<PAGE>   1

                                                                   EXHIBIT 99.1
    
 
                                     (LOGO)
 
                             199 NORTH LAKE AVENUE
                           PASADENA, CALIFORNIA 91101
 
                                                                  April 21, 1996
 
Dear Stockholder:
 
     On behalf of the Board of Directors, I cordially invite you to attend the
Annual Meeting of Stockholders of CENFED Financial Corporation ("CENFED"), which
will be held at the University Club, 175 North Oakland Avenue, Pasadena,
California, at 10:30 a.m., California time, on May 22, 1996.
 
     As described in the accompanying Notice of Annual Meeting of Stockholders
and Proxy Statement, stockholders will be asked to vote on the election of
directors and to ratify the appointment of an independent auditor for CENFED.
 
     YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. I
urge you to mark, sign and date each proxy card you receive and return it as
soon as possible in the postage-paid envelope provided, even if you currently
plan to attend the Annual Meeting. Returning your proxy card will not prevent
you from voting in person, but will assure that your vote is counted if you are
unable to attend.
 
                                          Sincerely,
 
                                           [SIG]
                                          D. Tad Lowrey
                                          President and Chief Executive Officer
 
IMPORTANT: If your CENFED shares are held in the name of a brokerage firm or
nominee, only they can execute a proxy on your behalf. To ensure that your
shares are voted, we urge you to telephone the individual responsible for your
account today and obtain instructions on how to direct him or her to execute a
proxy.
 
     If you have any questions or need any assistance in voting your shares,
please telephone CENFED's Investor Relations Department at (818) 585-2595.
<PAGE>   2
 
                                     (LOGO)
 
                             199 NORTH LAKE AVENUE
                           PASADENA, CALIFORNIA 91101
 
                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
 
                           TO BE HELD ON MAY 22, 1996
 
     NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CENFED
Financial Corporation ("CENFED") will be held at the University Club, 175 North
Oakland Avenue, Pasadena, California, on May 22, 1996, at 10:30 a.m., California
time, for the following purposes:
 
     1. To elect two directors of CENFED to serve until the Annual Meeting to be
        held in 1999 and until their successors are elected and qualified.
 
     2. To ratify the appointment of KPMG Peat Marwick as CENFED's independent
        auditors for the year commencing January 1, 1996.
 
     3. To consider and act upon such other business as may properly come before
        the Annual Meeting or any adjournment thereof.
 
     The Board of Directors has selected March 29, 1996 as the record date for
the Annual Meeting. Only those stockholders of record at the close of business
on that date will be entitled to notice of and to vote at the Annual Meeting or
any adjournment thereof. A list of stockholders entitled to vote at the Annual
Meeting will be available at the executive offices of CENFED during the ten days
prior to the meeting.
 
                                          By Order of the Board of Directors
 
                                          (SIG)
                                          Rosemarie Gibson
                                          Secretary
 
Pasadena, California
April 21, 1996
<PAGE>   3
 
                                     (LOGO)
 
                             199 NORTH LAKE AVENUE
                           PASADENA, CALIFORNIA 91101
 
                            ------------------------
 
                                PROXY STATEMENT
 
                         ANNUAL MEETING OF STOCKHOLDERS
 
                                  MAY 22, 1996
 
                            ------------------------
 
              INFORMATION RELATING TO VOTING AT THE ANNUAL MEETING
 
     This Proxy Statement is furnished to stockholders of CENFED Financial
Corporation ("CENFED") in connection with the solicitation of proxies by
CENFED's Board of Directors for use at the Annual Meeting of Stockholders
("Annual Meeting") to be held at the University Club, 175 North Oakland Avenue,
Pasadena, California, on May 22, 1996, and at any adjournment thereof. This
Proxy Statement and the accompanying form of proxy were first mailed to
stockholders on or about April 21, 1996.
 
     CENFED became the holding company of Century Federal Savings and Loan
Association, now known as CenFed Bank, A Federal Savings Bank ("Bank"), in
connection with the conversion of the Bank from a mutual to the stock form of
organization, effective November 1, 1991. Unless otherwise indicated, references
to CENFED include the Bank as its predecessor.
 
     The Board of Directors of CENFED has selected March 29, 1996 as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting. A total of 4,574,147 shares of CENFED's common stock, par
value $.01 per share ("Common Stock"), were outstanding at the close of business
on that date. A majority of the shares entitled to vote, present in person or
represented by proxy, will constitute a quorum for the transaction of business
at the meeting. Stockholders will be entitled to cast one vote for each share of
Common Stock held by them of record at the close of business on the record date
on any matter that may be presented at the Annual Meeting for consideration and
action by the stockholders. Abstentions will be treated as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum, but as unvoted for purposes of determining the approval of any matter
submitted for a vote of the shareholders. If a broker indicates on its proxy
that the broker does not have
 
                                        1
<PAGE>   4
 
discretionary authority to vote on a particular matter as to certain shares,
those shares will be counted for general quorum purposes but will not be
considered as present and entitled to vote with respect to that matter.
 
     All valid proxies received in response to this solicitation will be voted
in accordance with the instructions indicated thereon by the stockholders giving
such proxies. If no contrary instructions are given, such proxies will be voted
for the election of the directors named in this Proxy Statement and for
ratification of the appointment of KPMG Peat Marwick as CENFED's independent
auditors for the fiscal year commencing January 1, 1996. Any stockholder has the
power to revoke his or her proxy at any time before it is voted at the Annual
Meeting by giving written notice of such revocation to the Secretary of CENFED
(which notice may be given by the filing of a duly executed proxy bearing a
later date) or by attending the Annual Meeting and voting in person.
 
