loss experience and allowance for loan
loss reconciliation applicable to the loans held for investment as of and for
the respective periods ended as shown below:

<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,      DECEMBER 31,
                                                                                    2005               2004
                                                                                ------------       -----------
                                                                                     (THOUSANDS OF DOLLARS,
                                                                                       EXCEPT PERCENTS)

<S>                                                                             <C>                <C>
COMMERCIAL REAL ESTATE:

Non-accrual loans held for investment ("HFI") ...............................   $     21,926       $    82,289
Real estate owned/foreclosed assets (REO) ...................................         24,712            21,344
                                                                                ------------       -----------
Total non-performing assets .................................................   $     46,638       $   103,633
                                                                                ============       ===========

Accruing loans past due 90 days or more .....................................   $          -       $         -
                                                                                ============       ===========

Restructured loans on accrual status: .......................................   $     12,350       $     9,302
                                                                                ============       ===========


Non-accrual loans to total loans HFI ........................................           0.53%             2.36%
Allowance for loan losses to total loans HFI ................................           3.85%             4.92%
Allowance for loan losses to non-accrual loans ..............................          723.9%            208.4%

</TABLE>


                                       53

<PAGE>
<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED SEPTEMBER 30, 2005
                                                                     ----------------------------------------------------
                                                                      COMMERCIAL     RESIDENTIAL
                                                                     REAL ESTATE     REAL ESTATE      OTHER       TOTAL
                                                                     -----------     -----------     -------    ---------
                                                                             (THOUSANDS OF DOLLARS, EXCEPT PERCENTS)

<S>                                                                    <C>           <C>             <C>        <C>
Beginning allowance for loan losses ................................   $ 159,909     $         -     $    47    $ 159,956
Provision for loan losses ..........................................      (4,077)             (5)         11       (4,071)
Charge-offs ........................................................           -               -           -            -
Recoveries .........................................................       2,823               5           -        2,828
                                                                       ---------     -----------     -------    ---------
Ending allowance for loan losses ...................................   $ 158,655     $         -     $    58    $ 158,713
                                                                       =========     ===========     =======    =========

Net charge-offs ....................................................   $   2,823     $         5     $     -    $   2,828
                                                                       =========     ===========     =======    =========

Net loan charge-offs to average commercial
  real estate loans held for investment ............................       (0.28)%
                                                                       =========
</TABLE>
<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED SEPTEMBER 30, 2004
                                                                     -------------------------------------------------------
                                                                      COMMERCIAL     RESIDENTIAL
                                                                     REAL ESTATE     REAL ESTATE      OTHER       TOTAL
                                                                     -----------     -----------     -------    ---------
                                                                             (THOUSANDS OF DOLLARS, EXCEPT PERCENTS)

<S>                                                                  <C>             <C>             <C>        <C>
Beginning allowance for loan losses ................................ $   191,475     $    21,672     $ 1,579    $ 214,726
Provision for loan losses ..........................................       1,707         (11,713)       (303)     (10,309)
Charge-offs ........................................................      (5,353)            (21)          -       (5,374)
Fair value adjustment (1) ..........................................           -          (9,856)          -       (9,856)
Recoveries .........................................................         392               7          36          435
                                                                     -----------     -----------     -------    ---------
Ending allowance for loan losses ................................... $   188,221     $        89     $ 1,312    $ 189,622
                                                                     ===========     ===========     =======    =========

Net charge-offs .................................................... $    (4,961)    $    (9,870)    $    36    $ (14,795)
                                                                     ===========     ===========     =======    =========

Net loan charge-offs to average commercial
  real estate loans held for investment ............................        0.52%
                                                                     ===========


<FN>

(1)    Resulting from the transfer of $910.0 million in residential real
       estate loans from held for investment to held for sale during the third
       quarter of 2004.
</FN>
</TABLE>


                                       54

<PAGE>
<TABLE>
<CAPTION>
                                                                             NINE MONTHS ENDED SEPTEMBER 30, 2005
                                                                     ---------------------------------------------------
                                                                      COMMERCIAL     RESIDENTIAL
                                                                     REAL ESTATE     REAL ESTATE     OTHER        TOTAL
                                                                     -----------     -----------    --------    ---------
                                                                           (THOUSANDS OF DOLLARS, EXCEPT PERCENTS)

