<PAGE>

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

                                   FORM 10-Q

(Mark one)

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


For the quarterly period ended                  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           N/A          to          N/A
                               ----------------------    ----------------------

Commission File Number:                       33-82654
                        -------------------------------------------------------

                         First Nationwide Holdings Inc.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                 Delaware                            13-3778552
-------------------------------------------------------------------------------
     (State or other jurisdiction of     (I.R.S. Employer Identification No.)
      incorporation or organization)

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

                                  415-904-0100
-------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

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


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

     The number of shares outstanding of registrant's classes of $1.00 par
value common stock, as of the close of business on May 8, 1998: 800 shares of
class A common stock; and 200 shares of class B common stock.

                               Page 1 of 32 pages
                           Exhibit index on page: 31


<PAGE>



                         FIRST NATIONWIDE HOLDINGS INC.
                     FIRST QUARTER 1998 REPORT ON FORM 10-Q
                               TABLE OF CONTENTS

                                                                        Page No.
                                                                        --------
PART I.       FINANCIAL INFORMATION

     Item 1.  Consolidated Financial Statements

              Unaudited Consolidated Balance Sheets
              March 31, 1998 and December 31, 1997.........................  3
                                                                            
              Unaudited Consolidated Statements of Income                   
              Three Months ended March 31, 1998 and 1997...................  4
                                                                            
              Unaudited Consolidated Statements of Comprehensive Income     
              Three Months ended March 31, 1998 and 1997...................  5
                                                                            
              Unaudited Consolidated Statement of Stockholders' Equity      
              Three Months ended March 31, 1998............................  6
                                                                            
              Unaudited Consolidated Statements of Cash Flows               
              Three Months ended March 31, 1998 and 1997...................  7
                                                                            
              Notes to Unaudited Consolidated Financial Statements.........  9
                                                                            
     Item 2.  Management's Discussion and Analysis of                       
              Financial Condition and Results of Operations................ 12
                                                                            
                                                                            
PART II.      OTHER INFORMATION                                             
                                                                            
     Item 1.  Legal Proceedings............................................ 30
                                                                            
     Item 2.  Changes in Securities........................................ 30
                                                                            
     Item 3.  Defaults Upon Senior Securities.............................. 30
                                                                            
     Item 4.  Submission of Matters to a Vote of Security Holders.......... 30
                                                                            
     Item 5.  Other Information............................................ 31
                                                                            
     Item 6.  Exhibits and Reports on Form 8-K............................. 31
                                                                           

                                     Page 2

<PAGE>



                FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                      MARCH 31, 1998 AND DECEMBER 31, 1997
                                  (Unaudited)
                 (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                     March 31,       December 31,
                                                                                       1998             1997
                                                                                     ---------       ------------
<S>                                                                                   <C>              <C>        
                      Assets
Cash and amounts due from banks                                                       $   379,831      $   350,214
Interest-bearing deposits in other banks                                                      128           36,164
Short-term investment securities                                                           84,305           25,933
                                                                                      -----------      -----------
     Cash and cash equivalents                                                            464,264          412,311

Securities available for sale, at fair value                                              988,235          813,085
Securities held to maturity                                                                58,424           58,299
Mortgage-backed securities available for sale, at fair value                            5,695,135        5,076,598
Mortgage-backed securities held to maturity                                             1,250,639        1,337,877
Loans held for sale, net                                                                1,887,856        1,483,466
Loans receivable, net                                                                  18,977,777       19,424,410
Investment in Federal Home Loan Bank ("FHLB") System                                      485,793          468,191
Office premises and equipment, net                                                        161,047          159,349
Foreclosed real estate, net                                                                75,674           76,997
Accrued interest receivable                                                               196,637          188,203
Intangible assets (net of accumulated amortization of
     $71,383 in 1998 and $60,294 in 1997)                                                 669,831          675,927
Mortgage servicing rights                                                                 625,554          536,703
Other assets                                                                              651,119          635,663
                                                                                      -----------      -----------
         Total assets                                                                 $32,187,985      $31,347,079
                                                                                      ===========      ===========

         Liabilities, Minority Interest and Stockholders' Equity

Deposits                                                                              $16,403,429      $16,202,605
Securities sold under agreements to repurchase                                          1,965,818        1,842,442
Borrowings                                                                             11,257,067       10,769,594
Other liabilities                                                                         699,027          702,475
                                                                                      -----------      -----------
         Total liabilities                                                             30,325,341       29,517,116
                                                                                      -----------      -----------

Commitments and contingencies                                                                  --               --

Minority interest                                                                         986,810          986,456

Stockholders' equity:
     Floating rate cumulative perpetual preferred stock, $1.00 par value,
         liquidation value of $15,000 per share, 24,000 shares authorized, 0
         shares and 1,712 shares issued and outstanding
         at March 31, 1998 and December 31, 1997, respectively                                 --           25,680
     Class A common stock, $1.00 par value, 800 shares
         authorized, issued and outstanding                                                     1                1
     Class B common stock, $1.00 par value, 200 shares
         authorized, issued and outstanding                                                    --               --
     Additional paid-in capital                                                            32,677           31,890
     Net unrealized holding gain on securities available for sale                          31,159           35,162
     Retained earnings (substantially restricted)                                         811,997          750,774
                                                                                      -----------      -----------
         Total stockholders' equity                                                       875,834          843,507
                                                                                      -----------      -----------
         Total liabilities, minority interest and stockholders' equity                $32,187,985      $31,347,079
                                                                                      ===========      ===========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                     Page 3

<PAGE>
               FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF INCOME
                 THREE MONTHS ENDED MARCH 31, 1998 AND 1997
                               (UNAUDITED)
                              (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                          1998              1997
                                                                                          ----              ----
<S>                                                                                      <C>                <C>     
Interest income:
     Loans receivable                                                                    $384,720           $390,643
     Mortgage-backed securities available for sale                                         81,502             61,005
     Mortgage-backed securities held to maturity                                           24,857             29,940
     Loans held for sale                                                                   27,336             17,253
     Securities available for sale                                                         13,723             10,971
     Securities held to maturity                                                              874                 71
     Interest-bearing deposits in other banks                                                 410              2,868
                                                                                        ---------          ---------
         Total interest income                                                            533,422            512,751
                                                                                        ---------          ---------

Interest expense:
     Deposits                                                                             178,175            187,020
     Securities sold under agreements to repurchase                                        26,528             34,383
     Borrowings                                                                           163,760            123,588
                                                                                        ---------          ---------
         Total interest expense                                                           368,463            344,991
                                                                                        ---------          ---------
         Net interest income                                                              164,959            167,760
Provision for loan losses                                                                  10,000             19,950
                                                                                        ---------          ---------
     Net interest income after provision for loan losses                                  154,959            147,810
                                                                                        ---------          ---------

Noninterest income:
     Loan servicing fees, net                                                              36,962             39,714
     Customer banking fees and service charges                                             25,346             22,519
     Gain on sale of loans, net                                                            14,505              2,869
     (Loss) gain on sale of assets, net                                                     (379)                 22
     Dividends on FHLB stock                                                                7,007              5,962
     Other income                                                                           6,337              7,753
                                                                                        ---------          ---------
         Total noninterest income                                                          89,778             78,839
                                                                                        ---------          ---------

Noninterest expense:
     Compensation and employee benefits                                                    62,981             64,480
     Occupancy and equipment                                                               21,483             20,682
     Savings Association Insurance Fund ("SAIF") deposit insurance premium                  2,573              2,653
     Loan expense                                                                           9,595              7,824
     Marketing                                                                              3,505              4,068
     Professional fees                                                                      8,710              9,103
     Data processing                                                                        2,840              2,935
     Foreclosed real estate operations, net                                               (1,720)              1,005
     Amortization of intangible assets                                                     11,089             12,106
     Other                                                                                 23,696             28,430
                                                                                        ---------          ---------
         Total noninterest expense                                                        144,752            153,286
                                                                                        ---------          ---------

Income before income taxes and minority interest                                           99,985             73,363
Income tax expense                                                                         15,232             11,654
                                                                                        ---------          ---------
     Income before minority interest                                                       84,753             61,709
Minority interest                                                                          22,952             19,849
                                                                                        ---------          ---------
     Net income                                                                            61,801             41,860
Preferred stock dividends                                                                     578              4,523
                                                                                        ---------          ---------
     Net income available to common stockholders                                        $  61,223          $  37,337
                                                                                        =========          =========
</TABLE>


See accompanying notes to unaudited consolidated financial statements.


                                     Page 4

<PAGE>



                FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                   THREE MONTHS ENDED MARCH 31, 1998 AND 1997
                                  (Unaudited)
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                    1998            1997
                                                                    ----            ----
<S>                                                                <C>            <C>    
Net income                                                         $61,801        $41,860

Other comprehensive income, net of tax:
     Unrealized holding (loss) gain on securities
         available for sale:
         Unrealized holding (loss) gain arising during              (3,855)        25,608
              the period
         Less: reclassification adjustment for gains
              included in net loss                                    (148)             --
                                                                   -------        -------
     Other comprehensive (loss) income                              (4,003)        25,608
                                                                   -------        -------
Comprehensive income                                               $57,798        $67,468
                                                                   =======        =======
</TABLE>



See accompanying notes to unaudited consolidated financial statements.


                                     Page 5

<PAGE>



                FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                       THREE MONTHS ENDED MARCH 31, 1998
                                  (Unaudited)
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                             Net unrealized
                                                               Additional   holding gains on                    Total
                                     Preferred    Common        paid-in        securities        Retained    stockholders'
                                       stock       stock        capital    available for sale    earnings       equity
                                     ---------    ------       ----------  ------------------    --------    -------------
<S>                                    <C>         <C>         <C>            <C>               <C>            <C>     
Balance at December 31, 1997         $  25,680       $1          $31,890        $35,162           $750,774       $843,507
Net income                                  --       --               --             --             61,801         61,801
Redemption of FN Holdings                                                                      
Preferred Stock                        (25,787)      --              787             --                 --        (25,000)
Change in net unrealized holding                                                               
gains on securities available for                                                              
sale                                        --       --               --         (4,003)                --         (4,003)
Stock dividends                            107       --               --             --               (107)            --
Cash dividends on preferred stock           --       --               --             --               (471)          (471)
                                     ---------      ---          -------        -------           ---------      --------
Balance at March 31, 1998            $      --       $1          $32,677        $31,159           $811,997       $875,834
                                     =========      ===          =======        =======           =========      ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.



