UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-QSB

[Mark One]

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

For the quarterly period ended September 30, 2000

                                       OR

[ ]         TRANSITION REPORT UNDER SECTION 13 OR
            15(d) OF THE EXCHANGE ACT

For the transition period from ____________ to ______________

Commission file number 0-13311

                             CityFed Financial Corp.
                             -----------------------
      (Exact name of small business issuer as specified in its charter)

                   Delaware                            22-2527684
                   --------                            ----------
 (State or other jurisdiction of incorporation        (IRS Employer
               or organization)                     Identification No.)

                       P.O. Box 3126, Nantucket, MA 02584
                       ----------------------------------
                    (Address of principal executive offices)

                                 (508) 228-2366
                                 --------------
                           (Issuer's telephone number)

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest  practicable date. As of September 30, 2000, the number
of shares of outstanding common stock was 18,715,609.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]


<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

CITYFED FINANCIAL CORP.

STATEMENTS OF FINANCIAL CONDITION
September 30, 2000 and December 31, 1999
(Dollars in Thousands)
                                                    September 30,   December 31,
                                                        2000           1999
                                                    (Unaudited)


ASSETS
------

Cash                                                $       4        $      63
Investment securities at amortized cost
   (Market value $6,354 in 2000 and $9,430 in 1999)     6,356            9,444
Other assets                                              150              145
                                                    ---------        ---------

TOTAL ASSETS                                        $   6,510        $   9,652
                                                    =========        =========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------

LIABILITIES:
  Contingency reserve                               $   4,193        $   6,353
  Other liabilities                                     4,444            4,504
                                                    ---------        ---------

           Total liabilities                            8,637           10,857
                                                    ---------        ---------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY:
   Preferred stock, 30,000,000 shares authorized:
     $2.10 cumulative convertible, Series B, $25
          par value, issued and outstanding:           63,471           63,471
          2,538,850 in 2000 and 1999
     Series C Junior, cumulative, $.01 par value,
          liquidation preference $3.00 per share,
          shares issued and outstanding: 8,257,079         82               82
          in 2000 and 1999
   Common stock, $.01 par value, 100,000,000
      shares authorized, issued:  18,914,609 in
      2000 and 1999, outstanding: 18,715,609 in           188              188
      2000 and 1999
   Additional paid-in capital                         108,868          108,868
   Accumulated deficit                               (173,736)        (172,814)
   Treasury stock (199,000 shares of common stock)     (1,000)          (1,000)
                                                    ---------        ---------

      Total stockholders' deficiency                   (2,127)          (1,205)
                                                    ---------        ---------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY      $   6,510        $   9,652
                                                    =========        =========

See notes to financial statements.


                                       2
<PAGE>


<TABLE>
CITYFED FINANCIAL CORP.

STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 2000 and 1999
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
<CAPTION>
                                              Three Months Ended       Nine Months Ended
                                                 September 30,            September 30,
                                              2000          1999       2000         1999
                                              ----          ----       ----         ----

<S>                                     <C>          <C>          <C>          <C>
INCOME:
  Interest on investments               $       105  $       156  $       360  $       383
  Other income                                    -            -           24            -

   Total income                                 105          156          384          383
                                        -----------  -----------  -----------  -----------

EXPENSES:
  Compensation and employee benefits             41           31          127           95
  Other operating expenses                       25           27          142           85
                                        -----------  -----------  -----------  -----------

   Total expenses                                66           58          269          180
                                        -----------  -----------  -----------  -----------

INCOME FROM CONTINUING OPERATIONS                39           98          115          203

LOSS FROM DISCONTINUED OPERATIONS                 -            -      ( 1,037)           -
                                        -----------  -----------  -----------  -----------

NET (LOSS) INCOME                       $        39  $        98  $      (922) $       203
                                        ===========  ===========  ===========  ===========


NET LOSS AVAILABLE FOR COMMON
  STOCKHOLDERS                          $    (2,120)  $   (2,061) $    (7,398) $    (6,273)

BASIC LOSS PER SHARE:
  From continuing operations            $     (0.11)  $    (0.11) $     (0.34) $     (0.34)
  From discontinued operations          $         -   $        -  $     (0.06) $         -
  Net loss                              $     (0.11)  $    (0.11) $     (0.40) $     (0.34)

AVERAGE SHARES OUTSTANDING               18,715,609   18,715,609   18,715,609   18,715,609

DIVIDENDS PER COMMON SHARE                        -            -            -            -
</TABLE>

See notes to financial statements.