     To the extent necessary, proxies may be solicited by CENFED personnel
through letters, telephone calls and other means. CENFED personnel who
participate in this solicitation will not receive any additional compensation
for such solicitation. CENFED will request record holders of shares beneficially
owned by others to forward this Proxy Statement and related materials to the
beneficial owners of such shares and will reimburse such record holders for
their reasonable expenses incurred in doing so.
 
                             ELECTION OF DIRECTORS
 
     CENFED's Certificate of Incorporation provides that the Board of Directors
shall be divided into three classes as nearly equal in number as possible. The
members of each class are to be elected for terms of three years and until their
successors are elected and qualified, with one of the three classes of directors
being elected each year. The Certificate of Incorporation further provides that
the number of directors shall be fixed by resolution adopted by the affirmative
vote of a majority of the full Board of Directors. In connection with the
retirement of Ronald R. Clark from CENFED's Board of Directors effective May 22,
1996, the Board of Directors adopted, on March 26, 1996, a resolution which will
reduce the authorized number of directors from eight to seven upon the effective
date of Mr. Clark's retirement. CENFED's bylaws set forth director eligibility
criteria, including a provision governing mandatory retirement age. Two
directors are to be elected at the Annual Meeting. The Certificate of
Incorporation does not provide for cumulative voting in the election of
directors.
 
     The nominees listed below are currently directors of CENFED and each has
indicated a willingness to serve, if reelected. If any nominee becomes unable to
serve as a director or should any vacancy occur before the election, the proxies
solicited hereby will be voted for the election of such other person or persons
as the Board of Directors may select, or the authorized number of directors may
be reduced.
 
                                        2
<PAGE>   5
 
     The following table sets forth information with respect to the two persons
nominated by the Board of Directors for election as directors of CENFED at the
Annual Meeting and each other director of CENFED who will continue to serve as a
director after the Annual Meeting. Each director listed below served as a
director of the Bank prior to its reorganization into a holding company
structure, and the dates listed below pertaining to length of service as a
director reflect service as a director of the Bank prior to such reorganization
as well as service as a director of CENFED thereafter.
 
<TABLE>
<CAPTION>
                             AGE AT                     TERM OF       POSITIONS CURRENTLY
                          DECEMBER 31,     DIRECTOR     OFFICE         HELD WITH CENFED
         NAME                 1995          SINCE       EXPIRES          AND THE BANK
----------------------    ------------     --------     -------     -----------------------
<S>                       <C>              <C>          <C>         <C>
NOMINEES:
Robert K. Leishman             66            1973         1999      Director
D. Tad Lowrey                  43            1990         1999      Director, President and
                                                                    Chief Executive Officer
                                                                    of CENFED and the Bank
CONTINUING DIRECTORS:
Gareth A. Dorn                 56            1980         1997      Director
Richard W. Patton              64            1982         1997      Director
Ralph DiMeglio                 69            1974         1998      Director
John H. Michel                 64            1974         1998      Chairman of the Board
                                                                    of CENFED and the Bank
Richard G. Redman              64            1969         1998      Director
</TABLE>
 
   THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ABOVE
                                   NOMINEES.
 
     The business experience of each of the directors is as follows:
 
NOMINEES:
 
     Robert K. Leishman has been the President and co-owner of Leishman
Management Company, Inc., a real estate management and brokerage company in
Pasadena, California, since 1971.
 
     D. Tad Lowrey was elected President and Chief Executive Officer of CENFED
and the Bank in March 1991 and August 1990, respectively, and had served as
Senior Vice President and Chief Financial Officer of the Bank since May 1988. He
has previous employment experience as a partner in a public accounting firm and
as a senior financial officer with other savings institutions. He is a certified
public accountant. Mr. Lowrey has served as a director of the Western League of
Savings Institutions and is currently Chairman of the Board of the League. Mr.
Lowrey also serves as a director of the Federal Home Loan Bank of San Francisco
and is the Eleventh District's representative on the Savings Association
Insurance Fund Industry Advisory Council. He serves as a director and on the
executive committee of the San Gabriel Valley Council of the Boy Scouts of
America, a director of Pacific Clinics and as a member of the Azusa Pacific
University Business Advisory Council, and the Government Affairs Council of
America's Community Bankers.
 
                                        3
<PAGE>   6
 
CONTINUING DIRECTORS:
 
     Gareth A. Dorn has been President and owner of Dorn Realty Company, a real
estate brokerage firm, in Arcadia, California, since 1986.
 
     Richard W. Patton is the owner and President of Richard W. Patton
Enterprises, a private investment firm and a secondary mortgage market broker.
 
     Ralph DiMeglio has been President and Chief Executive Officer of H.C.
Henshey Co., a real estate management company in Santa Monica, California, since
1974 and has been employed by that company in various capacities since 1959.
 
     John H. Michel has been President and owner of North Valley Distribution, a
dairy product Company and distributor in Santa Monica, California, since 1984.
Mr. Michel currently serves as Chairman of the Board of Directors of Saint
John's Hospital and Health Center Corporation and as President of the Santa
Monica College Foundation in Santa Monica, California.
 
     Richard G. Redman recently retired as President of La Quinta Air Services,
Inc., an aviation services business at Thermal Airport in Southern California.
Mr. Redman is President of the Downie Redman Co., a truck and equipment leasing
company, and is the managing partner of Redman Properties, a private real estate
investment-management firm based in Los Angeles County. He has been involved in
Downie Redman Co. and Redman Properties for nineteen years and twelve years,
respectively.
 