                                     Page 6

<PAGE>



                FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 1998 AND 1997
                                  (Unaudited)
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                  1998             1997
                                                                                  ----             ----
<S>                                                                               <C>             <C>     
Cash flows from operating activities:
Net income                                                                        $ 61,801        $ 41,860
Adjustments to reconcile net income to net cash used in
     operating activities:
   Amortization of intangible assets                                                11,089          12,106
   Accretion of purchase accounting premiums and discounts, net                     (2,239)         (4,847)
   Amortization of mortgage servicing rights                                        27,218          24,285
   Provision for loan losses                                                        10,000          19,950
   Loss (gain) on sales of assets, net                                                 379             (22)
   Loss on sale of branches                                                             86              --
   Gain on sales of foreclosed real estate, net                                     (3,812)         (3,066)
   Loss on sale of loans, net                                                       24,473          23,024
   Depreciation and amortization of office premises and equipment                    5,469           3,638
   Amortization of deferred debt issuance costs                                      1,662             880
   FHLB stock dividends                                                             (7,007)         (5,962)
   Capitalization of originated mortgage servicing rights
      and excess servicing fees receivable                                         (38,978)        (25,893)
   Purchases and originations of loans held for sale                            (2,267,462)     (1,502,274)
   Proceeds from the sale of loans held for sale                                 1,835,401       1,201,502
   (Increase) decrease in other assets                                              (9,833)         80,172
   Increase in accrued interest receivable                                          (7,852)         (4,854)
   Increase (decrease) in other liabilities                                         21,777         (13,377)
   Minority interest                                                                22,952          19,849
                                                                               -----------     -----------
      Net cash used in operating activities                                       (314,876)       (133,029)
                                                                               -----------     -----------
</TABLE>



See accompanying notes to unaudited consolidated financial statements.

                                                                    (Continued)



                                     Page 7

<PAGE>



                FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 1998 AND 1997
                                  (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                   1998              1997
                                                                                   ----              ----
<S>                                                                           <C>                  <C>          
Cash flows from investing activities:
     Acquisitions:
         Cal Fed Acquisition                                                  $            --      $    (161,196)
         GSAC Acquisition                                                            (123,718)                --
     Purchases of securities available for sale                                      (481,588)          (394,709)
     Proceeds from maturities of securities available for sale                        312,262            105,810
     Purchases of securities held to maturity                                            (407)                --
     Proceeds from maturities of securities held to maturity                              282              3,800
     Purchases of mortgage-backed securities available for sale                    (1,052,098)          (686,510)
     Principal payments on mortgage-backed securities available for sale              422,098            147,843
     Proceeds from sales of mortgage-backed securities available for sale               3,195              7,589
     Principal payments on mortgage-backed securities held to maturity                 87,101             69,400
     Proceeds from sales of loans                                                         346              2,000
     Net decrease in loans receivable                                                 521,816            460,166
     Purchases of FHLB stock, net                                                     (17,602)                --
     Purchases of office premises and equipment                                        (9,615)           (12,815)
     Proceeds from disposal of office premises and equipment                            2,501              5,282
     Proceeds from sales of foreclosed real estate                                     33,904             34,181
     Purchases of mortgage servicing rights                                           (77,091)           (11,697)
                                                                                   ----------        -----------
         Net cash flows used in investing activities                                 (378,614)          (430,856)
                                                                                   ----------        -----------

Cash flows from financing activities:
     Net increase (decrease) in deposits                                              201,008           (476,129)
     Proceeds from additional borrowings                                            4,828,742          3,821,502
     Principal payments on borrowings                                              (4,359,104)        (4,605,063)
     Net increase in securities sold under agreements to repurchase                   123,445          1,037,114
     Proceeds from FN Escrow Merger                                                        --            603,313
     Issuance of REIT Preferred Stock, net                                                 --            482,650
     Redemption of FN Holdings/FN Escrow Preferred Stock                                   --            (17,250)
     Redemption of FN Holdings Preferred Stock                                        (25,000)           (31,250)
     Dividends on preferred stock                                                        (471)                --
     Dividends paid to minority stockholders, net of taxes                            (23,177)           (20,959)
     Capital distribution to parent                                                        --               (550)
                                                                                   -----------       -----------
         Net cash flows provided by financing activities                              745,443            793,378
                                                                                   -----------       ------------

Net change in cash and cash equivalents                                                51,953            229,493
Cash and cash equivalents at beginning of period                                      412,311            269,869
                                                                                   -----------       ------------
Cash and cash equivalents at end of period                                         $  464,264        $   499,362
                                                                                   ===========       ============
</TABLE>



See accompanying notes to unaudited consolidated financial statements.



                                     Page 8

<PAGE>


                FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements

(1)  Basis of Presentation

     The accompanying consolidated financial statements were prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for meeting the requirements of
Regulation S-X, Article 10 and therefore do not include all disclosures
necessary for complete financial statements. In the opinion of management, all
adjustments have been made that are necessary for a fair presentation of the
financial position and results of operations and cash flows as of and for the
periods presented. All such adjustments are of a normal recurring nature. The
results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the entire
fiscal year or any other interim period. Certain amounts for the three month
period in the prior year have been reclassified to conform with the current
period's presentation.

     The accompanying consolidated financial statements include the accounts of
First Nationwide Holdings Inc. ("FN Holdings" or the "Company"), California
Federal Bank, A Federal Savings Bank and its subsidiaries. On January 3, 1997,
First Nationwide Bank, A Federal Savings Bank merged with and into California
Federal Bank, A Federal Savings Bank (the "Cal Fed Acquisition"). Unless the
context otherwise indicates, (i) "Old California Federal" refers to California
Federal Bank, A Federal Savings Bank prior to the consummation of the Cal Fed
Acquisition and (ii) "California Federal" or "Bank" refers to California
Federal Bank, A Federal Savings Bank, as the surviving entity after the
consummation of the Cal Fed Acquisition, and to First Nationwide and its
predecessors for periods prior to the Cal Fed Acquisition. All significant
intercompany balances and transactions have been eliminated in consolidation.
These financial statements should be read in conjunction with the consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997. All terms used but not defined elsewhere
herein have meanings ascribed to them in the Company's Annual Report on Form
10-K.

     Minority interest represents amounts attributable to the preferred stock
of the Bank, the preferred stock ("REIT Preferred Stock") of California Federal
Preferred Capital Corporation, whose common stock is wholly owned by the Bank,
and that portion of stockholders' equity of Auto One Acceptance Corporation, a
subsidiary of the Bank ("Auto One"), attributable to 20% of its common stock.

     Earnings per share data is not presented due to the limited ownership of
the Company. FN Holdings is a holding company whose only significant asset is
all of the common stock of the Bank, and therefore all activities for the
consolidated entity are carried out by the Bank and its operating subsidiaries.

(2)  Acquisitions

     On February 4, 1998, Auto One acquired 100% of the partnership interests
in Gulf States Acceptance Company, a Delaware limited partnership ("GSAC") and
its general partner, Gulf States Financial Services, Inc., a Texas corporation;
GSAC was liquidated and its assets and liabilities were transferred to Auto One
(the "GSAC Acquisition"). The aggregate consideration paid in connection with
the GSAC Acquisition was approximately $13.6 million plus a 20% interest in the
common stock of Auto One.

     On February 4, 1998, First Nationwide (Parent) Holdings Inc. ("Parent
Holdings"), parent company of FN Holdings and the Bank, and Hunter's Glen/Ford
Ltd. ("Hunter's Glen"), a 20% minority shareholder of FN Holdings, entered into
a definitive merger agreement ("Golden State Merger Agreement") with Golden
State Bancorp Inc. ("Golden State"), the publicly traded parent company of
Glendale Federal Bank, Federal Savings Bank ("Glendale Federal"), pursuant to
which Parent Holdings, Hunter's Glen and Golden State agreed to a tax-free
exchange of shares in a merger transaction (the "Golden State Merger"), to be
accounted for under the purchase method of accounting. In connection with the
execution of the Golden State Merger Agreement, Golden State, Glendale Federal,
the Bank, Stephen J. Trafton, Chairman of the Board, President and Chief
Executive Officer of Golden State and Richard A. Fink, Vice Chairman of Golden
State, entered into a Litigation Management Agreement ("Litigation Management
Agreement") pursuant to which, among other things, Messrs. Trafton and Fink
will oversee and manage the California Federal Litigation (hereinafter defined)
and continue to oversee and manage similar litigation being prosecuted by
Glendale Federal, following the consummation of the Golden State Merger.
Following the Golden State Merger, the combined parent company, Golden State,
will have 135 to 145 million common shares outstanding and will continue to be
a publicly traded company. As part of the Golden State Merger Agreement,
Glendale Federal will be merged with and into the Bank. At December 31, 1997,
Glendale Federal had total assets of approximately $16.0 billion and deposits
of $9.5


                                     Page 9

<PAGE>


                FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements

billion and operated 181 branches and 26 loan offices in California. The Golden
State Merger is subject to regulatory and stockholder approval and is expected
to close during the third quarter of 1998.

     On March 29, 1998, the Company signed a definitive agreement to sell its
Florida bank franchise (consisting of 24 branches with deposits of $1.5
billion) to Union Planters Bank of Florida, a wholly owned subsidiary of Union
Planters Corp. (the "Florida Branch Sale"). The Company expects to record a
pre-tax gain of approximately $110 million in connection with the Florida
Branch Sale, representing a deposit premium of approximately 7.5%. This
transaction is subject to regulatory approval and is expected to close in the
third quarter of 1998.