                                       3
<PAGE>




CITYFED FINANCIAL CORP.

STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2000 and 1999
(Dollars in Thousands)
(Unaudited)


                                                                2000       1999
                                                                ----       ----
CASH FLOWS FROM OPERATING ACTIVITIES:
   Interest received                                      $      568  $     365
   Operating expenses                                           (360)      (256)
   Settlement payment                                         (3,169)         -
   Other income                                                   24          -
                                                          ----------  ---------

     Net cash (used in) provided by operating
      activities                                              (2,937)       109
                                                          ----------  ---------


CASH FLOWS FROM INVESTING ACTIVITIES:
   Decrease  (increase) in investment securities               2,880        (96)
   Other - net                                                    (2)         -
                                                          ----------  ---------

     Net cash provided by (used in) investing                  2,878        (96)
     activities                                           ----------  ---------

NET (DECREASE) INCREASE IN CASH                                  (59)        13

CASH AT BEGINNING OF PERIOD                                       63         48
                                                          ----------  ---------

CASH AT END OF PERIOD                                     $        4  $      61
                                                          ==========  =========

RECONCILIATION OF NET (LOSS) INCOME TO NET CASH
(USED IN) PROVIDED BY OPERATING ACTIVITIES:
   Net (loss) income                                      $     (922) $     203
   Loss from discontinued operations                           1,037          -
   Settlement payment                                         (3,169)         -
   Contingency reserve payments                                  (34)       (56)
   Increase  in other assets                                      (5)        (4)
   Increase (decrease) in accrued income and expense,            156        (34)
     net                                                  ----------  ---------

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES       $   (2,937) $     109
                                                          ==========  =========

See notes to financial statements.


                                       4
<PAGE>


CITYFED FINANCIAL CORP.
NOTES TO FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)

1.    Until  December  8,  1989,  CityFed  Financial  Corp.  (the  "Company"  or
      "CityFed") was a unitary  savings and loan holding  company that conducted
      its business  primarily through its ownership of City Federal Savings Bank
      ("City Federal") and its subsidiaries.  On December 7, 1989, the Office of
      Thrift Supervision ("OTS") of the United States Department of the Treasury
      declared  City  Federal  insolvent,  ordered it closed and  appointed  the
      Resolution Trust  Corporation  ("RTC") as receiver of City Federal.  A new
      federal mutual savings bank, City Savings Bank,  F.S.B.  ("City Savings"),
      was created,  which  acquired all  deposits and  substantially  all of the
      assets and  liabilities of City Federal.  CityFed no longer  controls City
      Federal and has no control over City Savings.

      As a result of the receivership of City Federal, the Company has undergone
      material  changes in the nature of its business and is no longer operating
      as a  savings  and loan  holding  company.  At  September  30,  2000,  the
      Company's business activities consisted primarily of attempting to resolve
      outstanding  indemnification claims against the Company and the management
      of investments.

      As a result of the receivership of City Federal,  the financial statements
      of  CityFed  at  December  31,  1989,  for the year  then  ended,  and for
      subsequent  periods,   reflect  CityFed's  interest  in  City  Federal  as
      discontinued  operations.  The  financial  statements  have been  prepared
      assuming the Company will continue as a going concern.  As discussed above
      and in Note 4,  substantially  all of the  operations  of the Company have
      been  discontinued and the Company is subject to a number of contingencies
      that raise  substantial  doubt  about its  ability to  continue as a going
      concern.  Except as indicated in Note 4, the  financial  statements do not
      include  any  adjustments  that  might  result  from the  outcome of these
      uncertainties. Currently, CityFed is not conducting an operating business.
      At the  present  time,  management  has  invested,  and intends to invest,
      CityFed's assets on a short-term basis.