BOARD MEETINGS AND COMMITTEES
 
     The Board of Directors of CENFED and the Board of Directors of the Bank
held eight and eleven meetings, respectively, during 1995. CENFED and the Bank
have three joint Board committees: Executive Committee, Audit and Compliance
Committee and Compensation Committee. The Executive Committee consists of
Directors Lowrey (chairman), Dorn, Leishman and Michel and has the authority to
exercise certain powers of CENFED's and the Bank's Board of Directors in the
intervals between Board meetings. The Audit and Compliance Committee is
responsible for reviewing the scope and results of the independent auditors'
services, the Company's system of internal controls and the results of audits
performed by the Bank's Audit Services Department and during 1995 consisted of
Directors DiMeglio (chairman), Clark, Leishman and Michel. The Compensation
Committee is responsible for administering CENFED's and the Bank's compensation
policies and during 1995 consisted of Directors Michel (chairman), Clark, Dorn
and Redman. CENFED does not have a standing nominating committee. During 1995,
the Executive Committee met one time, the Compensation Committee met eight times
and the Audit and Compliance Committee met seven times. The Bank established the
Directors' Loan Committee to establish internal loan limits, review and approve
all Bank lending policies and approve individual loans and purchased loan
packages above internal lending limits. The Directors' Loan Committee has
regularly scheduled meetings on a semi-monthly basis and meets more frequently,
if necessary. During 1995, the Directors' Loan Committee consisted of Directors
Leishman (chairman), Lowrey, Michel, Patton, Redman and Dorn. The presence of
three directors constitutes a quorum for the Directors' Loan Committee. A
description of the procedures to be followed by shareholders wishing to nominate
a candidate for election as a CENFED director may be found in the section
captioned "SHAREHOLDER PROPOSALS."
 
                                        4
<PAGE>   7
 
DIRECTORS' FEES
 
     Directors of CENFED currently do not receive any remuneration in their
capacity as such. Directors of the Bank receive annual retainer fees of $24,000,
except that the Chairman receives an annual retainer fee of $30,000. Directors
also receive meeting attendance fees of $750 per regular board meeting. No fees
are received for telephonic board meetings or for attending committee meetings.
 
     Directors may elect to receive some or all of their retainer and meeting
fees in the form of stock options in accordance with the provisions of the 1994
Directors' Stock Option Plan which was approved by stockholders in May 1994. The
exercise price of options awarded under the Directors' Stock Option Plan will
equal 75% of the fair market value of the Common Stock. Fair market value will
be determined at the date of each award of options and will generally equal the
average of the closing prices of the Common Stock as reported on the NASDAQ
National Market System for the five trading days preceding the date as of which
fair market value is determined. The difference between the exercise price and
the fair market value of each share of Common Stock subject to an option awarded
under the Directors' Stock Option Plan is referred to as the "Per Share Option
Discount" and the aggregate of such discounts for an award to a non-employee
director will equal the directors' fees foregone by such director.
 
     Directors emeritus receive one-half of the combined regular directors' fees
and one years' meeting attendance fees for life or an actuarial equivalent for a
ten-year period, as elected by the retired director and as established on the
date of the director's retirement.
 
              RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
 
     The Board of Directors has selected KPMG Peat Marwick as CENFED's
independent auditors for the year commencing January 1, 1996 subject to
ratification of the selection by the stockholders at the Annual Meeting. KPMG
Peat Marwick began service as CENFED's independent auditors in 1995.
 
     Representatives of KPMG Peat Marwick are expected to be present at the
Annual Meeting and to be available to respond to appropriate questions. They
will also be provided an opportunity to make a statement, if they desire to do
so.
 
   THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO RATIFY THE
       APPOINTMENT OF KPMG PEAT MARWICK AS CENFED'S INDEPENDENT AUDITORS.
 
                                        5
<PAGE>   8
 
                        SECURITY OWNERSHIP OF MANAGEMENT
 
     The following table sets forth information concerning the shares of CENFED
Common Stock beneficially owned by each director, by certain executive officers
and by all directors and executive officers of CENFED and its subsidiaries as a
group, as of February 29, 1996. Except as otherwise noted, each beneficial owner
listed has sole investment and voting power with respect to the Common Stock
indicated.
 
<TABLE>
<CAPTION>
        NAME OF BENEFICIAL OWNER OR         AMOUNT AND NATURE OF      PERCENT OF
         NUMBER OF PERSONS IN GROUP        BENEFICIAL OWNERSHIP(1)      CLASS
        ---------------------------        -----------------------    ----------
  <S>                                               <C>                 <C>
  Ronald R. Clark.........................           16,125               *
  Ralph DiMeglio..........................           26,025               *
  Gareth A. Dorn..........................           25,718               *
  Robert K. Leishman......................           17,806               *
  D. Tad Lowrey...........................          168,147(2)          3.60%
  John H. Michel..........................           21,454               *
  Richard W. Patton.......................           15,556               *
  Richard G. Redman.......................           22,923               *
  William Nichol..........................           23,323               *
  Michael A. Quigley......................           85,336             1.85%
  Lawrence J. Winslow.....................           76,994             1.66%
  All directors and executive officers 
    as a group (11 persons)...............          499,407(3)(4)      10.22%
</TABLE>
 
---------------
 
 *  Less than 1%.
 
(1) Includes options awarded under long-term incentive plans to the extent such
    options were exercisable within sixty days of the date of this table.
 