(3)  Cash, Cash Equivalents, and Statement of Cash Flows

     The Company uses the indirect method to present cash flows from operating
activities. Cash paid for interest for the three months ended March 31, 1998
and 1997 was $341.2 million and $318.9 million, respectively.

     During the three months ended March 31, 1998, noncash activity consisted
of transfers of $33.9 million from loans receivable to foreclosed real estate,
$4.4 million of loans made to facilitate sales of real estate owned and
transfers of $3.2 million from loans held for sale (at lower of cost or market)
to mortgage-backed securities classified as trading securities upon the
securitization of certain of the Bank's single-family loans. Noncash activity
also includes the retirement of preferred stock of $.8 million and the issuance
of additional preferred stock through preferred stock dividends of $.1 million.

     During the three months ended March 31, 1997, noncash activity consisted
of transfers of $41.2 million from loans receivable and $1.2 million from loans
held for sale (at lower of cost or market) to foreclosed real estate, the
retirement of preferred stock of $.3 million, the issuance of additional
preferred stock through preferred stock dividends of $.8 million and the
forgiveness of a $19 million loan from an affiliate of FN Holdings in exchange
for the redemption of the FN Holdings/FN Escrow Preferred Stock.

(4)  Minority Interest

     In connection with the GSAC Acquisition, Auto One issued 250 shares of
common stock, par value $1.00 per share, representing a 20% interest in Auto
One.

(5)  Stockholders' Equity

     Cash dividends on the FN Holdings Preferred Stock totalled $.5 million and
$3.8 million during the three months ended March 31, 1998 and 1997,
respectively. There were no dividends or distributions on common stock during
the three months ended March 31, 1998 or 1997.

(6)  Newly Issued Accounting Pronouncements

     In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS No. 131"). SFAS No. 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. SFAS No. 131 also establishes standards for related disclosures
about products and services, geographic areas, and major customers. This
statement supersedes FASB Statement No. 14, Financial Reporting for Segments of
a Business Enterprise, but retains the requirement to report information about
major customers. It amends FASB Statement No. 94, Consolidation of All
Majority-Owned Subsidiaries, to remove the special disclosure requirements for
previously unconsolidated subsidiaries. This statement is effective for fiscal
years beginning after December 15, 1997. In the initial year of application,
comparative information for earlier years is to be restated. This statement
need not be applied to interim financial statements in the initial year of
application, but comparative information for interim periods in the initial
year of application is to be reported in financial statements for interim
periods in the second year of application. This statement has no impact on the
financial condition or results of operations of the Company, but will require
changes in the Company's disclosure requirements.



                                    Page 10

<PAGE>


        CALIFORNIA FEDERAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements

     In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("SFAS No. 132"), an amendment of FASB Statements No.
87, 88 and 106. SFAS No. 132 revises employers' disclosures about pension and
other postretirement benefit plans. It does not change the measurement or
recognition of those plans. It standardizes the disclosure requirements for
pensions and other postretirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis, and eliminates certain
disclosures that are no longer useful as they were when FASB Statements No. 87,
Employers' Accounting for Pensions, No. 88, Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits, and No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, were issued. SFAS No. 132 is effective for fiscal
years beginning after December 15, 1997 and requires restatement of disclosures
for earlier periods provided for comparative purposes, if available. It is not
expected that the Company will experience any material revision in its
disclosures when SFAS No. 132 is adopted.



                                    Page 11

<PAGE>



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

     The statements contained in this Report on Form 10-Q that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding the Company's expectations, intentions,
beliefs or strategies regarding the future. Forward-looking statements include
the Company's statements regarding liquidity, provision for loan losses,
capital resources and anticipated expense levels in "Management's Discussion
and Analysis of Financial Condition and Results of Operations." In addition, in
those and other portions of this document, the words "anticipate," "believe,"
"estimate," "expect," "intend," and other similar expressions, as they relate
to the Company or the Company's management, are intended to identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions. It is important to note that the Company's
actual results could differ materially from those described herein as
anticipated, believed, estimated or expected. Among the factors that could
cause results to differ materially are the risks discussed in the "Risk
Factors" section included in the Company's Registration Statement on Form S-1
filed with the Securities and Exchange Commission on February 3, 1997 (File No.
333-21015) and declared effective on February 26, 1997. The Company assumes no
obligation to update any such forward-looking statement.

OVERVIEW

     The principal business of FN Holdings, through California Federal,
consists of (i) operating retail deposit branches to serve consumers in
California and, to a lesser extent, in Florida and Nevada, (ii) originating
and/or purchasing, on a nationwide basis, 1-4 unit residential loans and, to a
lesser extent, certain commercial real estate and consumer loans, for
investment and (iii) mortgage banking activities, including originating and
servicing 1-4 unit residential loans for others. Revenues are derived primarily
from interest earned on loans, interest received on government and agency
securities and mortgage-backed securities, gains on sales of loans and other
investments and fees received in connection with loan servicing, securities
brokerage and other customer service transactions. Expenses primarily consist
of interest on customer deposit accounts, interest on short-term and long-term
borrowings, provisions for losses, general and administrative expenses
consisting of compensation and benefits, advertising and marketing, premises
and equipment, loan expenses, deposit insurance assessments, data processing
and other general and administrative expenses.

     Acquisitions and Sales

     On February 4, 1998, Auto One consummated the GSAC Acquisition for a
purchase price of $22.5 million plus a 20% interest in the common stock of Auto
One.

     Net Income

     FN Holdings reported net income for the three months ended March 31, 1998
of $61.8 million compared with net income of $41.9 million for the
corresponding period in 1997.

     Net interest income was $165.0 million for the three months ended March
31, 1998, compared to $167.8 million in the same period in 1997. The decrease
in 1998 over 1997 is primarily due to a reduction in the net interest margin
resulting from prepayments of higher rate interest-earning assets being
replaced with interest-earning assets having comparatively lower rates,
primarily reflecting the flattening of the yield curve which occurred in 1997
and management's steps to limit interest rate risk.

     Year 2000

     During the year ended December 31, 1997, the Company finalized its plan to
address issues related to required changes in computer systems for the year
2000 ("Year 2000"). Issues arise because computer systems and related software
have been designed to recognize only dates that relate to the 20th century.
Accordingly, if no changes are implemented, computer systems would interpret
"1/1/00" as January 1, 1900 instead of January 1, 2000. Additionally, some
equipment, being controlled by microprocessor chips, may not deal appropriately
with a year "00."



                                    Page 12

<PAGE>



     The Company has formed an internal task force to determine what changes
are needed in its custom software and what changes are required to be made in
software purchased from third party vendors as well as what steps will be
necessary to ensure continued operations of the Company's equipment.

     It is expected that, by December 31, 1998, all issues related to Year 2000
will be addressed, either by programming changes to the Company's custom
software, by programming changes implemented by third party vendors to
purchased systems, or through the upgrading or purchase of Year 2000-compliant
hardware and equipment. Extensive testing is expected to occur during 1999.
Year 2000 is the highest priority project within the Information and Technology
Services unit of the Company. Management believes there is no material risk
that the Company will fail to address Year 2000 issues in a timely manner. It
is currently expected that costs related to Year 2000, not including Year 2000
costs associated with the Golden State Merger, will total approximately $14
million over the years 1997 to 1999, of which $1.9 million and $3.3 million
have been incurred during the three months ended March 31, 1998 and since the
inception of the Year 2000 project, respectively.

     Financial Condition

     During the three months ended March 31, 1998, consolidated total assets
increased $.8 billion, to $32.2 billion, from December 31, 1997, and total
liabilities increased from $29.5 billion to $30.3 billion.

     During the three months ended March 31, 1998, minority interest increased
by $.4 million. This increase is the result of the issuance of Auto One common
stock as part of the GSAC Acquisition.

     The Company's non-performing assets, consisting of non-performing loans,
net of purchase accounting adjustments and specific allowances for loan losses,
foreclosed real estate, net, and repossessed assets, decreased to $261 million
at March 31, 1998 compared with $272 million at December 31, 1997. Total
non-performing assets as a percentage of the Bank's total assets decreased to
 .81% at March 31, 1998 from .87% at December 31, 1997.



                                    Page 13

<PAGE>



RESULTS OF OPERATIONS

     Three Months ended March 31, 1998 versus Three Months ended March 31, 1997

     The following table sets forth, for the periods and at the dates
indicated, information regarding the Company's consolidated average balance
sheets, together with the total dollar amounts of interest income and interest
expense and the weighted average interest rates for the periods presented.
Average balances are calculated on a daily basis. The information presented
represents the historical activity of the Company.