<S>                                                                  <C>             <C>            <C>         <C>
Beginning allowance for loan losses ..............................   $   171,471     $         -    $     54    $ 171,525
Provision for loan losses ........................................        (7,250)             (6)          5       (7,251)
Charge-offs ......................................................       (12,180)              -           -      (12,180)
Recoveries .......................................................         6,613               6           -        6,619
                                                                     -----------     -----------    --------    ---------
Ending allowance for loan losses .................................   $   158,654     $         -    $     59    $ 158,713
                                                                     ============    ===========    ========    =========

Net charge-offs ..................................................   $    (5,567)    $         6    $      -    $  (5,561)
                                                                     ===========     ===========    ========    =========

Net loan charge-offs to average total loans
  held for investment ............................................         0.20%
                                                                     ===========
</TABLE>
<TABLE>
<CAPTION>
                                                                             NINE MONTHS ENDED SEPTEMBER 30, 2004
                                                                     ----------------------------------------------------
                                                                      COMMERCIAL     RESIDENTIAL
                                                                     REAL ESTATE     REAL ESTATE     OTHER        TOTAL
                                                                     -----------     -----------    --------    ---------
                                                                           (THOUSANDS OF DOLLARS, EXCEPT PERCENTS)

<S>                                                                  <C>             <C>            <C>         <C>
Beginning allowance for loan losses ..............................   $   194,957     $    15,643    $  2,991    $ 213,591
Provision for loan losses ........................................        12,255          (5,422)       (597)       6,236
Charge-offs ......................................................       (19,519)           (403)     (1,236)     (21,158)
Fair value adjustment (1) ........................................             -          (9,856)          -       (9,856)
Recoveries .......................................................           528             127         154          809
                                                                     -----------     -----------    --------    ---------
Ending allowance for loan losses .................................   $   188,221     $        89    $  1,312    $ 189,622
                                                                     ===========     ===========    ========    =========

Net charge-offs ..................................................   $   (18,991)    $   (10,132)   $ (1,082)   $ (30,205)
                                                                     ===========     ===========    ========    =========

Net loan charge-offs to average total loans
  held for investment ............................................          0.65%
                                                                     ===========
<FN>

(1)    Resulting from the transfer of $910.0 million in residential real
       estate loans from held for investment to held for sale during the third
       quarter of 2004.
</FN>
</TABLE>

     There were six commercial real estate non-accrual loans held for investment
(the largest having a balance of $7.6 million) totaling $21.9 million, or 0.6%
of the total loans held for investment, as of September 30, 2005. At December
31, 2004 there were 13 commercial real estate loans totaling $82.3 million on
non-accrual status, which represented 2.5% of the total loans held for
investment as of that date. Loans secured by hotel and lodging properties
represented 38% and 55% of the total commercial real estate loans on non-accrual
status as of September 30, 2005 and December 31, 2004, respectively.

     REO related to commercial real estate loans was $24.7 million at September
30, 2005, consisting of seven properties (the largest having a balance of $11.1
million), which were acquired through or in lieu of foreclosure on loans secured
by real estate. At December 31, 2004 there were eight commercial real estate
properties owned, totaling $21.3 million.


                                       55

<PAGE>

     The level of non-performing assets fluctuates and specific loans can have a
material impact upon the total. Consideration must be given that, due to the
secured nature of the Company's loans and the presence of larger-balance loans,
the classification, and the timing thereof, of an individual loan as non-accrual
or REO can have a significant impact upon the level of total non-performing
assets, without necessarily a commensurate increase in loss exposure.

     The allowance for loan losses, as a percentage of total loans held for
investment decreased to 3.85% as of September 30, 2005, as compared to 4.92% as
of December 31, 2004. In the third quarter of 2005, the Company incurred no net
loan charge-offs and realized $2.8 million in recoveries of loan balances
previously charged-off, as compared to $14.8 million in total net charge-offs
for the third quarter of 2004. The net charge-off ratio for commercial real
estate loans for the first nine months of 2005 was 0.20% as compared to 0.65%
for the first nine months of 2004. Loans secured by hotel and lodging properties
represented (25.3%) and 53.7% of the total commercial real estate net
(recoveries)/charge-offs for the first nine months of 2005 and 2004,
respectively.


