<PAGE> 1


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

                                   FORM 10-Q

(Mark One)

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

              For the quarterly period ended March 31, 1998

                                    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 0-25664

                               SGV BANCORP, INC.
--------------------------------------------------------------------------------
              (Exact name of registrant as specified in its charter)

DELAWARE                                                            95-4524789
--------------------------------------------------------------------------------
(State or other jurisdiction of                           (I. R. S. Employer 
incorporation or organization)                            Identification No.)



225 NORTH BARRANCA STREET, WEST COVINA, CALIFORNIA                        91791
--------------------------------------------------------------------------------
(Address of principal executive offices)

                                   (626) 859-4200
--------------------------------------------------------------------------------
                (Registrant's telephone number, including area code)


                                   Not Applicable
--------------------------------------------------------------------------------
                (Former name, former address and former fiscal 
                     year, if changed since last report)

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

                           APPLICABLE ONLY TO CORPORATE ISSUERS:
      Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 2,345,340 shares of common
stock, par value $0.01 per share, were outstanding as of  May  10, 1998.


<PAGE> 2



                                SGV BANCORP, INC.
                                   FORM 10-Q
                                     INDEX


PART I        FINANCIAL INFORMATION                                         PAGE
                                                                            ----

Item 1        Consolidated Statements of Financial Condition:
              March 31, 1998 (unaudited) and June 30, 1997....................1

              Consolidated Statements of Operations (unaudited):
              For the Nine Months Ended March 31, 1998 and 1997 and
              for the Three Months Ended March 31, 1998 and 1997 .............2

              Consolidated Statements of Cash Flows (unaudited):
              For the Nine Months Ended March 31, 1998 and 1997...............3

              Notes to Consolidated Financial Statements......................5

Item 2        Management's Discussion and Analysis of
              Results of Operations and Financial Condition...................8

Item 3        Quantitative and Qualitative Disclosures About Market Risk.....17

PART II       OTHER INFORMATION

Item 1        Legal Proceedings..............................................18

Item 2        Changes in Securities..........................................18

Item 3        Defaults Upon Senior Securities................................18

Item 4        Submission of Matters to a Vote of Security Holders............18

Item 5        Other Information..............................................18

Item 6        Exhibits and Reports on Form 8-K...............................18

SIGNATURES...................................................................19





<PAGE> 3
<TABLE>
<CAPTION>


SGV BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
-------------------------------------------------------------------------------------------------------------------------------

                                                                                          MARCH 31,                JUNE 30,
                                                                                            1998                     1997
                                                                                            ----                     ----
ASSETS:                                                                                  (Unaudited)
<S>                                                                                       <C>                     <C> 
 Cash and cash equivalents, including short-term bank obligations of
   $4,500 at March 31, 1998 and $18,600 at June 30, 1997                                  $    8,361              $  22,664
 Investment securities available for sale, amortized cost of $15,748
   at March 31, 1998 and $12,500 at June 30, 1997                                             15,745                 12,467
 Mortgage-backed securities available for sale, amortized cost of
  $21,244 at March 31, 1998 and $37,323 at June 30, 1997                                      21,198                 37,164
 Mortgage-backed securities held to maturity, estimated fair value of
  $33,376 at March 31, 1998 and $38,783 at June 30, 1997                                      33,253                 39,072
 Loans receivable held for sale                                                                  907                    230
 Loans receivable held for investment, net of allowance for estimated
  loan losses of $1,423 at March 31, 1998 and $1,263 at June 30, 1997                        307,985                284,608
 Accrued interest receivable                                                                   2,787                  2,911
 Stock of Federal Home Loan Bank of San Francisco, at cost                                     4,173                  3,987
 Real estate acquired through foreclosure, net                                                 1,757                  1,150
 Premises and equipment, net                                                                   3,657                  3,866
 Prepaid expenses and other assets, net                                                        1,242                  1,221
                                                                                        -----------------     ------------------
     Total assets                                                                         $  401,065              $ 409,340
                                                                                        =================     ==================

LIABILITIES AND STOCKHOLDERS' EQUITY

 LIABILITIES:
 Deposit accounts                                                                         $  290,122              $ 288,339
 Federal Home Loan Bank advances                                                              69,131                 77,907
 Securities sold under agreements to repurchase                                                6,000                  9,430
 Accrued expenses and other liabilities                                                        4,178                  3,761
                                                                                       ------------------     ------------------
     Total liabilities                                                                       369,431                379,437

 STOCKHOLDERS' EQUITY:
 Preferred stock, $.01 par value; 2,000,000 shares authorized; none
  Issued
 Common stock, $.01 par value;  10,000,000 shares authorized;
  2,727,656 issued;  2,345,340 shares outstanding at March 31, 1998 and
  2,342,176 shares outstanding at June 30, 1997                                                   27                     27
 Additional paid-in capital                                                                   21,082                 20,789
 Retained earnings, substantially restricted                                                  16,257                 15,201
 Net unrealized loss on investment securities and mortgage-backed
  securities available for sale, net of taxes                                                    (28)                  (110)
 Deferred stock compensation                                                                  (1,614)                (1,880)
 Treasury stock, 382,316 shares at March 31,1998 and
   385,480 shares at June 30, 1997                                                            (4,090)                (4,124)
                                                                                       ------------------     ------------------
     Total stockholders' equity                                                               31,634                 29,903
                                                                                       ------------------     ------------------
     Total liabilities and stockholders' equity                                           $  401,065              $ 409,340
                                                                                       ==================     ==================
</TABLE>


                                                          1


<PAGE> 4
<TABLE>
<CAPTION>


SGV BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------------
                                                                   FOR THE THREE MONTHS                    FOR THE NINE MONTHS
                                                                      ENDED MARCH 31,                        ENDED MARCH 31,
                                                                   1998            1997                   1998            1997
                                                             ------------------------------           ------------------------------
<S>                                                           <C>             <C>                    <C>             <C>      
INTEREST INCOME:
  Interest on loans                                           $   6,158       $   5,413              $  17,616       $  15,387
  Interest on investment securities                                 241             272                    817             847
  Interest on mortgage-backed securities                            904             989                  3,157           2,692
  Other                                                             131             191                    627             488
                                                             -------------   -------------          -------------   -------------
      Total interest income                                       7,434           6,865                 22,217          19,414
                                                             -------------   -------------          -------------   -------------

INTEREST EXPENSE:
  Interest on deposit accounts                                    3,323           3,133                 10,356           8,831
  Interest on borrowings                                          1,210           1,298                  3,834           3,583
                                                             -------------   -------------          -------------   -------------
      Total interest expense                                      4,533           4,431                 14,190          12,414
                                                             -------------   -------------          -------------   -------------