2.    The financial  statements should be read in conjunction with the financial
      statements and notes thereto included in the Company's Form 10-KSB for the
      year ended December 31, 1999 ("1999 Form 10-KSB").  The interim statements
      reflect  all  adjustments  of a normal  recurring  nature that are, in the
      opinion of management,  necessary for a fair  presentation  of the results
      and financial position for the periods presented.

3.    In July 1989,  the Company's  Board of Directors  suspended the payment of
      dividends  on all three  currently  outstanding  series  of the  Company's
      stock. These include the Company's common stock, $0.01 par value per share
      ("Common Stock"), on which the Company had been paying quarterly dividends
      of one cent per share; the Series C, Junior  Preferred Stock,  Cumulative,
      $0.01 par value per share ("Series C Stock"), with a quarterly dividend of
      ten cents per share; and the $2.10 Cumulative Convertible Preferred Stock,
      Series B, $25.00 par value per share ("Series B Stock"),  with a quarterly
      dividend of $0.525 per share.  Dividends  on both series of the  Company's
      preferred  stock are  cumulative.  At  September  30,  2000,  dividends in
      arrears were $60.0 million and $37.2 million on the Company's Series B and
      Series C Stock, respectively.


                                       5
<PAGE>


4.    COMMITMENTS AND CONTINGENCIES

      INDEMNIFICATION  CLAIMS - The  Bylaws of  CityFed,  INTER  ALIA,  obligate
      CityFed to  indemnify,  to the fullest  extent  authorized by the Delaware
      General Corporation Law, any person who is made or threatened to be made a
      party to or becomes involved in an action by reason of the fact that he or
      she is or was an  employee of CityFed or one of its  subsidiaries,  and to
      pay on his or her behalf  expenses  incurred in  defending  such an action
      prior to the final  disposition  of such action;  provided  that  expenses
      incurred  by an officer or  director  may be paid in advance  only if such
      person  delivers  an  undertaking  to CityFed to repay such  amounts if it
      ultimately is determined that the person is not entitled to be indemnified
      under CityFed's  Bylaws and the Delaware  General  Corporation  Law. These
      undertakings are generally not secured.  Consequently,  CityFed may become
      obligated  to  indemnify  such  persons  for their  expenses  incurred  in
      connection with any such action and to advance legal expenses  incurred by
      such  persons  prior  to the  final  disposition  of any such  action.  In
      addition  to any  amounts  paid on  behalf  of such  person  for  expenses
      incurred in connection with such an action,  CityFed may also have further
      indemnification  responsibilities  to  the  extent  damages  are  assessed
      against such a person and for settlement amounts.

      As described  below,  CityFed and several former directors and/or officers
      of City Federal have been named as defendants or  respondents in the First
      and Second  RTC  Actions  and in the Notice of Charges  (as such terms are
      defined  below).  Many of these former  directors  and/or officers of City
      Federal have requested  CityFed to indemnify them and to advance  expenses
      to them in connection with these matters. A special committee of CityFed's
      Board of Directors,  comprised of directors who have not been named in the
      First or Second RTC Actions,  was established to consider this request for
      indemnification  and advancement of expenses with respect to the First and
      Second RTC  Actions.  On the advice of counsel to the  special  committee,
      CityFed  advanced  reasonable  defense costs to such former  directors and
      officers in such Actions.

      In addition to the First and Second RTC Actions, the Notice of Charges and
      the  "Indemnification  Claims  Relating  to Deferred  Compensation  Plans"
      (described  below),  CityFed is  currently  aware of several  other  legal
      actions  and matters  with  respect to which  current or former  officers,
      directors  or  employees  of  CityFed  or  its  former  subsidiaries  have
      requested that CityFed advance expenses and indemnify them. Except for the
      indemnification   requests  relating  to  the  Notice  of  Charges  (which
      CityFed's  Board  of  Directors  has  not  yet  considered),  CityFed  had
      generally  agreed to advance  expenses in connection  with these requests,
      except where certain preconditions to advancement and indemnification have
      not been met or where advancement and indemnification may not be warranted
      under applicable law.