LIQUIDITY AND CAPITAL RESOURCES

     The commercial and residential real estate lending activities are financed
primarily through deposit accounts offered by FIL and which are insured by the
FDIC. FIL offers certificates of deposit and savings and money market deposit
accounts (insured by the FDIC to the legal maximum) through its 21 branches in
California. FIL minimizes the costs associated with its accounts by not offering
traditional checking, safe deposit boxes, ATM access and other traditional
retail services. Deposits totaled $8.44 billion at September 30, 2005 and are
summarized as to type as follows:

<TABLE>
<CAPTION>
                                                                       NUMBER OF         TOTAL
                                                                        ACCOUNTS        DEPOSITS
                                                                       ---------      ------------
                                                                                       (THOUSANDS
                                                                                       OF DOLLARS)


<S>                                                                    <C>           <C>
Savings and money market deposit accounts ..........................      33,162      $ 1,613,632

Certificates of deposit:
  Retail ...........................................................     115,117        5,464,933
  Brokered .........................................................           -        1,362,147
                                                                                      -----------
                                                                                      $ 8,440,712
                                                                                      ===========
</TABLE>


     FIL is also eligible for financing through the FHLB, from which financing
is available based upon advance rates on certain pledged collateral and at
various rates and terms. At September 30, 2005, FIL had a borrowing capacity
with the FHLB of $2.47 billion, of which $639.0 million was borrowed and
outstanding. The $2.47 billion in borrowing capacity was based upon a total of
$2.73 billion in pledged loan collateral at September 30, 2005. FIL's maximum
financing availability, based upon its regulatory assets and subject to the
amount of collateral pledged and the related advance rates, was approximately
$3.79 billion as of September 30, 2005.

                                       56


<PAGE>

     To add flexibility and capacity to its ability to fund the origination of
residential real estate loans, the Company currently maintains three separate
warehouse lines of credit. The total funding capacity of these three facilities
was $2.50 billion at September 30, 2005. Borrowings, if any, under each of the
facilities are secured by loans held for sale as pledged by FIL. There were no
amounts outstanding at September 30, 2005. The three facilities are summarized
as follows:

o    $1 billion master repurchase facility ($500 million committed) with Goldman
     Sachs Mortgage Company expiring in February 2006, secured by certain
     residential real estate loans held for sale, interest at one-month LIBOR
     plus a margin of 0.45%.

o    $1 billion master loan and security facility ($500 million committed) with
     Greenwich Capital Financial Products expiring in September 2006, secured by
     certain residential real estate loans held for sale, interest at one-month
     LIBOR plus a margin of 0.40%.

o    $500 million master repurchase facility ($250 million committed) with
     Credit Suisse First Boston Mortgage Capital expiring in January 2006,
     secured by certain residential real estate loans held for sale, interest at
     overnight LIBOR plus a margin of 0.50%.

     Each of the facilities is subject to certain conditions, including but not
limited to financial and other covenants. At September 30, 2005, FIL was in
compliance with all financial and other covenants under these facilities.

     In addition, FIL has a line of credit with the Federal Reserve Bank of San
Francisco ("Federal Reserve") with a borrowing capacity of $435.5 million at
September 30, 2005. There were no amounts outstanding under the line of credit
with the Federal Reserve at September 30, 2005.

     The Company's residential loan disposition strategy is to primarily utilize
whole loan sales and, to a lesser extent, securitizations. The Company attempts
to build multiple whole loan sale relationships to achieve diversity and enhance
market liquidity. During the first nine months of 2005, the Company had
transacted whole loan sales with 20 different financial institutions, the
largest institution representing 17.8% of the total whole loan sales volume
during this period.

     As a holding company, Fremont General currently pays its operating
expenses, interest expense, taxes, obligations under its various employee
benefit plans, and stockholders' dividends, and meets its other obligations
primarily from its cash on hand and intercompany tax payments and benefit plan
reimbursements from FIL. During 2002 and 2003, Fremont General had significant
net operating loss carryforwards which were used to offset taxable income
generated by FIL. As a result, intercompany payments of federal income tax
obligations from FIL, which were otherwise payable to taxing authorities, were
available for use by Fremont General for general working capital purposes. The
last of the net


                                       57

<PAGE>

operating loss carryforwards were fully utilized during 2003 and only current
operating losses at Fremont General will offset taxable income generated by FIL;
as a result, during 2004 and 2005, Fremont General paid most of the federal
income taxes it received from FIL to the federal taxing authorities. Dividends
of $6.2 million and $4.6 million were paid on Fremont General's common stock in
the quarters ended September 30, 2005 and 2004, respectively; however, no
assurance can be given that future common stock dividends will be declared.