(2) Includes 5,308 shares of stock held by the Employee Stock Ownership Plan
    ("ESOP") that were not allocated to eligible participants as of December 31,
    1995. Pursuant to the ESOP plan documents, each participant in the ESOP may
    exercise voting rights with respect to the portion of unallocated shares
    equal to the percentage of allocated shares such participant is entitled to
    vote.
 
(3) Includes 9,001 unallocated shares held by the ESOP.
 
(4) Includes 323,391 stock options which are vested within sixty days of the
    date of this table. The percentage of Common Stock is based upon the
    4,560,837 shares of Common Stock issued and outstanding on February 29, 1996
    plus 323,391 stock option shares.
 
                                        6
<PAGE>   9
 
                    PRINCIPAL HOLDERS OF CENFED COMMON STOCK
 
     The following table sets forth information as of December 31, 1995, with
respect to any person or entity known by CENFED to be the beneficial owner of
more than 5% of the issued and outstanding Common Stock.
 
<TABLE>
<CAPTION>
                    NAME AND ADDRESS OF                  AMOUNT AND NATURE OF         PERCENT OF
                     BENEFICIAL OWNER                    BENEFICIAL OWNERSHIP           CLASS
    ---------------------------------------------------  --------------------         ----------
    <S>                                                  <C>                          <C>
    Neumeier Investment Counsel........................         489,400(1)              10.74%
      26435 Carmel Rancho Blvd.
      Carmel, CA 93923
    Wellington Management Company......................         360,980(2)               7.92%
      75 State Street
      Boston, MA 02109
    CENFED Employee Stock Ownership Plan...............         273,570(3)               6.00%
      c/o CalTrust
      15253 Bake Parkway
      Irvine, CA 92718
    Henry Kamberg......................................         228,500(4)               5.01%
      12500 Culver Boulevard
      Los Angeles, CA 90066
</TABLE>
 
---------------
 
(1) Based on a Schedule 13G filed pursuant to the 1934 Act, which indicates that
    Neumeier Investment Counsel in its capacity as an investment company has
    sole dispositive power and sole voting power with respect to such shares.
 
(2) Based on a Schedule 13G filed pursuant to the 1934 Act, which indicates that
    Wellington Management Company in its capacity as an investment company
    shares dispositive power with respect to the indicated shares.
 
(3) In accordance with the provisions of the CENFED Employee Stock Ownership
    Plan, the ESOP Trustee votes the unallocated shares of Common Stock in the
    plan in the same proportions as the ESOP participants vote shares allocated
    to them. At December 31, 1995, the ESOP had 133,158 shares of Common Stock
    that were not allocated to ESOP participants.
 
(4) Based on a Schedule 13F filed pursuant to the 1934 Act, which indicates that
    Henry Kamberg in his capacity as an individual investor has sole dispositive
    power with respect to the indicated shares and has sole voting power with
    respect to such shares.
 
                                        7
<PAGE>   10
 
                    EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
 
     The following table sets forth certain information with respect to
executive officers of CENFED and/or the Bank who are not directors. Officers of
CENFED and the Bank serve at the discretion of their respective Boards of
Directors.
 
<TABLE>
<CAPTION>
                             AGE AT                    POSITIONS HELD WITH CENFED
        NAME            DECEMBER 31, 1995                   AND/OR THE BANK
--------------------    -----------------     --------------------------------------------
<S>                     <C>                   <C>
William Nichol                  51            Executive Vice President and Chief Financial
                                              Officer
Michael A. Quigley              44            Executive Vice President and Chief Savings
                                              Officer of the Bank
Lawrence J. Winslow             42            Executive Vice President and Chief Lending
                                              Officer of the Bank
</TABLE>
 
     The business experience of each of the executive officers is as follows:
 
     William Nichol joined the Bank as Executive Vice President and Chief
Financial Officer in January 1995 and was named Corporate Secretary of CENFED in
April 1995. Prior to joining CENFED, he served in a similar capacity at a
Scottsdale, Arizona-based mortgage banking company and, prior to that, he served
for nine years as Executive Vice President and Chief Financial Officer of
HomeFed Bank in San Diego, California.
 
     Michael A. Quigley joined the Bank as Senior Vice President and Chief
Savings Officer in February 1989 and was elected Executive Vice President in
February 1995. Prior to joining the Bank, he served in similar capacities in
other savings institutions in the western United States.
 
     Lawrence J. Winslow joined the Bank as Executive Vice President and Chief
Administrative Officer in April 1993 and was named its Chief Lending Officer in
1995. Prior to joining the Bank, he was employed as President and Chief
Executive Officer of Tracy Federal Bank, Tracy, California for eight years.
 
            COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
 
     CENFED's Compensation Committee (the "Committee"), established in 1991, is
composed entirely of independent outside members of CENFED's Board of Directors.
The Committee reviews and approves each of the elements of the executive
compensation program of CENFED (including its subsidiaries) and continually
assesses the effectiveness and competitiveness of the program in total. In
addition, the Committee administers the key provisions of the executive
compensation program and reviews with the Board of Directors all major aspects
of compensation for CENFED's executive officers.
 
     The Committee's review of the executive compensation program includes
analyzing compensation programs, pay levels, and business results compared to a
peer group of competitor financial institutions of comparable asset size.
 
COMPENSATION PHILOSOPHY
 
     The goals of the executive compensation program are to support a
performance-oriented environment, to reinforce CENFED's performance and business
plans, and to enable CENFED to attract and retain executive talent CENFED needs
to maximize its return to shareholders.
 
                                        8
<PAGE>   11
 
     The philosophy of CENFED is to provide compensation programs designed to
reward achievement of CENFED's annual and long-term strategic goals, to provide
total compensation and benefits opportunities that are competitive with a peer
group of selected financial institutions, and to offer appropriate stock
ownership opportunities for increased shareholder value.
 
