HomeSide

Selected Consolidated Financial Data

The selected consolidated financial and operating information of HomeSide
set forth below is for the periods from March 1, 1997 to February 10, 1998
and March 16, 1996 to February 28, 1997 and should be read in conjunction
with, and is qualified in its entirety by reference to, the Consolidated
Financial Statements and the Notes thereto and in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of HomeSide included elsewhere in this document.

                                         For the Period From For the Period From
                                           March 1, 1997 to   March 16, 1996 to
                                             February 10,        February 28,
(In Thousands, Except Share Data)                1998                1997
                                         ------------------- -------------------
Selected Statement of Income Data:
Revenues:
  Mortgage servicing fees                        $   398,159         $  312,341
  Amortization of mortgage servicing rights         (210,200)          (155,827)
    Net servicing revenue                            187,959            156,514
  Interest income                                     97,050             81,507
  Interest expense                                   (97,028)           (87,700)
    Net interest revenue                                  22             (6,193)
  Net mortgage origination revenue                    85,206             66,073
  Other income                                         1,671                682
      Total revenues                                 274,858            217,076
Expenses:
  Salaries and employee benefits                      75,419             72,976
  Occupancy and equipment                             15,447             11,770
  Servicing losses on investor-owned loans and
    foreclosure-related expenses                      21,974             17,934
  Other expenses                                      39,415             41,714
      Total expenses                                 152,255            144,394
Income before provision for income taxes and
  extraordinary loss                                 122,603             72,682
Provision for income taxes                            47,816             29,273
Income before extraordinary loss                      74,787             43,409
Extraordinary loss (Note 9)                                -              6,440
Net income                                       $    74,787        $    36,969
Per Share Data (diluted):
Net income per share before extraordinary loss   $      1.69        $      1.33
Weighted average shares outstanding               44,365,823         32,687,780
Selected Balance Sheet Data at Period End:
Mortgage loans held for sale                     $ 1,292,403        $   805,274
Mortgage servicing rights                          1,781,134          1,614,307
Total assets                                       3,883,603          2,752,182
Bank credit facility                               2,074,956          1,818,503
Long-term debt                                       900,466            151,128
Total liabilities                                  3,294,470          2,239,886
Total stockholders' equity                           589,133            512,296
Selected Operating Data:
Volume of loan production                        $20,529,531        $20,877,535
Loan servicing portfolio (at period end)          99,956,050         90,192,247
Loan servicing portfolio
  (average outstanding during the period)         96,083,220         75,692,214
Weighted average interest rate of
  the servicing portfolio (at period end)               7.85%              7.92%
Weighted average servicing fee of the servicing 
  portfolio, including ancillary income 
  (during the period)                                  0.439%             0.431%



Management's Discussion and Analysis of Financial Condition and Results of
Operations

For the period from March 1, 1997 to February 10, 1998 and for the period
from March 16, 1996 to February 28, 1997

General

HomeSide, Inc., through its wholly-owned operating subsidiary HomeSide
Lending, Inc., is one of the largest full service residential mortgage
banking companies in the United States, formed through the acquisition of
the mortgage banking operations of BankBoston, N.A., formerly known as The
First National Bank of Boston ("BankBoston"), and Barnett Banks, Inc.
("Barnett"). HomeSide's strategy emphasizes variable cost mortgage loan
originations, low cost mortgage servicing and effective risk management.
Headquartered in Jacksonville, Florida, HomeSide ranks as the 5th largest
mortgage loan originator and the 6th largest servicer in the United States
for the twelve months ended December 31, 1997 based on data published by
Inside Mortgage Finance.

HomeSide plans to build its core operations through (i) improved economies
of scale in servicing costs; (ii) increased productivity using proprietary
technology; and (iii) expanded and diversified variable cost origination
channels. In addition, HomeSide intends to pursue additional loan portfolio
acquisitions and strategic origination relationships similar to the
existing BankBoston and Barnett arrangements (see Note 4).
On February 10, 1998, National Australia Bank Limited (the "National")
acquired all outstanding shares of common stock of HomeSide, Inc. for
$27.825 per share or approximately $1.2 billion. Following this
transaction, the National owns 100% of the registrant's common stock and
HomeSide, Inc. is an indirect wholly-owned subsidiary of the National.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. This report contains
forward-looking statements, which reflect the Company's current views with
respect to future events and financial performance. These forward-looking
statements are subject to certain risks and uncertainties, including those
identified below, which could cause actual results to differ materially
from historical results or those anticipated. The words "believe,"
"expect," "anticipate," "intend," "estimate" and other expressions, which
indicate future events and trends, identify forward-looking statements,
which speak only as of their dates. The Company undertakes no obligation to
publicly update or revise any forward-looking statements whether as a
result of new information, future events or otherwise. The following
factors could cause actual results to differ materially from historical
results or those anticipated: (1) the Company's ability to grow which is
dependent on its ability to obtain additional financing in the future for
originating loans, investment in servicing rights, working capital, capital
expenditures and general corporate purposes, (2) economic factors may
negatively affect the Company's profitability as the frequency of loan
default tends to increase in such environments and (3) changes in interest
rates may affect the volume of loan originations and acquisitions, the
interest rate spread on loans held for sale, the amount of gain or loss on
the sale of loans and the value of the Company's servicing portfolio. These
risks and uncertainties are more fully detailed in the Company's filings
with the Securities and Exchange Commission.

Mortgage Banking

Mortgage banking is a specialized branch of the financial services industry
which primarily involves (i) originating and purchasing mortgage loans
("origination" and/or "production"); (ii) selling the originated mortgages
to third parties either as mortgage-backed securities or as whole loans
("secondary marketing"); (iii) servicing of mortgage loans on behalf of the
ultimate purchasers, which includes the collection and disbursement of
payments of mortgage principal and interest, the collection of payments of
taxes and insurance premiums to pay property taxes and insurance premiums
and management of certain loan default activities (collectively,
"servicing"); and (iv) risk management, a program primarily designed to
protect the economic performance of the servicing portfolio that could
otherwise be adversely affected by increased loan prepayments due to
declines in interest rates.

Mortgage bankers originate loans generally through two channels: wholesale
and direct. Wholesale origination involves the origination of mortgage
loans from sources other than homeowners, including mortgage brokers and
other mortgage lenders. Direct origination typically includes (i) networks
of retail loan offices with sales staff that solicit business from
homeowners, realtors, builders and other real estate professionals, (ii)
centers that use telemarketing, direct mail, and advertising to market
loans directly to home buyers or homeowners, (iii) affinity and co-branding
partnerships and (iv) corporate relocation programs. Once originated or
purchased, mortgage bankers hold the loans temporarily ("warehousing")
until they are sold, typically earning an interest spread equal to the
difference between the loan's interest rate and the cost of financing the
loan. Each loan is sold either excluding or including the associated right
to service the loan ("servicing retained" or "servicing released,"
respectively).

Mortgage bankers rely mainly on short-term borrowings, such as warehouse
lines, to finance the origination of mortgages that are sold. Mortgage
bankers also borrow on a longer termbasis to finance their servicing assets
and working capital requirements. Revenues consist primarily of those
related to servicing and, to a lesser extent, fees and interest spreads
from originations. The major expenses of a mortgage banker include costs of
financing, operating costs related to origination and servicing and the
amortization of mortgage servicing rights.

Mortgage bankers typically seek to retain the rights to service the loans
they originate or acquire in order to generate recurring fee income. The
purchase and sale of servicing rights can occur on a loan-by-loan basis
("flow") or on a portfolio (group of loans) basis ("bulk" or "mini-bulk").
Prices for servicing rights are typically stated as a multiple of the
servicing fee or as a percentage of the outstanding unpaid principal
balance for a group of mortgage loans. Values of servicing portfolios are
generally based on the present value of the servicing fee income stream,
net of servicing costs, expected to be received over the estimated life of
the loans. The assets of a mortgage banking company consist primarily of
mortgage loans held for sale and the value of the servicing rights.

Loan Production Activities

As a multi-channel loan production lender, HomeSide has one of the
industry's largest correspondent lending production operations, a
full-service brokered loan program and a national production center for
consumer direct mortgage lending. By focusing on production channels with a
variable cost structure, HomeSide eliminates the fixed costs associated
with traditional mortgage branch offices. Without the burden of high fixed
cost loan origination networks, HomeSide is positioned to weather a variety
of interest rate environments.

The following information regarding loan production activities for HomeSide
is presented to aid in understanding the results of operations and
financial condition of HomeSide for the period from March 1, 1997 to
February 10, 1998 and for the period from March 16, 1996 to February 28,
1997 (in millions):
                                        For the           For the
                                      Period From       Period From
                                     March 1, 1997     March 16, 1996
                                    to February 10,   to February 28,
                                          1998              1997
Correspondent                           $13,304           $11,113
Co-issue                                  5,584             8,222
Broker                                    1,305               843
Total wholesale                          20,193            20,178
Consumer Direct                             337               700
Total production                         20,530            20,878
Bulk acquisitions                         3,446             4,073
Total production and acquisitions       $23,976           $24,951

Total loan production, excluding bulk acquisitions, was $20.5 billion for
the period from March 1, 1997 to February 10, 1998, relatively equal to the
period from March 16, 1996 to February 28, 1997. HomeSide also purchased
bulk servicing acquisitions of $3.4 billion and $4.1 billion during the
period from March 1, 1997 to February 10, 1998 and the period from March
16, 1996 to February 28, 1997, respectively.

HomeSide continues to examine a number of ways to diversify and grow
revenue sources from its existing and new customer base. As part of this
effort, HomeSide has announced an alliance with a subprime lender, which
allows HomeSide to offer additional mortgage-related products to the
production network. HomeSide then sells the loans, servicing released, to
its strategic partners. The subprime lending unit began operations in
January 1998.

Servicing Portfolio

Management believes that HomeSide is one of the most efficient mortgage
loan servicers in the industry based on its servicing cost per loan and the
number of loans serviced per employee. The servicing operation makes
extensive use of state-of-the-art technology, process re-engineering and
expense management. With a portfolio size of $100 billion, HomeSide
services the loans of approximately 1.2 million homeowners from across the
United States and is committed to protecting the value of this important
asset by a sophisticated risk management strategy. HomeSide anticipates its
low cost of servicing loans will continue to maximize the bottom-line
impact of its growing servicing portfolio. HomeSide's focus on efficient
and low cost processes is pursued through the selective use of automation
as well as the strategic outsourcing of selected servicing functions and
effective control of delinquencies and foreclosures.

The following information on the dollar amounts of loans serviced is
presented to aid in understanding the results of operations and financial
condition of HomeSide for the period from March 1, 1997 to February 10,
1998 and for the period from March 16, 1996 to February 28, 1997 (in
millions):
                                        For the           For the
                                      Period From       Period From
                                     March 1, 1997     March 16, 1996
                                     to February 10,   to February 28,
                                          1998              1997
Balance at beginning
  of period                             $90,192           $42,907
Acquisition of
  Barnett Mortgage
  Company                                     -            33,082
Other additions                          23,976            25,252
  Total additions                        23,976            58,334
Scheduled amortization                    2,038             1,822
Prepayments                              11,097             6,226
Foreclosures                                682               514
Sales of servicing                          395             2,487 (a)
  Total reductions                       14,212            11,049
Balance at end of period                $99,956           $90,192

(a) Includes $1.9 billion of servicing sold as part of the sale of
Honolulu Mortgage Company.

The number of loans serviced at February 10, 1998 was 1,185,241, compared
to 1,087,336 at February 28, 1997. HomeSide's strategy is to build its
mortgage servicing portfolio by concentrating on variable cost loan
origination strategies, and as a result, benefit from improved economies of
scale. A key to HomeSide's future growth is the proprietary servicing
software purchased from Barnett. This system will allow HomeSide to double
the number of loans serviced on a single system. During the period from
March 1, 1997 to February 10, 1998, HomeSide transferred approximately
210,000 of the loans serviced to its proprietary servicing software. After
the transfer, over half the servicing portfolio is serviced on the
proprietary system. The transfer of the remaining portfolio is expected to
occur by the end of calendar 1998.

Results of Operations

For the period from March 1, 1997 to February 10, 1998 compared to the
period from March 16, 1996 to February 28, 1997

Summary

HomeSide's net income increased 102% to $74.8 million for the period from
March 1, 1997 to February 10, 1998 from $37.0 million for the period from
March 16, 1996 to February 28, 1997. Total revenues for the period from
March 1, 1997 to February 10, 1998 increased 27% to $274.9 million from
$217.1 million for the period from March 16, 1996 to February 28, 1997. The
increases in net income and revenues for the period from March 1, 1997 to
February 10, 1998 compared to the period from March 16, 1996 to February
28, 1997 were primarily attributable to the acquisition of Barnett Mortgage
Company ("BMC") on May 31, 1996 and increases of $31.4 million in net
servicing revenue, $19.1 million in net mortgage origination revenue and
$6.2 million in net interest revenue. The BMC servicing portfolio was $33.1
billion at May 31, 1996. Its acquisition increased HomeSide's servicing
portfolio by 75% on that date, and was a major factor in the increase in
net servicing revenue. In addition, subsequent increases in the size of the
servicing portfolio contributed to the increased revenue. The servicing
portfolio increased to $100.0 billion at February 10, 1998 from $90.2
billion at February 28, 1997, an 11% increase. As part of the BMC
acquisition, Barnett agreed to sell HomeSide the loans produced by the loan
production networks retained by Barnett, which contributed to the increase
in net mortgage origination revenue. Net interest revenue increased
primarily because of lower borrowing costs resulting from the lower
interest rate environment during the period ending February 10, 1998,
improved terms for the bank line of credit and the issuance of medium-term
notes. The Company's improved credit ratings lowered the cost of borrowing
under the bank line of credit and enabled HomeSide to issue publicly traded
notes, which expanded borrowing capacity.

Net Servicing Revenue

Net servicing revenue was $188.0 million for the period from March 1, 1997
to February 10, 1998 compared to $156.5 million for the period from March
16, 1996 to February 28, 1997. Net servicing revenue is comprised of
mortgage servicing fees, ancillary servicing revenue, and amortization of
mortgage servicing rights expense.

Mortgage servicing fees increased 27% to $398.2 million for the period from
March 1, 1997 to February 10, 1998 from $312.3 million for the period from
March 16, 1996 to February 28,1997, primarily as a result of the BMC
acquisition and growth of the servicing portfolio through loan production
channels and bulk servicing acquisitions. The servicing portfolio increased
to $100.0 billion at February 10, 1998 compared to $90.2 billion at
February 28, 1997. HomeSide's weighted average interest rate of the
mortgage loans in the servicing portfolio was 7.85% at February 10, 1998
and 7.92% at February 28, 1997. The weighted average servicing fee,
including ancillary income, for the servicing portfolio was 0.439% and
0.431% for the period from March 1, 1997 to February 10, 1998 and the
period from March 16, 1996 to February 28, 1997, respectively. The increase
in the weighted average servicing fee for the period from March 1, 1997 to
February 10, 1998 compared to the period from March 16, 1996 to February
28, 1997 was due to growth of ancillary revenues, including late fees and
other mortgage-related products.

Amortization expense increased to $210.2 million for the period March 1,
1997 to February 10, 1998 from $155.8 million for the period from March 16,
1996 to February 28, 1997 mainly as a result of a higher average balance of
mortgage servicing rights and a decrease of 86 basis points in average
mortgage interest rates from the period from March 16, 1996 to February 28,
1997 to the period from March 1, 1997 to February 10, 1998. Amortization
charges are highly dependent upon the level of prepayments during the
period and changes in prepayment expectations, which are significantly
influenced by the direction and level of long-term interest rate movements.
A decrease in mortgage interest rates results in an increase in prepayment
estimates used in calculating periodic amortization expense. Because
mortgage servicing rights are amortized over the expected period of service
fee revenues, an increase in mortgage prepayment activity typically results
in a shorter estimated life of the mortgage servicing assets and,
accordingly, higher amortization expense.

Net Interest Revenue

Net interest revenue is driven by the level of interest rates, the
direction in which rates are moving and the spread between short and
long-term interest rates. These factors influence the size of the
residential mortgage origination market, HomeSide's loan production volumes
and the interest rates HomeSide earns on loans and pays to its lenders.
Loan refinancing levels are the largest contributor to changes in the size
of the mortgage origination market. To reduce the cost of their home
mortgages, borrowers tend to refinance their loans during periods of
declining interest rates, increasing the size of the origination market and
HomeSide's loan production volumes. Higher loan production volumes resulted
in higher average balances of loans held for sale and consequently higher
levels of interest income earned on such loans prior to their sale. This
higher level of interest income due to increased volumes is partially
offset by the lower rates earned on the loans.

Overall borrowing costs also fluctuate with changes in interest rates.
Currently, the interest expense HomeSide pays to finance mortgage loans
held for sale and other net assets is generally calculated with reference
to short-term interest rates. In addition, because mortgage loans held for
sale earn interest based on longer term interest rates, the level of net
interest revenue is also influenced by the spread between long-term and
short-term interest rates.

Net interest revenue increased $6.2 million for the period from March 1,
1997 to February 10, 1998 to $0.02 million from ($6.2) million for the
period from March 16, 1996 to February 28, 1997, primarily due to improved
funding rates obtained through improved credit ratings, the issue of
medium-term notes and the adoption of an early pool buyout program. During
the period from March 1, 1997 to February 10, 1998, HomeSide's primary
operating subsidiary, HomeSide Lending, Inc. issued $750.0 million of
medium-term notes to the public market at an average cost of 6.251% as of
February 10, 1998. The proceeds were used to pay down existing bank debt,
increasing HomeSide's borrowing capacity. An immediate benefit of this
increased borrowing capacity was the initiation of an early pool buyout
program, which involves the purchase of delinquent government loans from
pools early in the foreclosure process, thereby reducing the unreimbursed
interest expense that HomeSide incurs.

Interest income increased from the period from March 16, 1996 to February
28, 1997 to the period from March 1, 1997 to February 10, 1998, primarily
as a result of an increase of $246.6 million in the average balance of
loans held for sale. Interest expense increased from the period from March
16, 1996 to February 28, 1997 to the period from March 1, 1997 to February
10, 1998 as a result of increased borrowings to fund growth of the
servicing portfolio and loan origination activity. These expenses were
offset by an increase in credits received on borrowings as a result of
higher average balances of custodial deposits.

Net Mortgage Origination Revenue

Net mortgage origination revenue is comprised of fees earned on the
origination of mortgage loans, gains and losses on the sale of loans, gains
and losses resulting from hedging of secondary marketing activities and
fees charged to review loan documents for purchased loan production.
Net mortgage origination revenue was $85.2 million for the period from
March 1, 1997 to February 10, 1998 compared to $66.1 million for the period
from March 16, 1996 to February 28, 1997, a 29% increase. The increase in
net mortgage origination revenue during the period from March 1, 1997 to
February 10, 1998 as compared to the period from March 16, 1996 to February
28, 1997 is due in part to an increase in loan production volumes resulting
from the preferred seller relationships with Barnett and BankBoston and
HomeSide's broker and correspondent lending channels. The increase also
reflects larger gains from secondary marketing activities.

Salaries and Employee Benefits

Salaries and employee benefits expense was $75.4 million for the period
from March 1, 1997 to February 10, 1998 compared to $73.0 million for the
period from March 16, 1996 to February 28, 1997 due to growth in the number
of employees as a result of the purchase of the BMC mortgage servicing
operations acquired on May 31, 1996. The average number of full-time
equivalent employees increased to 1,805 for the period from March 1, 1997
to February 10, 1998 from 1,593 for the period from March 16, 1996 to
February 28, 1997.

Occupancy and Equipment Expense

Occupancy and equipment expense primarily includes rental expense, repairs
and maintenance costs, certain computer software expenses and depreciation
of HomeSide's premises and equipment. Occupancy and equipment expense for
the period from March 1, 1997 to February 10, 1998 was $15.4 million
compared to $11.8 million for the period from March 16, 1996 to February
28, 1997. The increase in expense was mainly due to increases in the costs
of information systems required to handle the growing mortgage servicing
portfolio.

Servicing Losses on Investor-Owned Loans and Foreclosure-Related Expenses

Servicing losses on investor-owned loans represent anticipated losses
primarily attributable to servicing FHA and VA loans for investors. These
amounts include actual losses for final disposition of loans,
non-recoverable foreclosure costs, accrued interest for which payment has
been denied and estimates for potential losses based on HomeSide's
experience as a servicer of government loans.

During the period from March 1, 1997 to February 10, 1998, the servicing
losses on investor-owned loans and foreclosure-related expenses totaled
$22.0 million compared to $17.9 million for the period from March 16, 1996
to February 28, 1997. The increase was largely attributable to the growth
of the servicing portfolio resulting from loan production and increased
foreclosure losses.