     During the third quarter of 2005, FIL implemented a dividend of all of its
retained residual interests in securitized loans to Fremont General Credit
Corporation ("FGCC"), which is an intermediate holding company wholly-owned by
Fremont General. All of the retained residual interests in securitized loans now
reside at FGCC. The purpose of the dividend was to create an additional source
of cash flow to Fremont General to the extent of cash received from the residual
interests.

     There exist certain Federal Income Tax and California Franchise Tax matters
pending resolution, of which Fremont General is not yet able to make a
determination of their ultimate liability, but does not believe that the actual
outcomes of these matters will adversely impact its liquidity. It is expected
that the final resolution of these matters may take several years.

     Fremont General has cash and cash equivalents of $102.1 million at
September 30, 2005 and no debt maturities until March of 2009.


OFF-BALANCE SHEET ACTIVITIES

     In the third quarter of 2005, the Company continued to securitize a certain
amount of its residential real estate loans. Securitization is a process of
transforming the loans into securities, which are sold to investors. The loans
are first sold to a special purpose corporation, which then transfers them to a
qualifying special-purpose entity (a "QSPE") which is legally isolated from the
Company. The QSPE, in turn, issues interest-bearing securities, commonly known
as asset-backed securities, that are secured by the future cash flows to be
derived from the securitized loans. The QSPE uses the proceeds from the issuance
of the securities to pay the purchase price of the securitized loans. The
Company does not utilize unconsolidated special-purpose entities as a mechanism
to remove non-performing assets from the consolidated balance sheets.

     Securitization is used by the Company to provide an additional source of
liquidity. The QSPEs are not consolidated into the Company's financial
statements since they meet the criteria established by SFAS No. 140, "Accounting
for the Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities." In general, those criteria require the QSPE to be isolated and
distinct from the transferor (the Company), to be limited to permitted
activities, and have defined limits on the assets it can hold and the permitted
sales, exchanges or distributions of its assets.


                                       58

<PAGE>

     During the third quarter of 2005, the Company securitized $1.03 billion in
residential real estate loans. The investors and the QSPEs do not have any
recourse to the Company if the cash flows generated by the securitized loans are
inadequate to service the securities issued by the QSPEs. At the close of each
securitization, the Company removes from its balance sheet the carrying value of
the loans securitized and adds to its balance sheet the estimated fair value of
the assets obtained in consideration for the loans which generally include the
cash received (net of transaction expenses), retained junior class securities
(referred to as residual interests) and mortgage servicing rights.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK

     The Company is subject to market risk resulting primarily from the impact
of fluctuations in interest rates upon balance sheet financial instruments such
as loans, debt and derivatives. Changes in interest rates can affect loan
interest income, gains on the sale of residential real estate loans, interest
expense, loan origination volume, net investment income, and total stockholders'
equity. The level of gain on the sale of residential real estate loans is
dependent upon the level of loan origination volume, the premium paid by the
purchasers of such loans and the gain or loss realized from hedging activities.
Each of these factors, in turn, are highly dependent upon changes in, and the
level of, interest rates and other economic factors. The Company may experience
a decrease in the amount of gain it realizes should significant interest rate
volatility occur or if other economic factors have a negative impact on the
value and volume of the loans the Company originates. The objective of the asset
and liability management activities is to provide a high level of net interest
and investment income and to seek cost effective sources of capital, while
maintaining acceptable levels of interest rate and liquidity risk.

     The Company is subject to interest rate risk resulting from differences
between the rates on, and repricing characteristics of, interest-earning loans
held for investment (and loans held for sale) and the rates on, and repricing
characteristics of, interest-bearing liabilities used to finance its loans such
as deposits and debt. Interest rate gaps may arise when assets are funded with
liabilities having different repricing intervals or different market indices to
which the instruments' interest rate is tied and to this degree, earnings will
be sensitive to interest rate changes. Additionally, interest rate gaps could
develop between the market rate and the interest rate on loans in the loan
portfolio, which could result in borrowers' prepaying their loan obligations.
The Company attempts to match the characteristics of interest rate sensitive
assets and liabilities to minimize the effect of fluctuations in interest rates.
For the Company's financial instruments, the expected maturity date does not
necessarily reflect the net market risk exposure because certain instruments are
subject to interest rate changes before expected maturity. With respect to the
Company's residential real estate loans held for sale and its unfunded loan
pipeline, the Company attempts to minimize its interest rate risk exposure
through forward loan sale commitments and other financial instruments, such as
Eurodollar futures contracts. These other financial instruments meet the
definition of a derivative under generally accepted accounting principles and,
accordingly, they are recorded in the consolidated financial statements at fair
value.