      CityFed is not  continuing to advance  expenses in connection  with any of
      the  indemnification and advancement  requests referred to above.  CityFed
      may be required to make  payments  of legal fees and  expenses  (including
      settlement  amounts) to the  individuals  who have settled with the RTC or
      Federal Deposit Insurance  Corporation  ("FDIC") in the Second RTC Action.
      For more information regarding these settlements,  see "Second RTC Action"
      below.


                                       6
<PAGE>


      CityFed received a letter dated June 21, 1995, from Skadden,  Arps, Slate,
      Meagher & Flom  ("Skadden"),  which is counsel for Gordon Allen,  Marshall
      Criser, Edwin Halkyard,  Peter Kellogg,  William Liffers and Victor Pelson
      ("Outside  Directors"),  who  are or  were  parties  to one or more of the
      following matters (collectively,  the "Cases"): (1) the Second RTC Action;
      (2) the efforts to set aside the Temporary Order (as defined  below);  (3)
      the Supreme  Court Case (as  defined  below);  and (4) the  administrative
      enforcement  proceeding  brought  by  the  OTS  against  CityFed  and  the
      Individual  Respondents  (as defined  below).  In the letter,  the Outside
      Directors  demanded  that,  pursuant  to  CityFed's  Bylaws  and  Restated
      Certificate of  Incorporation,  CityFed pay all outstanding  invoices from
      Skadden for legal services rendered to the Outside Directors in connection
      with the Cases.  The letter  states that,  if CityFed  refuses to make the
      payments demanded,  the Outside Directors will consider taking appropriate
      legal action to enforce their rights.  CityFed  received a similar  letter
      from Venable, Baetjer, Howard & Civiletti,  counsel for John Kean, who was
      a party to the  Second  RTC  Action,  as well as from  Alfred  J.  Hedden,
      Gilbert G.  Roessner,  and Gordon  Allen,  who were or are  parties to the
      Cases.  CityFed  also  received  similar  letters in  connection  with the
      deferred compensation matters described below. See "Indemnification Claims
      Relating to Deferred  Compensation  Plans."  CityFed is  considering  what
      action to take in response to these letters.  CityFed  expects that it may
      receive other,  similar  letters  demanding  payment from other current or
      former  directors  and  officers who were or are parties to one or more of
      the Cases.

      Through  September 30, 2000,  CityFed  received,  but has not paid,  bills
      totaling  $4,357,000  in the  aggregate  for legal  services  and expenses
      rendered in  connection  with the defense of current and former  directors
      and officers of CityFed in the Cases.

      On May 19, 2000,  CityFed finalized with the OTS and the FDIC a settlement
      ("Settlement")  that  settled  the action  described  below  under "In the
      Matter of CityFed Financial Corporation." Pursuant to the Settlement,  the
      Temporary  Order was  dissolved,  and the Escrow  Agreement  (as described
      below) was  terminated.  Following  the  Settlement,  CityFed  may undergo
      reorganization,   perhaps  involving  a  bankruptcy   proceeding.   It  is
      anticipated that these  indemnification  claims will be addressed prior to
      or as part of any such reorganization.

      CityFed does not know whether all current or former officers, directors or
      employees of CityFed or its former  subsidiaries  who are or were involved
      in actions or  proceedings  will request  advancement  or payment of legal
      expenses  and  indemnification  or,  if  requested,  whether  they will be
      entitled to  advancement of expenses or  indemnification.  Thus, it is not
      possible for CityFed to estimate with any accuracy the probable  amount or
      range of liability relating to current or potential indemnification claims
      pursuant to CityFed's Bylaws,  although the amount of such claims could be
      material.