Included in accounts payable and accrued liabilities at February 10, 1998
and February 28, 1997 is a reserve for estimated servicing losses on
investor-owned loans of $21.7 million. The reserve has been established for
potential losses related to the mortgage servicing portfolio. Increases to
the reserve are charged to earnings as servicing losses on investor-owned
loans. The reserve is decreased for actual losses incurred related to the
mortgage servicing portfolio. HomeSide's historical loss experience on VA
loans generally has been consistent with industry experience. Management
believes that HomeSide has an adequate level of reserve based on servicing
volume, portfolio composition, credit quality and historical loss rates, as
well as estimated future losses. Servicing portfolio delinquencies
increased from prior year due to an increased delinquency trend throughout
the industry.

The following table sets forth HomeSide's delinquency and foreclosure
experience:
Servicing Portfolio Delinquencies
(Percent by Loan Count)
                                             February 10,      February 28,
                                                 1998              1997
Servicing Portfolio Delinquencies,
  excluding bankruptcies(at end of period)
30 days                                           3.52%             3.27%
60 days                                           0.78%             0.69%
90+ days                                          0.72%             0.54%
  Total past due                                  5.02%             4.50%
Foreclosures pending                              0.74%             0.72%

Other Expenses

Other expenses consist mainly of professional fees, communications expense,
advertising and public relations, data processing expenses and certain loan
origination expenses. The level of other expenses fluctuates in part based
upon the level of HomeSide's mortgage servicing portfolio and loan
production volumes.

Other expenses during the period from March 1, 1997 to February 10, 1998
were $39.4 million, compared to $41.7 million for the period from March 16,
1996 to February 28, 1997. The decrease was primarily due to decreases in
advertising and certain loan origination expenses.

Income Tax Expense

HomeSide's income tax expense was $47.8 million for the period from March
1, 1997 to February 10, 1998 and $29.3 million for the period from March
16, 1996 to February 28, 1997. The increase was attributable to an increase
in net income. The effective income tax rate for the period from March 1,
1997 to February 10, 1998 and the period from March 16, 1996 to February
28, 1997 was approximately 39% and 40%, respectively.

Risk Management Activities

HomeSide has a risk management program designed to protect the economic
value of its mortgage servicing portfolio from declines in value due to
increases in estimated loan prepayment speeds, which are primarily
influenced by declines in interest rates. When loans prepay faster than
anticipated, the cash flow HomeSide expects to receive from servicing such
loans is reduced. The value of mortgage servicing rights is based on the
present value of the cash flows to be received over the life of the loan
and therefore, the value of the servicing portfolio declines as prepayments
increase.

During the period from March 1, 1997 to February 10, 1998, HomeSide
utilized options on U.S. Treasury bond futures and U.S. Treasury bond
futures to protect a significant portion of the market value of its
mortgage servicing portfolio from a decline in value. The risk management
contracts used by HomeSide have characteristics such that they tend to
increase in value as interest rates decline. Conversely, these risk
management contracts tend to decline in value as interest rates rise.
Accordingly, changes in value of these risk management instruments will
tend to move inversely with changes in value of HomeSide's mortgage
servicing rights.

These risk management instruments are designated as hedges on the purchase
date and such designation is at a level at least as specific as the level
at which mortgage servicing rights are evaluated for impairment. The risk
management instruments are marked-to-market with changes in market value
deferred and applied as an adjustment to the basis of the related mortgage
servicing right asset being hedged. As a result, any changes in market
value that are deferred are amortized and evaluated for impairment in the
same manner as the related mortgage servicing rights. The effectiveness of
HomeSide's hedging activity can be measured by the correlation between
changes in the value of the risk management instruments and changes in the
value of HomeSide's mortgage servicing rights. This correlation is assessed
on a quarterly basis to ensure that high correlation is maintained over the
term of the hedging program. During the periods presented, HomeSide has
experienced a high measure of correlation between changes in the value of
mortgage servicing rights and the risk management contracts. However, in
periods of rising interest rates, the increase in value of mortgage
servicing rights may outpace the decline in value of the options included
in the hedge position, because the loss on the options is limited to the
premium paid.

During the period from March 1, 1997 to February 10, 1998, deferred gains
and losses on risk management contracts resulted in net deferred hedge
gains of $142.7 million. As of February 10, 1998, net deferred hedge gains
of $39.5 million are included in the carrying value of mortgage servicing
rights. Activity in the deferred hedge account during the period from
March 1, 1997 to February 10, 1998 is as follows (in thousands):

Net deferred hedge loss at February 28, 1997           $(110,637)
Amortization of net deferred hedge losses                  7,423
Net deferred hedge gains                                 142,667
Net deferred hedge gain at February 10, 1998           $  39,453

HomeSide's future cash needs as they relate to its hedging program will be
influenced by such factors as long-term interest rates, loan production
levels and growth in the mortgage servicing portfolio. The fair value of
open risk management contracts at February 10, 1998 was $43.9 million,
which was equal to their carrying amount because the risk management
contracts are marked-to-market at each reporting date. See "-Liquidity and
Capital Resources" for further discussion of HomeSide's sources and uses
of cash. See Note 3 of Notes to Consolidated Financial Statements for a
description of HomeSide's accounting policy for its risk management
contracts. See Notes 14 and 15 of Notes to Consolidated Financial
Statements for additional fair value disclosures with respect to HomeSide's
risk management contracts.

Liquidity and Capital Resources

The Company's principal financing needs are the financing of loan
origination activities and the investment in mortgage servicing rights. To
meet these needs, the Company currently utilizes funding from an
independent syndicate of banks, including a warehouse credit facility and a
servicing-related facility, medium-term notes and cash flow from
operations. In the past, the Company has also utilized short-term credit
facilities and public offerings of common stock. HomeSide continues to
investigate and pursue alternative and supplementary methods to finance its
growing operations through the public and private capital markets. These
may include methods designed to expand the Company's financial capacity and
reduce its cost of capital. In addition, to facilitate the sale and
distribution of certain mortgage products, HomeSide Mortgage Securities,
Inc., a wholly-owned subsidiary of HomeSide Lending, Inc., may continue to
issue mortgage backed securities.

Operations

Net cash used in operations for the period from March 1, 1997 to February
10, 1998 was $247.7 million. Net cash provided by operations for the period
from March 16, 1996 to February 28, 1997 was $203.8 million. The primary
uses of cash in operations were to fund loan originations and pay corporate
expenses. These uses of cash were offset by cash provided from servicing
fee income, loan sales and principal repayments. Cash flows from loan
originations are dependent upon current economic conditions and the level
of long-term interest rates. Decreases in long-term interest rates
generally result in higher loan refinancing activity, which results in
higher cash demands to meet increased loan production levels. Higher cash
demands to meet increased loan production levels are primarily met through
borrowings and loan sales.

Investing

Net cash used in investing activities was $773.7 million for the period
from March 1, 1997 to February 10, 1998 and $862.2 million for the period
from March 16, 1996 to February 28, 1997. Cash used in investing activities
was for the purchase and origination of mortgage servicing rights. For the
period from March 1, 1997 to February 10, 1998, cash was also used for
funding the early pool buyout program. During the period from March 1, 1997
to February 10, 1998, these uses of cash were offset by net proceeds from
risk management contracts, while during the period from March 16, 1996 to
February 28, 1997, cash was used to purchase risk management contracts.
Other assets increased $41.7 million to $134.6 million at February 10, 1998
from $92.9 million at February 28, 1997 primarily as a result of an
increase in HomeSide's hedge assets. Early pool buyout advances, a program
initiated in fiscal 1998, totaled $374.1 million at February 10, 1998.
During the period from March 16, 1996 to February 28, 1997, HomeSide also
made net payments of $133.4 million and $106.2 million to acquire certain
mortgage banking operations of BBMC and BMC, respectively (see Note 4 of
Notes to Consolidated Financial Statements). Future uses of cash for
investing activities will be dependent on the mortgage origination market
and HomeSide's hedging needs. Except for the Banc One acquisition, HomeSide
is not able to estimate the timing and amount of cash uses for future
acquisitions of other mortgage banking entities, if such acquisitions were
to occur. HomeSide will fund the Banc One acquisition under existing
borrowing capacity.

Financing

Net cash provided by financing activities was $1,000.8 million for the
period from March 1, 1997 to February 10, 1998 and $711.1 million for the
period from March 16, 1996 to February 28, 1997. The primary source of cash
from financing activities during the period from March 1, 1997 to February
10, 1998 was $750.0 million from the issuance of medium-term notes and net
borrowings of $256.5 million from HomeSide's line of credit. The primary 
sources of cash from financing activities during the period from March 16, 
1996 to February 28, 1997 were net borrowings under HomeSide's lines of 
credit of $334.2 million, $269.6 million from proceeds from issuance of 
common stock and $200.0 million from the issuance of Notes. Cash used in 
financing activities during the period ended February 10, 1998 was used for 
the payment of debt issue costs. Cash used in financing activities for the
period ended February 28, 1997 was used to repay a $90.0 million bridge
loan, $70.6 million of Notes and the payment of debt issue costs.
During the period from March 1, 1997 to February 10, 1998, net cash used in
operations was $247.7 million, net cash used in investing activities was
$773.7 million and net cash provided by financing activities was $1,000.8
million, resulting in a net decrease in cash of $20.6 million. HomeSide
expects that to the extent cash generated from operations is inadequate to
meet its liquidity needs, those needs can be met through financing from its
bank credit facility and other facilities which may be entered into from
time to time, as well as from the issuance of debt securities in the
public markets. Accordingly, HomeSide does not currently anticipate that it
will make sales of servicing rights to any significant degree for the
purpose of generating cash. Nevertheless, in addition to its cash and
mortgage loans held for sale balances, HomeSide's portfolio of mortgage
servicing rights provides a potential source of funds to meet liquidity
requirements, especially in periods of rising interest rates when loan
origination volume slows. Repurchase agreements also provide an alternative
to the bank line of credit for mortgages held for sale. Future cash needs
are highly dependent on future loan production and servicing results, which
are influenced by changes in long-term interest rates.

Year 2000 Compliance

HomeSide uses and is dependent upon a significant number of computer
software programs and operating systems to conduct its business. Such
programs and systems include those developed and maintained by HomeSide,
software and systems purchased from outside vendors and software and
systems used by HomeSide's third party providers. HomeSide has initiated a
review and assessment of all hardware and software to determine whether it
will function properly in the Year 2000. It is anticipated that some level
of modification or replacement of hardware and software will be necessary
in order to make HomeSide's systems "Year 2000 Compliant." HomeSide
presently estimates these remediation costs to total approximately $15.0
million. Remediation costs are expected to be expensed as incurred, with
the exception of new software purchases, which will be capitalized. The
Company has not incurred significant remediation costs prior to February
10, 1998. Year 2000 remediation costs are based on management's best
estimates, which were derived utilizing numerous assumptions of future
events including the continued availability of certain resources, third
party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could
differ materially from those plans. In addition, HomeSide has relationships
with vendors, customers and other third parties that rely on software and
systems that may not be Year 2000 compliant. With respect to such third
parties, Year 2000 compliance matters will not be within HomeSide's direct
control. There can be no assurance that Year 2000 compliance failures by
such third parties will not have a material adverse effect on HomeSide's
results of operations.



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholder of HomeSide, Inc.

We have audited the accompanying consolidated balance sheets of HomeSide,
Inc., (a Delaware corporation, see Note 1) and subsidiaries as of February
10, 1998 and February 28, 1997, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the periods from
March 1, 1997 to February 10, 1998 and March 16, 1996 to February 28, 1997.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of HomeSide,
Inc. and subsidiaries as of February 10, 1998 and February 28, 1997 and the
results of their operations and their cash flows for the periods from March
1, 1997 to February 10, 1998 and March 16, 1996 to February 28, 1997, in
conformity with generally accepted accounting principles.

Arthur Andersen LLP

Jacksonville, Florida
April 15, 1998



HomeSide, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share Data)

                                                February 10,      February 28,
                                                    1998              1997
Assets
Cash and cash equivalents                        $   32,113        $   52,691
Mortgage loans held for sale, net                 1,292,403           805,274
Mortgage servicing rights, net                    1,781,134         1,614,307
Accounts receivable, net                            227,294           157,518
Early pool buyout advances                          374,097                 -
Premises and equipment, net                          41,982            29,515
Other assets                                        134,580            92,877
Total Assets                                     $3,883,603        $2,752,182
Liabilities and Stockholders' Equity
Notes payable                                    $2,074,956        $1,818,503
Accounts payable and accrued liabilities            143,870           140,304
Deferred income taxes                               175,178           129,951
Long-term debt                                      900,466           151,128
Total Liabilities                                 3,294,470         2,239,886
Commitments and Contingencies

Stockholders' Equity:
  Common stock:
    Common stock, $.01 par value,
      119,610,000 shares authorized;
      43,394,861 and 43,375,430 shares issued
      and outstanding in 1998 and 1997,respectively       434               434
    Class C non-voting common stock,
      $1.00 par value, 195,000 shares authorized;
      97,138 shares issued and outstanding                 97                97
  Additional paid-in capital                          476,846           476,646
  Retained earnings                                   111,756            36,969
                                                      589,133           514,146
  Less: Notes received in payment for capital stock         -            (1,850)
Total Stockholders' Equity                            589,133           512,296
Total Liabilities and Stockholders' Equity         $3,883,603        $2,752,182

The accompanying notes are an integral part of these financial statements.



Homeside, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Data)

                                         For the Period From For the Period From
                                          March 1, 1997 to    March 16, 1996 to
                                            February 10,         February 28,
                                                1998                 1997
Revenues:
Mortgage servicing fees                          $ 398,159            $ 312,341
Amortization of mortgage servicing rights         (210,200)            (155,827)
  Net servicing revenue                            187,959              156,514
Interest income                                     97,050               81,507
Interest expense                                   (97,028)             (87,700)
  Net interest revenue                                  22               (6,193)
Net mortgage origination revenue                    85,206               66,073
Other income                                         1,671                  682
     Total Revenues                                274,858              217,076

Expenses:
Salaries and employee benefits                      75,419               72,976
Occupancy and equipment                             15,447               11,770
Servicing losses on investor-owned loan
     and foreclosure-related expenses               21,974               17,934
Other expenses                                      39,415               41,714
  Total Expenses                                   152,255              144,394
Income before income taxes and 
     extraordinary loss                            122,603               72,682
Income tax expense                                  47,816               29,273
Income before extraordinary loss                    74,787               43,409
Extraordinary loss, net of tax (Note 9)                  -                6,440
Net Income                                       $  74,787            $  36,969
Basic income per share:
  Income per share before 
     extraordinary loss                          $    1.72            $    1.34
  Extraordinary loss, net of tax                         -                  .20
  Net income                                     $    1.72            $    1.14
Diluted income per share:
  Income per share before 
     extraordinary loss                          $    1.69            $    1.33
  Extraordinary loss, net of tax                         -                  .20
  Net income                                     $    1.69            $    1.13

The accompanying notes are an integral part of these financial statements.



HomeSide, Inc. and Subsidiaries
STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY
(Dollars in Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                                                     
                                                                
                                                                                      Notes
                        Total                                         Additional  Received in
                       Number of     Common Stock        Subscription  Paid-in    Payment for   Retained
                       Shares(d) Class A Class B Class C  Receivable   Captial   Capital Stock  Earnings   Total
                                                                                                      
<S>                    <C>       <C>     <C>     <C>     <C>          <C>        <C>            <C>        <C>
Balance,
  March 15, 1996(a)   19,457,724    $193     $-      $97   $(200,000)  $199,710      $    -     $     -    $    -
Subscription payment
  associated with
  acquisition of
  BancBoston
  Mortgage
  Corporation                                                200,000                   (1,850)             198,150
Issuance of common
  stock associated
  with acquisition of
  Barnett Mortgage
  Company(b)          15,562,344     156                                160,135                            160,291
Public offering of
  common stock(c)      8,452,500      85                                116,801                            116,886
Net income                                                                                       36,969     36,969
Balance,
  February 28, 1997   43,472,568     434      -      97           -     476,646        (1,850)   36,969    512,296

Exercise of stock
  options for
  common stock            19,431                                            200                                200
Repayment of notes
  received in payment
  for capital stock                                                                     1,850                1,850
Net income                                                                                       74,787     74,787
Balance,
  February 10, 1998   43,491,999    $434     $-     $97     $     -    $476,846         $   -  $111,756   $589,133
</TABLE>

(a) Total number of shares includes 19,263,448 shares of Class A common
stock (par value $.01), 97,138 shares of Class B common stock (par value
$.01) and 97,138 shares of Class C common stock (par value $1.00).
(b) Total number of shares includes 15,562,344 shares of Class A common stock.
(c) Total number of shares includes 8,452,500 shares of Class A common
stock of which 97,138 shares of Class B common stock were converted to
Class A on a 1-for-1 basis.
(d) Number of shares reflects a 17-for-1 stock split resulting from the
initial public offering.

The accompanying notes are an integral part of these financial statements.



Homeside, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>

                                                  For the Period From  For the Period From
                                                    March 1, 1997 to    March 16, 1996 to
                                                      February 10,         February 28,
                                                         1998                 1997
<S>                                               <C>                  <C> 
Cash Flows (Used In) Provided by Operating   
  Activities:
Net income                                            $    74,787         $    36,969
Adjustments to reconcile net income to net cash
  (used in) provided by operating activities:
    Amortization of mortgage servicing rights             210,200             155,827
    Depreciation and amortization                          10,439               9,015
    Servicing losses on investor-owned loans               12,346              13,683
    Deferred income tax expense                            45,227              24,973
    Capitalized servicing rights                                -             (21,015)
    Mortgage loans originated and purchased
         for sale                                     (23,975,752)        (12,504,567)
    Proceeds and principal repayments of
         mortgage loans held for sale                  23,540,371          12,572,217
    Change in accounts receivable                         (82,121)            (63,378)
    Change in other assets and accounts payable
         and accrued liabilities                          (83,250)            (19,900)
      Net cash (used in) provided by
        operating activities                             (247,753)            203,824

Cash Flows Used in Investing Activities:
Purchase of premises and equipment, net                   (17,252)             (4,929)
Acquisition of mortgage servicing rights                 (519,694)           (475,729)
Net proceeds from (purchases of) risk management
         contracts                                        137,393            (141,944)
Purchase of early pool buyout advances,
         net of repayments                               (374,097)                  -
Acquisition of BancBoston Mortgage Corp.,
         net of cash acquired                                   -            (133,392)
Acquisition of Barnett Mortgage Co., 
         net of cash acquired                                   -            (106,244)
    Net cash used in investing activities                (773,650)           (862,238)

Cash Flows Provided by Financing Activities:
Net borrowings                                            256,453             334,170
Issuance of notes payable                                 750,000             200,000
Payment of debt issue costs                                (7,017)            (22,090)
Repayment of long-term debt                                  (661)            (70,567)
Repayment of stockholder loans                              1,850                   -
Proceeds from issuance of common stock                        200             269,592
Issuance of bridge financing                                    -              90,000
Repayment of bridge financing                                   -             (90,000)
  Net cash provided by financing activities             1,000,825             711,105

Net (decrease) increase in cash and cash
  equivalents                                             (20,578)             52,691
Cash and cash equivalents at beginning of period           52,691                   -
Cash and cash equivalents at end of period            $    32,113         $    52,691
</TABLE>

The accompanying notes are an integral part of these financial statements.



Notes to Consolidated Financial Statements

1. BASIS OF PRESENTATION

HomeSide, Inc. ("HomeSide" or the "Company"), through its primary operating
subsidiary HomeSide Lending, Inc., is engaged in the mortgage banking
business and as such originates, purchases, sells and services mortgage
loans throughout the United States. The accompanying consolidated financial
statements of HomeSide include the accounts of HomeSide and its
subsidiaries, after elimination of all material intercompany balances and
transactions. Amounts of acquired companies have been included from the
date of acquisition.

The accompanying financial statements of HomeSide, Inc. have been prepared
for the period March 1, 1997 to February 10, 1998 and for the period March
16, 1996 to February 28, 1997 to coincide with the commencement of
operations of HomeSide and the merger as discussed in Note 2 below. The
financial statements do not reflect the effects of HomeSide's acquisition
by National Australia Bank Limited ("the National"). HomeSide will adopt a
fiscal year end of September 30 to conform to the fiscal year of the
National.

2. ORGANIZATION

On December 11, 1995, HomeSide was formed by an investor group, consisting
of Thomas H. Lee Company and Madison Dearborn Partners (collectively, the
"Investors"), and signed a definitive stock purchase agreement with The
First National Bank of Boston ("BankBoston") for the purpose of acquiring
certain assets and liabilities of the mortgage banking business owned by
BankBoston. BankBoston received cash and an ownership interest in HomeSide.
The transaction closed on March 15, 1996 and HomeSide began operations on
March 16, 1996 through its operating subsidiary, HomeSide Lending, Inc.
On May 31, 1996, Barnett Banks, Inc. ("Barnett") sold certain of its
mortgage banking operations, primarily its servicing portfolio, mortgage
servicing operations and proprietary mortgage banking software systems, to
HomeSide. Barnett received cash and an ownership interest in HomeSide. The
accompanying financial statements reflect the effects of both of these
acquisitions. For more information on these acquisitions, see Note 4. From
May 31, 1996 until the 1997 public offering of common stock, the Investors
as a group, BankBoston and Barnett each owned approximately one-third of
HomeSide. Following the public offering, the Investors as a group,
BankBoston and Barnett owned in the aggregate approximately 79% of the
outstanding common stock.