Net interest income before provision for
  estimated loan losses                                           2,901           2,434                  8,027           7,000
PROVISION FOR ESTIMATED LOAN LOSSES                                 115             194                    458             487
                                                             -------------   -------------          -------------   -------------
Net interest income after provision for
  estimated loan losses                                           2,786           2,240                  7,569           6,513

OTHER INCOME (EXPENSE):
  Loan servicing and other fees                                     138             109                    401             332
  Secondary marketing activity, net                                  (1)            (10)                     8             (36)
  Gain (loss) on sale or redemption of securities
    available for sale, net                                           2             (13)                    39             148
  Other income                                                      208             119                    553             362
  Net loss on real estate acquired through foreclosure              (70)            (10)                  (133)            (78)
                                                             -------------   -------------          -------------   -------------
      Total other income                                            277             195                    868             728
                                                             -------------   -------------          -------------   -------------

GENERAL AND ADMINISTRATIVE EXPENSES:
  Compensation and other employee expenses                        1,228           1,070                  3,610           2,964
  Office occupancy                                                  260             215                    801             584
  Equipment                                                          75              51                    197             145
  Data Processing                                                   221             227                    628             503
  Advertising                                                        42              37                    120             107
  FDIC insurance premiums                                            46              11                    135             273
  FDIC special assessment                                                                                                1,332
  Other operating expenses                                          344             331                  1,120             916
                                                             -------------   -------------          -------------   -------------
      Total general and administrative expenses                   2,216           1,942                  6,611           6,824
                                                             -------------   -------------          -------------   -------------

EARNINGS BEFORE INCOME TAXES                                        847             493                  1,826             417
INCOME TAXES                                                        356             208                    770             180
                                                             -------------   -------------          -------------   -------------
     NET EARNINGS                                             $     491        $    285              $   1,056      $      237
                                                             =============   =============          =============   =============
EARNINGS PER SHARE - Basic                                    $    0.21        $   0.12              $    0.45      $     0.09
                                                             =============   =============          =============   =============
EARNINGS PER SHARE - Diluted                                  $    0.20        $   0.11              $    0.43      $     0.09
                                                             =============   =============          =============   =============
</TABLE>

                                                           2




<PAGE> 5
<TABLE>
<CAPTION>


SGV BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------
                                                                                      FOR THE NINE MONTHS
                                                                                          ENDED MARCH 31,
                                                                                    1998                    1997
                                                                              -----------------------------------------
<S>                                                                              <C>                    <C>   
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net earnings                                                                    $  1,056               $     237
 Adjustments to reconcile net earnings to net
  cash provided by (used in) operating activities:
   Depreciation and amortization                                                      509                     260
   Loans originated for sale                                                      (13,791)                 (4,471)
   Proceeds from sale of loans                                                     13,142                   4,476
   Gain on sale of loans, net                                                         (33)                     (5)
   Gain on sale of investments available for sale, net                                 (6)                   (148)
   Gain on sale of mortgage-backed securities available for sale, net                 (33)
   Federal Home Loan Bank stock dividend                                             (187)                   (179)
   Increase in prepaid expenses and other assets                                     (108)                   (791)
   Amortization of deferred loan fees                                                 (88)                    (21)
   Deferred loan origination costs                                                   (218)                   (147)
   Increase (decrease) in accrued expenses and other liabilities                      358                     (26)
   Provision for estimated loan losses                                                458                     487
   Provision for estimated real estate losses                                         111                      73
   Premium amortization, net                                                          294                     156
   Decrease (increase) in accrued interest receivable                                 124                    (269)
   Other, net                                                                          19                     338
                                                                              --------------        -----------------
    Net cash provided by (used in) operating activities                             1,607                     (30)

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of investment securities available for sale                             (25,748)                (41,451)
 Proceeds from sale and redemption of investment securities
  available for sale                                                               22,506                  44,936
 Purchase of mortgage-backed securities available for sale                         (5,080)                (35,229)
 Purchase of mortgage-backed securities held to maturity                                                  (15,451)
 Proceeds from sale of mortgage-backed securities available for sale               16,566                   9,866
 Principal repayments on mortgage-backed securities                                10,240                   5,909
 Loans funded, net                                                                (23,048)                (23,621)
 Loans purchased, net                                                             (40,623)                (33,344)
 Principal repayments on loans                                                     37,979                  22,986
 Purchase of FHLB Stock                                                                                        (3)
 Proceeds from sale of real estate                                                  1,448                   2,798
 Purchase of premises and equipment                                                  (220)                   (906)
 Other, net                                                                           (99)
                                                                              ---------------       -----------------
    Net cash used in investing activities                                          (6,079)                (63,510)

</TABLE>


                                                           3  

<PAGE> 6
<TABLE>
<CAPTION>


SGV BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)(CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                        FOR THE NINE MONTHS
                                                                                           ENDED MARCH 31,

                                                                                  1998                        1997
                                                                          ---------------------------------------------------
<S>                                                                          <C>                            <C>   
CASH FLOWS FROM FINANCING ACTIVITIES: 
Net (decrease) increase in certificate accounts                              $     (20,068)                 $    19,503
Net increase in passbook , money market savings
   NOW and noninterest-bearing accounts                                             21,851                        8,257
 Purchase of deposit accounts                                                                                    20,159
 Proceeds from Federal Home Loan Bank advances                                                                   45,000
 Repayment of Federal Home Loan Bank advances                                       (8,777)                     (36,305)
 Proceeds from reverse repurchase agreements, net                                                                 9,600
 Repayment of securities sold under agreements to repurchase                                                       (150)
 Purchase of treasury stock                                                         (3,430)                      (2,884)
 Other, net                                                                            593                          304
                                                                          --------------------         ---------------------
    Net cash (used in) provided by financing activities                             (9,831)                      63,484

NET DECREASE  IN CASH AND CASH
    EQUIVALENTS                                                                    (14,303)                         (56)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                      22,664                        8,884
                                                                          --------------------         ---------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                     $       8,361                  $     8,828
                                                                          ====================         =====================


SUPPLEMENTAL CASH FLOW DISCLOSURES
 Cash paid during the period for:
Interest                                                                     $      14,218                  $    12,561
Income taxes, net                                                                      536

NONCASH INVESTING ACTIVITIES DURING THE PERIOD:
Real estate acquired through foreclosure                                             2,135                        2,129
Loans to facilitate sales of real estate acquired through foreclosure                  152
Change in net unrealized loss on investment securities and
  mortgage-backed securities available for sale, net of taxes                           82                         (183)

</TABLE>







                                                             4




<PAGE> 7 


                       SGV BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1998
                                   (UNAUDITED)

1.        Basis of Presentation:
          ---------------------

          SGV  Bancorp,  Inc. ("SGV")  is  a  savings  and  loan holding company
incorporated  in  the  state of  Delaware that was  organized for the purpose of
acquiring all of the capital stock of First Federal Savings and Loan Association
of San Gabriel Valley ("the Association")  upon its conversion from  a federally
chartered  mutual  savings  and  loan association to a federally chartered stock
savings  and  loan  association.  On  June 28, 1995,  SGV completed  its sale of
2,727,656  shares  of  its  common  stock  through  subscription  and  community
offerings to the Association's depositors, the Employee Stock Ownership Plan and
the  public  and used approximately  60% of the net proceeds from  such sales to
purchase  all of  the Association's  common  stock  issued  in the Association's
conversion  to  stock  form.  Such  business combination  was  accounted  for at
historical cost in a manner similar to a pooling of interests.