      Certain   insurance   policies   may  provide   coverage  to  CityFed  for
      indemnification  payments  made by  CityFed.  These  policies,  subject to
      certain exclusions, limitations and loss participation provisions, provide
      coverage  to  CityFed  for  amounts  that  it may be  obligated  to pay to
      indemnify its current and former directors and officers, and in some cases
      also provide  coverage to the directors  and officers of CityFed  directly
      for covered losses resulting from claims made against CityFed's  directors
      and officers for certain  wrongful  acts.  Under the  insurance  policies,
      CityFed would be required,  prior to any payment by the insurers to it, to


                                       7
<PAGE>


      absorb a retention  amount  equal to the first $4 million of each  covered
      loss unless it is unable to do so by reason of insolvency.

      The insurers have denied  coverage with respect to the claims made against
      the   directors  and  officers  in  the  First  and  Second  RTC  Actions.
      Consequently,  CityFed  may  not be  reimbursed  by the  insurers  for any
      expenses advanced or indemnification payments made to these individuals in
      the First and Second RTC Actions.

      IN THE MATTER OF  CITYFED  FINANCIAL  CORPORATION,  OTS Order No. AP 94-26
      (June 2, 1994) - On June 2, 1994, the Office of Thrift  Supervision issued
      a Notice of Charges ("OTS Action")  against  CityFed and against Gordon E.
      Allen, John W. Atherton,  Jr., Edwin M. Halkyard,  Alfred J. Hedden, Peter
      R.  Kellogg,  William A.  Liffers  and  Gilbert G.  Roessner  ("Individual
      Respondents"),  who are current or former directors or officers of CityFed
      and of CityFed's former subsidiary, City Federal.

      The OTS charged  that  CityFed  failed to  maintain  the net worth of City
      Federal at levels required by applicable capital requirements in violation
      of a  Stipulation  dated  December  4,  1984.  CityFed  had  provided  the
      Stipulation  to the Federal  Savings  and Loan  Insurance  Corporation  in
      connection  with the  approval  by the  Federal  Home Loan  Bank  Board of
      CityFed's  acquisition of City Federal in December 1984. Federal Home Loan
      Bank Board  ("FHLBB")  Resolution  No.  84-664,  dated  November 21, 1984,
      approved  CityFed's  acquisition  of City Federal on the  condition  that,
      among other things, CityFed provide the Stipulation to the Federal Savings
      and Loan Insurance Corporation.  The Stipulation provided that, as long as
      CityFed controlled City Federal, CityFed would cause the net worth of City
      Federal to be  maintained  at a level  consistent  with that  required  by
      regulations and would infuse sufficient  additional  equity capital,  in a
      form satisfactory to the regulators, to effect compliance with the capital
      requirement.

      The Notice of Charges sought restitution in an amount not less than $118.4
      million,  which the OTS alleged to be the  regulatory  capital  deficiency
      reported by City Federal in the Fall of 1989.

      The OTS also sought a civil money penalty  against  CityFed on the grounds
      that  CityFed  allegedly  "knowingly"  committed  the  alleged  violations
      described   above  and  allegedly   "knowingly  or  recklessly   caused  a
      substantial  loss to City  Federal." The amount of the civil money penalty
      assessed against CityFed in the Notice of Charges was $2,649,600.

      The  OTS  charged  that  the  Individual  Respondents  had an  affirmative
      obligation to see that CityFed  complied  with its net worth  maintenance.
      The OTS alleged that some of the Individual  Respondents  (Messrs.  Allen,
      Atherton,  Hedden,  Kellogg and Roessner) were unjustly  enriched  through
      CityFed's  payment  of  their  legal  expenses  with  CityFed  assets,  an
      allegation  that refers to the  advancement  by  CityFed,  pursuant to its
      obligations in its Bylaws and Restated  Certificate of  Incorporation,  of
      litigation  expenses to those Individual  Respondents in the RTC action in
      the  United  States  District  Court  for  the  District  of  New  Jersey,
      RESOLUTION TRUST CORPORATION V. ATHERTON, ET AL., Civil Action No. 93-1811
      (consolidated with RESOLUTION TRUST CORPORATION V. SIMMONS,  ET AL., Civil
      Action No.  92-5261-B).  The Notice of Charges  requested that an order be
      entered by the Director of the OTS requiring the Individual Respondents to
      make restitution,  reimburse,  indemnify or guarantee the OTS against loss
      in an amount  not less than  $400,000,  which  the OTS  alleged  to be the