On January 9, 1998, Nations Bank Corporation acquired all the outstanding
common stock of Barnett Banks, Inc. (see Note 16).
On February 10, 1998, the National acquired all outstanding shares of the
common stock of HomeSide, Inc. As consideration, the National paid $27.825
per share for all of the outstanding common stock and paid $17.7 million
cash to retire all outstanding stock options. The total purchase price was
approximately $1.2 billion. The National paid for the purchase with
borrowed and available funds. The transaction was accounted for as a
purchase. As a result, all assets and liabilities were recorded at their
fair value on February 11, 1998, and the purchase price in excess of the
fair value of net assets acquired of $713.6 million was recorded as
goodwill. Following the transaction described above, the National now owns
100% of HomeSide's common stock and HomeSide, Inc. has become an indirect
wholly-owned subsidiary of the National.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

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

HomeSide utilizes a risk management program to protect and manage the value
of its mortgage loans held for sale and mortgage commitment pipeline. As a
result, the Company is party to various derivative financial instruments to
reduce its exposure to interest rate risk. These financial instruments
primarily include mandatory forward delivery commitments, put and call
option contracts and treasury futures contracts. The Company uses these
financial instruments for the purposes of managing its resale pricing and
interest rate risks. These financial instruments are designated as hedges
to the extent they demonstrate a high degree of correlation with the
underlying hedged items. Accordingly, hedging gains and losses related to
this risk management program are deferred and recognized as a component of
the gain or loss on sale of the underlying mortgage loans or
mortgage-backed securities. Such gains and losses are included in mortgage
origination revenue. Hedge losses are recognized currently if the deferral
of such losses would result in mortgage loans held for sale and the
pipeline being valued in excess of their estimated net realizable value.
Premiums paid for purchased put and call option contracts are included in
other assets and amortized over the options' contract period as a component
of mortgage origination revenue. Unamortized premiums are recognized as a
component of the gain or loss on sale of loans at the earlier of the
expiration of the underlying contract or when exercise of the contract is
considered unlikely.

Risk management of mortgage servicing rights

Mortgage servicing rights permit HomeSide to receive a portion of the
interest coupon and fees collected from the mortgagor for performing
specified servicing activities. The mortgage notes underlying the mortgage
servicing rights permit the borrower to prepay the loan. As a result, the
value of the related mortgage servicing rights tends to diminish in periods
of declining interest rates and increase in value in periods of rising
rates. This tendency subjects HomeSide to substantial interest rate risk.
It also directly affects the volatility of reported earnings because
mortgage servicing rights are carried at the lower of amortized cost or
fair value. It is HomeSide's policy to mitigate and hedge this risk
through its risk management program.

The risk management instruments used by HomeSide have characteristics such
that they tend to increase in value as interest rates decline. Conversely,
these risk management instruments tend to decline in value as interest
rates rise. Accordingly, changes in value of these hedge instruments will
tend to move inversely with changes in value of HomeSide's mortgage
servicing rights.

Options on U.S. Treasury bond futures and U.S. Treasury bond futures have
been purchased by HomeSide to manage interest rate risk. When purchased,
the options and futures contracts are designated to a specific strata of
mortgage servicing rights. The risk management instruments are
marked-to-market and changes in market value are included as adjustments to
the basis of the related mortgage servicing right asset being hedged.
Deferred hedge gains and losses are amortized and evaluated for impairment
in the same manner as the related mortgage servicing rights. Correlation
between changes in the risk management contracts and changes in value of
HomeSide's mortgage servicing rights is assessed on a quarterly basis to
ensure that high correlation is maintained over the term of the hedging
program.

Mortgage loans

Mortgage loans held for sale are carried at the lower of aggregate cost or
fair value. Fair value is based on the contract prices at which the
mortgage loans will be sold or, if the loans are not committed for sale,
the current market price. Deferred hedge gains and losses on risk
management hedging instruments are included in the cost of the mortgage
loans held for sale for the purpose of determining the lower of aggregate
cost or fair value.

Mortgage loans held for investment are included in other assets and stated
at the lower of cost or fair value at the time the permanent investment
decisions are made. Discounts, if any, are amortized over the anticipated
life of the investment.

Loans are placed on non-accrual status when any portion of the principal or
interest is ninety days past due or earlier when concern exists as to the
ultimate collectibility of principal or interest. When loans are placed on
nonaccrual status, the related interest receivable is reversed against
interest income of the current period. Interest payments received on
nonaccrual loans are applied as a reduction of the principal balance when
concern exists as to the ultimate collection of principal; otherwise, such
payments are recognized as interest income. Loans are removed from
nonaccrual status when principal and interest become current and they are
anticipated to be fully collectible.

Mortgage servicing rights

The total cost of loans originated or acquired is allocated between the
mortgage servicing rights and the mortgage loans (without the servicing
rights) based on relative fair values. The value of servicing rights
acquired through bulk acquisitions is capitalized at cost.

Effective January 1, 1997, the Company adopted SFAS No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." SFAS No. 125 supersedes SFAS No. 122 and is effective for
transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996. SFAS No. 125 is based on a
financial-components approach which focuses on control. Under the approach
required by this standard, after a transfer of financial assets (for
example, the sale of mortgage loans), an entity recognizes the financial
and servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered and
derecognizes liabilities when extinguished. The capitalization,
amortization and impairment principles of SFAS No. 125 are substantially
consistent with the principles previously defined by SFAS No. 122, insofar
as they relate to the mortgage banking activities of HomeSide. Accordingly,
the impact of the adoption of SFAS No. 125 was not material to the
Company's financial statements.

Mortgage servicing rights are amortized in proportion to and over the
period of the estimated net servicing revenue. They are evaluated for
impairment by comparing the carrying amount of the servicing rights to
their fair value. Fair value is estimated based on the market prices of
similar servicing assets and on discounted anticipated future net cash
flows considering market prepayment estimates, historical prepayment rates,
portfolio characteristics, interest rates and other economic factors. For
purposes of measuring impairment, the mortgage servicing rights are
stratified by the predominant risk characteristics which include product
types of the underlying loans and interest rates of mortgage notes.
Impairment is recognized through a valuation reserve for each impaired
stratum and is included in amortization of mortgage servicing rights. An
analysis of HomeSide's mortgage servicing rights is included in Note 5.
Prior to January 1, 1997, mortgage servicing rights included excess
mortgage servicing rights, which represent the present value of servicing
fee income in excess of a normal servicing fee rate. Until the adoption of
SFAS No. 125 on January 1, 1997, when loans were sold, the estimated excess
servicing was recognized as income and amortized over the estimated
servicing period in proportion to the aggregate net cash flows from the
loans serviced. Remaining asset balances were evaluated for impairment
based on current estimates of future discounted cash flows. Such
write-downs were included in amortization of mortgage servicing rights.
Upon the adoption of SFAS No. 125, previously recognized excess mortgage
servicing rights were combined with and accounted for as mortgage servicing
rights.

Accounts receivable

Accounts receivable includes advances, consisting primarily of payments for
property taxes and insurance premiums, as well as principal and interest
remitted to investors before they are collected from mortgagors, made in
connection with loan servicing activities. Accounts receivable also
includes loans purchased from mortgage-backed securities serviced by
HomeSide for others and mortgage claims filed primarily with the FHA and
the VA.

Early pool buyout advances

Early pool buyout advances consist of delinquent government loans in
foreclosure process that have been purchased from pools. The program
reduces the unreimbursed interest expense that HomeSide incurs. The funding
of the purchases of these delinquent loans for the early pool buyout
program is recorded as interest expense. Interest income earned from the
guarantor agency during the foreclosure process is accrued to match the
funding expense incurred. Scheduled interest payments made to the investor
before the loans were purchased from the pool are recorded as early pool
buyout advances with a reserve for advances which will not ultimately be
collected.

Premises and equipment

Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized over the
shorter of the estimated life of the improvement or the term of the lease.
Long-lived assets are evaluated regularly for the other-than-temporary
impairment. If circumstances suggest that their value may be impaired and
the write-down would be material, an assessment of recoverability is
performed prior to any write-down of the asset. Impairment, if any, is
recognized through a valuation allowance with a corresponding charge
recorded in the statement of income.

Goodwill

Net assets acquired in purchase transactions are recorded at fair value at
the inception of the date of acquisition. Goodwill, representing the excess
of the purchase price over the fair value of the net assets purchased, is
amortized on a straight-line basis over 15 years. Goodwill is reviewed
periodically for events or changes in circumstances that may indicate that
the carrying amounts of the assets are not recoverable on an undiscounted
cash flow basis.

Mortgage servicing fees

Mortgage servicing fees represent servicing and other fees earned for
servicing mortgage loans owned by investors. Servicing fees are generally
calculated on the outstanding principal balances of the loans serviced and
are recognized as income on an accrual basis.
HomeSide's mortgage servicing portfolio totaled $100.0 billion at February
10, 1998. Related custodial deposits are segregated in trust accounts,
principally held with depository institutions, and are not included in the
accompanying financial statements.

Interest expense

Interest expense is reduced by credits received from depository
institutions for custodial balances placed with such institutions.
Net mortgage origination revenue

Mortgage origination revenue includes gains and losses from sales of
mortgage loans and fees associated with the origination and purchase of
mortgage loans.

Servicing losses on investor-owned loans and foreclosure-related expenses
HomeSide records losses attributable to servicing FHA and VA loans for
investors. These amounts include actual losses for final disposition of
loans, foreclosure-related expenses, accrued interest for which payment is
uncollectible and estimates for potential losses based on HomeSide's
experience as a servicer of government loans.
A reserve for estimated servicing losses on investor-owned loans is
available for potential losses related to the mortgage servicing portfolio
and is included in accounts payable and accrued liabilities (see Note 7).

Income taxes

Current tax liabilities or assets are recognized through charges or credits
to the current tax provision for the estimated taxes payable or refundable
for the current year.

Deferred tax liabilities are recognized for temporary differences that will
result in amounts taxable in the future and deferred tax assets are
recognized for temporary differences and tax benefit carryforwards that
will result in amounts deductible or creditable in the future. Net deferred
tax liabilities or assets are recognized through charges or credits to the
deferred tax provision. A deferred tax valuation reserve is established if
it is more likely than not that all or a portion of the deferred tax
assets will not be realized. Changes in the deferred tax valuation reserve
are recognized through charges or credits to the deferred tax provision.
The effect of enacted changes in tax law, including changes in tax rates,
on deferred tax assets and liabilities is recognized in income in the
period that includes the enactment date.

Statement of cash flow

For purposes of reporting on the statement of cash flows, cash and cash
equivalents include cash and due from banks and interest-bearing deposits
with an original maturity of three months or less.

Income per share

The company adopted Statement of Financial Accounting Standard ("SFAS")
No. 128, "Earnings Per Share," as of December 31, 1997. Accordingly, all
prior period earnings per share amounts have been restated in accordance
with this standard.

Basic income per share amounts were computed by dividing net income by the
weighted average number of common shares outstanding. Diluted income per
share amounts were computed by dividing net income, adjusted for the effect
of assumed conversions, by the weighted average number of common shares
outstanding plus dilutive potential common shares calculated for stock
options outstanding using the treasury stock method.

New accounting standards

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements with the same prominence as other financial
statements. This statement is effective for fiscal years beginning after
December 15, 1997. Management expects that the impact of this statement on
the presentation of the financial statements of HomeSide will be immaterial.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement establishes
standards for the way that public business enterprises report information
about operating segments in annual financial statements and interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and
major customers. This statement is effective for fiscal years beginning
after December 15, 1997. Management expects that the impact of this
statement on the presentation of the financial statements of HomeSide will
be immaterial.

4. ACQUISITIONS

Acquisition of BancBoston Mortgage Corporation

On March 15, 1996, HomeSide acquired from BankBoston all of the outstanding
stock of BancBoston Mortgage Corporation ("BBMC"), which was subsequently
renamed HomeSide Lending, Inc. Certain assets and liabilities of BBMC were
retained by BankBoston, including BBMC's mortgage retail production
operations in New England.

HomeSide made cash payments of $139.5 million in cash and issued $86.8
million of common stock to BankBoston in consideration for certain assets,
net of assumed liabilities, and the stock of BBMC. Also, in connection with
the BBMC acquisition, the Investors purchased approximately 55% of the then
outstanding common stock of HomeSide for $107.2 million in cash.
Simultaneously, BankBoston paid approximately $1.0 million in cash for all
of HomeSide's class C non-voting common stock. In consideration of services
rendered to HomeSide with respect to the BBMC Acquisition, class B
non-voting stock valued at $1.0 million was issued to an investment bank.
Management purchased common stock for $4.1 million in cash, $1.9 million of
which was financed by loans from HomeSide. On May 31, 1996, HomeSide paid
an additional $5.0 million to BankBoston in connection with the closing of
the Barnett Mortgage Company ("BMC") acquisition. The transaction was
accounted for under the purchase method of accounting. The assets and
liabilities of BBMC were recorded at their fair values at March 16, 1996,
which totaled $1.5 billion and $1.2 billion, respectively. The total
purchase price paid for BBMC, including transaction costs and interest, was
$247.0 million. The excess of fair value of net assets acquired over cost
was $56.0 million and was allocated as a reduction to mortgage servicing
rights.

Acquisition of Barnett Mortgage Company

On May 31, 1996, HomeSide acquired from Barnett certain assets, net of
assumed liabilities, and the outstanding common stock of BMC (the "BMC
Acquisition"). Certain assets and liabilities of BMC were retained by
Barnett, including those assets of BMC and its subsidiaries (other than
Honolulu Mortgage Company, Inc.) associated withthe loan origination or
production activities.

HomeSide made cash payments of $228.0 million to Barnett in consideration
for certain assets, net of assumed liabilities, and the stock of BMC. In
connection with the BMC Acquisition, an affiliate of Barnett purchased
shares of HomeSide common stock for an aggregate purchase price of $118.0
million. Also in connection with the BMC Acquisition, BankBoston and the
Investors paid approximately $42.3 million in cash for additional shares of
HomeSide. The transaction was accounted for using the purchase method of
accounting and, accordingly, the results of operations of HomeSide include
BMC from the date of acquisition. The assets and liabilities of BMC were
recorded by HomeSide at their estimated fair values at May 31, 1996, which
totaled $764.8 million and $521.4 million, respectively. The total purchase
price paid for BMC, including transaction costs and interests, was $235.0
million. The excess of the purchase price over the fair value of net assets
acquired was $8.4 million and was allocated to goodwill and is being
amortized on a straight-line basis over 15 years.

The unaudited condensed pro forma statement of income for the period from
March 16, 1996 to February 28, 1997, assuming BMC had been acquired as of
March 16, 1996 is as follows (in millions, except per share data):
               
                                                Pro Forma for
                                               the Period From
                                                March 16, 1996
                                                to February 28,
                                                      1997
Net servicing revenue                               $ 167.3
Net interest revenue                                   (4.5)
Net mortgage origination revenue                       67.1
Other income                                            0.7
  Total revenues                                      230.6
Expenses                                             (157.5)
Income before income taxes
  and extraordinary loss                               73.1
Income tax expense                                     29.5
Income before extraordinary loss                       43.6
Extraordinary loss                                     (6.4)
  Net income                                        $  37.2
Net income per share:
  Basic                                             $  1.15
  Diluted                                           $  1.14

The purchase accounting adjustments in the above pro forma statement of
operations are based on the actual purchase price and the amount of assets
and liabilities actually acquired. No adjustments have been made for
restructuring costs that might have been incurred or for cost efficiencies
that might have been realized during the period presented. Accordingly,
these pro forma results are not indicative of future results.

5. MORTGAGE SERVICING RIGHTS

An analysis of mortgage servicing rights is as follows (in thousands):

                                      February 10,      February 28,
                                          1998              1997
Beginning balance                      $1,614,307          $      -
Additions, including BBMC
  and BMC acquisitions                    416,822         1,685,242
Sales of servicing                           (342)          (25,745)
Net deferred hedge (gain)
  loss, net of amortization               (39,453)          110,637
Amortization                             (210,200)         (155,827)
Ending balance                         $1,781,134        $1,614,307

At February 10, 1998, the net deferred hedge gain of $39.5 million consists
of the net deferred loss for the period from March 16, 1996 to February 28,
1997 of $110.6 million adjusted for gains of $195.2 million, losses of
$52.5 million, and amortization of $7.4 million. For the period from March
16, 1996 to February 28, 1997, the net deferred hedge loss of $110.6
million consists of gains of $133.3 million and losses of $254.9 million,
less $11.0 million of amortization.

6. PREMISES AND EQUIPMENT

Premises and equipment consist of the following (in thousands):

                                      February 10,      February 28,
                                          1998              1997
Land                                $    3,451        $    3,451
Buildings and
  building improvements                 10,604            10,986
Furniture and equipment                 22,464            15,739
Leasehold improvements                  14,717             3,808
                                        51,236            33,984
Accumulated depreciation
  and amortization                      (9,254)           (4,469)
Ending balance                      $   41,982        $   29,515

7. RESERVE FOR ESTIMATED SERVICINGLOSSES ON INVESTOR-OWNED LOANS

An analysis of the reserve for estimated servicing losses on investor-owned
loans is as follows (in thousands):

                                        For the Period    For the Period
                                         March 1, 1997    March 16, 1996
                                        to February 10,   to February 28,
                                             1998              1997
Beginning balance                             $ 21,650          $ 11,100
Provision for servicing losses
  on investor-owned loans                       12,346            13,683
Charge-offs                                    (12,747)          (10,295)
Recoveries                                         401                60
Additions from
  acquisition of BMC                                 -             7,102
Ending balance                                $ 21,650          $ 21,650

8. NOTES PAYABLE

Notes payable consist of the following (in thousands):
                                                          Weighted Average
                                                            Interest Rate
                                        Total          At Period        During
                                     Outstanding          End        the Period
Bank line of credit,
  February 10, 1998                   $2,074,956         6.00%           6.04%

Bank line of credit,
  February 28, 1997                    1,778,496         5.65%           5.83%
Short-term
  credit facilities                       40,007         8.25%           8.25%
  Total,
    February 28, 1997                 $1,818,503

HomeSide borrows funds on a demand basis from an independent syndicate of
banks under a $2.5 billion credit facility which, at the request of
HomeSide, may be increased to $3.0 billion. The line of credit is used to
provide funds for HomeSide's business of originating, acquiring and
servicing mortgage loans. The line of credit includes both a warehouse
credit facility, which is limited to 98% of the fair value of eligible
mortgage loans held for sale, and a servicing-related facility, which is
capped at $950.0 million. On February 14, 2000, the line of credit will
terminate. The credit agreement contains covenants that impose limitations
and restrictions on HomeSide, including the maintenance of certain net
worth and ratio requirements. Under certain circumstances set forth in the
credit agreement, borrowings under the agreement become collateralized by
substantially all of HomeSide's assets. HomeSide is in compliance with all
requirements included in the credit agreement. At February 10, 1998 and
February 28, 1997, $2.1 billion and $1.8 billion, respectively, was
outstanding under the credit line. Amounts outstanding at February 10, 1998
and February 28, 1997 under the bank line of credit are comprised of a
warehouse credit facility of $1.2 billion and $0.8 billion and a
servicing-related credit facility of $0.9 billion and $0.9 billion,
respectively. The amount of the unused bank line of credit was $0.4 billion
and $0.7 billion as of February 10, 1998 and February 28, 1997,
respectively.

Borrowings under the bank line of credit bear interest at rates per annum,
based on, at HomeSide's option (A) the highest of (i) the lead bank's prime
rate, (ii) the secondary market rate of certificates of deposit plus 100
basis points and (iii) the federal funds rate in effect from time to time
plus 0.5% or (B) various rates based on federal fund rates.

On January 15, 1997, HomeSide entered into a short-term credit facility
with a bank in a maximum aggregate principal amount of $85.0 million. On
March 14, 1997, HomeSide entered into another short-term credit facility in
an aggregate principal amount of $100.0 million. The facilities each
expired on May 1, 1997 and amounts borrowed under these lines were repaid.

9. LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

                                      February 10,      February 28,
                                         1998              1997
Medium-term notes                      $750,000           $     -
11.25% Notes                            130,000           130,000
Mortgage note payable                    20,466            21,128
  Total                                $900,466          $151,128

Medium-term notes

As of February 10, 1998, $650.0 million of the outstanding medium-term
notes had been effectively converted by interest rate swap agreements to
floating-rate notes. The weighted average borrowing rates on medium-term
borrowings issued for the period from March 1, 1997 to February 10, 1998,
including the effect of the interest rate swap agreements, was 6.251% . Net
proceeds from the issuance were primarily used to reduce the amounts
outstanding under the bank credit agreement. Amounts were subsequently
reborrowed under the bank credit facility to fund the early pool buyout
program.