<TABLE>
<CAPTION>
                                                                           Three months ended
                                                                             March 31, 1998
                                                               ------------------------------------------
                                                               Average                            Average
                                                               Balance          Interest           Rate
                                                               -------          --------          -------
                                                                          (dollars in millions)
<S>                                                            <C>                <C>            <C>  
ASSETS

Interest-earning assets (1):
     Securities and interest-bearing deposits in banks (2)            $ 955              $ 15           6.29%
     Mortgage-backed securities available for sale                    5,087                81           6.41
     Mortgage-backed securities held to maturity                      1,292                25           7.69
     Loans held for sale, net                                         1,485                27           7.36
     Loans receivable, net                                           19,744               385           7.79
                                                                   --------             -----           ----
         Total interest-earning assets                               28,563               533           7.47%
                                                                                        -----           ----
Noninterest-earning assets                                            2,932
                                                                   --------
         Total assets                                               $31,495
                                                                   ========

LIABILITIES, MINORITY INTEREST
     AND STOCKHOLDERS' EQUITY

Interest-bearing liabilities:
     Deposits                                                       $16,133               178           4.48%
     Securities sold under agreements to repurchase                   1,864                27           5.69
     Borrowings (3)                                                  10,659               163           6.23
                                                                   --------             -----           ----
         Total interest-bearing liabilities                          28,656               368           5.21%
                                                                                        -----           ----
Noninterest-bearing liabilities                                         995
Minority interest                                                       984
Stockholders' equity                                                    860
                                                                   --------
         Total liabilities, minority interest and
               stockholders' equity                                 $31,495
                                                                   ========
Net interest income                                                                      $165
                                                                                        =====
Interest rate spread                                                                                    2.26%
                                                                                                        ====
Net interest margin                                                                                     2.24%
                                                                                                        ====
Average equity to average assets                                                                        2.73%
                                                                                                        ====
</TABLE>




                                    Page 14

<PAGE>



<TABLE>
<CAPTION>
                                                                           Three months ended
                                                                             March 31, 1997
                                                               ------------------------------------------
                                                               Average                            Average
                                                               Balance          Interest           Rate
                                                               -------          --------          -------
                                                                          (dollars in millions)
<S>                                                              <C>                <C>              <C>  
ASSETS

Interest-earning assets (1):
     Securities and interest-bearing deposits in banks (2)       $     950          $   14           5.86%
     Mortgage-backed securities available for sale                   3,552              61           6.87
     Mortgage-backed securities held to maturity                     1,577              30           7.59
     Loans held for sale, net                                          995              17           6.93
     Loans receivable, net                                          20,050             391           7.79
                                                                 ---------           -----           ----
         Total interest-earning assets                              27,124             513           7.56%
                                                                                     -----           ----
Noninterest-earning assets                                           3,095
                                                                 ---------
         Total assets                                              $30,219
                                                                 =========

LIABILITIES, MINORITY INTEREST
     AND STOCKHOLDERS' EQUITY

Interest-bearing liabilities:
     Deposits                                                     $ 16,845             187           4.50%
     Securities sold under agreements to repurchase                  2,457              34           5.60
     Borrowings (3)                                                  7,796             124           6.43
                                                                 ---------           -----           ----
         Total interest-bearing liabilities                         27,098             345           5.16%
                                                                                     -----           ----
Noninterest-bearing liabilities                                      1,409
Minority interest                                                      812
Stockholders' equity                                                   900
                                                                 ---------
         Total liabilities, minority interest                      
             and stockholders' equity                              $30,219
                                                                 =========
Net interest income                                                                   $168
                                                                                     =====
Interest rate spread                                                                                 2.40%
                                                                                                     ====
Net interest margin                                                                                  2.40%
                                                                                                     ====
Average equity to average assets                                                                     2.98%
                                                                                                     ====
</TABLE>
------------------

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

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

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




                                    Page 15

<PAGE>



     The following table presents certain information regarding changes in
interest income and interest expense of the Company during the periods
indicated. The dollar amount of interest income and interest expense fluctuates
depending upon changes in the respective interest rates and upon changes in the
respective amounts (volume) of the Company's interest-earning assets and
interest-bearing liabilities. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable
to (i) changes in volume (changes in average outstanding balances multiplied by
the prior period's rate) and (ii) changes in rate (changes in average interest
rate multiplied by the prior period's volume). Changes attributable to both
volume and rate have been allocated proportionately.


<TABLE>
<CAPTION>
                                                                    Three months ended March 31, 1998 vs. 1997
                                                                            Increase (Decrease) Due to
                                                                    ------------------------------------------
                                                                     Volume            Rate                Net
                                                                     ------            ----                ---
<S>                                                                 <C>               <C>                <C> 
INTEREST INCOME:                                                                  (in millions)


     Securities and interest-bearing deposits in banks               $   --              $  1              $  1
     Mortgage-backed securities available for sale                       24                (4)               20
     Mortgage-backed securities held to maturity                         (5)               --                (5)
     Loans held for sale                                                  9                 1                10
     Loans receivable, net                                               (6)               --                (6)
                                                                     -------             -----             -----
         Total                                                           22                (2)               20
                                                                     -------             -----             -----

INTEREST EXPENSE:

     Deposits                                                            (8)               (1)               (9)
     Securities sold under agreements to repurchase                      (9)                1                (8)
     Borrowings                                                          44                (4)               40
                                                                     -------             -----             -----
         Total                                                           27                (4)               23
                                                                     -------             -----             -----
              Change in net interest income                          $   (5)             $  2              $ (3)
                                                                     =======             =====             =====
</TABLE>

     The volume variances in total interest income and total interest expense
for the three months ended March 31, 1998 compared to the corresponding period
in 1997 are largely due to increased purchases of mortgage-backed securities
funded with FHLB advances. The positive total rate variance of $2 million is
primarily attributed to the increase in FHLB advances, partially offset by the
comparatively lower market rates on mortgage-backed securities purchased in
1998 and 1997 and prepayments of higher rate interest-earning assets as a
result of the flattening of the yield curve.

     Interest Income. Total interest income was $533.4 million for the three
months ended March 31, 1998, an increase of $20.7 million from the three months
ended March 31, 1997. Total interest-earning assets for the three months ended
March 31, 1998 averaged $28.6 billion, compared to $27.1 billion for the
corresponding period in 1997. The yield on total interest-earning assets during
the three months ended March 31, 1998 decreased to 7.47% from 7.56% for the
three months ended March 31, 1997, primarily due to the lower market rates on
new mortgage-backed securities purchased in 1998 and 1997 and prepayments of
higher rate interest-earning assets.

     FN Holdings earned $27.3 million of interest income on loans held for sale
for the three months ended March 31, 1998, an increase of $10.1 million from
the three months ended March 31, 1997. The average balance of loans held for
sale was $1.5 billion for the three months ended March 31, 1998, an increase of
$490 million from the comparable period in 1997, due to increased originations.
The weighted average yield on loans held for sale increased to 7.36% for the
three months ended March 31, 1998 from 6.93% for the three months ended March
31, 1997, primarily due to a higher percentage of comparatively higher
fixed-rate portfolio in 1998 compared to 1997.

     Interest income on mortgage-backed securities available for sale was $81.5
million for the three months ended March 31, 1998, an increase of $20.5 million
from the three months ended March 31, 1997. The average portfolio balances
increased $1.5 billion, to $5.1 billion, during the three months ended March
31, 1998 compared to the same period in 1997. The weighted average yield on
these assets decreased from 6.87% for the three months ended March 31, 1997 to
6.41% for the three months ended March 31, 1998. The increase in the volume and
decrease in the weighted


                                    Page 16

<PAGE>



average yield is primarily due to the purchases of $1.0 billion in other
mortgage-backed securities during the three months ended March 31, 1998 and
$2.0 billion during the last nine months of 1997 at comparatively lower market
rates.

     There were no material variances between the three months ended March 31,
1998 and the three months ended March 31, 1997 with respect to interest income
from loans receivable, mortgage-backed securities held to maturity, and
securities and interest-bearing deposits in banks.

     Interest Expense. Total interest expense was $368.5 million for the three
months ended March 31, 1998, an increase of $23.5 million from the three months
ended March 31, 1997. The increase is primarily the result of increased
borrowings on FHLB advances, partially offset by a decline in the average
balance of deposits resulting from net deposit run-off.

     Interest expense on customer deposits, including Brokered Deposits, was
$178.2 million for the three months ended March 31, 1998, a decrease of $8.8
million from the three months ended March 31, 1997. The average balance of
customer deposits outstanding decreased from $16.8 billion to $16.1 billion for
the three months ended March 31, 1997 and 1998, respectively. The decrease in
the average balance is primarily due to net deposit run-off, anticipated
following the Cal Fed Acquisition. The overall weighted average cost of
deposits was 4.48% for the three months ended March 31, 1998 and 4.50% for the
three months ended March 31, 1997.

     Interest expense on securities sold under agreements to repurchase
totalled $26.5 million for the three months ended March 31, 1998, a decrease of
$7.9 million from the three months ended March 31, 1997. The average balance of
such borrowings for the three months ended March 31, 1998 and 1997 was $1.9
billion and $2.5 billion, respectively. The decrease in the average balance is
primarily attributed to maturities and payoffs refinanced with FHLB advances at
more favorable rates. The weighted average interest rate on these instruments
increased to 5.69% during the three months ended March 31, 1998 from 5.60% for
the three months ended March 31, 1997, primarily due to an increase in rates on
new borrowings compared to such borrowings during 1997.

     Interest expense on borrowings totalled $163.8 million for the three
months ended March 31, 1998, an increase of $40.2 million from the three months
ended March 31, 1997. The increase is primarily attributed to the increase in
FHLB advances used to fund the purchases of mortgage-backed securities and
replace reverse repurchase agreements which matured. The average balance
outstanding for the three months ended March 31, 1998 and 1997 was $10.7
billion and $7.8 billion, respectively. The weighted average interest rate on
these instruments decreased to 6.23% during the three months ended March 31,
1998 from 6.43% for the three months ended March 31, 1997, primarily due to the
shorter average maturity of the portfolio at March 31, 1998 compared to March
31, 1997.

     Net Interest Income. Net interest income was $165.0 million for the three
months ended March 31, 1998, a decrease of $2.8 million from the three months
ended March 31, 1997. The interest rate spread decreased to 2.26% for the three
months ended March 31, 1998 from 2.40% for the three months ended March 31,
1997.

     Noninterest Income. Total noninterest income, consisting primarily of loan
servicing fees, customer banking fees, gains on sales of loans and dividends on
FHLB stock, was $89.8 million for the three months ended March 31, 1998, an
increase of $10.9 million from the three months ended March 31, 1997. Income
for the three months ended March 31, 1998 reflects an $11.6 million increase in
gain on sales of loans attributed to an increase in early payoffs of commercial
loans with unamortized discounts and an increase in gains from the sales of 1-4
unit residential loans.