                                       8
<PAGE>


      amount  of legal  expenses  CityFed  paid on their  behalf  from  April to
      December 1993.

      In the Notice of  Charges,  the OTS also  assessed a civil  money  penalty
      against the  Individual  Respondents  on the grounds  that they  allegedly
      "violated a condition imposed in writing and/or a written  agreement." The
      amount  of  civil  money   penalties   assessed   against  the  Individual
      Respondents was $51,750 each.

      Also on June 2, 1994, the OTS issued a Temporary Order to Cease and Desist
      ("Temporary  Order")  against  CityFed.  The  Temporary  Order  sought  to
      "freeze"  CityFed's  assets by placing them in various  respects under the
      control of the OTS.  CityFed  and  several of the  Individual  Respondents
      attempted to have the Temporary Order set aside in court, but that attempt
      was unsuccessful.

      On October 26, 1994,  CityFed and the OTS entered into an Escrow Agreement
      with  CoreStates  Bank,  N.A. (now First Union  National Bank) pursuant to
      which CityFed  transferred  substantially all of its assets to First Union
      Bank for deposit into an escrow  account.  The Escrow  Agreement  provided
      CityFed  with $15,000 per month for normal  business  expenses and allowed
      CityFed to sell and purchase  securities in the escrow  account.  Although
      the Escrow  Agreement  was  terminated,  CityFed's  assets  continue to be
      invested in money market  instruments  with a maturity of one year or less
      and money market mutual funds.

      The terms of the Settlement generally include the following:

        o   CityFed paid to the FDIC, as receiver for City Federal, $3,169,115;

        o   CityFed  assigned  to the  FDIC  all of  CityFed's  interest  in its
            goodwill claim;

        o   CityFed conveyed to the FDIC its ownership  interest in City Federal
            and gave up any claims against its receivership estate;

        o   The OTS dismissed with prejudice the OTS Action, and the OTS and the
            FDIC gave full and complete  releases to CityFed and the  Individual
            Respondents;

        o   CityFed  and the  Individual  Respondents  gave  full  and  complete
            releases to the OTS and the FDIC; and

        o   The OTS  dissolved the Temporary  Order and  authorized  First Union
            Bank to release to CityFed all of its assets remaining in the escrow
            account following payment of the settlement proceeds.

      For further information regarding the Stipulation,  see "First RTC Action"
      below.

      FIRST  RTC  ACTION - On  December  7,  1992,  the RTC in its  capacity  as
      receiver for City Savings,  and the RTC in its corporate  capacity,  filed
      the First RTC Action in the N.J.  Court  against  CityFed  and against two
      former officers of City Federal. In its complaint in the First RTC Action,
      the RTC, in its corporate capacity, sought, inter alia, to recover damages


                                       9
<PAGE>


      in excess of $12 million against CityFed  resulting from CityFed's alleged
      violation of the Stipulation to maintain the net worth of City Federal.