As of February 10, 1998, outstanding medium-term notes issued by HomeSide
Lending, Inc., under a $1.0 billion shelf registration statement were as
follows (in thousands):

                                     Stated
                   Outstanding      Interest
Issue Date           Balance          Rate         Maturity Date
May 20, 1997          $250,000       6.890%        May 15, 2000
June 30, 1997          200,000       6.883%        June 30, 2002
June 30, 1997           40,000       6.820%        July 2, 2001
July 1, 1997            15,000       6.860%        July 2, 2001
July 31, 1997          200,000       6.818%        August 1, 2004
September 15, 1997      45,000       6.770%        September 17, 2001
    Total             $750,000

As of February 10, 1998, $250.0 million was available for future issuances
under the shelf registration. On March 6, 1998, HomeSide Lending, Inc.
filed an amendment increasing the shelf registration to $1.5 billion.

11.25% Notes

On May 14, 1996, HomeSide issued $200.0 million of 11.25% notes ("Notes")
maturing on May 15, 2003 and paying interest semiannually in arrears on May
15 and November 15 of each year, commencing on November 15, 1996. The Notes
are redeemable at the option of HomeSide, in whole or in part, at any time
on or after May 15, 2001, at certain redemption prices. The indenture
contains covenants that impose limitations and restrictions on HomeSide,
including the maintenance of certain net worth and ratio requirements. In
addition, the Notes are secured by a second priority pledge of the common
stock of HomeSide Lending, Inc. HomeSide is in compliance with all net
worth and ratio requirements contained in the indenture relating to the
notes. The amount of Notes outstanding at February 10, 1998 is $130.0
million.

On February 5, 1997, the Company issued 8,452,500 shares of common stock to
the public at $15 per share. A portion of the proceeds from the offering
was used to pre-pay $70.0 million of the Notes at a premium of $7.9
million. In connection with the early repayment of the Notes, HomeSide
wrote off a portion of the unamortized debt issuance costs related to the
Notes and incurred a prepayment penalty equal to one year's interest on the
Notes retired. The loss amounted to $6.4 million, net of tax, and was
recorded as an extraordinary item. The remaining proceeds were used to
reduce amounts outstanding under the bank line of credit.

Mortgage note payable

HomeSide assumed a mortgage note payable that is due in 2017 and bears
interest at a stated rate of 9.50%. HomeSide's main office building is
pledged as collateral. A purchase accounting premium was recorded in
connection with HomeSide assuming the mortgage note payable.

Principal payments due on long-term debt at February 10, 1998 are as
follows (in thousands):

Fiscal Year
1999                                              $    256
2000                                               250,281
2001                                               100,309
2002                                               200,340
2003                                               130,373
Thereafter                                         211,724
Unamortized purchase accounting premium              7,183
  Total                                           $900,466

10. INCOME TAXES

The Company files a consolidated federal income tax return. All companies
included in the consolidated federal income tax return are jointly and
severally liable for any tax assessments based on such consolidated return.
Components of the provision for income taxes before the effect of the tax
benefit associated with the early extinguishment of debt were as follows
(in thousands):

                                          For the           For the
                                        Period From        Period From
                                        March 1, 1997     March 16, 1996
                                       to February 10,    to February 28,
                                             1998               1997
Current:
  Federal                                 $ 2,589             $    -
  State                                         -                  -
                                            2,589                  -
Deferred
  Federal                                  38,043             23,756
  State                                     7,184              5,517
                                           45,227             29,273
Total                                     $47,816            $29,273

The following is a reconciliation of the statutory federal income tax rate
to the effective income tax rate as reflected in the consolidated
statements of income.
                                           For the           For the
                                         Period From       Period From
                                        March 1, 1997     March 16, 1996
                                        to February 10,   to February 28,
                                              1998              1997
Statutory federal
  income tax rate                             35.0%             35.0%
State income and franchise
  taxes, net of federal tax effect             3.5%              4.0%
Other                                           .5%              1.0%
  Effective income tax rate                   39.0%             40.0%

For the period from March 16, 1996 to February 28, 1997, the extraordinary
loss on the early extinguishment of debt is stated net of the related tax
benefit of $4.3 million at an effective tax rate of 40%.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below (in thousands):

                                           February 10,      February 28,
                                              1998              1997
Deferred tax assets:
  Net operating loss
    carryforwards                             $ 45,446          $ 53,355
  Alternative minimum tax
    credit carry forward                         2,589                 -
  Loss reserves                                 25,404            17,563
  Hedge activities                              30,754                 -
  Other assets                                   4,879            12,087
    Total gross deferred
      tax assets                              $109,072          $ 83,005
Deferred tax liabilities:
  Mortgage servicing fees                     $267,871          $207,278
  Other liabilities                             16,379             5,678
    Total gross deferred tax liabilities       284,250           212,956
        Net deferred tax liability            $175,178          $129,951

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which these temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income and tax planning strategies in making this
assessment. No valuation allowance was recorded at February 10, 1998 or
February 28, 1997.

The Company has consolidated tax net operating loss carryforwards at
February 10, 1998. These carryforwards expire in the years 2002 to 2012.

11. LEASE COMMITMENTS

HomeSide leases office facilities and equipment under noncancelable leases
that include renewal options and escalation clauses which extend into 2004.
Rental expense for leases of office facilities and equipment was $4.5
million and $3.9 million for the period March 1, 1997 to February 10, 1998
and for the period March 16, 1996 to February 28, 1997, respectively.
HomeSide's minimum future lease commitments are as follows (in thousands):

Fiscal Year
1999                     $2,124
2000                        984
2001                        800
2002                        710
2003                        625
Thereafter                  700
  Total                  $5,943

12. STOCKHOLDERS' EQUITY

On March 15, 1996, in connection with the BBMC acquisition discussed in
Note 4, the Investors contributed cash of $107.3 million for 10,863,293
shares of common stock. Also on March 15, 1996, HomeSide issued 8,427,155
shares of common stock and cash to BankBoston in exchange for BBMC. The
common stock issued to BankBoston was assigned a value of $86.8 million.
Simultaneously with the closing of the BBMC acquisition, HomeSide also
issued 97,138 shares of its class B non-voting common stock to an
investment bank in consideration of services rendered to HomeSide in
connection with the BBMC acquisition. BankBoston also paid $1.0 million in
cash for 97,138 shares of HomeSide's class C non-voting common stock.
BankBoston then sold the class C shares to an unaffiliated third party.
On May 31, 1996, in connection with the BMC Acquisition discussed in Note
4, BankBoston, the Investors and certain directors and executive managers
of HomeSide contributed a total of approximately $46.0 million in cash for
4,100,944 shares of common stock. Approximately, $1.9 million of the amount
contributed by management was financed by HomeSide and, accordingly, was
reported as a reduction of stockholders' equity. Also on May 31, 1996,
HomeSide issued 11,461,400 shares of common stock and cash to Barnett in
exchange for BMC. The common stock issued to Barnett was assigned a value
of $118.0 million.

On February 5, 1997, HomeSide issued 8,452,500 shares of common stock to
the public at $15 per share. The stock was listed on the New York Stock
Exchange under the symbol HSL. The transaction resulted in net proceeds to
the Company of $116.9 million. A portion of the proceeds from the sale was
to pre-pay $70.0 million of Notes at a pre-tax premium of $7.9 million. Pro
forma earnings per share giving effect for the public offering as of the
date of the issuance of the Notes and the related use of proceeds to repay
$70.0 million of the Notes and to reduce the bank line of credit borrowings
was $1.27 per share. Upon completion of the issue, all shares of class B
non-voting common stock converted automatically, on a 1-for-1 basis, into
shares of common stock.

On December 31, 1997, HomeSide issued 19,431 shares of common stock at
$10.29 per share for stock options exercised under the HomeSide 1996
Employee Stock Option Plan.

13. SUPPLEMENTAL CASH FLOW INFORMATION

During the period March 16, 1996 to February 28, 1997, HomeSide extended
loans totaling $1.9 million to certain members of management in connection
with their purchase of shares of common stock. These loans were repaid in
fiscal 1998 in anticipation of HomeSide's acquisition by the National.
In connection with the acquisitions of BBMC and BMC, HomeSide recorded
non-cash assets and assumed liabilities, including fair value adjustments,
of approximately $2.3 billion and $1.7 billion in 1998 and 1997,
respectively.

HomeSide paid $70.5 million and $81.8 million of interest during the period
from March 1, 1997 to February 10, 1998 and March 16, 1996 to February 28,
1997, respectively. HomeSide paid taxes totaling $0.3 million and received
$51.7 million cash for reinstated loans from early pool buyout advances for
the period from March 1, 1997 to February 10, 1998.

14. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates are made as of a specific point in time based on the
characteristics of the financial instruments and the relevant market
information. Where available, quoted market prices are used. In other
cases, fair values are based on estimates using other valuation techniques,
such as discounting estimated future cash flows using a rate commensurate
with the risks involved or other acceptable methods. These techniques
involve uncertainties and are significantly affected by the assumptions
used and the judgments made regarding risk characteristics of various
financial instruments, prepayments, discount rates, estimates of future
cash flows, future anticipated loss experience and other factors. Changes
in assumptions could significantly affect these estimates. Derived fair
value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in an immediate sale of
the instrument. Also because of differences in methodologies and
assumptions used to estimate fair value, the Company's fair values should
not be compared to those of other companies.

Fair value estimates are based on existing financial instruments without
attempting to estimate the value of anticipated future business and the
value of assets and liabilities that are not considered financial
instruments. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company. For certain assets and
liabilities, the information required is supplemented with additional
information relevant to an understanding of the fair value.

The methods and assumptions used to estimate the fair values of each class
of financial instruments are as follows:

Cash and cash equivalents

The carrying amount reported in the balance sheet approximates fair value.

Mortgage loans held for sale

Fair values are based on the estimated value at which the loans could be
sold in the secondary market. These loans are priced to be sold with
servicing rights retained, as this is the Company's normal business
practice.

Accounts receivable, early pool buyout advances and accounts payable

Carrying amounts are considered to approximate fair value. Accounts payable
do not include the effects of additional costs incurred and additional
liabilities assumed in connection with HomeSide's acquisition by the
National.

Risk management contracts

Fair values are estimated based on actual market quotes or option models.

Notes payable

The carrying amount of the notes payable reported in the balance sheet
approximates its fair value due to the short-term nature of the borrowings
under the credit agreements.

Long-term debt

Fair value of long-term debt is estimated by discounting estimated future
cash flows using a rate consistent with the Company's current borrowing
rate as adjusted for the effects of certain prepayment penalties.

Commitments to originate mortgage loans

Fair value is estimated using quoted market prices for securities backed by
similar loans adjusted for differences in loan characteristics.

Forward contracts to sell mortgages

Forward contracts to sell mortgages, which represent legally binding
agreements to sell loans to permanent investors at a specified price or
yield, are valued using market prices for securities backed by similar
loans and are reflected in the fair values of the mortgages held for sale,
to the extent that these commitments relate to mortgage loans already
originated, or of the related commitments to extend credit.

Options on mortgage-backed securities and U.S. treasury bond futures

The fair values of options are estimated based on actual market quotes. In
some instances, quoted prices for the underlying loans or valuations
determined by option models are used.

Interest rate swaps

The fair values of interest rate swaps are estimated based on dealer quotes.

Fair Value

The fair values of the Company's financial instruments are as follows (in
thousands):

                                      February 10, 1998     February 28, 1997
                                      Carrying     Fair     Carrying     Fair
                                       Amount      Value     Amount      Value
Assets
Cash and cash equivalents            $   32,113 $   32,113 $   52,691 $  52,691
Mortgage loans held for sale          1,292,403  1,296,685    805,274   806,432
Accounts receivable and early pool
  buyout advances                       601,391    601,391    157,518   157,518
Risk management contracts for 
  mortgage servicing rights              43,947     43,947     45,212    45,212

Liabilities
Notes payable                         2,074,956  2,074,956  1,818,503 1,818,503
Long-term debt                          900,466    929,893    151,128   151,128
Accounts payable and accrued 
  liabilities                           143,870    143,870    140,304   140,304

Off-Balance Sheet(1)
Commitments to originate mortgage 
  loans                                       -     (1,510)         -    (2,805)
Mandatory forward contracts to sell 
  mortgages                                   -     (3,621)         -     3,588
Mandatory forward contracts to sell 
  U.S. treasuries                             -         65          -         7
Options on mortgage-backed securities     3,543      5,890      2,025     1,741
Options on U.S treasury bond futures        743        604        321      (147)
Interest rate swaps                           -     13,496          -         -

(1) Parenthesis denote a liability

Fair value estimates are made as of a specific point in time, based on
relevant market data and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale the Company's entire holding of a particular financial
instrument. Because no active market exists for some portion of the
Company's financial instruments, fair value estimates are based on
judgments regarding future expected loss experience, current economic
conditions, current interest rates and prepayment trends, risk
characteristics of various financial instruments and other factors.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be determined with
precision. Changes in any of these assumptions used in calculating fair
value would also significantly affect the estimates. Further, the fair
value estimates were calculated as of February 10, 1998 and February 28,
1997. Subsequent changes in market interest rates and prepayment
assumptions could significantly change the fair value.

15. RISK MANAGEMENT AND OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

As discussed in Note 3, HomeSide utilizes risk management financial
instruments to manage interest rate risk related to the value of its
mortgage servicing rights. A summary of HomeSide's position in risk
management financial instruments at February 10, 1998 and February 28, 1997
is included on the following page.

The fair value of HomeSide's risk management contracts is based on quoted
market prices of the underlying instruments at February 10, 1998 and
February 28, 1997. The notional amounts represent the par value of the
underlying U.S. Treasury bonds. However, the notional amounts are not
recognized in the balance sheet and should not be considered as a measure
of credit risk or future cash requirement.

The amount of the risk management contracts maintained depends on factors
such as interest rates, interest volatility and growth in the mortgage
servicing portfolio. HomeSide is subject to market risk to the extent that
interest rates fluctuate; however, the purpose of the risk management
contracts is to hedge the value of the mortgage servicing rights portfolio.
HomeSide's risk management financial instruments qualify as hedges, and
gains or losses on the risk management instruments correlate to movements
in the value of the mortgage servicing rights. Cash requirements for
HomeSide's option contracts are limited to premiums paid. Cash requirements
for futures contracts are managed based on limits established by HomeSide's
risk management committee. HomeSide's credit risk on its risk management
contracts is limited because the contracts are traded on a national
exchange which guarantees counterparty performance.

As discussed in Note 3, HomeSide purchases financial instruments and enters
into financial agreements with off-balance sheet risk in the normal course
of business through the origination and selling of mortgage loans and as
part of its risk management programs. These instruments involve, to
varying degrees, elements of credit and interest rate risk.  Credit risk
is the possibility that a loss may occur if a counterparty to a transaction
fails to perform according to the terms of the contract. Interest rate risk
is the possibility that a change in interest rates will cause the value of
a financial instrument to decrease or become more costly to settle.

Options and forward contracts

The notional amount of the options and forward contracts used in HomeSide's
risk management programs is the amount upon which interest and other
payments under the contract are based and is generally not exchanged.
Therefore, the notional amounts should not be taken as the measure of
credit risk or a reflection of future cash requirements. The risk
associated with options and forwards is the exposure to current and
expected market movements in interest rates and the ability of the
counterparties to meet the terms of the contracts. The cash requirements
associated with these options and forward contracts, aside from the initial
purchase price, are minimal. These contracts generally require future
performance on the part of the counterparty upon exercise of the option or
execution of the forward contract by HomeSide.

HomeSide is exposed to credit loss in the event of nonperformance by the
counterparties to the various instruments. HomeSide controls credit and
market risk associated with interest rate products by establishing and
monitoring limits with counterparties as to the types and degree of risks
that may be undertaken. HomeSide's exposure to credit risk in the event of
default by the counterparties for the options is $57.0 million at February
10, 1998.

HomeSide's exposure to credit risk in the event of default by the
counterparty for mandatory forward commitments to sell mortgage loans is
the difference between the contract price and the current market price,
offset by any available margins retained by HomeSide or an independent
clearing agent, which totaled $30.2 million at February 10, 1998. The
amount of credit risk as of February 10, 1998, if all counterparties failed
completely and if the margins, if any, retained by HomeSide or an
independent clearing were to become unavailable, was approximately $4.4
million for mandatory forward commitments of mortgage-backed securities.

The following is a summary of HomeSide's notional amounts and fair values
of interest rate products (in thousands):

                                          February 10, 1998    February 28, 1997
                                          Notional    Fair    Notional    Fair
                                           Amount    Value(1)  Amount   Value(1)
Purchased commitments to sell  mortgage 
 loans:
  Mandatory forward contracts             $2,847,668 $(3,556) $1,445,345 $3,588
  Options on mortgage-backed securities      835,000   5,890     755,000  1,741
  Options on U.S. treasury bond futures      145,000     604     140,000   (147)
Risk management contracts on mortgage 
 servicing rights:
  Options on U.S. treasury bond futures    4,440,100  50,487   3,572,300 45,212
  Futures contracts on U.S. treasury bonds 2,121,800  (6,540)          -      -

(1) Fair value represents the amount at which a given instrument could be
exchanged in an arms length transaction with a third party as of the
balance sheet date.

Commitments to originate mortgage loans

HomeSide regularly enters into commitments to originate and purchase
mortgage loans at a future date subject to compliance with stated
conditions. Commitments to originate mortgage loans have off-balance sheet
risk to the extent HomeSide does not have matching commitments to sell
loans, which exposes HomeSide to lower of cost or market valuation
adjustments in a rising interest rate environment. Additionally, the
extension of a commitment, which is subject to HomeSide's credit review and
approval policies, gives rise to credit exposure when certain borrowing
conditions are met and the loan is made. Until such time, it represents
only potential exposure. The obligation to lend may be voided if the
customer's financial condition deteriorates or if the customer fails to
meet certain conditions. Commitments to originate mortgage loans do not
necessarily reflect future cash requirements since some of the commitments
will not be drawn upon before expiration. Commitments to originate mortgage
loans totaled $3.2 billion and $2.7 billion at February 10, 1998 and
February 28, 1997, respectively.

Mortgage loans sold with recourse

HomeSide sells mortgage loans with recourse to various investors and
retains the servicing rights and responsibility for credit losses on these
loans. The total outstanding balance of loans sold with recourse does not
necessarily represent future cash outflows. The total outstanding principal
balance of loans sold with recourse was $16.7 million and $14.2 million at
February 10, 1998 and February 28, 1997, respectively.
For five years following the May 31, 1996 acquisition of BMC, Barnett is
obligated to repurchase or reimburse HomeSide for any credit losses related
to $101.0 million of loans serviced with recourse.

Servicing commitment to investors

HomeSide is required to submit to certain investors, primarily GNMA,
guaranteed principal and interest payments from the underlying mortgage
loans regardless of actual collections.

Purchase mortgage servicing rights commitments

HomeSide routinely enters into commitments to purchase mortgage servicing
rights associated with mortgages originated by third parties, subject to
compliance with stated conditions. These commitments to purchase mortgage
servicing rights correspond to mortgage loans having an aggregate loan
principal balance of approximately $0.6 billion and $2.3 billion at
February 10, 1998 and February 28, 1997, respectively.

Geographical concentration of credit risk

HomeSide is engaged in business nationwide and has no material
concentration of credit risk in any geographic region.

16. OTHER RELATED PARTY TRANSACTIONS

HomeSide entered into an agreement with BankBoston and Barnett for certain
corporate support services. For the period from March 1, 1997 to February
10, 1998, HomeSide paid BankBoston and Barnett approximately $5.2 million
and $0.5 million, respectively, for these services. For the period from
March 16, 1996 to February 28, 1997, HomeSide paid BankBoston and Barnett
approximately $2.5 million and $0.9 million, respectively, for these
services.

HomeSide purchases mortgage loans eligible for sale from BankBoston and
Barnett. For the period from March 1, 1997 to February 10, 1998, HomeSide
paid approximately $5.3 million and $45.4 million, respectively, to
BankBoston and Barnett for the purchase of mortgage servicing rights. For
the period from March 1, 1996 to February 28, 1997, HomeSide paid
approximately $4.7 million and $27.6 million, respectively, to BankBoston
and Barnett for the purchase of mortgage servicing rights. HomeSide also
purchases the mortgage servicing rights to the mortgage loans BankBoston
and Barnett hold in their portfolios. For the period from March 1, 1997 to
February 10, 1998, HomeSide purchased mortgage servicing rights for loans
retained by BankBoston and Barnett totaling approximately $1.6 million and
$9.5 million, respectively. For the period from March 16, 1996 to February
28, 1997 HomeSide purchased mortgage servicing rights for loans retained by
BankBoston and Barnett totaling approximately $1.3 million and $8.2
million, respectively. The BankBoston and Barnett purchases represent 2.8%
and 20.4%, respectively, of the Company's total production for the period
from March 1, 1997 to February 10, 1998. For the period from March 16, 1996
to February 28, 1997, the BankBoston and Barnett purchases represented 2.8%
and 16.0%, respectively, of the Company's total production.