          SGV engages only in limited business  operations  primarily  involving
investments in federal agency securities and mortgage-backed  securities, and as
a result,  substantially all of the net earnings and performance  figures herein
reflect the results of the Association.

          The Association is primarily  engaged in attracting  deposits from the
general public in the areas in which its branches are located and investing such
deposits  and other  available  funds  primarily  in mortgage  loans  secured by
one-to-four  family residences.  To a lesser extent, the Association  invests in
multi-family  residential  mortgages,  commercial  real  estate,  land and other
loans. The Association's  revenues are derived  principally from interest on its
mortgage loans, and to a lesser extent, interest and dividends on its investment
and mortgage-backed securities and income from loan servicing. The Association's
primary sources of funds are deposits, principal and interest payments on loans,
advances from the Federal Home Loan Bank of San  Francisco  (the FHLB) and, to a
lesser  extent,  proceeds  from the sale of  loans.  As of March 31,  1998,  the
Association operated eight branch offices located in the San Gabriel Valley.

          The  consolidated financial statements  include the  accounts  of  SGV
Bancorp, Inc. and  its  wholly-owned  subsidiary, First Federal Savings and Loan
Association of  San Gabriel Valley and its wholly-owned subsidiary, First Covina
Service Company (collectively, the Company).  All material intercompany balances
and transactions have been eliminated in consolidation.

          The accompanying  consolidated financial statements have been prepared
in  accordance   with  generally  accepted  accounting  principles  for  interim
financial information and with  the instructions  to Form 10-Q and Article 10 of
Regulation S-X.  Accordingly,  they  do  not include  all of the information and
footnotes required  by  generally  accepted  accounting  principles for complete
financial  statements.   In the opinion of management all necessary adjustments,
consisting   only  of   normal  recurring  adjustments  necessary  for  a   fair
presentation have been included.  The results of  operations for the three-month
period ended  March 31, 1998 are  not necessarily indicative of the results that
may be expected for the entire fiscal year.

                                        5


<PAGE> 8


          These consolidated  financial statements and the information under the
heading  "Management's  Discussion  and  Analysis of Results of  Operations  and
Financial Condition" should be read in conjunction with the audited consolidated
financial  statements and notes thereto of SGV Bancorp,  Inc. for the year ended
June 30,  1997  included  in the  Company's  Annual  Report on Form 10-K for the
fiscal year ended June 30, 1997.

2.        Earnings Per Share
          ------------------

          As  required  in SFAS  No.  128,  Earnings  Per  Share,  which  became
effective for periods ending after  December 15, 1997,  basic earnings per share
for the three  months  ended and nine  months  ended March 31, 1998 and 1997 are
based on the weighted average common shares outstanding,  net of treasury stock.
The total issued shares of 2,727,656 have been adjusted for the average treasury
stock  outstanding  of 382,316 and 290,930 for the three  months ended March 31,
1998 and 1997,  respectively,  and 384,171 and 203,200 for the nine months ended
March 31, 1998 and 1997,  respectively.  Diluted  earnings  per share  represent
basic  earnings  per share  adjusted for the common  stock  equivalent  of stock
options granted and  unexercised.  The common stock  equivalent  shares of stock
options for diluted  earnings per share  calculations are 121,074 and 58,908 for
the three  months ended March 31, 1998 and 1997,  respectively,  and 122,278 and
27,011 for the nine  months  ended March 31,  1998 and 1997,  respectively.  The
numerator for earnings per share for all periods is  represented by net earnings
with no adjustments.

3.        Accounting Principles
          ---------------------

          In February 1997, the FASB issued SFAS No. 128, which is effective for
financial  statements issued  for  periods  ending  after December 15, 1997.  It
replaces the presentation of primary earnings per share with the presentation of
basic earnings per share.  It also requires the presentation of diluted earnings
per share  for entities with  complex capital  structures.  Diluted earnings per
share  takes into  account the potential dilution that could occur if securities
or  other contracts to  issue  common stock,  such as options, were exercised or
converted into  common stock.   The Company adopted SFAS No. 128  effective with
the financial reports of December 31, 1997.  Previous periods have been restated
to reflect the requirements of this statement.

          In  February  1997,  the FASB  issued  SFAS  No.  129,  Disclosure  of
Information About Capital  Structure.  The statement  establishes  standards for
disclosing  information  about an entity's  capital  structure.  The  disclosure
requirements of SFAS No. 129 are effective for periods ending after December 15,
1997. The Company does not believe that the adoption of SFAS No. 129 will have a
significant impact on its financial statements.

          In June 1997,  the FASB issued SFAS No. 130,  Reporting  Comprehensive
Income and SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information.  SFAS No. 130  establishes  standards  for reporting and display of
comprehensive  income  and  its  components  in a full  set  of  general-purpose
financial  statements.  SFAS No.  131  establishes  standards  of  reporting  by
publicly-held business enterprises and disclosure of information about operating
segments in annual financial statements to a lesser extent, in interim financial
reports  issued to  shareholders.  SFAS No. 130 and 131 are effective for fiscal
years  beginning after December 15, 1997. As both SFAS No. 130 and 131 deal with
financial  statement  disclosure,  the  Company  does  not  anticipate  that the
adoption of these new  standards  will have a material  impact on its  financial
statements.

                                        6

<PAGE> 9


4.        Use of Estimates in the Preparation of Financial Statements
          -----------------------------------------------------------

          The  preparation of financial  statements in conformity with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.


5.        Recent Developments

          The Year 2000 Issue concerns the potential impact of historic computer
software code that only utilizes two digits to represent the calendar year (e.g.
"98"  for  "1998").   Software  so  developed   could   produce   inaccurate  or
unpredictable  results  upon  January 1, 2000,  when  current  and future  dates
present a lower two digit  year  number  than  dates in the prior  century.  The
Company,  similar  to most  financial  services  providers,  is  subject  to the
potential  impact of the  "Year  2000  Issue"  due to the  nature  of  financial
information. Potential impacts to the Company may arise from software, hardware,
and  equipment  both  within the  Company's  direct  control  and outside of the
Company's ownership,  yet with which the Company electronically or operationally
interfaces (e.g. vendors providing credit bureau information).