                                       59

<PAGE>

     The Company is reliant upon the secondary mortgage market for execution of
its whole loan sales and securitizations of residential real estate loans. While
the Company strives to maintain adequate levels of liquidity support and capital
to withstand certain disruptions in the secondary mortgage market, a significant
disruption could adversely impact the Company's ability to fund, sell,
securitize or finance its residential real estate loan origination volume,
leading to reduced gains on sale and a corresponding decrease in revenue and
earnings. A deterioration in performance of the residential real estate loans
after being sold in whole loan sales and securitizations could adversely impact
the availability and pricing of such future transactions.

     Quantitative and qualitative disclosures about the Company's market risk
are included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2004. There have been no material changes in such risks or in
the Company's asset and liability management activities during the nine months
ended September 30, 2005.



ITEM 4.  CONTROLS AND PROCEDURES

     As of September 30, 2005, the Company evaluated the effectiveness of the
design and operation of the Company's disclosure controls and procedures. The
evaluation was performed under the supervision and with the participation of the
Company's management, including the Chief Executive Officer ("CEO") and Chief
Financial Officer ("CFO"). Based on that evaluation, the Company's management,
including the CEO and CFO, have concluded that the Company's disclosure controls
and procedures were effective as of September 30, 2005.

     There have been no changes in the Company's internal controls over
financial reporting that occurred in the last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal controls over financial reporting.


                                       60

<PAGE>

                           PART II - OTHER INFORMATION



ITEM 1:    LEGAL PROCEEDINGS


     The Company is a defendant in a number of legal actions arising in the
ordinary course of business and from the discontinuance of the insurance
operations. Management and its legal counsel are of the opinion that the
settlement of these actions, individually or in the aggregate, will not have a
material effect on the Company's business, financial position or results of
operations.

     On June 2, 2004, the State of California Insurance Commissioner John
Garamendi (the "Commissioner"), as statutory liquidator of Fremont Indemnity
Company ("Fremont Indemnity"), filed suit in Los Angeles Superior Court against
Fremont General alleging the improper utilization by Fremont General of certain
net operating loss deductions ("NOLs") allegedly belonging to its Fremont
Indemnity subsidiary (the "Fremont Indemnity case"). This complaint involves
issues that Fremont General considers were resolved in an agreement among the
California Department of Insurance, Fremont Indemnity and Fremont General (the
"Letter Agreement"). The Letter Agreement, dated July 2, 2002, was executed on
behalf of the California Department of Insurance by the Honorable Harry Low, the
State of California Insurance Commissioner at that time. Fremont General has
honored all of its obligations under the Letter Agreement. On July 16, 2004, the
Commissioner filed a First Amended Complaint ("FAC") adding a cause of action
for concealment of an alleged reinsurance dispute and is seeking to rescind the
Letter Agreement.

     On January 25, 2005, the Company's motions to dismiss the lawsuit brought
by the Commissioner, on behalf of Fremont Indemnity, against the Company were
argued and heard before the Superior Court of the State of California (the
"Court"). On January 26, 2005 the Court issued its rulings dismissing all the
causes of action in the FAC without leave to amend, except for the cause of
action for alleged concealment by Fremont General of a potential reinsurance
dispute, which was dismissed with leave to amend. The Court also found that the
Company had properly utilized the NOLs in accordance with the Letter Agreement.
In addition, the Court rejected the Commissioner's request for findings that the
Company's use of the NOLs and worthless stock deduction were voidable
preferences and/or fraudulent transfers. The Court also rejected the
Commissioner's request for injunctive relief to force the Company to amend its
prior consolidated income tax returns to remove and forgo the worthless stock
deduction for its investment in Fremont Indemnity.