HomeSide services residential mortgage loans held in portfolio by
BankBoston and Barnett. The servicing fees paid by BankBoston and Barnett
to HomeSide are market-based fees consistent with the fees charged by
HomeSide to other investors. For the period from March 1, 1997 to February
10, 1998, BankBoston and Barnett paid $3.8 million and $29.1 million in
servicing fees, respectively. For the period from March 16, 1996 to
February 28, 1997, BankBoston and Barnett paid $5.3 million and $23.6 million 
in servicing fees, respectively.

As a result of NationsBank Corporation's acquisition of Barnett Banks,
Inc., the Company agreed to release Barnett from a five year agreement to
sell certain of its mortgage loans to HomeSide. In consideration, the
Company received the right to purchase $5.0 billion in mortgage servicing
rights, an increase in the weighted average servicing fee for Barnett
portfolio loans currently serviced, and will receive $3.0 million cash in
June 1998.

As of February 28, 1997, certain members of management owed $1.9 million
related to loans granted to purchase shares of the Company's common stock.
During the period from March 1, 1997 to February 10, 1998, all related
loans were repaid.

17. STOCK BASED COMPENSATION

HomeSide established the HomeSide 1996 Employee Stock Option Plan under
which 582,845 shares of Common Stock are reserved for issuance. Options
issued under the plan may be either non-qualified or incentive stock
options. The options will be exercisable at such prices as are set by
HomeSide's board of directors.

HomeSide has also adopted a 1996 Time Accelerated Restricted Stock Option
Plan under which 1,165,724 shares of Common Stock are reserved for
issuance. Options granted under this plan will be non-qualified and will be
exercisable at such prices as are set by the board of directors. Options
granted under the plan will vest nine years from the date of grant. Vesting
will accelerate upon the achievement of certain performance criteria.

There was no compensation expense associated with the above option grants
since the exercise price was equal to the estimated fair value of the
Common Stock at the date of grant.

Options outstanding and the activity for the period from March 1, 1997 to
February 10, 1998 and for the period from March 16, 1996 to February 28,
1997 are presented below:
                                      For the Period From    For the Period From
                                        March 1, 1997 to      March 16, 1996 to
                                       February 10, 1998      February 28, 1997
                                                Weighted              Weighted
                                     Options Average Price Options Average Price
Employee stock option plans:
  Outstanding at beginning of year  1,321,716   $10.294           -            -
  Granted                             415,000    20.386   1,341,198      $10.294
  Exercised                            19,431    10.294           -            -
  Forfeited                                 -         -      19,482      $10.294
Outstanding at period end           1,717,285   $12.733   1,321,716      $10.294
Options exercisable at period end     244,912   $10.294           -            -
Weighted average fair value of
  options granted during the period    $11.06                 $3.21

The company applies the provisions of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," in accounting for its
stock option plans and has adopted the disclosure-only option under SFAS
No. 123, "Accounting for Stock-Based Compensation." If the company had
adopted the accounting provisions of SFAS 123 and recognized expense for
the fair value of employee stock options granted during the period from
March 1, 1997 to February 10, 1998 and the period from March 16, 1996 to
February 28, 1997, over the vesting life of the options, pro forma net
income before extraordinary loss would be as indicated below (dollars in
thousands, except share data):
<TABLE>
<CAPTION>

                                        As Reported                               Pro Forma
                         For the Period from  For the Period from  For the Period from  For the Period from 
                           March 1, 1997 to     March 16, 1996 to    March 1, 1997 to     March 16, 1996 to
                          February 10, 1998     February 28, 1997    February 10, 1998    February 28, 1997
<S>                      <C>                  <C>                  <C>                  <C>    
Net income                        $74,787              $36,969              $74,158              $36,692
Basic income per share            $  1.72              $  1.14              $  1.71              $  1.14
Diluted income per share          $  1.69              $  1.13              $  1.67              $  1.12
</TABLE>

In determining the pro forma disclosures above, the fair value of options
granted was estimated on the date of grant using the Black-Scholes
option-pricing model. The Black-Scholes model was developed to estimate the
fair value of traded options, which have different characteristics than
employee stock options, and changes to the subjective assumptions used in
the model can result in materially different fair value estimates. The
weighted-average grant date fair values of the options granted during the
period from March 1, 1997 to February 28, 1998 and the period from March
16, 1996 to February 28, 1997 were based on the following assumptions:
<TABLE>
<CAPTION>

                                         Risk-Free Interest Rates                         Dividend Yield
                                 For the Period From  For the Period From  For the Period From  For the Period From
                                   March 1, 1997 to     March 16, 1996 to    March 1, 1997 to     March 16, 1996 to
                                  February 10, 1998     February 28, 1997    February 10, 1998    February 28, 1997
<S>                              <C>                  <C>                  <C>                  <C>   
1996 Time accelerated restricted 
 option plan                        6.31 to 6.97%         6.61 to 6.98%              0.0                  0.0
1996 Employee stock option plan     6.27 to 6.93%         6.50 to 6.86%              0.0                  0.0
</TABLE>
<TABLE>
<CAPTION>
         
                                                  Expected Lives                            Volatility
                                   For the Period From  For the Period From  For the Period From  For the Period From
                                     March 1, 1997 to     March 16, 1996 to    March 1, 1997 to    March 16, 1996 to
                                    February 10, 1998     February 28, 1997    February 10, 1998   February 28, 1997
<S>                                <C>                  <C>                  <C>                  <C>   
1996 Time accelerated restricted 
option plan                                8.5 years             8.5 years             .35                 .35
1996 Employee stock option plan            7.5 years             7.5 years             .35                 .35   
</TABLE>

Compensation expense under the fair value-based method is recognized over
the vesting period of the related stock options. Accordingly, the pro forma
results of applying SFAS No. 123 may not be indicative of future amounts.
The following table summarizes information about stock options outstanding
at February 10, 1998:

         Outstanding                       Exercisable
                      Average                        Average
            Average  Exercise                       Exercise
Shares       Life     Price              Shares       Price
1,302,285     7.3     $10.29            244,912       $10.29
   10,000     8.2      15.75                  -            -
  405,000     8.2      20.50                  -            -
1,717,285     7.5     $12.73            244,912       $10.29

In connection with the National merger, vesting of all outstanding stock
options was accelerated or the related options were canceled.

18. EARNINGS PER SHARE

In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." This
Statement establishes standards for computing and presenting earnings per
share (EPS) and applies to entities with publicly held common stock or
potential common stock. It replaces the presentation of primary EPS with a
presentation of basic EPS and requires dual presentation of basic and
diluted EPS on the face of the income statement and a reconciliation of the
numerator and denominator of the diluted EPS computation.

This statement is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods. The Company is
required to retroactively adopt this standard when reporting its operating
results for periods after December 15, 1997. Income per share after
extraordinary loss and weighted average shares are as follows:
 
                                               For the Period From
                                        March 1, 1997 to February 10, 1998
                                                                Per-Share
                                         Income       Shares       Amount
Basic Earnings per Share
Net income available to common
  stockholders                       $74,787,000    43,474,864     $ 1.72
Option issued (See Note 17)                    -       890,959
Diluted Earnings per Share
Income available to
  common stockholders
  plus assumed conversions           $74,787,000    44,365,823     $ 1.69

                                               For the Period From
                                       March 16, 1996 to February 28, 1997
                                                                   Per-Share
                                        Income       Shares          Amount
Basic Earnings per Share
Net income available to common
  stockholders                       $36,969,000    32,288,313        $ 1.14
Options issued (See Note 17)                   -       399,467
Diluted Earnings per Share
Income available to 
  common stockholders
  plus assumed conversions           $36,969,000    32,687,780        $ 1.13

19. CONTINGENCIES

HomeSide, along with its subsidiaries, is a defendant in a number of legal
proceedings arising in the normal course of business. HomeSide, in
management's estimation, has recorded adequate reserves in the financial
statements for pending litigation. Management, after reviewing all actions
and proceedings pending against or involving HomeSide, considers that the
aggregate liabilities or loss, if any, resulting from the final outcome of
these proceedings will not have a material effect on the financial
position, results of operations or liquidity of HomeSide.

20. EMPLOYEE BENEFITS

HomeSide offers a 401(k) defined contribution benefit plan in which
employees may contribute a portion of their compensation. Substantially all
employees are eligible for participation in the plan. The Company matches
100% of amounts contributed up to 4% of an employee's compensation.
Further, the Company may contribute additional amounts at its discretion.
Total expense related to the benefit plan was approximately $3.0 million
and $4.0 million for the period from March 1, 1997 to February 10, 1998 and
the period from March 16, 1996 to February 28, 1997, respectively.

21. QUARTERLY FINANCIAL DATA (Unaudited)
<TABLE>
<CAPTION>

                                For the Period From  For the Three  For the Three  For the Three
                                 December 1, 1997 to   Months Ended   Months Ended   Months Ended
                                   February 10,         November 30,   August 31,       May 31,
(In Thousands, Except Share Data)      1998                 1997          1997           1997
<S>                             <C>                  <C>            <C>            <C>   
Revenue                               $62,523              $72,131       $72,746        $67,458
Expenses                               36,254               38,537        39,733         37,731
Provision for income taxes             10,245               13,102        12,875         11,594
Net income                            $16,024              $20,492       $20,138        $18,133
Net income per share(1)  
  Basic                               $  0.37              $  0.47       $  0.46        $  0.42
  Diluted                             $  0.36              $  0.46       $  0.46        $  0.41
Weighted average shares 
     outstanding(1)
  Basic                            43,483,633           43,472,568    43,472,568     43,472,568
  Diluted                          44,425,067           44,350,533    44,132,639     43,968,011
</TABLE>

(1) Net income per share is computed independently for each of the
quarters presented. Therefore, the sum of the quarterly earnings per share
amounts may not equal the annual amount. This is caused by rounding and the
averaging effect of the number of share equivalents utilized throughout the
year, which changes with the market price of the common stock.
<TABLE>
<CAPTION>

                                       For the Three  For the Three  For the Three  For the Period From
                                       Months Ended   Months Ended   Months Ended     March 16, 1996
                                        February 28,   November 30,    August 31,         to May 31,
(In Thousands, Except Share Data)           1997           1996           1996                1996
<S>                                    <C>            <C>            <C>            <C>    
Revenue                                    $63,171        $62,325        $57,863             $33,717
Expenses                                    40,288         40,655         40,842              22,609
Provision for income taxes                   8,750          9,015          6,954               4,554
Extraordinary loss from the early
  extinguishment of debt, net of tax         6,440              -              -                   -
Net income                                 $ 7,693        $12,655        $10,067             $ 6,554
Net income per share before 
  extraordinary loss on early 
  extinguishment of debt(1)
    Basic                                  $  0.37        $  0.36        $  0.29             $  0.34
    Diluted                                $  0.37        $  0.36        $  0.29             $  0.34
Net income per share(1)
    Basic                                  $  0.20        $  0.36        $  0.29             $  0.34
    Diluted                                $  0.20        $  0.36        $  0.29             $  0.34
Weighted average shares outstanding(1)
    Basic                               37,743,651     35,020,068     35,020,068          19,040,000
    Diluted                             38,143,118     35,329,380     35,329,380          19,349,312
</TABLE>

(1) Net income per share is computed independently for each of the
quarters presented. Therefore, the sum of the quarterly earnings per share
amounts may not equal the annual amount. This is caused by rounding and the
averaging effect of the number of share equivalents utilized throughout the
year, which changes with the market price of the common stock.

22. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Balance Sheets
                                            February 10,    February 28,
(Dollars in Thousands)                          1998            1997
Assets
Investment in subsidiary                       $700,374        $629,513
Other assets                                     22,202          17,105
Total Assets                                   $722,576        $646,618
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses          $  3,443        $  4,322
Long-term debt                                  130,000         130,000
Total Liabilities                               133,443         134,322
Commitments and Contingencies
Stockholders' Equity:
  Common stock                                      531             531
  Additional paid-in capital                    476,846         476,646
  Retained earnings                             111,756          36,969
                                                589,133         514,146
  Less: Notes received in
    payment for capital stock                         -          (1,850)
Total stockholders' equity                      589,133         512,296
Total Liabilities and Stockholders' Equity     $722,576        $646,618

Statements of Income
                                                 For the            For the
                                              Period From         Period From
                                             March 1, 1997      March 16, 1996
                                            to February 10,     to February 28,
(Dollars in Thousands)                            1998                1997
Revenues
Dividends from subsidiary                       $14,712             $16,965
  Total Revenues                                 14,712              16,965
Expenses
Interest expense                                 14,518              19,445
Other expenses                                      131                 842
  Total Expenses                                 14,649              20,287
Income (loss) before income
  taxes, equity in undistributed income
  of subsidiary and extraordinary loss               63              (3,322)
Income tax benefit                                5,713               8,171
Income before equity in undistributed  
  income of subsidiary and
  extraordinary loss                              5,776               4,849
Equity in undistributed income of 
  subsidiary                                     69,011              38,560
Extraordinary loss, net of tax                        -               6,440
Net Income                                      $74,787             $36,969

Statements of Cash Flows
                                                 For the            For the
                                               Period From        Period From
                                              March 1, 1997      March 16, 1996
                                             to February 10,     to February 28,
(Dollars in Thousands)                             1998                1997
Cash flows Used in
Operating Activities:
Net income                                     $  74,787           $  36,969
Adjustments to reconcile net income to 
  net cash  provided by (used in)
  operating activities:
    Amortization                                       -                 842
    Equity in undistributed earnings of
      subsidiary                                 (69,011)            (38,560)
    Deferred income
      tax benefit                                 (5,713)            ( 8,171)
    Change in other assets and accounts 
      payable and accrued liabilities             (2,113)             (3,810)
Net cash used in operating activities          $  (2,050)          $ (12,730)
Cash Flows Used in Investing Activities:
Capital contribution to subsidiary                     -            (376,453)
Net cash used in investing activities                  -            (376,453)
Cash Flows Provided by Financing Activities:
Issuance of bridge financing                           -              90,000
Repayment of bridge financing                          -             (90,000)
Issuance of Notes                                      -             200,000
Payment of debt issue costs                            -             (10,409)
Repayment of long-term debt                            -             (70,000)
Repayment of stockholder loans                      1,850                  -
Proceeds from issuance of common stock                200            269,592
Net cash provided by financing activities           2,050            389,183
Cash and cash equivalents at beginning 
  of period                                             -                  -
Cash and cash equivalents at end of period              -                  -
                                                  $     -            $     -
23. SUBSEQUENT EVENTS

On April 1, 1998, HomeSide, Inc.'s primary operating subsidiary, HomeSide
Lending, Inc. ("HomeSide Lending"), entered into an agreement with Banc One
Mortgage Corporation ("Banc One") to acquire the mortgage servicing assets
of Banc One. HomeSide Lending and Banc One have also entered into a
Preferred Partner agreement, whereby Banc One will sell a significant
portion of its residential mortgage loans to HomeSide Lending over the next
five years. The total purchase consideration is $201.0 million cash. The
mortgage servicing rights acquired relate to mortgage servicing loans of
approximately $18 billion. The transaction is subject to regulatory
approvals and is expected to close late in the second calendar quarter of
1998.

On April 6, 1998, the Company signed an agreement with NationsBank
Corporation whereby NationsBank agreed to sell HomeSide a national
wholesale mortgage loan network which was formerly owned by Barnett Banks,
Inc.



BancBoston Mortgage Corporation

Summary Historical Consolidated Financial and Operating Information

 The following table sets forth summary historical consolidated financial
and operating information for BBMC (formerly BancBoston Mortgage
Corporation and the Predecessor to the Issuer) for the periods prior to its
acquisition by the Parent. Such information should be read in conjunction
with, and is qualified in its entirety by reference to, the Consolidated
Financial Statements and the Notes thereto and in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of BBMC included elsewhere in this document.
<TABLE>
<CAPTION>

                                                                                    For the Period From
                                                                                      January 1, 1996
                                                       Years ended December 31,         to March 15,
(Dollars in Thousands)                              1993         1994         1995           1996
<S>                                           <C>          <C>          <C>            <C>   
Consolidated Statements of Operations Data:
Revenues:
Mortgage servicing fees                       $   111,822  $   140,491  $   173,038    $    38,977
Gain (loss) on risk management contracts            6,688       (6,702)     108,702       (128,795)
Amortization of mortgage servicing rights        (112,492)     (66,801)    (108,013)        (7,245)
  Net servicing revenue                             6,018       66,988      173,727        (97,063)
Interest income                                    50,156       31,585       24,324          8,423
Interest expense                                  (44,199)     (33,952)     (27,128)       (10,089)
  Net interest revenue                              5,957       (2,367)      (2,804)        (1,666)
Net mortgage origination revenue (expense)          6,173        4,983        3,417          7,638
Gain on sales of servicing rights                     651       10,862       10,230              -
Other income                                           50          147          511            253
  Total revenues                                   18,849       80,613      185,081        (90,838)
Expenses: 
Salaries and employee benefits                     33,096       40,370       45,381         10,287
Occupancy and equipment                             7,966        9,012       10,009          2,041
Servicing losses on investor-owned loans            2,770        7,177        9,981          5,560
Real estate acquired                                1,600          253        1,054            291
Other expenses                                     22,058       19,326       21,896          7,377
  Total expenses                                   67,490       76,138       88,321         25,556
Income (loss) before income taxes and
  cumulative effects of changes in
  accounting principles                       $   (48,641) $     4,475  $    96,760    $  (116,394)
Net income (loss)                             $   (85,185) $     5,405  $    58,826    $   (73,861)
Selected Balance Sheet Data (at Period End):
Mortgage loans held for sale                  $   607,506  $   271,215  $   388,436    $   628,504
Mortgage servicing rights                         281,727      431,148      551,338        542,862
Total assets                                    1,193,583    1,006,887    1,254,303      1,520,357
Note payable to Bank of Boston                  1,019,011      779,021      966,000      1,256,000
Total liabilities                               1,071,223      879,122    1,067,712      1,407,627
Total stockholders' equity                        122,360      127,765      186,591        112,730

Selected Operating Data
Volume of loans originated and acquired       $13,682,761  $14,473,000  $ 9,567,521    $ 4,187,603 (a)
Loan servicing portfolio (at period end)       27,999,100   37,971,200   41,555,354     44,158,163 (a)
Loan servicing portfolio (average)             25,852,400   33,178,600   39,283,700     43,158,072 (a)
Weighted average interest rate 
  (at period end)                                    8.07%        7.91%        7.97%          7.90%(a)
Weighted average servicing fee
  (average for period)                              0.372%       0.389%       0.383%         0.380%(a)
</TABLE>

(a) Period information is for the period January 1, 1996 to March 31, 1996
and period end information is at March 31, 1996.



Management's Discussion and Analysis of Financial Condition and Results of 
Operations

BBMC-For the Period January 1, 1996 to March 15, 1996 and January 1, 1995 to 
March 31, 1995 and for the Two Years Ended December 31, 1995

General

Prior to March 15, 1996, BBMC was a wholly-owned subsidiary of Bank of
Boston, a subsidiary of Bank of Boston Corporation ("BKBC"). On March 15,
1996, BBMC was acquired by HomeSide. The interim financial statements of
BBMC have been prepared for the period January 1, 1996 to March 15, 1996 to
coincide with the closing of the BBMC Acquisition. Results of operations
for periods subsequent to March 15, 1996 are included in the financial
statements of HomeSide. Results of operations for the three months ended
March 31, 1995 have been presented for comparative purposes. Unless
otherwise noted, references to the first quarter 1996 pertain to the period
January 1, 1996 to March 15, 1996. BBMC reported earnings on a calendar
year basis.

BBMC operates as a full-service mortgage banking firm emphasizing wholesale
mortgage originations and low cost mortgage servicing. Servicing activities
represent BBMC's primary revenue source. BBMC also generates revenue, to a
lesser extent, from mortgage loan origination fees. BBMC incurs expenses
for amortization of mortgage servicing rights, interest on its line of
credit and general corporate activities.

On June 1, 1995, BBMC purchased certain assets and assumed certain
liabilities of Bell Mortgage Company ("Bell Mortgage"), a privately-held
mortgage origination company located in Minneapolis, Minnesota. The
acquisition of Bell Mortgage was accounted for under the purchase method
of accounting. Results of operations of Bell Mortgage are included in the
1995 consolidated financial statements from the date of acquisition. See
Note 16 of Notes to Consolidated Financial Statements of BancBoston
Mortgage Corporation for further discussion.