          Financial  institution  regulators have recently increased their focus
upon Year 2000 issues,  issuing  guidance  concerning  the  responsibilities  of
senior  management and directors.  Year 2000 testing and  certification is being
addressed as a key safety and soundness  issue in  conjunction  with  regulatory
exams.

          In order to address the Year 2000 issue, the Company has developed and
implemented a five phase plan divided into the following major components:

o     awareness
o     assessment
o     renovation
o     validation
o     implementation

          The  Company  has  completed  the first two  phases of the plan and is
currently  working  internally  and with  external  vendors  on the final  three
phases.  Because the Company  outsources its data processing and item processing
operations,  a  significant  component  of the Year  2000  plan is to work  with
external  vendors to test and  certify  their  systems  as Year 2000  compliant.
Another  important  segment  of the Year 2000  plan is to  identify  those  loan
customers whose possible lack of Year 2000 preparedness might expose the Bank to
financial loss.

          The  Company  expects  its Year 2000  date  conversion  project  to be
completed on a timely  basis.  During the  execution of this project the Company
will incur internal staff costs as well as consulting and other expenses related
to enhancements  necessary to prepare the systems for the

                                        7


<PAGE> 10


Year 2000. The expense of the Year 2000 project as well as the related potential
effect  on the  Company's  earnings is not expected to have a material effect on
its financial position or results of operations.

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

          This   Management's   Discussion  and  Analysis   should  be  read  in
conjunction  with the  Management's  Discussion  and  Analysis  contained in the
Company's  Annual  Report on Form 10-K,  which  focuses  upon  relevant  matters
occurring  during  the  year  ended  June 30,  1997.  Accordingly,  the  ensuing
discussion  focuses  upon the  material  matters at and for the three months and
nine months ended March 31, 1998.

          In  addition  to  historical  information,  this Form 10-Q may include
forward  looking  statements  based  on  current  management  expectations.  The
Company's   actual  results  could  differ   materially  from  those  management
expectations.  Factors  that could  cause  future  results to vary from  current
management  expectations  include,  but are not  limited  to,  general  economic
conditions,  legislative and regulatory changes, monetary and fiscal policies of
the  federal  government,  changes in tax  policies,  rates and  regulations  of
federal,  state and local tax  authorities,  changes in interest rates,  deposit
flows,  the cost of  funds,  demand  for loan  products,  demand  for  financial
services,  competition,  changes in the quality or  composition of the Company's
loan and investment portfolios,  changes in accounting  principles,  policies or
guidelines,  and other economic,  competitive,  governmental  and  technological
factors  affecting  the Company's  operations,  markets  products,  services and
prices.  Further  description of the risks and  uncertainties to the business of
the Company are  included  in detail in the  Company's  Form 10-K for the fiscal
year ended June 30, 1997.

GENERAL
-------

          The principal  business of the Company is attracting  retail  deposits
from the  general  public and  investing  those  deposits,  together  with funds
generated  from  operations  and  borrowings,  primarily in one- to  four-family
residential mortgage loans. To a lesser extent, the Company engages in secondary
marketing  activities  and  invests in  multi-family,  commercial  real  estate,
construction,  land and consumer  loans.  Loan sales come from loans held in the
Company's  portfolio  designated as being held for sale or originated during the
period and being so designated.  The Company retains virtually all the servicing
rights of loans  sold.  The  Company's  revenues  are derived  principally  from
interest on its mortgage loans,  and to a lesser extent,  interest and dividends
on its investment and mortgage-backed securities and income from loan servicing.
The  Company's  primary  sources of funds are  deposits,  principal and interest
payments on loans,  advances from the FHLB,  securities sold under agreements to
repurchase and, to a lesser extent, proceeds from the sale of loans.

RESULTS OF OPERATIONS
---------------------

          The Company posted net earnings of $491,000 for the three months ended
March 31, 1998  compared to net  earnings of $285,000 for the three months ended
March 31,  1997.  For the nine months ended March 31, 1998,  the  Company's  net
earnings were $1,056,000, as compared to a net earnings of $237,000 for the nine
months ended March 31, 1997.  For the three months


                                        8


<PAGE> 11


ended  March 31, 1998,  the net earnings  were $0.21 per share - basic, compared
to $0.12 per share - basic for the three  months  ended March 31, 1997.  For the
nine months ended March 31, 1998, the net earnings were $0.45 per share - basic,
compared  to $0.09  per share - basic  for the nine months ended March 31, 1997.
The net earnings for the nine months  ended March 31, 1997  reflects the payment
of  the one-time  special  assessment to  recapitalize  the SAIF insurance fund.
This one-time  special  assessment (of  approximately  $1.3 million on a pre-tax
basis) represented 65.7 basis  points  of the  deposits  held by the Association
as of March 31, 1995. A discussion of the specific components of net earnings is
set forth in the Notes to Consolidated Financial Statements.

Net Interest Income
-------------------

          Net interest income before the provision for estimated loan losses was
$2.9 million for the three months ended March 31, 1998  compared to $2.4 million
for the three months  ended March 31, 1997.  For the nine months ended March 31,
1998, net interest income was $8.0 million compared to $7.0 million for the nine
months ended March 31, 1997.

Interest Income
---------------

          Total  interest  income for the three  months ended March 31, 1998 was
$7.4 million, an increase of $0.6 million from the comparable period a year ago.
The increase in interest income was primarily due to the $17.9 million  increase
in the  average  balance of  interest-earning  assets to $391.5  million for the
three months ended March 31, 1998 from $373.6 million for the three months ended
March 31, 1997. The interest  income on loans  increased to $6.2 million for the
three  months  ended March 31, 1998 from $5.4 million for the three months ended
March 31, 1997. The increase in interest on loans was due to the increase in the
average balance of loans receivable  outstanding to $312.7 million for the three
months ended March 31, 1998 from $285.4 million for the three months ended March
31, 1997.  The increase in interest on loans was also due to the increase in the
average  yield on loans to 7.88% for the three  months ended March 31, 1998 from
7.59%,  partially as a result of the purchase in December 1997 of  approximately
$10 million of equity  lines of credit  yielding in excess of 13%.  The interest
income on mortgage-backed  securities decreased to $904,000 for the three months
ended March 31, 1998  compared to $989,000  for the three months ended March 31,
1997.  The  decrease in interest  income was due  primarily  to the  decrease in
average  balance of  mortgage-backed  securities  to $54.6 million for the three
months ended March 31, 1998 from $61.1  million for the three months ended March
31, 1997. The total yield on total  interest-earning  assets  increased to 7.60%
for the three  months  ended  March 31,  1998 as compared to 7.35% for the three
months ended March 31, 1997 primarily as a result of the increased  yield on the
loans receivable.