     Loan servicing fees, net of amortization of mortgage servicing rights,
were $37.0 million for the three months ended March 31, 1998, compared to $39.7
million for the three months ended March 31, 1997. The single-family
residential loan servicing portfolio, excluding loans serviced for the Bank,
decreased from $47.5 billion at March 31, 1997 to $46.7 billion at March 31,
1998. During the three months ended March 31, 1998, the Company sold $1.8
billion in single-family mortgage loans originated for sale as part of its
ongoing mortgage banking operations compared to $1.2 billion of such sales for
the corresponding period in 1997.



                                    Page 17

<PAGE>



     Gain on sales of loans was $14.5 million for the three months ended March
31, 1998, compared to a gain of $2.9 million for the three months ended March
31, 1997. The increase is primarily attributed to early pay-offs of commercial
loans with unamortized discounts.

     Dividends on FHLB stock were $7.0 million for the three months ended March
31, 1998, an increase of $1.0 million from the three months ended March 31,
1997, representing an increase in the amount of such stock owned by the
Company, primarily as a result of an increase in borrowings on FHLB advances.

     There were no material variances between the three months ended March 31,
1998 and the comparable period in 1997 with respect to customer banking fees,
gain (loss) on sales of assets and other noninterest income.

     Noninterest Expense. Total noninterest expense was $144.8 million for the
three months ended March 31, 1998, a decrease of $8.5 million from the three
months ended March 31, 1997. The variance between the two periods is primarily
attributed to transitional expenses (primarily reflected in compensation
expense and other noninterest expense) incurred during the three months ended
March 31, 1997 related to the Cal Fed Acquisition.

     Provision for Income Tax. During the three months ended March 31, 1998 and
1997, FN Holdings recorded income tax expense of $15.2 million and $11.7
million, respectively. FN Holdings' effective Federal tax rate was 2% during
the three months ended March 31, 1998 and 1997, while its statutory Federal tax
rate was 35% during both periods. The difference between the effective and
statutory rates was primarily the result of the utilization of net operating
loss carryforwards for both periods. FN Holdings' effective state tax rate was
13% during the three months ended March 31, 1998 and 1997.

     Minority Interest. Dividends on the REIT Preferred Stock totalling $11.4
million and $7.7 million were declared and paid during the three months ended
March 31, 1998 and 1997, respectively. Minority interest relative to the REIT
Preferred Stock is reflected on the consolidated statements of income net of
the income tax benefit of $1.5 million and $1.0 million for the three months
ended March 31, 1998 and 1997, respectively, which will inure to the Company as
a result of the deductibility of such dividends for income tax purposes.
Dividends on the preferred stock of the Bank of $13.2 million and $13.1 million
were also recorded during the three months ended March 31, 1998 and 1997,
respectively. Minority interest for the three months ended March 31, 1998 also
includes $.2 million representing that portion of Auto One's loss attributable
to the 20% interest in the common stock of Auto One that was issued as part of
the GSAC Acquisition.

PROVISION FOR LOAN LOSSES

     The adequacy of the allowance for loan losses is periodically evaluated by
management in order to maintain the allowance at a level that is sufficient to
absorb expected loan losses. The Company charges current earnings with a
provision for estimated credit losses on loans receivable. The provision
considers both specifically identified problem loans as well as credit risks
not specifically identified in the loan portfolio. The Company established
provisions for loan losses of $10.0 million and $20.0 million during the three
months ended March 31, 1998 and 1997, respectively. The decrease in the
provision for loan losses during the three months ended March 31, 1998 compared
to the same period in 1997 is the result of management's evaluation of the
adequacy of the allowance based on, among other things, past loan loss
experience and known and inherent risks in the portfolio, evidenced in part by
the continued decline in the Company's level of non-performing assets. In
addition, management's periodic evaluation of the adequacy of the allowance for
loan losses considers potential adverse situations that may affect the
borrower's ability to repay, the estimated value of underlying collateral, and
current and prospective economic conditions. The allowance for loan losses is
increased by provisions for loan losses and allowances on acquired loans, while
it is decreased by charge-offs (net of recoveries).




                                    Page 18

<PAGE>



     Activity in the allowance for loan losses during the three months ended
March 31, 1998 and 1997 is as follows (in thousands):

                                                   1998                1997
                                                   ----                ----
Balance - January 1                              $418,674           $246,556
   Purchase - Cal Fed Acquisition                      --            143,820
   Provision for loan losses                       10,000             19,950
   Charge-offs                                    (11,399)           (10,773)
   Recoveries                                       1,855                866
                                                 --------           --------
Balance - March 31                               $419,130           $400,419
                                                 ========           ========
                                                                   
     Although management believes that the allowance for loan losses is
adequate for its current portfolios, it will continue to review its loan
portfolio to determine the extent to which any changes in economic conditions
or loss experience may require additional provisions in the future.

ASSET AND LIABILITY MANAGEMENT

     Banks and savings associations are subject to interest rate risk to the
degree that their interest-bearing liabilities, consisting principally of
deposits, securities sold under agreements to repurchase and FHLB advances,
mature or reprice more or less frequently, or on a different basis, than their
interest-earning assets. The process of planning and controlling asset and
liability mixes, volumes and maturities to influence the net interest spread is
referred to as asset and liability management. The objective of the Company's
asset and liability management is to maximize its net interest income over
changing interest rate cycles within the constraints imposed by prudent lending
and investing practices, liquidity needs and capital planning.

     FN Holdings, through the Bank, actively pursues investment and funding
strategies intended to minimize the sensitivity of its earnings to interest
rate fluctuations while maintaining the flexibility required to execute its
business strategies. The Company measures the interest rate sensitivity of the
balance sheet through gap and duration analysis, as well as net interest income
and market value simulation, and, after taking into consideration both the
variability of rates and the maturities of various instruments, evaluates
strategies which may reduce the sensitivity of its earnings to interest rate
and market value fluctuations. An important decision is the selection of
interest-bearing liabilities and the generation of interest-earning assets
which best match relative to interest rate changes. In order to reduce interest
rate risk by increasing the percentage of interest sensitive assets, the
Company has continued its emphasis on the origination of adjustable rate
mortgage ("ARM") products for its portfolio. Where possible, the Company seeks
to purchase assets or originate real estate loans that reprice frequently and
that on the whole adjust in accordance with the repricing of its liabilities.
At March 31, 1998, approximately 91% of the Company's real estate loan
portfolio consisted of ARMs.

     ARMs have from time to time been offered with low initial interest rates
as marketing inducements. In addition, most ARMs are also subject to periodic
interest rate adjustment caps or floors. In a period of rising interest rates,
ARMs could reach a periodic adjustment cap while still at a rate significantly
below their contractual margin over existing market rates. Since repricing
liabilities are typically not subject to such interest rate adjustment
constraints, the Company's net interest margin would most likely be negatively
impacted in this situation. Certain ARMs now offered by the Company have a
fixed monthly payment for a given period, with any changes as a result of
market interest rates reflected in the unpaid principal balance through
negative amortization. From the lender's perspective, these loans respond most
quickly to rate changes because interest accruals immediately reflect the loans
as though they were fully indexed.

     One of the most important sources of a financial institution's net income
is net interest income, which is the difference between the combined interest
earned on interest-earning assets and the combined interest paid on
interest-bearing liabilities. Net interest income is also dependent on the
relative balances of interest-earning assets and interest-bearing liabilities.




                                    Page 19

<PAGE>



     A traditional measure of interest rate risk within the savings industry is
the interest rate sensitivity gap, which is the sum of all interest-earning
assets minus the sum of all interest-bearing liabilities to be repriced within
given periods. A gap is considered positive when the interest rate sensitive
assets exceed interest rate sensitive liabilities, while the opposite results
in a negative gap. During a period of rising interest rates, a negative gap
would tend to adversely affect net interest income, and a positive gap would
tend to result in an increase in net interest income, while the opposite would
tend to occur in a period of falling rates.




                                    Page 20

<PAGE>



     The following table sets forth the projected maturities based upon
contractual maturities as adjusted for projected prepayments and "repricing
mechanisms" (provisions for changes in the interest rates of assets and
liabilities), and the impact of interest rate swap agreements as of March 31,
1998. Prepayment rates are assumed in each period on substantially all of the
Company's loan portfolio based upon expected loan prepayments. Repricing
mechanisms on the Company's assets are subject to limitations such as caps on
the amount that interest rates and payments on its loans may adjust and,
accordingly, such assets may not respond in the same manner or to the same
extent to changes in interest rates as the Company's liabilities. In addition,
the interest rate sensitivity of the Company's assets and liabilities
illustrated in the table would vary substantially if different assumptions were
used or if actual experience differed from the assumptions set forth. The
Company's estimated interest rate sensitivity gap at March 31, 1998 is as
follows:


<TABLE>
<CAPTION>
                                                                       Maturity/Rate Sensitivity
                                                       ----------------------------------------------------------
                                                       Within         1-5        Over 5     Noninterest
                                                       1 Year        Years        Years       Bearing       Total
                                                       ------        -----       ------     -----------     -----
                                                                         (dollars in millions)
<S>                                                      <C>        <C>              <C>       <C>           <C>      
INTEREST-EARNING ASSETS:

Securities held to maturity, interest-bearing
     deposits in other banks and short-term
     investment securities(1)(2)                         $     84   $       --       $    58   $       --    $     142
Securities available for sale (3)                             988           --            --           --          988
Mortgage-backed securities
     available for sale (3)                                 5,695           --            --           --        5,695
Mortgage-backed securities
     held to maturity (1)(4)                                1,243           --             2           --        1,245
Loans held for sale, net (3)(5)                             1,887           --            --           --        1,887
Loans receivable, net (1)(6)                               16,873        1,723           628           --       19,224
Investment in FHLB                                            486           --            --           --          486
                                                       ----------  -----------      --------  -----------   ----------
     Total interest-earning assets                         27,256        1,723           688           --       29,667
Noninterest-earning assets                                     --           --            --        2,521        2,521
                                                       ----------  -----------      --------  -----------   ----------
                                                          $27,256       $1,723         $ 688       $2,521      $32,188
                                                       ==========  ===========      ========  ===========   ==========