Results of Operations

Summary

BBMC reported net income of $58.8 million in 1995 and $5.4 million in 1994.
Net income in 1994 included an after tax positive effect of $3.5 million
from a change in the accounting for mortgage servicing fee income. Prior to
the effect of such adjustment, BBMC had income of $58.8 million in 1995 and
$2.0 million in 1994. See Note 2 of Notes to Consolidated Financial

Statements for further discussion of BBMC's accounting changes.
The increase in net income in 1995 as compared to 1994 was primarily due to
factors that resulted from a decrease in interest rates coupled with growth
in BBMC's servicing portfolio. The lower interest rate environment resulted
in a gain related to BBMC's risk management activities in 1995 as compared
to a loss in 1994. BBMC also benefited from a 9% increase in the balance of
its residential servicing portfolio from $38.0 billion at December 31, 1994
to $41.6 billion at December 31, 1995.  The increases were partially offset,
however, by higher mortgage servicing rights amortization charges as a
result of larger mortgage servicing volumes and higher prepayment activity
in 1995.

Long-term interest rates declined through mid-February 1996, the
continuation of a trend which began in 1995. This decline led to an
increase in loan production to $4.2 billion during the first quarter of
1996 from $1.2 billion during the first quarter of 1995, and resulted in
growth in BBMC's mortgage servicing portfolio, which increased from $41.6
billion at December 31, 1995 to $44.2 billion at March 31, 1996. Beginning
in late February and continuing through March 1996, long-term interest
rates increased and negatively affected BBMC's results of operations for
the first quarter. BBMC reported a net loss of $73.9 million during the
first quarter of 1996, compared to net income of $3.4 million in the first
quarter of 1995. The decrease in net income was primarily due to losses of
$128.8 million on BBMC's risk management contracts during the first quarter
of 1996, a result of increasing interest rates in late February and March
1996.

Net Servicing Revenue

Net servicing revenue increased from $67.0 million to $173.7 million, an
increase of $106.7 million or 159.3%, from 1994 to 1995. This growth was
comprised of a $115.4 million increase in gain on risk management contracts
and a $32.5 million increase in mortgage servicing fees, offset by a $41.2
million increase in amortization of mortgage servicing rights. The gain
on risk management contracts resulted primarily from a decline in interest
rates in the fourth quarter of 1995 and was substantially offset by a
related decrease in the economic value of the servicing portfolio, which
was not reflected in earnings for the period. The cost of acquiring the
right to service mortgage loans originated by others is capitalized and
amortized as a reduction of servicing fee revenue over the estimated
servicing period. The increases in mortgage servicing fees and
amortization of mortgage servicing rights were primarily due to growth in
BBMC's average servicing portfolio during 1995. Average servicing fees,
excluding ancillary income, decreased slightly from 0.389% in 1994 to
0.383% in 1995.

At December 31, 1995, BBMC serviced approximately 510,000 loans, including
loans purchased not yet on BBMC's servicing system, with an unpaid
principal balance ("UPB") of $41.6 billion, compared to approximately
484,000 loans with UPB of $38.0 billion at December 31, 1994, an increase
of $3.6 billion, or 9.5%. The average servicing volume increased from $33.2
billion in 1994 to $39.3 billion in 1995, an increase of $6.1 billion or
18.4%. Growth in BBMC's servicing portfolio was primarily generated by
wholesale loan production, which includes correspondent, co-issue and
broker channels. BBMC also purchased servicing rights in bulk from other
mortgage servicing entities. Bulk purchases totalled $5.5 billion and $0.7
billion in 1994 and 1995, respectively.

In addition to growth in the servicing portfolio, an increase in late fee
income contributed to the rise in mortgage servicing revenue during 1995.
Late fees are included as a component of mortgage servicing revenue. BBMC
instituted efforts to improve the collection of ancillary fee income during
the year which contributed to an increase in late fee charges collected
from $10.5 million in 1994 to $14.4 million in 1995. Late fee income also
increased as a result of increases in BBMC's servicing portfolio size and
average loan size. The higher average loan size translates into higher loan
payments on which late fees are based. There was little or no change in
the rate on which late fees were computed during 1995 as compared to 1994.
During the first quarter of 1996, BBMC had net servicing revenues of
$(97.1) million, as compared to servicing revenues of $24.2 million in the
first quarter of 1995. The net negative amount recorded as servicing
revenue in 1996 was primarily due to losses on BBMC's risk management
contracts. Excluding the effect of risk management contracts, net servicing
revenue increased from $20.6 million in the first quarter 1995 to $31.7
million in the first quarter 1996. In the first quarter of 1995, BBMC
recorded gains on risk management contracts of $3.6 million. Due to an
increase in long-term interest rates in late February and early March 1996,
BBMC experienced losses on risk management contracts of $128.8 million
during the quarter. Changes in the value of BBMC's mortgage servicing
rights substantially offset the loss on risk management contracts. However,
such changes in value were not fully recorded in the financial statements
of BBMC because servicing rights were recorded at the lower of amortized
cost or market value.

The decrease in net servicing revenue was partially offset by a reduction
in amortization of mortgage servicing rights from $23.1 million in the
first quarter of 1995 to $7.2 million in the first quarter of 1996. The
reduction in amortization was due to the increase in long-term interest
rates noted above, which had a favorable effect on the prepayment estimates
used in calculating BBMC's periodic amortization expense. Because mortgage
servicing rights are amortized over the expected period of service fee
revenues, a reduction in mortgage prepayment activity typically results in
a longer estimated life of the mortgage servicing asset and, accordingly,
lower amortization expense. Amortization charges are highly dependent upon
the level of prepayments during the period and changes in prepayment
expectations, which are significantly influenced by the direction and level
of long-term interest rate movements.

Risk Management Activities

BBMC had a risk management program designed to protect the economic value
of its mortgage servicing portfolio from declines in value due to increases
in estimated prepayment speeds, which are primarily influenced by declines
in interest rates. When loans prepay faster than anticipated, the cash flow
BBMC would expect to receive from servicing such loans was reduced. Because
the value of the mortgage servicing rights is based on the present value
of the net cash flows to be received over the life of the loan, the value
of the servicing portfolio declines as prepayments increase.

Prior to 1994, risk management of the mortgage servicing rights value was
principally conducted by BKB as part of a consolidated risk management
program. Through the third quarter of 1995, BKB continued to manage a
portion of the risk associated with the servicing portfolio.

To implement its risk management objectives, BBMC purchased risk management
contracts that increased in value when long-term interest rates declined,
or when prepayment speeds increased above a specified level. During 1994
and 1995, BBMC purchased options on long-term United States Treasury bond
futures to protect a significant portion of the market value of its
mortgage servicing portfolio from a decline in value. The value of BBMC's
risk management position was designed to perform inversely with changes in
value of mortgage servicing rights due to the effects of the changes in
interest rates. The options were marked to market at each reporting date
with changes in value reported in revenues. BBMC recognized a gain on risk
management contracts of $108.7 million in 1995. While the value of the
servicing portfolio declined, the full effect of such decline was not
reflected in BBMC's financial results because the value of the associated
service rights exceeded its book value. Due to a rising interest rate
environment, BBMC experienced a $6.7 million loss related to its risk
management contracts in 1994.

BBMC recognized a gain on risk management contracts of $108.7 million in
1995, of which $86.5 million was unrealized. During the first quarter of
1996, long-term interest rates increased, reversing the declining trend
which prevailed during 1995. As a result, through the date of the sale of
BBMC in March 1996, BBMC recognized a loss on risk management contracts of
$128.8 million, which included a reversal of such $86.5 million unrealized
gain recognized during 1995. In 1995 and 1996, changes in the value of
BBMC's mortgage servicing rights substantially offset the gain and loss on
the risk management contracts. However, such changes in value were not
fully recorded in the financial statements of BBMC because servicing rights
are recorded at the lower of amortized cost or market value.

Net Interest Revenue/Expense

Net interest expense was $2.4 million in 1994 and $2.8 million in 1995.
Interest income decreased $7.3 million in 1995 as compared with 1994,
primarily as a result of a decrease in the average rate earned on
warehouse loans from 9.52% in 1994 to 7.78% in 1995. The reduction in
interest income on warehouse loans was partially offset by a $2.1 million
increase in interest earned on mortgage loans held for investment. Interest
expense decreased $6.8 million in 1995 as compared with 1994 as a result of
a decline in the average rate paid on BBMC's borrowings from 7.14% in 1994
to 6.89% in 1995.

Net interest expense decreased from $2.0 million in the first quarter of
1995 to $1.7 million in the first quarter of 1996. Interest income
increased in the first quarter of 1996 as compared with the first quarter
of 1995 as a result of an increase in the average balance of mortgage loans
held for sale from $124.6 million during the first quarter of 1995 to
$535.6 million during the first quarter of 1996. Increased loan production
volumes, $4.2 billion in the first quarter of 1996 compared to $1.2 billion
in the first quarter of 1995, created the increased average balance of
mortgage loans held for sale. In addition, an increase in long-term
interest rates during February and March 1996 improved the yield on its
mortgage loans held for sale. Interest expense incurred on BBMC's credit
facility with Bank of Boston increased in the first quarter of 1996 as
compared with the first quarter of 1995 as a result of the increase in the
average balance of BBMC's loans held for sale. In the first quarter of 1996
as well as the first quarter of 1995, interest earned on loans held for
sale was less than interest expense on borrowings, thereby creating net
interest expense for BBMC; but the increase in long-term interest rates
during February and March 1996, without a corresponding increase in
short-term rates on BBMC's credit facility, resulted in a decrease in net
interest expense in the first quarter of 1996 as compared with the first
quarter of 1995.

Net Mortgage Origination Revenue

Net mortgage origination revenue decreased from $5.0 million in 1994 to
$3.4 million in 1995. Lower production volumes and gains on sales of
mortgage loans were the primary reasons for this decline.
Net mortgage origination revenue (expense) increased from $(1.1) million in
the first quarter of 1995 to $7.6 million in the first quarter of 1996.
The increase in net origination revenue during the first quarter of 1996
was partially due to the adoption of SFAS No. 122, "Accounting for
Mortgage Servicing Rights" as of January 1, 1996, which had the effect of
increasing net mortgage origination revenue by $3.1 million. In previous
periods, the cost of mortgage servicing rights for originated loans was
included in the basis of the related loan. SFAS No. 122 requires that the
cost of an originated loan be allocated between the loan sold and the
servicing rights retained. Consequently, the cost basis of loans
originated in 1996 was lower than the basis that would have been recorded
prior to the adoption of SFAS No. 122 and resulted in additional gain on
the sale of loans. The remaining increase was due to increases in
origination income resulting from higher loan production volumes.

Gain on Sales of Servicing Rights

Gain on sales of servicing rights decreased from $10.9 million in 1994 to
$10.2 million in 1995. Gains on sales of servicing rights represent the
excess of proceeds from the sale over the cost basis of the assets. Gains
tend to be higher on sales of servicing rights with little or no cost
basis, as was the case for BBMC's sales in 1994. The servicing rights sold
during 1994 consisted primarily of retail originated loans and
consequently had relatively low cost basis. The servicing rights sales in
1995 consisted of a higher percentage of servicing on purchased loans,
which had a higher basis because servicing rights on purchased loans are
capitalized.

Gain on sales of servicing rights during the first quarter of 1995 was $4.3
million. There were no sales of servicing rights during the first quarter
of 1996.

Salaries and Employee Benefits

Salaries and employee benefits increased from $40.4 million in 1994 to
$45.4 million in 1995, or 12.4%. Including capitalized direct loan
origination costs (principally salary and employee benefits), salaries and
employee benefits increased from $51.5 million to $56.5 million from 1994
to 1995, or 9.7%. The increase included a $3.9 million increase in
salaries and a $1.1 million increase in benefits and were the result of a
larger staff needed to support BBMC's growing servicing portfolio. The
increases in salaries and benefits were partially offset by the outsourcing
of certain default administration and tax payment administration activities
during 1995. BBMC determined that the performance of these services on a
contracted basis was more cost effective than maintaining the personnel and
infrastructure necessary to carry out these functions in-house.
Salaries and employee benefits decreased from $11.7 million in the first
quarter of 1995 to $10.3 million in the first quarter of 1996, or 12.1%. If
capitalized direct loan origination costs (principally salary and employee
benefits) were included, the salaries and employee benefits increased from
$12.8 million in the first quarter of 1995 to $13.5 million in the first
quarter of 1996, or 5.8%. The increase reflected general salary and benefit
increases as compared to the first quarter of 1995 and a slight increase in
the number of full time equivalent employees from 1,117 as of March 31,
1995 to approximately 1,120 as of March 15, 1996.

Occupancy and Equipment Expense

Occupancy and equipment expense increased from $9.0 million in 1994 to
$10.0 million in 1995, or 11.1%, due primarily to the acquisition of Bell
Mortgage and the larger servicing operations.
Occupancy and equipment expense decreased $0.4 million, from $2.4 million
for the first quarter of 1995 to $2.0 million for the first quarter of
1996. The decrease was primarily due to a decline in equipment repair and
maintenance expenses in the first quarter of 1996 as compared to the first
quarter of 1995.

Servicing Losses on Investor-Owned Loans

Servicing losses on investor-owned loans primarily represent anticipated
losses attributable to servicing FHA and VA loans for investors. These
amounts include actual losses for final disposition of loans, accrued
interest for which payment has been denied and estimates for potential
losses based on experience as a servicer of government loans. Servicing
losses on investor-owned loans totaled $7.2 million and $10.0 million for
1994 and 1995, respectively, primarily representing losses on VA loans. In
1994 and 1995, BBMC recorded provisions in excess of actual foreclosure
losses. Management believes that BBMC had an adequate level of reserve
based on its servicing volume, portfolio composition, credit quality and
historical loss rates, as well as estimated future losses. For an analysis
of changes in the reserve for estimated servicing losses on investor-owned
loans for each of the two years ended December 31, 1995, see Note 4 of
Notes to Consolidated Financial Statements of BancBoston Mortgage
Corporation.

Servicing losses on investor-owned loans increased from $0.7 million in the
first quarter of 1995 to $5.6 million in the first quarter of 1996. The
increase was primarily due to a change in the VA's method of calculating
the amount it will guarantee on any loan, coupled with planned military
base closings in California that may have an impact on the performance of
certain VA loans serviced by BBMC. The increase in the VA marketing rate
effectively represents a potential increase in BBMC's exposure on
properties conveyed to the VA. BBMC analyzed the effect of these factors on
the level of its reserve for estimated servicing losses and recorded a
higher provision in the first quarter of 1996 in order to bring the reserve
to an acceptable level.

Real Estate Owned Expense

Real estate owned expense increased from $0.3 million in 1994 to $1.1
million in 1995. Real estate owned expense is incurred from foreclosed
properties on which BBMC has taken title and includes declines in the value
of the property, as well as the incurrence of property holding and
maintenance costs. The change in real estate owned expense in 1995 was due
primarily to an increase in the average balance of real estate owned from
$1.4 million in 1994 to $1.6 million in 1995. As part of the BBMC
Acquisition, BKB retained all real estate owned.

Real estate owned expense increased from $0.2 million in the first quarter
of 1995 to $0.3 million in the first quarter of 1996. The change was due
to an increase in the average balance of real estate owned from $1.2
million during the first quarter of 1995 to $2.6 million during the first
quarter of 1996.

Other Expenses

Other expenses increased from $19.3 million to $21.9 million, or 13.3%,
from 1994 to 1995. The increase in other expenses from 1994 to 1995
included increases of $1.1 million in advertising and public relations,
$1.0 million in contracted services, $0.9 million in software costs and
$0.6 million in communication expenses. These increases were partially
offset by a $0.7 million reduction in loan-related expenses. The increase
in advertising and public relations expense was due to a major advertising
campaign carried out during 1995 in addition to normal advertising
activity. Contracted services increased due to an increase in bank service
charges for loan payment processing, which also increased with the larger
BBMC servicing volume. Software costs increased as BBMC continued to expand
and redesign its computer platform in order to deliver more efficient and
reliable service. The increase in communications expense was due to higher
telephone postage and delivery expenses resulting from higher loan
production levels.

Other expense increased $2.7 million, from $4.7 million during the first
quarter of 1995 to $7.4 million in the first quarter of 1996. The increase
was the result of a $0.5 million increase in communications expense and a
$0.4 million increase in loan expense, coupled with a decrease in expense
credits resulting from a decline in early pool buyout activity in 1996.
These increases are reflective of the increase in BBMC's servicing
portfolio, $44.2 billion at March 31, 1996 as compared to $37.8 billion at
March 31, 1995, and higher loan production levels in the first quarter of
1996 as compared to the first quarter of 1995.

Provision for (Benefit from) Income Taxes

BBMC recorded a provision for income taxes of $2.5 million and $37.9
million for 1994 and 1995, respectively. The effective income tax rate was
39.2% and 56.4% for 1995 and 1994, respectively. The difference between
these rates and the statutory federal tax rate was primarily due to state
income taxes, net of federal tax benefit. The changes in the provisions
for, and benefit from, income taxes were the result of variances in BBMC's
pre-tax income and loss for each of the years presented. For additional
information regarding income taxes, refer to Note 10 of Notes to
Consolidated Financial Statements of BancBoston Mortgage Corporation.

BBMC's benefit from income taxes was $42.5 million during the first quarter
of 1996 as compared to a provision for income taxes of $2.3 million in the
first quarter of 1995. The change in BBMC's income tax provision was the
result of a decline in pre-tax income during the first quarter of 1996 as
compared to the first quarter of 1995, and a decrease in the effective tax
rate from 39.9% during the first quarter of 1995 to 36.5% during the first
quarter of 1996.

Accounting Changes

On January 1, 1994, BBMC changed its method of accounting for mortgage
servicing fees from the cash basis to the accrual basis. See Note 2 of
Notes to Consolidated Financial Statements of BancBoston Mortgage
Corporation on for further discussion of BBMC's accounting changes.
See "Liquidity and Capital Resources-New Accounting Standard" for
a discussion of Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights," which was adopted by BBMC in
1996.

Liquidity and Capital Resources

Overview

BBMC's primary sources of cash were revenues earned from the servicing of
mortgage loans, sales of mortgage loans and servicing rights and borrowings
under BBMC's warehouse line of credit. BBMC's primary uses of cash were to
fund loan originations and purchases, purchase bulk servicing rights, repay
its warehouse line of credit and pay general corporate expenses. BBMC had
a net increase (decrease) in cash of ($4.8 million) and $0.3 million in
1995 and 1994, respectively, and ($4.4 million) and $22.4 million in the
first quarter of 1995 and the first quarter of 1996, respectively.
The net decrease in cash in 1995 compared with 1994 was primarily
attributable to the use of cash to meet growth in loan origination volume
and purchases of mortgage servicing rights, coupled with a reduction in
proceeds on sales of mortgage loans. Declining interest rates in 1995
increased loan production across the industry. Cash inflows in 1995 were
positively affected by an increase in the proceeds from risk management
contracts, which increased in value as a result of the decline in interest
rates.

Prior to the BBMC Acquisition, a line of credit with Bank of Boston was
used to fund the origination and purchase of mortgage loans until the loans
were sold to investors. The proceeds of such sales were typically used to
pay down the related warehouse debt, with any excess retained by BBMC.
Maximum borrowings under the line of credit were $1.25 billion. The higher
level of borrowings in 1995 was indicative of higher loan production and
purchase volumes during that year as compared to 1994.
Net cash provided by operating activities and investing activities
decreased in the first quarter of 1996 as compared with the first quarter
of 1995, principally as a result of an increase in net cash used in the
origination and purchase of loans held for sale and in the purchase and
origination of mortgage servicing rights and the purchase of risk
management contracts. These increases were the result of higher loan
production levels and an increasing loan servicing portfolio. As a result
of increased loan production and held for sale balances in the first
quarter of 1996 as compared to the first quarter of 1995, BBMC had net
borrowings of $290.0 million on its line of credit with Bank of Boston
during the first quarter of 1996, as opposed to net repayments of $130.5
million on the line of credit during the first quarter of 1995.

Impact of Inflation

Inflation affects BBMC primarily through its effect on interest rates
because interest rates normally increase during periods of high inflation
and decrease during periods of low inflation.

New Accounting Standard

In May 1995, FASB issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights." This Statement, among other provisions, requires that the value of
mortgage servicing rights associated with mortgage loans originated by an
entity be capitalized as assets, which results in an increase in mortgage
origination revenues. The value of originated mortgage servicing rights is
determined by allocating the total costs of the mortgage loans between the
loans and the mortgage servicing rights based on their relative fair
values. Also, the Statement requires that capitalized servicing rights be
evaluated for impairment based on the fair value of these rights. For the
purposes of determining impairment, mortgage servicing rights that are
capitalized after the adoption of this Statement are stratified based on
one or more of the predominant risk characteristics of the underlying
loans. Impairment is recognized through a valuation allowance for each
impaired stratum. BBMC adopted this Statement effective January 1, 1996.



Reports of independent certified public accountants

The Board of Directors
BancBoston Mortgage Corporation

We have audited the accompanying consolidated balance sheet of BancBoston
Mortgage Corporation as of December 31, 1995, and the related consolidated
statements of operations and retained earnings and cash flows for the year
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of BancBoston
Mortgage Corporation as of December 31, 1995, and the consolidated results
of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.