          Total  interest  income for the nine  months  ended March 31, 1998 was
$22.2  million,  an increase of $2.8 million from the  comparable  period a year
ago.  The increase in interest  income was  primarily  due to the $42.4  million
increase in the average balance of interest-earning assets to $394.6 million for
the nine months  ended  March 31,  1998 from $352.2  million for the nine months
ended March 31, 1997.  The interest  income on loans  increased to $17.6 million
for the nine months ended March 31, 1998 from $15.4  million for the nine months
ended March 31, 1997.  The increase in interest on loans was due to the increase
in the average balance of loans receivable outstanding to $302.5 million for the
nine months  ended March 31, 1998 from $269.6  million for the nine months ended
March 31, 1997.  Also, the increase was due to the increase in


                                        9


<PAGE> 12

the  average  yield on loans to 7.77% for the nine  months  ended March 31, 1998
from 7.61% for the nine months ended March 31, 1997  resulting from repricing of
adjustable rate mortgages, primarily as a result of the increase in COFI, and to
the purchase in December 1997 of equity lines of credit with yields in excess of
13%. The interest income on mortgage-backed securities increased to $3.2 million
for the nine months  ended March 31, 1998  compared to $2.7 million for the nine
months  ended March 31,  1997.  The  increase  in  interest  on  mortgage-backed
securities was due to the increase in average  balances to $61.7 million for the
nine months  ended March 31, 1998 from $54.6  million for the nine months  ended
March 31, 1997. Also, the increase was due to the increase in yield to 6.82% for
the nine months  ended March 31, 1998 from 6.57% for the nine months ended March
31, 1997 as a result of the purchase of securities with higher yields.

Interest Expense
----------------

          Total  interest  expense for the three months ended March 31, 1998 was
$4.5  million,  an increase of $102,000  from $4.4  million for the three months
ended March 31, 1997. The increase in interest  expense was primarily due to the
increase  in the  average  balance  of  interest-bearing  liabilities  to $360.8
million for the three  months  ended March 31, 1998 from $347.5  million for the
three months ended March 31, 1997.  This  increase was  partially  offset by the
decrease  in the  overall  average  cost of funds to 5.03% for the three  months
ended March 31, 1998 from 5.12% for the three months  ended March 31, 1997.  The
increase  in the  average  balance  of  interest-bearing  savings  accounts  was
primarily  due to the purchase of a $20 million  branch from  another  financial
institution in February 1997 and the  establishment of a de novo branch in March
1997 which has generated  approximately  $12.0  million in total  deposits as of
March 31, 1998. The average cost of funds for interest-bearing  savings accounts
decreased  to 4.69% for the three months ended March 31, 1998 from 4.77% for the
three months ended March 31, 1997  primarily as a result of lower  renewal rates
on maturing  certificates  of deposits and the increase in average core deposits
(passbook accounts, NOW accounts, money market savings and checking accounts).

          Total  interest  expense was $14.2  million for the nine months  ended
March 31, 1998 as compared to $12.4  million for the nine months ended March 31,
1997. The increase in expense was primarily due to the $40.2 million increase in
average interest-bearing liabilities to $365.4 million for the nine months ended
March 31, 1998 from $325.2  million  for the nine months  ended March 31,  1997.
Interest expense on interest-bearing  savings accounts increased by $1.5 million
as a result of the  increase  in average  interest-bearing  savings  accounts to
$284.6  million for the nine  months  ended March 31, 1998 as compared to $247.5
million for the nine months  ended  March 31, 1997 due  partially  to the branch
acquisition  and  growth of the de novo  branch.  Interest  expense  on  savings
accounts  also  increased  due to the  increase in the  average  cost of savings
accounts  to 4.85% for the nine  months  ended March 31, 1998 from 4.76% for the
same period a year ago.  Interest expense from borrowings  increased by $251,000
due to the  increase in the  average  cost of funds to 6.33% for the nine months
ended March 31, 1998 from 6.15% for the nine months  ended March 31, 1997 and to
the slight  increase in the  average  borrowings  to $80.8  million for the nine
months ended March 31, 1998 compared to $77.7 million for the same period a year
ago.

                                        10


<PAGE> 13


Analysis of Net Interest Income
-------------------------------

          The following table sets forth average interest rates on the Company's
interest-earning assets and interest-bearing liabilities for the three month and
nine month  periods  ended  March 31, 1998 and March 31,  1997  (dollars  are in
thousands and average balances are based on month-end amounts):

<TABLE>
<CAPTION>
                                                   Three Months Ended March 31,             Nine months ended March 31,
                                                     1998              1997                   1998               1997
                                                     ----              ----                   ----               ----
                                                Average  Yield     Average  Yield       Average  Yield     Average  Yield
                                                Balance   Rate     Balance   Rate       Balance   Rate     Balance   Rate
                                                ---------------------------------        -----------------------------------
<S>                                            <C>       <C>      <C>       <C>        <C>       <C>      <C>       <C>  
ASSETS:
 Interest-earning assets:
  Loans receivable                             $312,720  7.88%    $285,428  7.59%      $302,483  7.77%    $269,623  7.61%
  Mortgage-backed securities                     54,617  6.62       61,087  6.48         61,723  6.82       54,593  6.57
  Investment securities and other                24,134  6.17       27,118  6.83         30,385  6.34       27,936  6.37
                                               --------           --------             --------           --------
          Total interest-earning assets         391,471  7.60%     373,633  7.35%       394,591  7.51%     352,152  7.35%
Noninterest-earning assets                       13,560             11,867               13,511             11,256
                                               --------           --------             --------           --------
          Total assets                         $405,031           $385,500             $408,102           $363,408
                                               ========           ========             ========           ========

LIABILITIES AND EQUITY:
Interest-bearing liabilities:
  Savings accounts                             $283,598  4.69%    $262,547  4.77%      $284,626  4.85%    $247,497  4.76%
  Borrowings                                     77,192  6.27       84,996  6.11         80,768  6.33       77,662  6.15
                                               --------           --------             --------           --------
          Total interest-bearing liabilities    360,790  5.03%     347,543  5.12%       365,394  5.18%     325,159  5.09%
Noninterest-bearing liabilities                  13,010              7,755               12,029              7,259
Stockholders' equity                             31,231             30,202               30,679             30,990
                                               --------           --------             --------           --------
          Total liabilities and equity         $405,031           $385,500             $408,102           $363,408
                                               ========           ========             ========           ========

Net interest rate spread                                 2.57%              2.25%                2.33%              2.26%
Net interest margin                                      2.96%              2.61%                2.71%              2.65%
Ratio of interest-earning assets
 to interest-bearing liabilities                 108.50%            107.51%              107.99%            108.30%

</TABLE>

          The Company's  average net interest spread  increased to 2.57% for the
three  months  ended March 31, 1998 from 2.25% for the three  months ended March
31, 1997.  The increase was the  combination of an increase in the average yield
on  interest-earning  assets with a decrease  in the  average  cost of funds for
interest-bearing  liabilities  for the three  months  ended  March  31,  1998 as
compared  to the  three  months  ended  March 31,  1997.  The  average  yield on
interest-earning  assets  improved to 7.60% for the three months ended March 31,
1998 as compared to 7.35% for the three months ended March 31, 1997. The average
cost of funds for interest-bearing  liabilities decreased to 5.03% for the three
months  ended  March 31,  1998 from 5.12% for the three  months  ended March 31,
1997.