INTEREST-BEARING LIABILITIES:

Deposits (7)                                              $14,442       $1,955        $    6   $       --      $16,403
Securities sold under agreements to
     repurchase (1)                                         1,866          100            --           --        1,966
FHLB advances (1)                                           7,085        2,831             2           --        9,918
Other borrowings (1)                                          276          359           704           --        1,339
                                                       ----------  -----------      --------  -----------   ----------
     Total interest-bearing liabilities                    23,669        5,245           712           --       29,626
Noninterest-bearing liabilities                                --           --            --          699          699
Minority interest                                              --           --            --          987          987
Stockholders' equity                                           --           --            --          876          876
                                                       ----------  -----------      --------  -----------   ----------
                                                          $23,669       $5,245          $712       $2,562      $32,188
                                                       ==========  ===========      ========  ===========   ==========

Gap before interest rate swap agreements                   $3,587     $ (3,522)         $(24)                      $41
Interest rate swap agreements (8)                              --           --            --                        --
                                                       ----------  -----------      --------                ----------
Gap adjusted for interest rate swap agreements             $3,587     $ (3,522)         $(24)                      $41
                                                       ==========  ===========      ========                ==========
Cumulative gap                                             $3,587          $65           $41                       $41
                                                           ======          ===           ===                       ===

Gap as a percentage of total assets                          11.1%       (10.9)%        (0.1)%                     0.1%
                                                             ====        ======         =====                      ===

Cumulative gap as a percentage of total assets               11.1%         0.2%          0.1%                      0.1%
                                                             ====        ======         =====                      ===
</TABLE>

                                    Page 21

<PAGE>

-------------

(1)  Based upon (a) contractual maturity, (b) instrument repricing date, if
     applicable, and (c) projected repayments and prepayments of principal, if
     applicable. Prepayments were estimated generally by using the prepayment
     rates forecast by various large brokerage firms as of March 31, 1998. The
     actual maturity and rate sensitivity of these assets could vary
     substantially if future prepayments differ from the Company's prepayment
     estimates.
(2)  Consists of $58 million of securities held to maturity, $.1 million of
     interest-bearing deposits in other banks and $84 million of short-term
     investment securities.
(3)  As loans held for sale and securities and mortgage-backed securities
     available for sale may be sold within one year, they are considered to be
     maturing within one year.
(4)  Excludes underlying non-performing loans of $6 million.
(5)  Excludes non-performing loans of $1 million.
(6)  Excludes allowance for loan losses of $419 million and non-performing
     loans of $173 million.
(7)  Fixed rate deposits and deposits with a fixed pricing interval are
     reflected as maturing in the year of contractual maturity or first
     repricing date. Money market deposit accounts, demand deposit accounts and
     passbook accounts are reflected as maturing within one year.
(8)  Agreements with notional amounts of $400 million maturing in April 1998
     have no impact within the time periods presented.

     At March 31, 1998, interest-earning assets of the Company exceeded
interest-bearing liabilities by approximately $41 million. At December 31,
1997, interest-earning assets of the Company exceeded interest-bearing
liabilities by approximately $154 million.

     The maturity/rate sensitivity analysis is a static view of the balance
sheet with assets and liabilities grouped into certain defined time periods,
and thus only partially depicts the dynamics of the Company's sensitivity to
interest rate changes. Since it is measured at a single point in time, this
analysis may not fully describe the complexity of relationships between product
features and pricing, market rates and future management of the balance sheet
mix. The Company utilizes computer modeling, under various interest rate
scenarios, to provide a dynamic view of the effects of the changes in rates,
spreads, and yield curve shifts on net interest income.

     The Company's risk management policies are established by the
Asset/Liability Management Committee ("ALCO") of the Bank. ALCO meets monthly
to formulate the Bank's investment and risk management strategies. The basic
responsibilities of ALCO include management of net interest income and market
value of portfolio equity, management of liquidity to provide adequate funding,
and the establishment of asset product priorities by formulating performance
evaluation criteria, risk evaluation techniques and a system to standardize the
analysis and reporting of originations, competitive trends, profitability and
risk. On a quarterly basis, the Board of Directors of the Bank is apprised of
ALCO strategies adopted and their impact on operations, and, at least annually,
the Board of Directors of the Bank reviews the Bank's interest rate risk
management policy statements.

LIQUIDITY

     The standard measure of liquidity in the savings industry is the ratio of
cash and short-term U. S. government securities and other specified securities
to deposits and borrowings due within one year. Effective November 24, 1997,
the OTS established a minimum liquidity requirement for the Bank of 4.00%, a
reduction from 5.00%, which had been in effect prior to that date in 1997 and
1996. California Federal has been in compliance with the liquidity regulations
during 1998 and 1997.

     The Company's funds are obtained from the repayment and maturities of
loans and mortgage-backed securities, customer and Brokered Deposits, loan
sales, securities sold under agreements to repurchase, FHLB advances and other
secured and unsecured borrowings.

     A major source of the Company's funding is expected to be the Bank's
retail deposit branch network, which management believes will be sufficient to
meet its long-term liquidity needs. The ability of the Company to retain and
attract new deposits is dependent upon the variety and effectiveness of its
customer account products, customer service and convenience, and rates paid to
customers. The Company also obtains funds from the repayment and maturities of
loans and mortgage-backed securities, while additional funds can be obtained
from a variety of sources including


                                    Page 22

<PAGE>



customer and Brokered Deposits, loan sales, securities sold under agreements to
repurchase, FHLB advances, and other secured and unsecured borrowings. It is
anticipated that FHLB advances and securities sold under agreements to
repurchase will continue to be important sources of funding, and management
expects there to be adequate collateral for such funding requirements.

     The Company's primary uses of funds are the origination or purchase of
loans, the purchase of mortgage-backed securities, the funding of maturing
certificates of deposit, demand deposit withdrawals, the repayment of
borrowings, and the payment of dividends with respect to the REIT Preferred
Stock and the Bank Preferred Stock. Certificates of deposit scheduled to mature
during the twelve months ending March 31, 1999 aggregate $8.2 billion. The
Company may renew these certificates, attract new replacement deposits, replace
such funds with other borrowings, or it may elect to reduce the size of the
balance sheet. In addition, at March 31, 1998, FN Holdings had securities sold
under agreements to repurchase, FHLB advances and other borrowings aggregating
$8.0 billion maturing within twelve months. The Company may elect to pay off
such debt or to replace such borrowings with additional FHLB advances or other
borrowings at prevailing rates.

     FN Holdings' primary source of cash to pay the interest on and principal
of its long-term debt is expected to be distributions from the Bank. The annual
interest on the Company's long-term debt is $98.4 million. Although FN Holdings
expects that distributions from the Bank will be sufficient to pay interest
when due and the principal amount of its long-term debt at maturity, there can
be no assurance that earnings from the Bank will be sufficient to make such
distributions to FN Holdings. In addition, there can be no assurance that such
distributions will be permitted by the terms of any debt instruments of FN
Holdings' subsidiaries then in effect, by the terms of any class of preferred
stock issued by the Bank, including the REIT Preferred Stock and the Bank
Preferred Stock, or under applicable federal thrift laws.

     The Company anticipates that cash and cash equivalents on hand, the cash
flow from assets as well as other sources of funds will provide adequate
liquidity for its operating, investing and financing needs and the Bank's
regulatory liquidity requirements for the foreseeable future. In addition to
cash and cash equivalents of $464.3 million at March 31, 1998, the Company has
substantial additional borrowing capacity with the FHLB and other sources.

     As presented in the accompanying unaudited consolidated statements of cash
flows, the sources of liquidity vary between periods. The primary sources of
funds during the three months ended March 31, 1998 were net loan repayments of
$521.8 million, proceeds from sales of loans of $1.8 billion, $4.8 billion in
additional borrowings, a $123.4 million net increase in securities sold under
agreements to repurchase, $734.4 million in proceeds from principal payments
and maturities of securities and mortgage-backed securities available for sale
and $201.0 million from a net increase in deposits. The primary uses of funds
were $4.4 billion in principal payments on borrowings, $1.5 billion in
purchases of securities and mortgage-backed securities available for sale, $2.3
billion in originations of loans and $123.7 million in net cash paid for the
GSAC Acquisition.

PROBLEM AND POTENTIAL PROBLEM ASSETS

     The Company considers a loan to be impaired when, based upon current
information and events, it believes it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the
loan agreement. Any insignificant delay (i.e., 60 days or less) or
insignificant shortfall in amount of payments will not cause a loan to be
considered impaired. In determining impairment, the Company considers large
non-homogeneous loans including non-performing loans, troubled debt
restructurings, and performing loans which exhibit, among other
characteristics, high LTV ratios, low debt-coverage ratios or other indications
that the borrowers are experiencing increased levels of financial difficulty.
The Company bases the measurement of collateral-dependent impaired loans on the
fair value of the loan's collateral. The amount, if any, by which the recorded
investment of the loan exceeds the measure of the impaired loan's value is
recognized by recording a valuation allowance.

     At March 31, 1998, the carrying value of loans that are considered to be
impaired totalled $102.2 million (of which $26.1 million were on non-performing
status). The average recorded investment in impaired loans during the three
months ended March 31, 1998 was approximately $103.4 million. For the three
months ended March 31, 1998, FN


                                    Page 23

<PAGE>



Holdings recognized interest income on those impaired loans of $2.0 million,
which included less than $.1 million of interest income recognized using the
cash basis method of income recognition.

     The following table presents the amounts, net of specific allowances for
loan losses and purchase accounting adjustments, of the Company's
non-performing loans, foreclosed real estate, repossessed assets, troubled debt
restructurings and impaired loans as of the dates indicated. These categories
are not mutually exclusive; certain loans are included in more than one
classification.