     CENFED's peer group for purposes of executive compensation includes
financial institutions of similar asset size and financial institutions
considered as competitors for business and executive talent.
 
ELEMENTS OF THE EXECUTIVE COMPENSATION PROGRAM
 
     Base Salaries. The objectives of the base salary program are to offer base
salaries targeted at the 50th percentile for comparable positions at CENFED's
peer group, and to provide base salary increases that reward all officers for
the ongoing performance of the duties of their positions and that are consistent
with CENFED's overall financial performance.
 
     Annual Incentive Plan. The objectives of the annual incentive plan are to
establish annual incentive targets that approximate the 50th percentile of the
peer group for total annual cash compensation when performance goals are met and
to offer opportunities for providing pay levels above the 50th percentile for
outstanding results.
 
     In February 1994, the Committee revised the annual incentive plan to
enhance compliance with the compensation philosophy. Maximum award opportunities
and goals were established to recognize and reward outstanding performance. The
maximum amounts were set at 150 percent of the targeted amounts.
 
     For 1995, certain key officers were given an opportunity to earn from 22.5
percent to 60 percent of their salaries for achieving Bank and individual
objectives. Corporate performance was measured against 1995 business plan levels
for specific performance criteria measuring growth and efficiencies of net
income, assets, deposits, asset quality and expenses. The corporate measure
varied by individual in importance and represented from 50 percent to 90 percent
of the total award opportunity. Individual performance was measured against
individual objectives established at the start of the year. Individual goals
represent 10 percent to 50 percent of the total award opportunity. For 1995,
participants received awards ranging from 16 percent to 41 percent of salary.
 
     Stock Ownership. The objectives of the long-term incentive program,
currently consisting of the plans described below, are to offer opportunities
for stock ownership that are competitive with those at the peer group and to
encourage and create ownership and retention of CENFED's stock by key employees.
These plans provide key employees with the opportunity to build, through the
achievement of corporate goals, a meaningful stake in CENFED.
 
     In May 1994, CENFED's stockholders approved the implementation of the 1994
Long-Term Incentive Plan. Additionally, in November 1991, the Bank adopted the
Management Development and Recognition Plan ("MDRP"), which provides for
restricted stock grants. These plans are designed to meet the objectives of the
long-term program.
 
     For employees other than the Chief Executive Officer, the options under the
1992 Long-Term Incentive Plan and the 1994 Long-Term Incentive Plan and the
restricted stock under the MDRP were granted based on management's subjective
assessment of each individual's level of performance, contribution and
responsibility and CENFED's financial results and Company stock price
performance.
 
                                        9
<PAGE>   12
 
     In 1994, the Committee implemented a program of CENFED stock ownership
guidelines for officers at the following levels:
 
<TABLE>
        <S>                                                   <C>
        Chief Executive Officer ("CEO")                         three times base salary
        Executive Vice President                                  two times base salary
        Vice President                                            one times base salary
</TABLE>
 
     These guidelines are to be met or exceeded over a five-year period. At the
end of 1995, eight of the ten officers subject to the stock ownership guidelines
had met or exceeded their guidelines.
 
     The Committee amended the annual incentive plan in 1994 to provide stock
options in lieu of cash with respect to incentive pay. Under the provisions of
the amendment, incentive plan participants electing to receive some or all of
their annual incentive pay in options receive four dollars of stock options at
the market strike price for each dollar of annual incentive payment foregone.
Participants electing to receive options in lieu of cash made the election in
February 1995, at which time the strike price was established, and were granted
options based upon incentive pay as determined in accordance with the
aforementioned guidelines in February 1996 based on 1995 results. Seven of the
ten eligible officers elected to receive all or a portion of their 1995 annual
incentive pay in the form of stock options.
 
     CEO Compensation. The Committee is responsible for determining the
compensation of the CEO. In February 1994, the Committee increased the salary of
the CEO to $300,000 (a 9.1% annual increase) to better support CENFED's
compensation philosophy and recognize its favorable review of the CEO's
performance. In addition, the Committee utilized information provided by an
independent compensation consulting firm to established a level of pay
consistent with the objectives of the salary program.
 
     The CEO's annual incentive award is determined in the same manner as the
awards for the other officers described above. For 1995, the CEO received 102.5
percent of his target award opportunity (representing 41% of base salary),
weighted ninety percent on achievement of corporate performance and ten percent
on individual performance. The stock options and restricted stock granted to the
CEO in 1995, other than stock options received in lieu of cash with respect to
incentive pay, were based on CENFED's performance as measured by financial
results and company stock price performance and on the Committee's assessment of
his individual performance compared to the peer group.
 
     Section 162(m) Compliance. CENFED does not presently anticipate the named
executive officers exceeding the million dollar non-performance based
compensation threshold of section 162(m) of the Internal Revenue Code, which
limits deductibility of individual annual compensation above that amount unless
certain criteria are met. CENFED and the Committee will continue to monitor the
compensation levels of the named executive officers and determine the
appropriate response to section 162(m) when and if necessary. In May 1994,
shareholders approved the 1994 Long Term Incentive Plan which includes
provisions to bring the stock option program into compliance with section 162(m)
to ensure that stock option grants are excluded from the compensation
calculation for the purposes of section 162(m).
 
                                          The Compensation Committee
                                          John H. Michel (chairman)
                                          Ronald R. Clark
                                          Gareth A. Dorn
                                          Richard G. Redman
 
                                       10
<PAGE>   13
 
     The following table sets forth the information regarding compensation of
the Company's four most highly compensated executive officers during the last
three fiscal years. All executive officers are paid by CenFed Bank.
 