          The average yield on loans receivable increased to 7.88% for the three
months  ended  March 31,  1998 from 7.59% for the three  months  ended March 31,
1997.  The increase in yield was due  partially to the increase in yields on new
loans  originated or purchased which have  adjustable  rate features,  primarily
indexed to COFI and the repricing of adjustable rate loans,  indexed to COFI and
to the One-Year  Treasury  Constant  Maturity  Index (CMT),  resulting in higher
current  rates.  The  increase  in  yield  was  also  due  to  the  purchase  of
approximately $10 million in equity lines of credit in December 1997 with yields
in excess of 13%.  The average  yield on  mortgage-backed  securities  increased
slightly to 6.62% for the three  months  ended March 31, 1998 from 6.48% for the
three  months  ended  March 31, 1997 as a result of  mortgage-


                                        11

<PAGE> 14


backed  securities  acquired  with  slightly  higher  yields  in the past twelve
months,  replacing mortgage-backed securities sold during the same period.

          The majority of the  Association's  savings  accounts  are  relatively
short term (less than two years) and  therefore  the  average  cost of  deposits
adjusts relatively rapidly to market rates. The average cost of savings accounts
decreased  by 8 basis  points to 4.69% for the three months ended March 31, 1998
from 4.77% for the three months  ended March 31,  1997.  The decrease was due to
the renewal of  certificates  of deposit at rates lower than those  maturing and
also due to an increase in the Association's  core deposits to $75.1 million for
the three  months  ended March 31, 1998 from $52.8  million for the three months
ended March 31, 1997. Also, the average balance of borrowings,  principally from
the FHLB,  decreased to $77.2 million in  borrowings  for the three months ended
March 31, 1998 compared to $85.0 million for the  comparable  period a year ago.
The average  balance of borrowings  decreased as a result of the increase of the
average savings accounts.  The average cost of borrowings increased to 6.27% for
the three  months ended March 31, 1998 from 6.11% for the same period a year ago
as a result of lengthening the average maturity of such borrowings to reduce the
Company's sensitivity to changes in interest rates.

          The net interest  spread  increased to 2.33% for the nine months ended
March 31,  1998 from 2.26% for the  comparable  period a year ago as a result of
the increase in the average yield on interest-earning assets partially offset by
the increase in the average cost of  interest-bearing  liabilities.  The average
yield on  interest-earning  assets  improved to 7.51% for the nine months  ended
March 31, 1998 from 7.35% for the nine months ended March 31, 1997. The increase
was  due  to the  increase  in the  average  yields  for  loans  receivable  and
mortgage-backed  securities  related to higher  yields on recent  purchases  and
originations.  The average cost of interest bearing  liabilities  increased by 9
basis  points to 5.18% for the nine  months  ended March 31, 1998 from 5.09% for
the nine months  ended March 31,  1997.  The  increase for the nine months ended
March 31, 1998 was  primarily due to  promotional  rates on new accounts for the
new branch and to the  lengthening  of the  average  maturity  of the  Company's
borrowings.

Provision for Estimated Loan Losses
-----------------------------------

          The  provision  for  estimated  loan losses for the three months ended
March 31, 1998 was $115,000  compared  with  $194,000 for the three months ended
March 31, 1997.  The decrease in the provision for estimated loan losses was due
primarily to the decrease in  charge-offs  related to fair value  writedowns  as
compared to the  comparable  period a year ago.  For the nine months ended March
31, 1998, the provision for estimated  loan losses totaled  $458,000 as compared
to $487,000  for the same period a year ago.  The decrease was due to a decrease
in  charge-offs  in the nine months ended March 31, 1998 as compared to the same
period a year ago. See "Financial Condition."

Other Income
------------

          Other  income  increased  to $277,000 for the three months ended March
31, 1998 from  $195,000 for the three months ended March 31, 1997.  The increase
was  primarily  due to the increase in fees from savings  deposit  activities to
$125,000  for the three  months  ended March 31, 1998 as compared to $78,000 for
the three  months ended March 31, 1997.  Also  contributing  to the increase was
increased  loan fee income to  $138,000  from  $109,000  and an increase in fees


                                        12

<PAGE> 15


generated by the Association's subsidiary, First Covina Service Company, related
to sales of mutual funds and annuities.  Partially offseting these increases was
the  increase in the net loss  resulting  from real estate owned  operations  to
$70,000 for the three months  ended  December 31, 1997 from $10,000 for the same
period a year ago.  For the nine  months  ended  March 31,  1998,  other  income
increased to $868,000  from  $728,000  primarily  as a result of  increased  fee
income on savings account  activities and the increase in loan related fees. See
"Financial Condition."

General and Administrative Expenses
-----------------------------------

          For the three months ended March 31, 1998,  general and administrative
expenses  increased to $2.2 million from $1.9 million for the three months ended
March 31,  1997.  The  increase was  primarily  due to the $158,000  increase in
compensation and benefits expense related to stock  compensation  programs which
increased as a result of the  appreciation in the Company's  Common Stock and to
the  increase  in  personnel  related  to the  addition  of two  branches.  Also
contributing to the increased general and administrative expenses were increases
totaling  $63,000 related to building,  equipment and data  processing  expenses
associated  with  these  two  additional   branches  as  well  as  increases  in
depreciation  expenses  for the  purchase of new  hardware  to replace  outdated
equipment in coordination with the transfer to a new data processor. Included in
other  expenses  for the three  months  ended  March  31,  1998 was  $27,000  in
amortization of the core deposit intangible related to the deposits purchased in
February 1997.

          For the nine months ended March 31, 1998,  the  Company's  general and
administrative  expenses  increased  to $6.6 million as compared to $5.5 million
(excluding the $1.3 million  one-time  special  assessment to  recapitalize  the
insurance  fund) for the  comparable  period a year  ago.  The  increase  in the
current  period was due to the increase in costs  related to stock  compensation
programs,  two  additional  branches  and the  amortization  of the core deposit
intangible.  Partially  offsetting  these  increases  was the  reduction in FDIC
assessments  as  a  result  of  the  lowering  of  premiums  subsequent  to  the
recapitalization of the insurance fund.