      In  connection  with the First RTC Action,  the RTC filed an Order to Show
      Cause with  Temporary  Restraints  Freezing  Assets of  Defendant  CityFed
      Financial  Corp.  ("Order to Show  Cause")  seeking an order from the N.J.
      Court  placing all assets of CityFed  under the control of the N.J.  Court
      and  related  relief  pending a hearing on a  preliminary  injunction.  On
      January 5, 1993,  CityFed and the RTC entered into the Expense  Agreement,
      effective as of December 14, 1992,  whereby the RTC agreed to refrain from
      seeking  the  relief  sought in its Order to Show  Cause.  In the  Expense
      Agreement,  the RTC further  agreed that  CityFed  could make  payments of
      ordinary   and   reasonable   business   expenses,   including   aggregate
      compensation and employee  benefits in amounts not to exceed those paid in
      1991 for John W. Atherton, Jr., as President of CityFed, and for CityFed's
      corporate secretary, directors' fees and reasonable expenses in connection
      with  attendance at meetings of CityFed's  Board of Directors,  reasonable
      and necessary fees for outside auditing  services,  taxes,  transfer fees,
      and rent and utilities for CityFed's offices in Florida and Massachusetts,
      reasonable corporate legal fees, and reasonable defense costs,  attorneys'
      fees and/or  disbursements  in  connection  with the First RTC Action and,
      relating  only to the  defense  of  CityFed,  with  respect  to the action
      originally  filed in the United  States  District  Court for the  Northern
      District of  California  captioned  RIDDER,  ET AL. V.  CITYFED  FINANCIAL
      CORP., C92-4649-BAC,  which was dismissed without prejudice and refiled in
      the N.J. Court captioned RIDDER, ET AL. V. CITYFED FINANCIAL CORP.,  (Case
      No. 93-1676) (HLS) ("Ridder  Action").  The Ridder Action has been settled
      and the Expense Agreement was terminated.

      On  September  30,  1993,  CityFed  was  advised  by the OTS staff that it
      intended to recommend that the OTS initiate an administrative  enforcement
      proceeding  against  CityFed.  The OTS staff  reaffirmed  its intention to
      recommend that the OTS initiate such a proceeding in meetings  between the
      OTS staff and  representatives of CityFed in April 1994. In light of this,
      and at the request of the RTC and CityFed,  the N.J. Court entered several
      successive  orders  staying the First RTC Action from October 1993 through
      June  1994.  In light of the filing by the OTS of the Notice of Charges on
      June 2, 1994, the RTC and CityFed agreed to (1) a Consent Order Dismissing
      Claims Against Defendant CityFed Financial Corp. Without Prejudice,  which
      provides for the  dismissal  without  prejudice of the RTC's claim against
      CityFed in the First RTC Action,  and which was entered as an Order of the
      N.J. Court on July 19, 1994; and (2) a Tolling Agreement,  effective as of
      July 11, 1994,  pursuant to which  CityFed and the RTC agreed (a) to toll,
      during the pendency of the OTS' proceeding against CityFed, the running of
      the statute of limitations with respect to the claims the RTC had asserted
      against  CityFed  in the  First  RTC  Action  and (b)  that,  if the  OTS'
      proceeding against CityFed results in a determination that the Stipulation
      was void and/or  unenforceable as a matter of law, or that CityFed did not
      violate the Stipulation, the RTC would be bound by such determination.

      Pursuant to the Settlement,  the FDIC released  CityFed from all claims in
      the First RTC Action.

      The RTC also sought,  in its complaint in the First RTC Action, to recover
      damages in excess of $130 million from two former officers of City Federal
      resulting  from their  alleged  negligence,  gross  negligence,  breach of


                                       10
<PAGE>


      fiduciary  duty and other duties and other  wrongful and improper  conduct
      while serving as officers of City Federal in connection with the approval,
      funding,  management,  oversight  and  workout  of two large  acquisition,
      development and  construction  loans for two projects  located in Florida,
      Grand  Harbor  ("Grand   Harbor")  and  Woodfield   Country  Club  Estates
      ("Woodfield").  On February  9, 1993,  upon motion of CityFed in the First
      RTC Action,  the N.J.  Court  entered an order  severing  the RTC's claims
      against  CityFed from the RTC's claims against the two former  officers of
      City Federal.