     On May 2, 2005 the Commissioner filed a Second Amended Complaint ("SAC")
with regard to the 7th cause of action on behalf of Fremont Indemnity against
the Company alleging intentional misrepresentation, concealment and promissory
fraud, which induced the Commissioner to first enter into the Letter Agreement.
On July 15, 2005, the Court dismissed the SAC with 20 days leave to amend. On
August 4, 2005, the Commissioner filed a Third Amended Complaint ("TAC") again
alleging intentional misrepresentation, concealment and promissory fraud. The
Company continues to believe that the lawsuit lacks merit and has filed its
opposition papers seeking to dismiss the TAC. The hearing is currently scheduled
for November 22, 2005.

                                       61


<PAGE>

     The Commissioner filed an additional and separate complaint against Fremont
General on behalf of Fremont Indemnity as successor in interest to Comstock
Insurance Company ("Comstock"), a former affiliate of Fremont Indemnity, which
was subsequently merged into Fremont Indemnity. This case alleged similar causes
of action regarding the usage of the NOLs as in the Fremont Indemnity case as
well as improper transactions with other insurance subsidiaries and affiliates
of Fremont Indemnity. This matter was deemed a related case to the Fremont
Indemnity case. On April 22, 2005, the Court dismissed, without leave to amend,
the entire complaint. This ruling does not address or necessarily have legal
effect on the related Fremont Indemnity case. On July 22, 2005, the Company
received a Notice of Appeal to the Court's dismissal of the complaint. The
Company continues to believe that this litigation is without merit.

     The Company, in relation to one of its commercial real estate lending
transactions, has participated in a standby letter of credit which represents a
conditional obligation of the Company; this letter of credit guarantees the
performance of a borrower to a third party in the amount of approximately $17.5
million.


ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


                      ISSUER PURCHASES OF EQUITY SECURITIES

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
                                                                              (c) TOTAL NUMBER            (d) MAXIMUM NUMBER
                                        (a )TOTAL          (b) AVERAGE        OF SHARES (OR UNITS)      (OR APPROXIMATE DOLLAR
                                         NUMBER OF          PRICE PAID         PURCHASED AS PART         VALUE) OF SHARES (OR
                                          SHARES            PER SHARE             OF PUBLICLY           UNITS) THAT MAY YET BE
                                        (OR UNITS)          (OR UNIT)           ANNOUNCED PLANS          PURCHASED UNDER THE
              PERIOD                   PURCHASED (1)          (1)(2)              OR PROGRAMS             PLANS OR PROGRAMS
-----------------------------------    -------------       ------------       -------------------      -----------------------



<S>                                    <C>                 <C>                <C>                       <C>
July 1-31, 2005                              58,737         $      0.30                    58,737
------------------------------------------------------------------------------------------------------------------------------
August 1-31, 2005                            39,267         $     21.38                    39,267
------------------------------------------------------------------------------------------------------------------------------
September 1-30, 2005                          1,520         $     23.23                     1,520
------------------------------------------------------------------------------------------------------------------------------
Total                                        99,524         $      8.97                    99,524                    4,285,980
=============================================================================================================================


<FN>

(1)  Shares of common stock acquired by the Company from participants through
     purchases of shares under certain eimployee benefits plans at fair value
     and/or reacquisition of shares under its restricted stock program at $0 per
     share.
(2)  Excluding the purchases of 60,450 restricted stock shares, the average
     price per share was $22.84 for the three months ended September 30,2005.

</FN>
</TABLE>


                                       62


<PAGE>

ITEM 6:    EXHIBITS

 EXHIBIT
    NO.                                DESCRIPTION
 -------       -----------------------------------------------------------------

     3.1       Restated Articles of Incorporation of Fremont General
               Corporation. (Incorporated by reference to Exhibit 3.1 to the
               Registrant's Quarterly Report on Form 10-Q, for the period ended
               June 30, 1998, Commission File Number 1-8007.)

     3.2       Certificate of Amendment of Articles of Incorporation of Fremont
               General Corporation. (Incorporated by reference to Exhibit 3.2 to
               the Registrant's Annual Report on Form 10-K, for the fiscal year
               ended December 31, 1998, Commission File Number 1-8007.)

     3.3(a)    Amended and Restated Bylaws of Fremont General Corporation.
               (Incorporated by reference to Exhibit 3.3 to the Registrant's
               Annual Report on Form 10-K, for the fiscal year ended December
               31, 1995, Commission File Number 1-8007.)