                              SUMMARY COMPENSATION
 
<TABLE>
<CAPTION>
                                                                             LONG TERM COMPENSATION
                                                                        --------------------------------
                                                                                AWARDS           PAYOUTS
                                                                        ----------------------   -------
                                           ANNUAL COMPENSATION          RESTRICTED               
                                   -----------------------------------    STOCK                   LTIP        ALL OTHER
         NAME AND                                        OTHER ANNUAL   AWARDS(2)   OPTIONS(3)   PAYOUTS   COMPENSATION(4)
    PRINCIPAL POSITION      YEAR    SALARY    BONUS(1)   COMPENSATION      ($)         (#)         ($)           ($)
    ------------------      -----  --------   --------   -------------  ---------   ----------   -------   ---------------
<S>                         <C>    <C>        <C>             <C>       <C>           <C>          <C>          <C>
D. Tad Lowrey,               1995  $300,000   $61,572         --        $120,000      21,441       --           29,735
  President and              1994   275,000    28,188         --          86,250      29,056       --           29,580
  Chief Executive Officer    1993   234,498   105,941         --         101,250       6,000       --           18,355
Lawrence J. Winslow,         1995   185,500        --         --          40,000      19,950       --            9,656
  Executive Vice President   1994   175,000        --         --          63,825      19,154       --            4,221
  and
  Chief Lending Officer of   1993   123,750    45,493         --              --      36,000       --               --
  the Bank
Michael A. Quigley,          1995   145,750    23,469         --          40,000      11,486       --           10,147
  Executive Vice President   1994   132,500    19,908         --          60,375      11,986       --            9,220
  and
  Chief Savings Officer of   1993   117,756    39,031         --          20,250       6,000       --           10,190
  the Bank
William Nichol               1995   190,000    29,865         --              --      47,490       --               --
  Executive Vice President
  and
  Chief Financial Officer
</TABLE>
 
---------------
 
(1) Incentive bonuses were earned for the year indicated and were distributed in
    the first quarter of the following year and represent cash amounts only.
    Options received in lieu of cash incentive pay are included in Long Term
    Compensation.
 
(2) Restricted stock awards in this column for 1995 for Messrs. Lowrey, Winslow
    and Quigley total 7,500 shares, 2,500 shares and 2,500 shares, respectively,
    with a market value of $16.00 per share at the time of award. Such shares
    vest over a five-year period.
 
(3) Awards of stock options for 1995 include options received in lieu of cash
    incentive compensation earned that year and in accordance with elections
    made by each executive officer in February 1995. Messrs. Lowrey, Winslow,
    Quigley and Nichol were awarded 15,441 options, 13,950 options, 5,886
    options and 7,490 options, respectively, to acquire shares of the Company's
    common stock at an exercise price of $15.95, the average market price per
    share in the five days preceding the date of election. At the date the
    options were awarded in 1996, the market price per share was $23.25.
 
(4) These amounts represent the Company's matching contributions under its
    qualified plan under section 401(k) and interest paid in the deferred
    compensation plans in excess of 120% of the applicable federal rate as
    defined in the regulation.
 
VALUATION OF OPTIONS GRANTED DURING FISCAL YEAR 1994
 
     Determining the value of stock option grants is one of the most
controversial issues surrounding the subject of executive compensation. Clearly,
stock options should have value to both the issuer and recipient as a mechanism
for aligning the objectives of the company and the executive, as well as
stockholders. Despite the
 
                                       11
<PAGE>   14
 
presence of stock options as a means of compensating executives for decades,
there is no universally-accepted formula for determining the future value of
these options.
 
     No matter what theoretical value is placed on a stock option at the date of
grant, its ultimate value will be dependent on the market value of the company's
stock at a future date. That value will depend on the efforts of such executives
to foster the future success of the company for the benefit of not only the
executives but all stockholders.
 
     The following table sets forth grants of options to the company's four most
highly compensated executives during the year ended December 31, 1995. The
present value of the options awarded has been determined using a Black-Scholes
pricing model that considers plan design features such as vesting, stock price
volatility and exercise period. The per share grant date present value for
options awarded in 1995 are set forth in the footnotes to the table.
 
                              OPTION GRANTS TABLE
 
<TABLE>
<CAPTION>
                                                          INDIVIDUAL GRANTS
                             ---------------------------------------------------------------------------
                                         % OF TOTAL
                             OPTIONS/     OPTIONS
                              SARS       GRANTED TO      EXERCISE OR
                             GRANTED    EMPLOYEES IN     BASE PRICE        EXPIRATION       GRANT DATE
           NAME               (#)       FISCAL YEAR        ($/SH)             DATE         PRESENT VALUE
           ----              ------     ------------     -----------     --------------    -------------
<S>                          <C>           <C>             <C>           <C>                 <C>
D. Tad Lowrey..............   6,000(1)      3.84%          $15.95        February 2005       $ 41,940(3)
                             15,441(2)      9.89%          $15.95        February 2006       $185,755(4)
                                585         0.37%          $22.85        November 2001       $  4,569(5)
Lawrence J. Winslow........   6,000(1)      3.84%          $15.95        February 2005       $ 41,940(3)
                             13,950(2)      8.93%          $15.95        February 2006       $167,819(4)
Michael A. Quigley.........   5,600(1)      3.59%          $15.95        February 2005       $ 39,144(3)
                              5,886(2)      3.77%          $15.95        February 2006       $ 70,809(4)
                                288         0.18%          $23.28        December 2001       $  2,212(6)
William Nichol.............  40,000(1)     25.62%          $14.70        January  2005       $279,600(7)
                              7,490(2)      4.80%          $15.95        February 2006       $ 90,105(4)
</TABLE>
 
---------------
 
(1) Options vest over a three-year period.
 