Coopers & Lybrand L.L.P.

Jacksonville, Florida

January 18, 1996, except
for the second paragraph
of Note 1 and the fifth
paragraph of Note 2, as to
which the date is March 4, 1996



To the Board of Directors of BancBoston Mortgage Corporation

We have audited the accompanying consolidated balance sheet of BancBoston
Mortgage Corporation and subsidiaries (see Note 1) as of March 15, 1996,
and the related consolidated statements of operations and retained earnings
and cash flows for the period from January 1, 1996 to March 15, 1996.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
BancBoston Mortgage Corporation and subsidiaries as of March 15, 1996 and
the consolidated results of their operations and their cash flows for the
period from January 1, 1996 to March 15, 1996, in conformity with
generally accepted accounting principles.


Arthur Andersen, L.L.P.

Jacksonville, Florida
March 14, 1997



BancBoston Mortgage Corporation

Consolidated Balance Sheets

(The Predecessor, Acquired by HomeSide, Inc. on March 15 1996, and now known
as HomeSide Lending, Inc.-Note 1)

                                                  At December 31,   At March 15,
(In Thousands)                                         1995             1996
Assets
Cash                                                   $     830         23,216
Mortgage loans
  Held for sale, net                                     388,436        628,504
  Held for investment                                     33,183         65,068
Purchased mortgage servicing rights, net                 533,891        522,469
Excess mortgage servicing receivable, net                 17,447         20,393
Accounts receivable                                       82,473         65,599
Accounts receivable from Bank of Boston and 
     affiliates                                              343              -
Pool loan purchases                                       65,272         56,261
Mortgage claims receivable, net                           45,422         17,563
Accrued income tax receivable                                 -          40,867
Deferred tax asset                                        40,724         36,390
Real estate acquired                                       2,627          2,797
Premises and equipment, net                               25,386         25,071
Other assets                                              18,269         16,159
    Total Assets                                      $1,254,303      1,520,357
Liabilities and Stockholder's Equity
Note payable to Bank of Boston                        $  966,000     $1,256,000
Accounts payable and accrued liabilities                  51,683        137,837
Accrued income taxes                                      36,213              -
Long-term debt                                            13,816         13,790
    Total liabilities                                  1,067,712      1,407,627
Commitments and Contingencies 
     (Notes 9, 11, 12, 13, 15 and 16)

Stockholder's Equity:
  Common stock, $1 par value per share: 
     10,000 shares authorized;
     100 shares issued and outstanding                         -              -
  Additional paid-in capital                             156,666        156,666
Retained earnings (accumulated deficit)                   29,925        (43,936)
  Total stockholder's equity                             186,591        112,730
    Total Liabilities & Stockholder's Equity          $    1,254     $1,520,357

The accompanying notes are an integral part of these financial statements.



BancBoston Mortgage Corporation

Consolidated Statements of Operations and Retained Earnings

(The Predecessor, Acquired by HomeSide, Inc. on March 15 1996, and now known
as HomeSide Lending, Inc.-Note 1)

                                                                    For the    
                                                     Year         Period From  
                                                    Ended       January 1, 1996
                                                  December 31, through March 15,
(In Thousands)                                       1995            1996
Revenues:
  Mortgage servicing fees                           $ 173,038         $  38,977
  Gain (loss) on risk management contracts            108,702          (128,795)
  Amortization of mortgage servicing rights          (108,013)           (7,245)
    Net servicing revenue                             173,727           (97,063)
  Interest income                                      24,324             8,423
  Interest expense                                    (27,128)          (10,089)
    Net interest revenue (expense)                     (2,804)           (1,666)
  Net mortgage origination revenue                      3,417             7,638
  Gain on sales of servicing rights                    10,230                 -
  Other income                                            511               253
    Total Revenues                                    185,081           (90,838)
Expenses:
  Salaries and employee benefits                       45,381            10,287
  Occupancy and equipment                              10,009             2,041
  Servicing losses on investor-owned loans              9,981             5,560
  Real estate acquired                                  1,054               291
  Other expenses                                       21,896             7,377
    Total Expenses                                     88,321            25,556
Income (loss) before income taxes and cumulative
  effect of change in accounting principle             96,760          (116,394)
Income tax expense (benefit) before cumulative 
  effect of change in accounting principle:
    Current                                            47,646           (46,867)
    Deferred                                           (9,712)            4,334
      Total Income Tax Expense (Benefit)               37,934           (42,533)
Income (loss) before cumulative effect of change
  in accounting principle                              58,826           (73,861)
Cumulative effect on prior years of change in 
  accounting for mortgage servicing fee income,
  net of tax                                                -                 -
    Net Income (Loss)                                  58,826           (73,861)
Retained Earnings (Accumulated Deficit), 
  January 1                                           (28,901)           29,925
Retained Earnings (Accumulated Deficit), 
  end of period                                     $  29,925         $ (43,936)

The accompanying notes are an integral part of these financial statements.



BancBoston Mortgage Corporation

Consolidated Statements of Cash Flows

(The Predecessor, Acquired by HomeSide, Inc. on March 15 1996, and now known
as HomeSide Lending, Inc.-Note 1)

                                                                   For the 
                                                      Year        Period From 
                                                     Ended      January 1, 1996
                                                  December 31, through March 15,
(In Thousands)                                        1995           1996
Cash flows provided by (used in) operating 
     activities:
  Net income (loss)                               $    58,826       $   (73,861)
  Adjustments to reconcile net income (loss) 
     to cash provided by (used in) operations:
    Cumulative effect of change in accounting 
     for mortgage servicing fees, net of tax                -                 -
    Amortization                                      108,404             7,327
    Depreciation                                        3,133               719
    Servicing losses on investor-owned loans            9,981             5,560
    Deferred tax (benefit) expense                     (9,712)            4,334
    Gain on sale of mortgage servicing rights         (10,230)                -
    (Gain) loss on risk management contracts         (108,702)          128,795
    Write down of real estate acquired                  1,699             1,067
    Capitalized excess mortgage servicing 
     receivable                                        (7,513)           (3,967)
    Mortgage loans originated and purchased 
     for sale                                      (4,816,964)       (2,027,741)
    Proceeds and principal repayments of mortgage
      loans held for sale                           4,694,909         1,787,673
    Change in accounts receivable                     (16,053)           17,217
    Change in pool loan purchases                      12,205             9,011
    Change in mortgage claims receivable               (5,383)           25,863
    Change in accrued income taxes                     31,388           (77,080)
    Change in other assets and accounts payable 
     and accrued liabilities                          (11,899)           82,622
      Net cash provided by (used in) operating 
       activities                                     (65,911)         (112,461)
Cash flows provided by (used in) investing 
     activities:
  Principal payments on (net origination) of 
     mortgage loans held for investment                12,966           (31,885)
  Purchase of premises and equipment                   (3,141)             (404)
  Acquisition of Bell Mortgage                           (891)                -
  Purchase of mortgage servicing rights              (193,013)          (60,171)
  Proceeds from (amounts paid for) risk management
      contracts, net                                   27,120           (63,426)
  Proceeds from real estate acquired                    2,610               759
  Proceeds from sales of mortgage servicing rights     28,649                 -
      Net cash used in investing activities          (125,700)         (155,127)
Cash flows provided by (used in) financing 
     activities:
  Borrowings from Bank of Boston                    3,669,085         1,692,500
  Repayments to Bank of Boston                     (3,482,106)       (1,402,500)
  Repayment of long-term debt                            (191)              (26)
        Net cash provided by (used in) financing
         activities                                   186,788           289,974
Net increase (decrease) in cash                        (4,823)           22,386
  Cash at January 1                                     5,653               830
  Cash at end of period                           $       830        $   23,216
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest                                      $    27,498        $    9,211
    Income taxes                                  $    16,258        $   30,213
Supplemental schedule of non-cash investing 
 activities:
  BBMC purchased bulk mortgage servicing rights 
   during the years 1994 and 1995. In conjunction
    with purchases, accounts payable were assumed $    23,022        $        -

The accompanying notes are an integral part of these financial statements.



Notes to Consolidated Financial Statements

1. ORGANIZATION

BancBoston Mortgage Corporation ("BBMC" or the "Company") was a
wholly-owned subsidiary of The First National Bank of Boston ("Bank of
Boston"), which was a wholly-owned subsidiary of Bank of Boston
Corporation. In December 1995, Bank of Boston Corporation signed an
agreement with Thomas H. Lee Company and Madison Dearborn Partners
("Investors") to sell BBMC, creating an independent mortgage company. Under
the terms of the agreement, Bank of Boston received cash and an equity
interest in the new company, HomeSide, Inc. The Investors acquired majority
interest in HomeSide, Inc. The transaction closed March 15, 1996. Upon
completion of the transaction, BBMC was renamed HomeSide Lending, Inc. BBMC
is the Predecessor company to both HomeSide, Inc. and HomeSide Lending, Inc.
On March 4, 1996, Barnett Banks, Inc. ("Barnett") entered into an agreement
to sell certain of its mortgage banking operations, primarily its servicing
portfolio and proprietary mortgage banking software systems to HomeSide,
Inc. Barnett received cash and an ownership interest in HomeSide, Inc. The
transaction closed May 31, 1996.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The consolidated financial statements include BBMC and its wholly-owned
subsidiaries. All material intercompany transactions have been eliminated.
These financial statements have been prepared using the carrying values of
BBMC and do not reflect the purchase of BBMC as discussed in Note 1.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Specifically, management adjusts the amount of amortization
recorded based on the effect of anticipated changes in prepayment speeds.

Interest rate products

BBMC enters into financial agreements and purchases financial instruments
as part of its interest rate risk management strategy. These agreements are
not considered trading instruments and are primarily entered into for
purposes of managing the prepayment risk associated with mortgage servicing
rights and interest rate risk relative to commitments to originate mortgage
loans against market value declines resulting from fluctuations in interest
rates. These instruments and agreements are designated as a part of BBMC's
risk management strategy and are linked to the related assets being managed.

BBMC acquires financial instruments, including derivative contracts (risk
management contracts), to partially protect the value of mortgage servicing
rights from the effects of prepayment activity caused by interest rate
declines. These financial instruments increase or decrease in value in an
inverse relationship to changes in market interest rates. Accordingly, as
interest rates decline, these financial instruments will increase in value,
and as interest rates increase, these financial instruments will decline in
value. The value of these financial instruments will fluctuate daily with
interest rate changes, and these fluctuations may be significant. However,
thedecline in the value of these financial instruments is limited to the
value recorded in the balance sheet. These financial instruments primarily
include options on U.S. treasury futures, forward contracts, and interest
rate floors.

As of March 15, 1996, due to rising interest rates, the risk management
contracts had declined in value by the carrying amount recorded on the
balance sheet at December 31, 1995 (see Note 14).

The cost of option contracts to manage BBMC's fixed and variable rate loan
origination commitments are capitalized and amortized as an adjustment of
gain or loss over the life of the underlying option contract. Unamortized
premiums are included in other assets on the balance sheet. At March 15,
1996, BBMC had call options to purchase mortgage-backed securities with a
total face amount of $653.0 million. The unamortized premiums associated
with these options were $2.6 million at March 15, 1996. There were no put
options outstanding as of the balance sheet date.

Short-term option contracts that are used to manage interest rate risk on
BBMC's mortgage servicing rights are marked-to-market with gains or losses
recognized in current income. The current market value of these option
contracts are included in the balance of capitalized mortgage servicing
rights. At March 15, 1996, the current market value of these option
contracts included in mortgage servicing rights was $20.2 million.
Unrealized gains (losses) at December 31, 1995 and March 15, 1996, included
in the consolidated statements of operations were $86.5 million and ($56.6)
million, respectively.

Mortgage loans

Mortgage loans held for sale are carried at the lower of aggregate cost or
fair value. Fair value is based on the contract prices at which the
mortgage loans will be sold or, if the loans are not committed for sale,
the current market price. Loan origination fees and certain direct costs
are deferred until the related mortgage loans are sold.

Mortgage loans held for investment are stated at the lower of cost or fair
value at the time the permanent investment decisions are made. Discounts,
if any, are amortized over the anticipated life of the investment.

Loans are placed on nonaccrual status when any portion of the principal or
interest is ninety days past due or earlier when concern exists as to the
ultimate collectibility of principal or interest. When loans are placed on
nonaccrual status, the related interest receivable is reversed against
interest income of the current period. Interest payments received on
nonaccrual loans are applied as a reduction of the principal balance when
concern exists as to the ultimate collection of principal; otherwise, such
payments are recognized as interest income. Loans are removed from
nonaccrual status when principal and interest become current and they are
estimated to be fully collectible.

Purchased and originated mortgage servicing rights

Purchased mortgage servicing rights (PMSR) represent the cost of purchasing
the right to service mortgage loans originated by others. PMSR are
amortized as a reduction of servicing fee income over the estimated
servicing period in proportion to the estimated future net cash flows from
the loans serviced. Remaining PMSR asset balances are evaluated for
impairment by determining their estimated recoverable amount through
applying the discount rate in effect at the time the servicing was
purchased to the estimated future aggregate net cash flows from the
underlying mortgages. The carrying value is written down for any
impairment; such write-downs are included in the amortization of mortgage
servicing rights.

On January 1, 1996, BBMC adopted Statement of Financial Accounting
Standards (SFAS) No. 122 which, among other provisions, requires that the
value of mortgage servicing rights associated with mortgage loans
originated by an entity be capitalized as assets. The value of BBMC's
originated mortgage servicing rights (OMSR) is determined by allocating the
total costs of the mortgage loans between the loans and the mortgage
servicing rights based on their relative fair values. Previously, OMSRs
were included with the cost of the related loans and considered in
determining the gain or loss on sale when the loans were sold. Through
March 15, 1996, BBMC capitalized $3.1 million of OMSR, which had the effect
of increasing net mortgage origination revenue by $3.1 million for the
period January 1, 1996 to March 15, 1996 since a portion of the basis of
loans originated for sale was allocated to OMSR. Since SFAS No. 122
prohibits retroactive application, historical accounting results have not
been restated and, accordingly, the accounting results for the previous
years ended are not directly comparable with the period January 1, 1996
through March 15, 1996.

SFAS No. 122 also requires that capitalized mortgage servicing rights be
evaluated for impairment based on the fair value of these rights. For the
purposes of determining impairment, BBMC's mortgage servicing rights are
stratified based on interest rate and type of loan(conventional/government).
Impairment, if any, is recognized through a valuation allowance for each
impaired stratum. BBMC did not record any impairment charges related to its
mortgage servicing right portfolio for the period January 1, 1996 through
March 15, 1996.

Excess mortgage servicing receivable

Excess mortgage servicing receivable (EMSR) represents the present value of
servicing fee income in excess of a normal servicing fee. When loans are
sold, the estimated excess servicing is recognized as income and amortized
over the estimated servicing period in proportion to the estimated future
aggregate net cash flows from the loans serviced. Remaining asset balances
are evaluated for impairment based on current estimates of future
discounted cash flows. Such write-downs are included in amortization of
mortgage servicing rights.

Accounts receivable

Accounts receivable includes advances made in connection with loan
servicing activities. These advances consist primarily of payments for
property taxes and insurance premiums, as well as, principal and interest
remitted to investors before they are collected from mortgagors.

Pool loan purchases

Pool loan purchases are carried at cost and consist of FHA-insured,
VA-guaranteed, and conventional loans purchased from mortgage-backed
securities serviced by BBMC for others. At the purchase date, these loans
were delinquent or in the process of foreclosure or repayment. Losses
associated with pool loan purchases are largely reimbursed by the insurer.

Mortgage claims receivable

Mortgage claims receivable includes claims filed primarily with the FHA and
the VA. These receivables are carried at cost, less an allowance for
estimated amounts that are not collectible from the mortgage insuring
agencies.

Real estate acquired

Real estate acquired includes properties on which BBMC has foreclosed and
taken title. It is initially reported at the lower of the carrying value of
the loan or the fair value of the real estate obtained, less estimated
selling costs. The excess, if any, of the loan balance over the fair value
of the property at the time of transfer to real estate acquired is charged
to the reserve for estimated servicing losses on investor-owned loans.
Subsequent declines in the value of the property and costs related to
holding the property are charged against income.

Premises and equipment

Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized over the
lesser of the estimated life of the improvement or the term of the lease.

Other assets

Other assets consist primarily of a prepaid pension asset of ($9.8 million
at March 15, 1996) allocated from the Bank of Boston, and the excess of
cost over fair value of net assets acquired. The excess of cost over fair
value of net assets acquired is amortized using a straight-line basis over
periods varying from seven to twenty-five years.

Mortgage servicing fees

Mortgage servicing fees represent fees earned for servicing mortgage loan
owned by investors. The fees are generally calculated on the outstanding
principal balances of the loans serviced and are recognized as income on an
accrual basis.

Servicing losses on investor-owned loans

BBMC records losses attributable to servicing FHA and VA loans for
investors. These amounts include actual losses for final disposition of
loans, accrued interest for which payment has been denied, and estimates
for potential losses based on BBMC's experience as a servicer of government
loans.

A reserve for estimated servicing losses on investor-owned loans is
available for potential losses related to the mortgage servicing portfolio
and is included in the balance of accounts payable and accrued liabilities.

Net mortgage origination revenue

Net mortgage origination revenue includes gains and losses from sales of
mortgage loans, deferred origination fees and expenses, and the present
value of gains from the EMSR.

Income taxes

BBMC files its federal tax return through inclusion in Bank of Boston
Corporation's consolidated return. Accordingly, Bank of Boston's federal
tax provision is allocated to all member subsidiaries as if each member
were a separate taxpayer. However, the timing of utilization of certain of
BBMC's tax attributes may differ from a stand-alone tax-paying basis. BBMC
accounts for income taxes in accordance with SFAS No. 109, "Accounting for
Income Taxes." Under SFAS No. 109, current tax liabilities or assets are
recognized through charges or credits to the current tax provision for the
estimated taxes payable or refundable for the current year.

Deferred tax liabilities are recognized for temporary differences that will
result in amounts taxable in the future and deferred tax assets are
recognized for temporary differences and tax benefit carryforwards that
will result in amounts deductible or creditable in the future. Net deferred
tax liabilities or assets are recognized through charges or credits to the
deferred tax provision. A deferred tax valuation reserve is established if
it is more likely than not that all or a portion of the deferred tax assets
will not be realized. Changes in the deferred tax valuation reserve are
recognized through charges or credits to the deferred tax provision.

The effect of enacted changes in tax law, including changes in tax rates,
on deferred tax assets and liabilities is recognized in income in the
period that includes the enactment date.

3. PURCHASED MORTGAGE SERVICING RIGHTS AND EXCESS MORTGAGE SERVICING
   RECEIVABLE

PMSR consist of the following:
                                   December 31,      March 15,
(In Thousands)                          1995           1996
PMSR                                $954,931         $951,817
Accumulated amortization            (421,040)        (429,348)
Balance                             $533,891         $522,469

EMSR consist of the following:
                                    December 31,      March 15,
(In Thousands)                          1995             1996
EMSR                                $ 66,465         $ 70,432
Accumulated amortization             (49,018)         (50,039)
Balance                             $ 17,447         $ 20,393

4. RESERVE FOR ESTIMATED SERVICING LOSSES ON INVESTOR-OWNED LOANS

An analysis of the reserve for estimated servicing losses on investor-owned
loans is as follows:
                                             December 31,      March 15,
(In Thousands)                                   1995            1996
Balance at January 1                         $ (6,650)      $  (9,400)
Servicing losses on investor-owned loans       (9,981)         (5,560)
Charge-offs                                     7,473           2,725
Recoveries                                       (242)              -
Ending Balance                               $ (9,400)      $ (12,235)

5. MORTGAGE SERVICING PORTFOLIO

BBMC's residential mortgage servicing portfolio totaled  $41.5 billion and
$44.2 billion at December 31, 1995 and March 15, 1996, respectively, and
included mortgage-backed securities of $28.5 billion and $29.1 billion at
December 31, 1995 and March 15, 1996, respectively. In addition, BBMC's
commercial loan servicing portfolio totaled $0.9 billion and $0.2 billion
at December 31, 1995 and March 15, 1996, respectively. Related fiduciary
funds are segregated in trust accounts, principally deposited with Bank of
Boston, and are not included in the accompanying consolidated financial
statements.

BBMC has in force an errors and omissions policy in the amount of $25
million. Fidelity coverage up to a limit of $75 million, subject to a $1
million deductible, is provided under a Bank of Boston master program.