     3.3(b)    Fremont General Corporation Bylaw Amendment Adopted by the
               Board of Directors on November 30, 2003. (Incorporated by
               reference to Exhibit 3.3(b) to the Registrant's Annual Report on
               Form 10-K, for the fiscal year ended December 31, 2003,
               Commission File Number 1-8007.)

     3.3(c)    Fremont General Corporation Bylaw Amendment Adopted by the
               Board of Directors on March 16, 2004. (Incorporated by reference
               to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q,
               for the period ended June 30, 2004, Commission File Number
               1-8007.)

     4.1       Form of Stock Certificate for Common Stock of the Registrant.
               (Incorporated by reference to Exhibit 4.1 to the Registrant's
               Annual Report on Form 10-K, for the fiscal year ended December
               31, 2000, Commission File Number 1-8007.)

     4.2       Indenture with respect to Liquid Yield Option Notes Due 2013
               between the Registrant and Deutsche Bank Trust Company Americas
               (formerly Bankers Trust Company.) (Incorporated by reference to
               Exhibit 4.4 to the Registrant's Registration Statement on Form
               S-3 filed on October 1, 1993, Registration Number 33-68098.)

     4.3       Notice of Redemption to the Holders of Liquid Yield Option Notes
               due 2013. (Incorporated by reference to Exhibit 4.3 to the
               Registrant's Registration Quarterly Report on Form 10-Q for the
               period ended June 30, 2005, Commission File Number 1-8007.)

     4.4       Indenture with respect to the 9% Junior Subordinated Debentures
               among the Registrant, the Trust and Bank of New York (originated
               with First Interstate Bank of California), a New York Banking
               Corporation, as trustee. (Incorporated by reference to Exhibit
               4.3 to the Registrant's Annual Report on Form 10-K, for the
               fiscal year ended December 31, 1995, Commission File Number
               1-8007.)

     4.5       Amended and Restated Declaration of Trust with respect to the 9%
               Trust Originated Preferred Securities among the Registrant, the
               Regular Trustees, Chase Bank (USA), a Delaware banking
               corporation, as Delaware trustee, and JPMorgan Chase Bank,
               National Association, as Institutional Trustee. (Incorporated by
               reference to Exhibit 4.5 to the Registrant's Annual Report on
               Form 10-K, for the fiscal year ended December 31, 1995,
               Commission File Number 1-8007.)

     4.6       Preferred Securities Guarantee Agreement between the Registrant
               JP Morgan Chase Bank, National Association, as Preferred
               Guarantee Trustee. (Incorporated by reference to Exhibit 4.6 to
               the Registrant's Annual Report on Form 10-K, for the fiscal year
               ended December 31, 1995, Commission File Number 1-8007.)

     4.7       Common Securities Guarantee Agreement by the Registrant.
               (Incorporated by reference to Exhibit 4.7 to the Registrant's
               Annual Report on Form 10-K, for the fiscal year ended December
               31, 1995, Commission File Number 1-8007.)

     4.8       Form of Preferred Securities. (Included in Exhibit 4.5).
               (Incorporated by reference to Exhibit 4.8 to the Registrant's
               Annual Report on Form 10-K, for the fiscal year ended December
               31, 1995, Commission File Number 1-8007.)

    31.1       Certification pursuant to Section 302 of the Sarbanes-Oxley Act
               of 2002.

    31.2       Certification pursuant to Section 302 of the Sarbanes-Oxley Act
               of 2002.
                                       63
<PAGE>

 EXHIBIT
    NO.                                DESCRIPTION
 -------       -----------------------------------------------------------------

    32.1       Certification pursuant to Section 906 of the Sarbanes-Oxley Act
               of 2002.



   With respect to long-term debt instruments, the Registrant undertakes to
   provide copies of such agreements upon request by the Commission.


                                       64


<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.


                                       FREMONT GENERAL CORPORATION



Date: November 9, 2005                 /s/    LOUIS J. RAMPINO
                                       -----------------------------------------
                                       Louis J. Rampino
                                       President and Chief Executive Officer



Date: November 9, 2005                 /s/    PATRICK E. LAMB
                                       -----------------------------------------
                                       Patrick E. Lamb
                                       Senior Vice President, Chief Financial
                                       Officer, Chief Accounting Officer and
                                       Treasurer
                                       (Principal Accounting Officer)



                                       65