                                                   March 31, 1998
                                      -------------------------------------
                                      Non-performing  Impaired  Restructured
                                      --------------  --------  ------------
                                                    (in millions)

Real Estate:
     1-4 unit residential                $148          $   --         $ 2
     5+ unit residential                   12              41           7
     Commercial and other                  13              60          34
     Land                                  --              --          --
     Construction                           1               1          --
                                        -----          ------        ----
         Total real estate                174             102          43
Non-real estate                             6              --          --
                                        -----          ------        ----
         Total loans, net                 180          $  102(b)      $43(c)
                                                       ======        ====
Foreclosed real estate, net                76
Repossessed assets                          5
                                        -----
         Total non-performing assets     $261(a)
                                        =====


                                                December 31, 1997
                                      --------------------------------------
                                      Non-performing  Impaired  Restructured
                                      --------------  --------  ------------
                                                    (in millions)
Real Estate:
     1-4 unit residential                $165          $   --         $ 2
     5+ unit residential                   12              43           7
     Commercial and other                   6              67          26
     Land                                  --              --          --
     Construction                           2              --          --
                                        -----          ------        ----
         Total real estate                185             110          35
Non-real estate                             7              --          --
                                        -----          ------        ----
         Total loans                      192          $  110(b)      $35(c)
                                                       ======        ====
Foreclosed real estate, net                77
Repossessed assets                          3
                                        -----
         Total non-performing assets     $272(a)
                                        =====

------------------
(a)  Includes loans securitized with recourse on non-performing status of $5.5
     million and $5.2 million at March 31, 1998 and December 31, 1997,
     respectively, and loans held for sale on non-performing status of $1.1
     million and $1.2 million at March 31, 1998 and December 31, 1997.
(b)  Includes $26.1 million and $18.6 million of loans on non-performing status
     at March 31, 1998 and December 31, 1997, respectively. Also includes $21.3
     million and $17.5 million of loans classified as troubled debt
     restructurings at March 31, 1998 and December 31, 1997, respectively.
(c)  Includes non-performing loans of $2.1 million at March 31, 1998 and
     December 31, 1997. At March 31, 1998 and December 31, 1997, $2.1 million
     and $1.7 million, respectively, of these non-performing troubled debt
     restructurings were also considered impaired.

     There were no accruing loans contractually past due 90 days or more at
March 31, 1998 or December 31, 1997.



                                    Page 24

<PAGE>



     FN Holdings' non-performing assets, consisting of non-performing loans,
net of purchase accounting adjustments, foreclosed real estate, net, and
repossessed assets, decreased to $261 million at March 31, 1998, from $272
million at December 31, 1997. Non-performing assets as a percentage of the
Bank's total assets decreased to .81% at March 31, 1998, from .87% at December
31, 1997.

     FN Holdings, through the Bank, manages its credit risk by regularly
assessing the current and estimated future performance of the real estate
markets in which it operates. The Company continues to place a high degree of
emphasis on the management of its asset portfolio. The Company has three
distinct asset management functions: performing loan asset management, problem
loan asset management and credit review. These three functions are charged with
the responsibility of reducing the risk profile within the residential,
commercial and multi-family asset portfolios by applying asset management and
risk evaluation techniques that are consistent with the Company's portfolio
management strategy and regulatory requirements. In addition to these asset
management functions, the Company has a specialized credit risk management
group that is charged with the development of credit policies and performing
credit risk analyses for all asset portfolios.

     The following table presents non-performing real estate assets by
geographic region of the country as of March 31, 1998:

                                                      Total
                  Non-performing    Foreclosed    Non-performing
                    Real Estate    Real Estate,    Real Estate     Geographic
                   Loans, Net (2)     Net (2)         Assets      Concentration
                   --------------  ------------   --------------  -------------
                                       (dollars in millions)
Region:                           
    California          $108            $49            $157           62.81%
    Northeast (1)         30             13              43           17.19
    Other regions         36             14              50           20.00
                        ----            ---            ----          ------
         Total          $174            $76            $250          100.00%
                        ====            ===            ====          ======
                                                
--------------
(1)  Includes Connecticut, Massachusetts, New Hampshire, New Jersey, New York,
     Pennsylvania, Rhode Island and Delaware.
(2)  Net of purchase accounting adjustments and specific allowances for losses.

     At March 31, 1998, the Company's largest non-performing asset was
approximately $5.4 million, and it had three non-performing assets over $2
million in size with balances averaging approximately $4.4 million. The Company
has 2,116 non-performing assets below $2 million in size, including 2,017
non-performing 1-4 unit residential assets.




                                    Page 25

<PAGE>



     A summary of the activity in the allowance for loan losses by loan type is
as follows for the three months ended March 31, 1998:

                                               5+ Unit
                                             Residential
                                1-4 Unit   and Commercial  Consumer
                              Residential    Real Estate   and Other    Total
                              -----------  --------------  ---------    -----
                                           (dollars in millions)

Balance - December 31, 1997       $202          $198          $ 19       $419
     Provision for loan losses       6             3             1         10
     Charge-offs                    (8)           (1)           (3)       (12)
     Recoveries                      1            --             1          2
                                  ----          ----          ----       ----
Balance - March 31, 1998          $201          $200           $18       $419
                                  ====          ====          ====       ====
                                                         
     The ratio of allowance for loan losses to non-performing loans at March
31, 1998 and December 31, 1997 was 232.9% and 217.8%, respectively.

MORTGAGE BANKING OPERATIONS

     Since 1994, the Company, through the Bank's wholly owned mortgage bank
subsidiary, First Nationwide Mortgage Corporation ("FNMC"), has significantly
expanded its mortgage banking operations. During May 1997 and January 1998,
FNMC acquired mortgage servicing assets of $3.2 billion and $3.6 billion,
respectively, as a result of four bulk servicing acquisitions. With the
consummation of the 1997 and 1998 bulk acquisitions, a 1997 servicing sale of
loans with an unpaid principal balance of $2.3 billion, the acquisition of
additional 1-4 unit residential loan servicing portfolios in the Cal Fed
Acquisition and the originated servicing, the 1-4 unit residential loans
serviced for others totalled $46.7 billion at March 31, 1998, an increase of
$.1 billion and a decrease of $.8 billion from December 31, 1997 and March 31,
1997, respectively. During the three months ended March 31, 1998, the Company,
through FNMC, originated $2.3 billion and sold (generally with servicing
retained) $1.8 billion 1-4 unit residential loans. Gross revenues from mortgage
loan servicing activities for the three months ended March 31, 1998 totalled
$59.6 million, a decrease of $.9 million from the three months ended March 31,
1997.

     A decline in long-term interest rates generally results in an acceleration
of mortgage loan prepayments. Higher than anticipated levels of prepayments
generally cause the accelerated amortization of mortgage servicing rights
("MSRs"), and generally will result in a reduction in the market value of MSRs
and in the Company's servicing fee income. To reduce the sensitivity of its
earnings to interest rate and market value fluctuations, the Company hedged the
change in value of its MSRs based on changes in interest rates ("MSR Hedge").

     At March 31, 1998, the Company, through FNMC, was a party to several
interest rate floor contracts maturing from October 2001 through June 2002. The
Company paid counterparties a premium in exchange for cash payments in the
event that the 10-year Constant Maturity Treasury rate falls below negotiated
strike prices. At March 31, 1998, the notional amount of the interest rate
floors was $1.4 billion and the strike prices were between 5.5% and 6.5%. In
addition, the Company, through FNMC, was a party to principal-only swap
agreements related to principal-only securities and prepayment-linked swap
agreements with a remaining notional amount of $113.1 million and $1.3 billion,
respectively. The estimated market values of interest rate floor contracts and
swaps designated as hedges against MSRs at March 31, 1998 were $24.1 million
and $16.9 million, respectively.




                                    Page 26

<PAGE>



     The following is a summary of activity in MSRs and the MSR Hedge for the
three months ended March 31, 1998 (in thousands):

<TABLE>
<CAPTION>
                                                                                                Total MSR
                                                                         MSRs     MSR Hedge      Balance
                                                                         ----     ---------     ---------
<S>                                                                    <C>           <C>         <C>     
Balance at December 31, 1997                                           $531,269      $5,434      $536,703
     Additions - bulk purchases                                          57,495          --        57,495
     Originated servicing                                                38,978          --        38,978
     Additions - other                                                    7,633          --         7,633
     Additions to MSR Hedge                                                  --      13,478        13,478
     Payments received under interest rate floor contracts                   --      (3,550)       (3,550)
     Net payments made under principal-only swap agreements                  --         381           381
     Net payments made under futures contracts                               --       1,654         1,654
     Amortization                                                       (25,750)     (1,468)      (27,218)
                                                                       -------      ------       --------
Balance at March 31, 1998                                              $609,625     $15,929      $625,554
                                                                       ========     =======      ========
</TABLE>

     Capitalized mortgage servicing rights are amortized in proportion to, and
over the period of, estimated future net servicing income. SFAS No. 125
requires enterprises to measure the impairment of servicing rights based on the
difference between the carrying amount of the servicing rights and their
current fair value. At March 31, 1998 and December 31, 1997, no allowance for
impairment of the mortgage servicing rights was necessary.