(2) Options received in lieu of cash incentive compensation, in accordance with
    elections made by each executive officer, and for that reason have no
    vesting period.
 
(3) The per share grant date value for options awarded in February 1995 and
    expiring in February 2005 was $6.99 per share.
 
(4) The per share grant date value for options awarded in February 1996 and
    expiring in February 2006 was $12.03 per share. These options were received
    in lieu of cash incentives based on agreements entered into between the
    officers and the Company in February 1995. At the date of the agreements,
    the exercise price per share was established at $15.95 per share, based on
    the average closing prices for the five previous business days for which
    there was trading activity. When the options were awarded in February 1996,
    the price per share was $23.25.
 
(5) The per share grant date value for options awarded in November 1995 and
    expiring in November 2001 was $7.81 per share.
 
(6) The per share grant date value for options awarded in December 1995 and
    expiring in December 2001 was $7.68 per share. These stock options were
    granted pursuant to a "reload" feature that replaces the
 
                                       12
<PAGE>   15
 
    number of options the individual exercised with a grant of a similar number
    of new options at the current market price. The reloaded stock options have
    contractual vesting periods of three years which accelerate to one year if
    the options exercised (giving rise to the reload) are held for at least one
    year.
 
(7) The per share grant date value for options awarded in January 1995 and
    expiring in January 2005 was $6.99 per share.
 
     The following table sets forth information regarding exercises of stock
options and the year-end value of unexercised options at December 31, 1995 for
the company's four most highly compensated executives:
 
                   OPTIONS EXERCISES AND YEAR-END VALUE TABLE
 
<TABLE>
<CAPTION>
                                                              NUMBER OF UNEXERCISED         VALUE OF UNEXERCISED
                                                           OPTIONS AT FISCAL YEAR END      IN-THE-MONEY OPTIONS AT
                                                                     (#)(1)                FISCAL YEAR END ($)(2)
                          SHARES ACQUIRED      VALUE       ---------------------------   ---------------------------
          NAME            ON EXERCISE (#)   REALIZED ($)   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
------------------------  ---------------   ------------   -----------   -------------   -----------   -------------
<S>                       <C>               <C>            <C>           <C>             <C>           <C>
D. Tad Lowrey...........       5,000           $79,150        92,939         15,252       $1,336,909      $114,975
Lawrence J. Winslow.....          --                --        38,154         23,000       $  337,632      $206,010
Michael A. Quigley......       1,000           $16,330        36,986         13,288       $  537,492      $103,257
William Nichol..........          --                --            --         40,000       $       --      $372,000
</TABLE>
 
---------------
 
(1) Shares awarded prior to the May 1993 stock split have been adjusted to
    reflect the split.
 
(2) Based on year-end market price of $24.00 per common share.
 
                                       13
<PAGE>   16
 
STOCK PERFORMANCE
 
     Securities and Exchange Commission regulations require a graphic
presentation of CENFED's stock performance compared to a broad market index and
an industry-specific index for the preceding five years. CENFED first became a
public entity in October 1991, so the following graph covers stock performance
for approximately four years. For the broad market index, CENFED has chosen the
performance of the companies that trade in the same market as CENFED, the
National Association of Dealers Automated Quotation/National Market System
("NASDAQ/NMS"). For an industry-specific index, CENFED has chosen the Western
Thrift index, published by SNL Securities.
 
                          CENFED FINANCIAL CORPORATION
 
                            STOCK PRICE PERFORMANCE
 
<TABLE>
<CAPTION>
      MEASUREMENT PERIOD                         NASDAQ TOTAL     SNL WESTERN
    (FISCAL YEAR COVERED)        CENFEDFin-CA      RETURN          THRIFT
<S>                              <C>             <C>             <C>
10/25/91                                100.00          100.00          100.00
12/31/92                                155.38          127.00          118.54
12/31/93                                264.81          145.79          128.23
12/30/94                                268.88          142.51          108.18
12/29/95                                380.98          201.38          179.46
</TABLE>
 
                                       14
<PAGE>   17
 
EMPLOYMENT AGREEMENTS WITH THE BANK
 
     In 1996, the Bank renewed its employment agreements with Messrs. Lowrey,
Nichol, Quigley and Winslow.
 
     The employment agreement with Mr. Lowrey provides for an initial three-year
term expiring on December 31, 1998. Commencing on the first anniversary date and
continuing each anniversary date thereafter, the Board of Directors may extend
the agreement for an additional year so that the remaining term equals the
length of the original term, unless the employment agreement has been terminated
or the Bank or Mr. Lowrey has provided a notice of non-renewal prior thereto.
The agreement provides for termination by the Bank for cause at any time or upon
death. In the event the Bank chooses to terminate Mr. Lowrey's employment for
reasons other than for cause, or in the event of Mr. Lowrey's resignation from
the Bank upon (i) failure to nominate him for election as a director of the
Bank, (ii) a material change in his functions, duties or responsibilities, (iii)
failure of the Bank to obtain from any successor or assign of all or
substantially all of the business of the Bank an agreement to assume and perform
the duties stated in the agreement, or (iv) a breach of the agreement by the
Bank, he would be entitled to severance pay in an amount equal to 2.99 times the
sum of Mr. Lowrey's prevailing base salary and the higher of the previous two
bonuses received by him. If payments and benefits under the employment agreement
would constitute an "excess parachute payment" under Section 280G of the
Internal Revenue Code, the agreement provides that such payment and benefits
would be reduced to the largest amount which may be paid without being subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code.
 