6. PREMISES AND EQUIPMENT

Premises and equipment consist of the following:
                                      December 31,      March 15,
(In Thousands)                            1995            1996
Land                                   $  4,086        $  4,086
Building                                 14,477          14,476
Furniture and equipment                  26,870          25,967
Leasehold improvements                      824             877
                                         46,257          45,406
Accumulated depreciation 
    and amortization                    (20,871)        (20,335)
Balance                                $ 25,386        $ 25,071

7. NOTE PAYABLE TO BANK OF BOSTON

BBMC borrows funds on a demand basis from Bank of Boston under a $1.25
billion line of credit, collateralized by substantially all of BBMC's
assets. At December 31, 1995 and March 15, 1996, the interest rate was 6.8%
and 7.7%, respectively, less the benefit received from balances held at
Bank of Boston. Interest expense, net of this benefit, was $20.5 million
and $6.7 million for the years ended December 31, 1995, and for the period
January 1, 1996 to March 15, 1996, respectively.

8. LONG-TERM DEBT

Long-term debt consists of a 30-year mortgage note, payable monthly with
interest at 9.5%, maturing in 2017. BBMC's main office building is pledged
as collateral. Principal payments due on long-term debt as of March 15,
1996, are as follows:
                         March 15,
(In Thousands)             1996
1997                      $   230
1998                          234
1999                          258
2000                          283
2001                          312
Thereafter                 12,473
Total Due                 $13,790

9. EMPLOYEE BENEFITS

BBMC participates with Bank of Boston and its affiliates in a
non-contributory defined benefit pension plan (Plan) covering substantially
all full-time employees. Bank of Boston funds the Plan in compliance with
the requirements of the Employee Retirement Income Security Act.

The Plan is an account balance defined benefit plan in which each employee
has an account to which amounts are allocated based on level of pay and
years of service and which grows at a specific rate of interest. Benefits
accrued prior to 1989 are based on years of service, highest average
compensation, and social security benefits. Expense (income) associated
with this Plan was $0.5 million for the year ended December 31, 1995, and
$0.3 million for the period January 1, 1996 to March 15, 1996.

BBMC also maintains non-qualified deferred compensation and retirement
plans for certain officers. All benefits provided under these plans are
unfunded and any payments to plan participants are made by BBMC. As of
December 31, 1995 and March 15, 1996, approximately $0.7 million and $0.7
million, respectively, were included in accrued expenses and other
liabilities for these plans. For the year ended December 31, 1995 and for
the period January 1, 1996 to March 15, 1996, expense related to these
plans was $0.2 million and $0.1 million, respectively.

BBMC also participates with Bank of Boston and its affiliates in a thrift
incentive plan. Under this plan, employer contributions are generally based
on the amount of eligible employee contributions. The amounts charged to
operating expense under this plan were $0.2 million and $0.1 million for
the year ended December 31, 1995 and for the period January 1, 1996 to
March 15, 1996, respectively. BBMC employees are eligible to participate in
the thrift plan until October 1, 1996 at which time BBMC participant
accounts will become part of a similar plan offered by the new company.

BBMC participates with Bank of Boston and its affiliates by providing
certain health and life insurance benefits for retired employees. Eligible
employees currently receive credits up to $10 thousand based on years of
service, which are used to purchase post-retirement health care coverage.
Life insurance coverage is dependent on years of service at retirement.

Amounts charged to employee benefits expense for these benefits were $0.5
million and $0.8 million for the year ended December 31, 1995 and for the
period January 1, 1996 to March 15, 1996, respectively. After March 15,
1996 retiree benefits associated with current retirees will be assumed by
Bank of Boston.

The components of post-retirement benefits expense for the year ended
December 31 were as follows:

(In Thousands)                                              1995
Service cost (benefits earned during the period)            $ 53
Interest cost on projected benefit obligation                264
Amortization:
  Unrecognized net asset                                     250
  Unamortized gain                                           (53)
Net post-retirement benefit cost                            $514

BBMC's unfunded accumulated post-retirement benefit obligation for the
year ended December 31 was as follows:

(In Thousands)                                              1995
Accumulated post-retirement benefit
  obligation for retirees                                $ 3,515
Unrecognized net gain                                      1,541
Unrecognized net obligation                               (4,250)
Post-retirement benefit liability                        $   806

Assumptions used in actuarial computations were:
                                                            1995
Rate of increase in future
  compensation levels                                       4.50%
Weighted average discount rate                              7.25%
Medical inflation rate 8% declining to 5% in 1999

An increase of 1% in the assumed health care cost trend rate would result
in an increase of 5.8% in the accumulated post-retirement benefit
obligation and 4.9% in annual post-retirement benefit expense for the year
ended December 31, 1995.

These retirement plans are assessed annually. There was no actuarial
valuation at March 15, 1996. Post-retirement benefit expense for the period
January 1, 1996 to March 15, 1996 was $0.1 million.

10. INCOME TAXES

The components of the net deferred tax asset are as follows:

                                    December 31,      March 15,
(In Thousands)                          1995            1996
PMSR                                  $34,008         $28,167
EMSR                                    8,957           8,881
     
Reserve for estimated servicing
  losses on investor-owned loans        3,657           4,759
Other                                  (1,301)         (1,303)
Valuation reserve                      (4,597)         (4,114)
Net deferred tax assets,
  net of reserve                      $40,724         $36,390

The deferred tax assets, net of the valuation reserve, can be realized from
the reversal of existing deferred tax liabilities and by carryback to
previous years with taxable income. The valuation reserve has been
primarily established against state deferred tax assets where carryback is
not permitted.

The components of the provision for (benefit from) income taxes are as
follows:
                                        December 31,      March 15,
(In Thousands)                              1995            1996
Current tax provision (benefit)           $47,646        $(46,867)
Deferred tax (benefit)expense on income    (8,651)          4,817
  Change in valuation reserve              (1,061)           (483)
Net deferred tax (benefit)expense          (9,712)          4,334
Income tax provision (benefit) before
  cumulative effect of changes
   in accounting principles                37,934         (42,533)
Change in accounting for 
  mortgage servicing fee                        -               -
Total income tax provision (benefit)      $37,934        $(42,533)

The following table reconciles the expected federal tax provision (benefit)
on income (loss) before cumulative effect of change in accounting
principle, based on the federal statutory tax rate of 35%, to the actual
tax provision (benefit) before cumulative effect of changes in accounting
principles:
                                           December 31,      March 15,
(In Thousands)                                 1995            1996
Expected tax provision (benefit) 
  applicable to income (loss) before
  cumulative effect of change in
  accounting principle                        $33,866        $(40,738)
Effect of:
  State income taxes, net of 
    federal tax benefits                        3,774             743
  Other                                           294          (2,538)
Actual tax provision (benefit) before 
  cumulative effect of change in
  accounting principle                        $37,934        $(42,533)

11. LEASE COMMITMENTS

BBMC leases office facilities and equipment under noncancelable leases
that include renewal options and escalation clauses which extend into 1999.
Rental expense for leases of office facilities and equipment was $3.9
million for the year ended December 31, 1995 and $1.8 million for the
period January 1, 1996 to March 15, 1996. BBMC's minimum future lease
commitments are as follows:

              December 31, March 15,
(In Thousands)     1995     1996
1996              $1,996   $1,837
1997                 622    1,910
1998                 280    1,764
1999                  52    1,079
2000                   -      107
Thereafter             -       21
Total             $2,950   $6,718

12. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

BBMC purchases financial instruments and enters into financial agreements
with off-balance sheet risk in the normal course of business through the
origination and selling of mortgage loans and the management of the risk of
fluctuations in interest rates. These instruments involve, to varying
degrees, elements of credit and interest rate risk. Credit risk is the
possibility that a loss may occur if a counterparty to atransaction fails
to perform according to the terms of the contract. Interest rate risk is
the possibility that a change in interest rates will cause the value of a
financial instrument to decrease or become more costly to settle. Financial
instruments primarily used by BBMC include commitments to extend credit,
mandatory and optional forward commitments, commitments to purchase
mortgage servicing rights, and other instruments to minimize the interest
rate risk of capitalized servicing assets, primarily options on treasury
bond futures.

Options and forward contracts

BBMC purchases options and forward contracts to protect the value of
mortgage servicing assets from exposure to increases in prepayment activity
and to reduce the impact of interest rate fluctuations on its lending
commitments. The notional amount of the options and forward contracts is
the amount upon which interest and other payments under the contract are
based and is generally not exchanged. Therefore, the notional amounts
should not be taken as the measure of credit risk or a reflection of future
cash requirements. The risk associated with options and forwards is the
exposure to current and expected market movements in the interest rates and
the ability of the counterparties to meet the terms of the contracts. The
cash requirements associated with these options and forward contracts,
aside from the initial purchase price, are minimal. These contracts
generally require future performance on the part of the counterparty upon
exercise of the option or execution of the forward contract by BBMC.

BBMC is exposed to credit loss in the event of nonperformance by the
counterparties to the various instruments. BBMC controls credit and market
risk associated with interest rate products by establishing and monitoring
limits as to the types and degree of risks that may be undertaken. BBMC's
exposure to credit risk in the event of default by the counterparties for
the options is $20.2 million which was due at March 15, 1996.

BBMC's exposure to credit risk in the event of default by the counterparty
for mandatory forward commitments to sell mortgage loans is the difference
between the contract price and the current market price, offset by any
available margins retained by BBMC or an independent clearing agent. The
amount of credit risk as of March 15, 1996, if all counterparties failed
completely and if the margins, if any, retained by BBMC or an independent
clearing agent were to become unavailable, was approximately $16.1 million
for mandatory forward commitments of mortgage-backed securities.

The following is a summary of BBMC's notional amounts and fair values of
interest rate products as of December 31, 1995, and March 15, 1996:

                                    December 31, 1995       March 15, 1996
                                 Notional   Estimated    Notional   Estimated
(In Thousands)                    Amount   Fair Value(1)  Amount   Fair Value(1)
Purchased commitments to sell
 mortgage loans:
  Mandatory forward contracts   $1,169,559   $ (9,798)   $941,087     $16,099
  Options on mortgage-backed
     securities                    315,000          -     653,000       7,607
Risk management contracts:
  Purchased                      3,107,500    118,753     781,000      17,990
  Sold                             295,000    (33,833)          -           -

(1) Fair value represents the amount at which a given instrument could be
exchanged in an arms length transaction with a third party as of the
balance sheet date.
(2) See Note 14 for additional disclosures on fair value of financial
instruments.

Commitments to originate mortgage loans

BBMC regularly enters into commitments to originate mortgage loans at a
future date subject to compliance with stated conditions. Commitments to
originate mortgage loans have off-balance sheet risk to the extent BBMC
does not have matching commitments to sell loans, which exposes BBMC to
lower of cost or market valuation adjustments in a rising interest rate
environment. Additionally, the extension of a commitment, which is subject
to BBMC's credit review and approval policies, gives rise to credit
exposure when certain borrowing conditions are met and the loan is made.

Until such time, it represents only potential exposure. The obligation to
lend may be voided if the customer's financial condition deteriorates or if
the customer fails to meet certain conditions. Commitments to originate
mortgage loans do not necessarily reflect future cash requirements since
some of the commitments are expected to expire without being drawn upon.
Commitments to originate mortgage loans totaled $885.6 million at December
31, 1995 and $956.4 million at March 15, 1996.

Mortgage loans sold with recourse

BBMC sells mortgage loans with recourse to various investors and retains
the servicing rights on these loans. The total outstanding balance of
loans sold with recourse does not necessarily represent future cash
outflows. The total outstanding principal balance of loans sold with
recourse was $6.8 million at December 31, 1995 and $7.0 million at March
15, 1996.

Servicing commitments to investors

BBMC is required to submit to certain investors, primarily GNMA, guaranteed
principal and interest payments from the underlying mortgage loans
regardless of actual collections.

Purchase mortgage servicing rights commitments

BBMC routinely enters into commitments to purchase mortgage servicing
rights associated with mortgages originated by third parties, subject to
compliance with stated conditions. These commitments to purchase mortgage
servicing rights, correspond to mortgage loans having an aggregate loan
principal balance of approximately $2.7 billion at December 31, 1995 and
$0.9 billion at March 15, 1996.

Geographical concentration of credit risk

BBMC is engaged in business nationwide and has no material concentration of
credit risk in any geographic region.

13. OTHER RELATED PARTY TRANSACTIONS

BBMC services mortgage loans for Bank of Boston and its affiliates. The
balances of those portfolios totaled $2.0 billion and $2.0 billion at
December 31, 1995 and March 15, 1996, respectively. Related servicing fees
are included in mortgage servicing fees and were $7.6 million and $1.2
million for the year ended December 31, 1995 and for the period January 1,
1996 to March 15, 1996, respectively.

BBMC reimburses Bank of Boston and its affiliates for certain occupancy and
supplies costs. Total costs reimbursed were $0.7 million for the year ended
December 31, 1995 and $0.2 million for the period January 1, 1996 to March
15, 1996.

BBMC services real estate acquired by the Bank of Boston and its
affiliates. Related expenses are reimbursed and were $1.7 million for the
year ended December 31, 1995 and $1.7 million for the period January 1,
1996 to March 15, 1996.

An affiliate of Bank of Boston purchases a 99.25% participation in
mortgages in the process of being sold to permanent investors. The
principal balances sold under this agreement aggregated approximately $6.5
billion for the year ended December 31, 1995, and $0.7 billion for the
period January 1, 1996 to March 15, 1996.

BBMC purchased mortgage servicing rights from Bank of Boston during 1995
and capitalized $4.8 million in mortgage servicing rights associated with
this transaction.

BBMC sold mortgage loans to Bank of Boston and its affiliates in its normal
course of business. These sales totaled $0.5 billion for the year ended
December 31, 1995, and $0.6 billion for the period January 1, 1996 to March
15, 1996. Included in mortgage loans held for sale are loans which will be
sold to Bank of Boston and its affiliates totaling $18.1 million at
December 31, 1995, and $64.1 million at March 15, 1996.

Miscellaneous administrative services are provided by related companies.
These services did not have a material impact on the consolidated financial
statements.

14.DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments
whether or not recognized in the balance sheet, for which it is practicable
to estimate fair value.

Financial instruments include such items as mortgage loans held for sale,
mortgage loans held for investment, interest rate contracts, notes payable,
and other instruments.

Fair value estimates are made as of a specific point in time based on the
characteristics of the financial instruments and the relevant market
information. Where available, quoted market prices are used. In other
cases, fair values are based on estimates using other valuation techniques,
such as discounting estimated future cash flows using a rate commensurate
with the risks involved or other acceptable methods. These techniques
involve uncertainties and are significantly affected by the assumptions
used and the judgments made regarding risk characteristics of various
financial instruments, prepayments, discount rates, estimates of future
cash flows, future expected loss experience, and other factors. Changes in
assumptions could significantly affect these estimates. Derived fair value
estimates cannot be substantiated by comparison to independent markets and,
in many cases, could not be realized in an immediate sale of the
instrument. Also, because of differences in methodologies and assumptions
used to estimate fair value, BBMC's fair values should not be compared to
those of other companies.

Under the Statement, fair value estimates are based on existing financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of BBMC. For certain assets
and liabilities, the information required under the Statement is
supplemented with additional information relevant to an understanding of
the fair value.

The methods and assumptions used to estimate the fair values of each class
of financial instruments are as follows:

Cash

The carrying amount reported in the balance sheet approximates fair value.

Mortgages held for sale

Fair values are based on the estimated value at which the loans could be
sold in the secondary market. These loans are priced to be sold with
servicing rights retained, as is BBMC's normal business practice.

Mortgages held for investment

Fair value is estimated using market quotes for securities backed by
similar loans or by discounting contractual cash flows, adjusted for credit
risk and prepayment estimates. These loans are priced with servicing rights
retained. Discount rates are obtained from secondary market sources.

Accounts receivable, pool loan purchases, and mortgage claims receivable, net

Carrying amounts are considered to approximate fair value. All amounts that
are assumed to be uncollectible within a reasonable time are written off.

Excess mortgage servicing receivable

Fair value is based on the present value of expected future net cash flows
and the current estimated servicing life.

Risk management contracts

Fair values are estimated based on actual market quotes or option models.

Note payable to Bank of Boston

The carrying amount of the note payable to Bank of Boston reported in the
balance sheet approximates its fair value.

Long-term debt

Fair value of long-term debt is estimated by discounting estimated future
cash flows using a rate commensurate with the risks involved.

Commitments to originate mortgage loans

Fair value is estimated using quoted market prices for securities backed by
similar loans adjusted for differences in loan characteristics.

Forward contracts to sell mortgages

Forward contracts to sell mortgages, which represent legally binding
agreements to sell loans to permanent investors at a specified price or
yield, are valued using market prices for securities backed by similar
loans and are reflected in the fair values of the mortgages held for sale,
to the extent that these commitments relate to mortgage loans already
originated, or of the related commitments to extend credit.

Options on mortgage-backed securities

The fair values of options are estimated based on actual market quotes. In
some instances, quoted prices for the underlying loans or option models are
used.

The estimated fair values of BBMC's financial instruments are as follows:

                                  December 31, 1995       March 15, 1996
                                   Carrying  Fair       Carrying    Fair
(In Thousands)                      Amount   Value        Amount   Value
Assets
Cash                              $    830 $    830   $   23,216  $ 23,216
Mortgages held for sale            388,436  395,984      628,504   633,993
Mortgages held for investment       33,183   35,003       65,068    65,068
Accounts receivable                 82,816   82,816       65,599    65,599
Pool loan purchases                 65,272   65,272       56,261    56,261
Mortgage claims receivable          45,422   45,422       17,563    17,563
Excess mortgage servicing 
    receivable                      17,447   19,117       20,393    23,100
Risk management contracts, 
    classified as PMSR, and other
     assets(2)                      84,520   84,920       20,169    20,169
Liabilities
Note payable to Bank of Boston     966,000  966,000    1,256,000 1,256,000
Long-term debt                      13,816   16,211       13,790    21,695
Off-Balance Sheet(1)
Commitments to originate 
  mortgage loans                         -    1,094            -    27,250
Mandatory forward contracts
  to sell mortgages(2)                   -   (9,798)           -    16,099
Options on mortgage-backed 
  securities(2)                          -        -            -     7,607
Risk management contracts                -        -            -         -

(1) Parentheses denote a liability.   
(2) See Note 12 for additional disclosures on notional amounts.

Fair value estimates are made as of a specific point in time, based on
relevant market data and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale BBMC's entire holding of a particular financial
instrument. Because no active market exists for some portion of BBMC's
financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions,
current interest rates and repayment trends, risk characteristics of
various financial instruments, and other factors.

These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be determined with
precision. Changes in any of these assumptions used in calculating fair
value would also significantly affect the estimates. Further, the fair
value estimates were calculated as of December 31, 1995 and March 15, 1996.
Changes in market interest rates and prepayment assumption could
significantly change the fair value.

15. CONTINGENCIES

BBMC is a defendant in a number of legal proceedings arising in the normal
course of business. BBMC, in management's estimation, has recorded adequate
reserves in the financial statements for pending litigation. Management,
after reviewing all actions and proceedings pending against or involving
BBMC, considers that the aggregate liability or loss, if any, resulting
from the final outcome of these proceedings will not have a material effect
on the financial position or results of operations of BBMC.

16. ACQUISITION OF BELL MORTGAGE

On June 1, 1995, BBMC purchased the assets and liabilities of Bell
Mortgage Company ("Bell Mortgage"), a privately-held mortgage origination
company located in Minneapolis, Minnesota, for $0.9 million in cash. The
acquisition of Bell Mortgage was accounted for as a purchase. Accordingly,
the purchase price was allocated to net assets acquired based upon their
estimated fair market value. As of a result of the acquisition, goodwill
of $0.4 million was recorded and is being amortized over a 7-year period
using the straight-line method.

Also, under the terms of the agreement, the shareholders of Bell Mortgage
will receive additional contingent cash payments based on Bell Mortgage
reaching specific performance goals over the next 3 years. These additional
cash payments will be recorded as additions to goodwill and will be
amortized over the remainder of the original 7-year period using the
straight-line method.

Results of operations after the acquisition date are included in the
consolidated financial statements. Pro forma financial results would not
have been materially different as a result of this acquisition.



MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

HomeSide's common stock was listed on the New York Stock Exchange ("NYSE")
under the symbol HSL. As of February 10, 1998 and February 28, 1997, there
were 99 and 86 shareholders of record of the Company's common stock,
respectively. Class C common stock has no voting rights and is not publicly
traded. There was 1 shareholder of record of Class C common stock as of
February 10, 1998 and February 28, 1997.

Common stock of HomeSide, Inc. was initially sold to the public on January
30, 1997, and the transaction closed on February 5, 1997. High and low
sales prices as reported by the NYSE for the Company's stock are as follows:

                                                             High       Low
For the period from January 31,
  1997 to February 28, 1997                                 19         16 1/8
For the three months ended May 31, 1997                     18 7/8     13 1/2
For the three months ended August 31, 1997                  23 5/8     17 3/4
For the three months ended November 30, 1997                27 7/16    13 1/2
For the three months ended February 10, 1998                27 7/8     27 5/16
For the period from March 1, 1997 to February 10, 1998      27 7/8     13 1/2

During the fiscal years ended February 10, 1998 and February 28, 1997, no
dividends were declared or paid on HomeSide's common stock.