CAPITAL RESOURCES

     OTS capital regulations require savings associations to satisfy three
minimum capital requirements: tangible capital, core (leverage) capital and
risk-based capital. In general, an association's tangible capital, which must
be at least 1.5% of adjusted total assets, is the sum of common stockholders'
equity (including retained earnings), noncumulative perpetual preferred stock
and minority interest in equity accounts of fully consolidated subsidiaries,
less disallowed intangibles. An association's ratio of core capital to adjusted
total assets (the "core capital ratio") must be at least 4%, recently amended
from 3% which had been in effect prior to March 1998. Core capital generally is
the sum of tangible capital plus certain qualifying intangibles. Under the
risk-based capital requirement, a savings association must have total capital
(core capital plus supplementary capital) equal to at least 8% of risk-weighted
assets (which equals assets plus the credit risk equivalent of certain
off-balance sheet items, each multiplied by the appropriate risk weight).
Supplementary capital, which may not exceed 100% of core capital for purposes
of the risk-based requirements, includes, among other things, certain permanent
capital instruments such as qualifying cumulative perpetual preferred stock, as
well as some forms of term capital instruments, such as qualifying subordinated
debt. The capital requirements are viewed as minimum standards by the OTS, and
most associations are expected to maintain capital levels well above the
minimum. In addition, the OTS regulations provide that minimum capital levels
higher than those provided in the regulations may be established by the OTS for
individual savings associations, depending upon their particular circumstances.
The Bank is not subject to any such individual minimum regulatory capital
requirement. These capital requirements are applicable to the Bank but not to
FN Holdings.




                                    Page 27
<PAGE>



     At March 31, 1998, the Bank's regulatory capital levels exceeded the
minimum regulatory capital requirements, with tangible, core and risk-based
capital ratios of 5.53%, 5.53% and 11.70%, respectively. The following is a
reconciliation of the Bank's stockholders' equity to regulatory capital as of
March 31, 1998:

                                                  Tangible   Core    Risk-based
                                                   Capital  Capital    Capital
                                                  --------  -------  ----------
                                                      (dollars in millions)
Stockholders' equity of the Bank at
     March 31, 1998                               $ 2,261   $ 2,261   $ 2,261
Minority interest - REIT Preferred Stock              500       500       500
Unrealized holding gain on securities available 
     for sale, net                                    (31)      (31)      (31)
Non-qualifying MSRs                                   (62)      (62)      (62)
Non-allowable capital:
     REIT Preferred Stock in excess of 25% of
         Tier 1 capital                               (70)      (70)      (70)
     Intangible assets                               (670)     (670)     (670)
     Goodwill Litigation Asset                       (100)     (100)     (100)
     Investment in subsidiaries                       (53)      (53)      (53)
     Excess deferred tax asset                        (53)      (53)      (53)
Supplemental capital:
     Qualifying subordinated debt debentures           --        --        94
     General loan loss allowance                       --        --       219
Assets required to be deducted:
     Low level recourse deduction                      --        --        (2)
     Land loans with more than 80% LTV ratio           --        --        (3)
                                                   ------   -------   -------
Regulatory capital of the Bank                      1,722     1,722     2,030
Minimum regulatory capital requirement                467     1,246     1,388
                                                   ------   -------   -------
Excess above minimum capital requirement           $1,255   $   476   $   642
                                                   ======   =======   =======


Regulatory capital of the Bank                       5.53%     5.53%    11.70%
Minimum regulatory capital requirement               1.50      4.00      8.00
                                                   ------   -------   -------
Excess above minimum capital requirement             4.03%     1.53%     3.70%
                                                   ======   =======   =======


     The amount of adjusted total assets used for the tangible and core capital
ratios is $31.1 billion. Risk-weighted assets used for the risk-based capital
ratio amounted to $17.4 billion.

     The Bank is also subject to the "prompt corrective action" standards
prescribed in the FDICIA and related OTS regulations, which, among other
things, define specific capital categories based on an association's capital
ratios. The capital categories, in declining order, are "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized." Associations categorized as
"undercapitalized" or worse are subject to certain restrictions, including the
requirement to file a capital plan with the OTS, prohibitions on the payment of
dividends and management fees, restrictions on executive compensation, and
increased supervisory monitoring, among other things. Other restrictions may be
imposed on the association either by the OTS or by the FDIC, including
requirements to raise additional capital, sell assets, or sell the entire
association. Once an association becomes "critically undercapitalized" it is
generally placed in receivership or conservatorship within 90 days.




                                    Page 28

<PAGE>



     To be considered "well capitalized," a savings association must generally
have a leverage capital ratio of at least 5.00%, a Tier 1 (core capital)
risk-based capital ratio of at least 6.00%, and a total risk-based capital
ratio of at least 10.00%. An association is deemed to be "critically
undercapitalized" if it has a tangible equity ratio of 2.00% or less. At March
31, 1998, the Bank's capital levels were sufficient for it to be considered
"well capitalized:"
                                                              Risk-based
                                        Leverage       -----------------------
                                         Capital       Tier 1    Total Capital
                                        --------       ------    -------------
Regulatory capital of the Bank            5.53%         9.92%        11.70
Well capitalized ratio                    5.00          6.00         10.00
                                          ----         ------        -----
Excess above well capitalized ratio       0.53%         3.92%         1.70%
                                          ====         ======        =====


     OTS capital regulations allow a savings association to include a net
deferred tax asset in regulatory capital, subject to certain limitations. To
the extent that the realization of a deferred tax asset depends on a savings
association's future taxable income, such deferred tax asset is limited for
regulatory capital purposes to the lesser of the amount that can be realized
within one year or 10 percent of core capital. At March 31, 1998, $53 million
of the net tax benefit was determined to be attributable to the amount of
taxable income that may be realized in periods beyond one year. Accordingly,
such amount has been excluded from regulatory capital at March 31, 1998.

DISCLOSURES ABOUT MARKET RISK

     There have been no material changes in reported market risks faced by the
Company since the Company's report in ITEM 7A of its Form 10-K for the year
ended December 31, 1997.




                                    Page 29

<PAGE>



                          PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     FN Holdings and California Federal are involved in legal proceedings on
claims incidental to the normal conduct of its business. Although it is
impossible to predict the outcome of any outstanding legal proceedings,
management believes that such legal proceedings and claims, individually or in
the aggregate, will not have a material effect on the financial condition or
results of operations of the Company.

     In addition to legal proceedings within the normal course of business, the
Bank is the plaintiff in a claim against the United States in the lawsuit,
California Federal Bank v. United States, Civil Action No. 92-138C (the
"California Federal Litigation"). In the California Federal Litigation, the
Bank alleges, among other things, that the United States breached certain
contractual commitments regarding the computation of its regulatory capital for
which the Bank seeks damages and restitution. The Bank's claims arose from
changes, mandated by the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), with respect to the rules for computing Old
California Federal's regulatory capital.

     On July 1, 1996, the United States Supreme Court issued its opinion for
United States v. Winstar Corporation, No. 95-865, which affirmed the decisions
of the United States Court of Appeals for the Federal Circuit and the United
States Court of Federal Claims in various consolidated cases (the "Winstar
Cases") granting summary judgment to the plaintiff thrift institutions on the
liability portion of their breach of contract claims against the United States.
The Supreme Court held that the government breached certain express contracts
when Congress enacted FIRREA, and the Supreme Court remanded the proceedings
for a determination of the appropriate measure and amount of damages, which to
date have not been awarded.

     On October 30, 1996, Old California Federal filed a motion for partial
summary judgment as to the Federal government's liability to the Bank for
breach of contract, which was opposed by the Federal government in briefs filed
on December 30, 1996 and February 27, 1997. In addition, the government filed a
cross-motion for partial summary judgment as to certain liability issues on
December 30, 1996. A hearing on the motions for partial summary judgment on
liability was held on August 7, 1997. On December 22, 1997, a U.S. Claims Court
Judge ruled in favor of this motion to establish the government's liability.
The trial of the damages phase of the Bank's case is expected to begin in early
1999.

     In connection with the Cal Fed Acquisition, the Company recorded as an
asset part of the estimated after-tax cash recovery from the California Federal
Litigation that will inure to the Company, net of amounts payable to holders of
the Litigation Interests and the Secondary Litigation Interests in any such
recovery (the "Goodwill Litigation Asset"). The Goodwill Litigation Asset was
recorded at its estimated fair value of $100 million, net of estimated tax
liabilities, as of January 3, 1997, and is included in the consolidated balance
sheets as of March 31, 1998 and December 31, 1997.

ITEM 2.  CHANGES IN SECURITIES.

     None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

     None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.



                                    Page 30

<PAGE>



ITEM 5.  OTHER INFORMATION.

     None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits:

         3.1      Fifth Restated Certificate of Incorporation of the
                  Registrant. (Incorporated by reference to Exhibit 3.1 to
                  Amendment No. 1 to the Registrant's Registration Statement on
                  Form S-1 (File No. 333- 21015)).

         3.2      By-laws of the Registrant, as amended. (Incorporated by
                  reference to Exhibit 3.2 to Amendment No. 1 to the
                  Registrant's Registration Statement on Form S-1 (File No.
                  333-21015)).

         10.1     Asset Purchase and Sale Agreement between California Federal
                  Bank, A Federal Savings Bank and Union Planters Bank of
                  Florida dated March 29, 1998.

         27.1     Financial Data Schedule

     (b) Reports on Form 8-K:

         During the quarter ended March 31, 1998, the Company made one filing
         on Form 8-K:

         1.       Form 8-K dated February 4, 1998, and filed on February 17,
                  1998 (as amended by Form 8-K/A filed on March 6, 1998)
                  reporting on Item 5, "Other Events" and Item 7, "Financial
                  Statements, Pro Forma Financial Information and Exhibits."
                  This filing reported that FN Holdings entered into an
                  agreement and plan of reorganization with Parent Holdings,
                  First Gibraltar Holdings Inc., Hunter's Glen/Ford Ltd.,
                  Golden State Bancorp Inc. and Golden State Financial
                  Corporation, providing for the merger of Parent Holdings with
                  and into Golden State and the merger of FN Holdings with and
                  into Golden State Financial. The agreement also contemplates
                  that immediately following the mergers, Glendale Federal Bank
                  will merge with and into California Federal.



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<PAGE>




                                   SIGNATURES


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


                                          First Nationwide Holdings Inc.


                                               /s/ Laurence Winoker
                                          -------------------------------------
                                          By:  Laurence Winoker
                                               Vice President and Controller

                                               (Signing on behalf of the 
                                               Registrant and as the
                                               Principal Accounting Officer)




May 14, 1997



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