     The employment agreements for Messrs. Nichol, Quigley and Winslow provide
for an initial term of one year. These employment agreements may thereafter be
extended on a year to year basis following the annual performance evaluation of
the executive. In the event of a change in control of the Bank, the terms of
such agreements are extended to three years and the agreements become subject to
further one-year extensions. These employment agreements terminate upon the
death or disability of the employee, in the event of certain regulatory actions
or upon notice by either the Bank or the employee, with or without cause, and
the agreements are suspended in the event of a regulatory suspension of the
employee. In the event of termination due to disability of the employee, the
Bank will be obligated to pay or provide to the employee, as applicable,
continued salary and benefits, less applicable offsets, until the earlier of the
end of the term of the agreement or the employee's death. In the event of
termination by the Bank without cause, or in the event of termination by the
employee due to the Bank's failure to comply with any of the "assumed conditions
of service" of the Bank, the Bank is obligated to make a lump sum payment to the
employee equal to six months of the employee's then prevailing base salary.
 
                                       15
<PAGE>   18
 
CERTAIN INDEBTEDNESS AND TRANSACTIONS OF MANAGEMENT
 
     The Bank has historically made mortgage loans to employees, officers and
directors of CENFED and the Bank in the ordinary course of its business. Loans
to employees and officers who are not executive officers are made at a reduced
interest rate of one percent above the Eleventh District Cost of Funds Index,
which is an index computed by the Federal Home Loan Bank of San Francisco that
reflects the monthly weighted average cost of savings, borrowings and advances
of member institutions such as the Bank. Prior to the passage of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), directors
and executive officers were eligible for similar loans. Subsequent to the
passage of FIRREA, the Bank changed its policy to preclude executive officers
and directors from receiving loans from the Bank under preferential terms.
Following the policy change, the Bank has not granted any mortgage loans to
executive officers or directors. The following table sets forth loans made to
directors and executive officers of CENFED and the Bank which were outstanding
at any time since January 1, 1995 and aggregated $60,000 or more per person.
 
<TABLE>
<CAPTION>
                                             LARGEST AMOUNT
                                ORIGINAL      OUTSTANDING
                                AMOUNT OF    SINCE JANUARY     BALANCE AS OF     INTEREST RATE ON
            NAME                  LOAN          1, 1995       FEBRUARY 1, 1996   FEBRUARY 1, 1996     TYPE
-----------------------------  -----------   --------------   ----------------   ----------------   ---------
<S>                            <C>           <C>              <C>                <C>                <C>
Clark, Ronald R..............  $200,000.00     $139,707.00       $105,863.00          6.111%        Mortgage
Lowrey, D. Tad...............  $231,200.00     $213,948.00       $208,616.00          6.037%        Mortgage
Quigley, Michael A...........  $240,000.00     $219,734.00       $213,956.00          6.144%        Mortgage
</TABLE>
 
                                       16
<PAGE>   19
 
                             STOCKHOLDER PROPOSALS
 
     Any stockholder of CENFED wishing to have a proposal considered for
inclusion in CENFED's 1997 proxy solicitation materials must set forth such
proposal in writing and file it with the Secretary of CENFED on or before
December 24, 1996. The Board of Directors of CENFED will review any stockholder
proposals which are filed as required and will determine whether such proposals
meet applicable criteria for inclusion in its 1997 proxy solicitation materials
or consideration at the 1997 Annual Meeting.
 
     Stockholder nominations for election of directors must be made pursuant to
written notice received by the Secretary of CENFED not less than 60 days nor
more than 90 days prior to the anniversary date of the previous year's Annual
Meeting (between February 21, 1997 and March 23, 1997 to be considered at the
Annual Meeting in 1997). Such notice must state the nominee's name, age and
addresses (business and residence), the nominee's principal occupation or
employment, and the class and number of shares of CENFED's stock beneficially
owned by the nominee on the date of the notice. The required notice must also
disclose certain information relating to the nominee which would be required to
be disclosed in a proxy statement and in certain other filings under federal
securities laws.
 
                             ADDITIONAL INFORMATION
 
     CENFED WILL FURNISH WITHOUT CHARGE TO ANY STOCKHOLDER SOLICITED HEREBY A
COPY OF ITS 1995 ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UPON THE WRITTEN REQUEST OF SUCH STOCKHOLDER. REQUESTS
SHOULD BE DIRECTED TO: INVESTOR RELATIONS DEPARTMENT, CENFED FINANCIAL
CORPORATION, 199 NORTH LAKE AVENUE, PASADENA, CALIFORNIA 91101.
 
                                 OTHER MATTERS
 
     At the time of the preparation of the Proxy Statement, the Board of
Directors of CENFED was not aware of any matters which would be presented for
action at the Annual Meeting other than those specifically identified in the
Notice of Annual Meeting accompanying this Proxy Statement. Should any other
matters properly come before the meeting, action may be taken thereon pursuant
to the proxies in the form enclosed, which confer discretionary authority on the
persons names therein or their substitutes with respect to such matters.
 
     PLEASE MARK, SIGN, DATE, AND RETURN THE ACCOMPANYING PROXY CARD IN THE
ENCLOSED POSTAGE-PAID ENVELOPE AT YOUR EARLIEST CONVENIENCE, WHETHER OR NOT YOU
CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING.
 
                                       17