Income Taxes
------------

          The Company  recorded  $356,000 in income  taxes for the three  months
ended March 31, 1998  compared to $208,000  for the three months ended March 31,
1997.  The  effective  tax rates for the three  months  ended March 31, 1998 and
March 31, 1997 were approximately  42.0% and 42.2%,  respectively.  For the nine
months ended March 31, 1998,  the income taxes recorded was $770,000 as compared
to $180,000 for the same period a year ago.

FINANCIAL CONDITION
-------------------

          The  Company's  total assets were $401.1  million at March 31, 1998, a
slight  decrease from the $409.3  million in total assets at June 30, 1997.  The
Company's  loans  receivable  held for investment  increased by $23.4 million to
$308.0 million at March 31, 1998 as compared to $284.6 million at June 30, 1997.
The increase is due primarily to the purchase of approximately  $30.2 million in
adjustable  rate mortgage loans and $10.4 million in home equity lines of credit
indexed to COFI. The Company  reduced its investment in overnight  federal funds
sold and sold approximately  $16.7 million in mortgage-backed  securities to aid
in the  funding of these  purchases.  The Company  purchased  the loans with the
intent on increasing interest income and to reduce its sensitivity to changes in
interest rates.

                                       13

<PAGE> 16


          During the nine months  ended March 31, 1998,  the Company  originated
and  purchased  for  investment  a total of $63.7  million in mortgage  and home
equity loans as compared to the $57.0 million  purchased  and  originated in the
nine month period ended March 31, 1997.  The loans  purchased in the nine months
ended March 31, 1998 were  adjustable  rate and primarily  indexed to COFI.  The
Company  also  originated  $13.8  million  in  mortgage  loans  for  sale to the
secondary market and sold approximately  $13.1 million through March 31, 1998 as
compared to the origination and sale of approximately  $4.5 million for the same
period a year ago.

          The Company's  non-performing assets totaled $5.1 million at March 31,
1998 compared to $2.8 million at June 30, 1997.  The increase in  non-performing
assets was due  primarily to the increase in the amount of loans on  non-accrual
status to $3.3  million at March 31, 1998  compared to $1.7  million at June 30,
1997.  The  increase  in  non-accrual  loans was due to the  continuation  of an
uncertain  local real estate market  throughout  most of this year.  Also,  real
estate  owned  increased  to $1.7  million at March 31,  1998  compared  to $1.1
million at June 30, 1997.  The overall  result was an increase in the  Company's
ratio of  non-performing  assets to total assets to 1.26% at March 31, 1998 from
0.70% at June 30, 1997.

The following table sets forth the  non-performing  assets at March 31, 1998 and
June 30, 1997:
<TABLE>
<CAPTION>
                                                         March 31, 1998     June 30, 1997
                                                         --------------     -------------
                                                               (dollars in thousands)
          <S>                                                 <C>                <C>   
          Non-accrual loans                                   $3,296             $1,699
          Real estate acquired through foreclosure             1,757              1,150
                                                              ------             ------
                   Non-performing assets                      $5,053             $2,849
                                                              ======             ======

          Non-performing assets as a percent of total
            assets                                              1.26%              0.70%

          Non-performing loans as a percent of gross
            loans receivable                                    1.06%              0.59%

</TABLE>

          The Company  considers a loan  impaired  when it is probable  that the
Company  will be  unable to  collect  all  contractual  principal  and  interest
payments  under  the  terms of the  loan  agreement.  Loans  are  evaluated  for
impairment as part of the Company's  normal internal asset review  process.  The
Company applies the  measurement  provisions of SFAS No. 114 to all loans in its
portfolio with the exception of one- to four-family  residential  mortgage loans
and  consumer  lines of credit which are  evaluated  on a  collective  basis for
impairment.  Also,  loans which have delays in payments of less than four months
are not necessarily considered impaired unless other factors apply to the loans.
The  accrual of interest  income on  impaired  loans is  discontinued  when,  in
management's opinion, the borrower may be unable to meet payments as they become
due. When the interest accrual is  discontinued,  all unpaid accrued interest is
reversed.  Interest  income is  subsequently  recognized only to the extent cash
payments are received. Where impairment is considered temporary, an allowance is
established. Impaired loans which are performing under the contractual terms are
reported as performing  loans,  and cash payments are allocated to principal and
interest  in  accordance  with the terms of the loan.  At March  31,  1998,  the
Company had  classified  one loan with a balance of  $615,000  as impaired  with
$100,000 in specific  reserves set aside as of March 31, 1998 as  determined  in
accordance  with SFAS No.

                                        14


<PAGE> 17


114. In comparison,  as of June 30, 1997, the Company had classified $530,000 of
its loans as impaired with  $100,000 in specific  reserves.  In addition,  as of
March 31, 1998,  the Company had $2.6  million in loans which were  collectively
evaluated for impairment  compared to $1.7 million at June 30, 1997. The average
recorded   investment   in  impaired   loans,   inclusive  of  those   evaluated
collectively,  during the nine months  ended March 31, 1998,  was $3.0  million,
whereas, the average for the twelve months ended June 30, 1997 was $1.6 million.

          The  Company,   in   consideration   of  the  current  local  economic
environment  and the condition of the loan  portfolio,  maintained the allowance
for estimated  loan losses at March 31, 1998 at $1.4 million.  Although loans on
non-accrual  status have  increased  to $3.3 million at March 31, 1998 from $1.7
million at June 30, 1997,  the allowance for estimated loan losses is maintained
at an amount  management  considers  adequate to cover estimated losses in loans
receivable  which are deemed  probable and estimable.  However,  there can be no
assurance  losses will not exceed the reserves  established or that the reserves
will not have to be  increased  in the  future.  The  allowance  is based upon a
number of factors, including current economic conditions, actual loss experience
and industry trends. The Company's non-performing loans are primarily made up of
one- to four-family  residential  mortgage loans. The following table sets forth
the activity in the Company's  allowance for estimated loan losses for the three
months ended March 31, 1998:

<TABLE>
<CAPTION>


                                                        Activity for the three months ended
                                                                  March 31, 1998
                                                                  --------------

          <S>                                                       <C>       
          Balance at June 30, 1997                                  $1,263,000
          Add:
                   Provision for estimated loan losses                 458,000
                   Recoveries of previous charge-offs                        -
          Less:
                   Charge-offs                                         298,000
                                                                    ----------
          Balance at March 31, 1998                                 $1,423,000
                                                                    ==========
                                    
</TABLE>

          The Company's total liabilities  decreased  slightly to $369.4 million
at March 31, 1998 from $379.4 million at June 30, 1997.  Total deposit  accounts
increased  $1.8 million to $290.1  million at March 31, 1998 from $288.3 million
at June 30, 1997, primarily as a result of the growth in deposit accounts at the
bank's new branch  office and due to interest  credited to accounts.  Total core
deposits  increased  approximately  $21.9  million to $87.8 million at March 31,
1998 as the Company  continued  its focus on increasing  customer  relationships
with checking,  passbook and money market savings  accounts.  The growth in core
deposits was partially  offset by the $20.1 million  decrease in certificates of
deposit to $202.3  million  at March 31,  1998 from  $222.4  million at June 30,
1997. The Company  reduced its borrowings  from the FHLB by $8.8 million and its
securities  sold under  agreements to repurchase by $3.4 million during the nine
months ended March 31, 1998. The Company  continues to utilize FHLB advances and
securities  sold  under  agreements  to  repurchase  as  part of its  asset  and
liability management strategy.

          The Company's stockholders' equity increased to $31.6 million at March
31, 1998 from $29.9  million at June 30, 1997  primarily due to the net earnings
from  operations  and the  reduction of the net  unrealized  loss on  securities
available for sale.

                                        15


<PAGE> 18

MANAGEMENT OF INTEREST RATE RISK
--------------------------------

          The  Company's  profitability  is dependent to a large extent upon its
net interest  income,  which is the  difference  between its interest  income on
interest-earning assets, such as loans and investments, and its interest expense
on interest-bearing  liabilities, such as deposits and borrowings. To manage its
interest  rate risk,  the Company has  utilized the  following  strategies : (i)
emphasizing  the  origination  and/or  purchase  of   adjustable-rate   one-  to
four-family  mortgage loans for portfolio;  (ii) selling to the secondary market
substantially all fixed-rate mortgage loans originated;  (iii) holding primarily
short-term  mortgage-backed  and investment  securities;  and (iv) attempting to
reduce the overall  interest rate sensitivity of liabilities by emphasizing core
and  longer-term  deposits,  utilizing FHLB advances and  securities  sold under
agreements to repurchase.

LIQUIDITY
---------

          The Company's  primary  sources of funds are  deposits,  principal and
interest  payments  on loans  and  mortgage-backed  securities,  FHLB  advances,
securities sold under agreements to repurchase,  increases in deposits and, to a
lesser extent, proceeds from the sale of loans and investments. While maturities
and scheduled  amortization of loans are predictable  sources of funds,  deposit
flows and mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition.

          The Association,  by regulation,  must maintain its liquidity ratio at
no less than 4.0% of deposits and short-term  borrowings.  Liquidity  represents
cash and  certain  investments  which are not  committed  or pledged to specific
liabilities.  The  Association's  average liquidity ratio for March 31, 1998 and
March 31, 1997 was 16.79% and 9.29%, respectively.

COMMITMENTS AND CONTINGENT LIABILITIES
--------------------------------------

          At March 31,  1998,  there were no material  changes to the  Company's
commitments  or  contingent  liabilities  from the period ended June 30, 1997 as
discussed  in the  Company's  notes  to the  consolidated  financial  statements
reflected in the audited consolidated financial statements of SGV Bancorp, Inc.,
for the year ended June 30, 1997  included in the Annual Report on Form 10-K for
the year ended June 30,  1997.  At March 31, 1998,  the Company had  outstanding
commitments to originate or purchase  mortgage loans of $3.3 million as compared
to $1.4 million at June 30, 1997.

REGULATORY CAPITAL
------------------

          The Office of Thrift  Supervision  (OTS) capital  regulations  require
savings institutions to meet three minimum capital requirements: a 1.5% tangible
capital ratio,  a 3% leverage (core capital) ratio and an 8% risk-based  capital
ratio. The core capital requirement has been effectively increased to 4% because
the prompt  corrective action  legislation  provides that institutions with less
than 4% core capital will be deemed  "undercapitalized".  In addition,  the OTS,
under the prompt corrective action regulation can impose various  constraints on
institutions   depending   on  their  level  of   capitalization   ranging  from
well-capitalized  to  critically  undercapitalized.   At  March  31,  1998,  the
Association was considered "well-capitalized".


                                        16

<PAGE> 19


        The  Association was  in  compliance  with  the capital  requirements in
effect as of March 31,  1998.  The following table reflects the  required ratios
and the  actual  capital  ratios  of the Association at March 31, 1998:

<TABLE>
<CAPTION>
                                                                          Capital
                                                                          -------
                            Actual       Required        Excess       Actual     Required
                            Capital       Capital        Amount      Percent      Percent
                            -------       -------        ------      -------      -------
                                 (dollars in thousands)
          <S>               <C>          <C>            <C>            <C>         <C>  
          Tangible          $27,343       $ 5,996       $21,347        6.84%       1.50%

          Core              $27,343       $11,993       $15,350        6.84%       3.00%

          Risk-based        $28,666       $15,828       $12,838       14.54%       8.00%

</TABLE>


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

         See the discussion under "Management of Interest Rate Risk" on page 16
for certain disclosures about market risk.  There have been no material changes
in information regarding quantitative and qualitative disclosures about market
risk as of March 31, 1998 from the information as of June 30, 1997, which was
disclosed in the Company's 1997 Form 10-K.

















                                               17




<PAGE> 20





PART II. OTHER INFORMATION


Item 1.   Legal Proceedings
          -----------------

          The Company is involved as plaintiff  or  defendant  in various  legal
actions incident to its business,  none of which is believed by management to be
material to the financial condition of the Company.

Item 2.         Changes in Securities
                ---------------------
                         None.

Item 3.         Defaults in Securities
                ----------------------
                         None.

Item 4.         Submission of Matters to a Vote of Security Holders
                ---------------------------------------------------
                         None.


Item 5.         Other Information
                -----------------
                         None.


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

          (a)      The following exhibits are filed as part of this report:

            3.1 Certificate of Incorporation of SGV Bancorp, Inc. *
            3.2 Bylaws of SGV Bancorp, Inc. *
           11.0 Computation of per share earnings (filed herewith).
           27.0 Financial data schedule (filed herewith).
          (b)      Reports on Form 8-K
                            None.
------------------------
*     Incorporated herein  by  reference  from  the Exhibits to the Registration
      Statement on  Form S-1,  as  amended, filed on  March 6, 1995 and declared
      effective on May 9, 1995, Registration No. 33-90018.





                                        18

<PAGE> 21




                                   SIGNATURES


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


                                          SGV BANCORP, INC.




May 10, 1998                              /s/  Barrett G. Andersen
--------------------------------          -------------------------------------
              Date                        Barrett G. Andersen
                                          President and Chief Executive Officer



May 10, 1998                              /s/  Ronald A. Ott
--------------------------------          ------------------------------------
              Date                        Ronald A. Ott
                                          Executive Vice President
                                          Chief Financial Officer and Treasurer










                                        19