      SECOND  RTC  ACTION - On April  26,  1993,  the RTC,  in its  capacity  as
      receiver for City Savings,  filed the Second RTC Action in the N.J.  Court
      against John W. Atherton, Jr., Gordon E. Allen, Alfred J. Hedden, Peter R.
      Kellogg,  John Kean,  Gilbert G.  Roessner,  George E. Mikula and James P.
      McTernan,  all former  directors  and/or officers of City Federal.  In its
      initial  complaint  in the  Second RTC  Action,  the RTC sought to recover
      damages in excess of $130 million for alleged negligence, gross negligence
      and breach of fiduciary  duties by the  defendants in connection  with the
      Grand Harbor and Woodfield loans. Although the Second RTC Action was filed
      separately from the First RTC Action,  the N.J. Court consolidated the two
      actions for administrative purposes.

      On June 17, 1993, the RTC filed a First Amended  Complaint ("First Amended
      Complaint")  in the Second RTC Action that named as additional  defendants
      in the Second RTC Action  Victor A.  Pelson and  Marshall M.  Criser,  two
      former  directors of City  Federal.  With the exception of the addition of
      Messrs.  Pelson  and  Criser as  defendants,  the  substance  of the First
      Amended  Complaint is identical to the complaint filed by the RTC on April
      26, 1993.

      On November 15, 1993, the N.J. Court granted the motions of several of the
      defendants to dismiss the RTC's First  Amended  Complaint to the extent it
      alleged a cause of action for simple negligence. On December 15, 1993, the
      RTC filed a Second Amended Complaint  ("Second Amended  Complaint") in the
      Second RTC Action,  alleging  gross  negligence and breach of duty against
      the defendants named in the Second RTC Action in connection with the Grand
      Harbor and Woodfield  loans,  and also in connection with the Port Liberte
      loan ("Port Liberte"),  a large real estate development loan in New Jersey
      that had not been  mentioned  in the  First RTC  Action or in the  initial
      complaint or the First  Amended  Complaint  in the Second RTC Action.  The
      Second Amended Complaint,  with the addition of allegations regarding Port
      Liberte,  seeks  damages in excess of $200  million  (as  compared to $130
      million in the First Amended Complaint).

      The RTC filed an  interlocutory  appeal  with the United  States  Court of
      Appeals for the Third  Circuit  ("Third  Circuit")  from the N.J.  Court's
      November 15, 1993 Orders in the Second RTC Action that dismissed the RTC's
      First  Amended  Complaint  to the  extent it alleged a cause of action for
      simple  negligence.  On June 23, 1995, the Third Circuit reversed the N.J.
      Court's  November  15,  1993  Orders.  On January  14,  1997,  in the case
      captioned  ATHERTON V. FEDERAL DEPOSIT INSURANCE  CORPORATION,  117 S. Ct.
      666 (1997) ("Supreme Court Case"),  the Supreme Court of the United States
      vacated the Third Circuit's judgment and remanded the case.

      On January 2, 1996,  the FDIC, as statutory  successor to the RTC, filed a
      Third Amended  Complaint  ("Third  Amended  Complaint")  in the Second RTC
      Action.  The Third Amended  Complaint  alleged that the  defendants in the
      Second RTC Action were liable for  negligence as well as gross  negligence


                                       11
<PAGE>


      and  breach of  fiduciary  duty under  federal  common  law.  In all other
      respects,  the Third Amended Complaint was identical to the Second Amended
      Complaint.  On February 14, 1996, some of the defendants in the Second RTC
      Action filed a motion to dismiss the Third Amended Complaint.

      CityFed is aware that all of the  defendants in the Second RTC Action have
      settled with the RTC or FDIC. The  settlement  agreement for Victor Pelson
      includes a waiver by him of his indemnification  claim against CityFed for
      legal fees and  expenses and the amount of his  settlement  payment in the
      Second RTC Action,  which occurred pursuant to the Settlement.  Mr. Pelson
      agreed to pay the RTC  $650,000  to settle  the  Second  RTC  Action.  The
      settlement  agreements for John Kean,  Marshall Criser,  Alfred Hedden and
      Gilbert  Roessner  include (1) an assignment by them to the RTC or FDIC of
      their  respective  indemnification  claims against  CityFed for settlement
      payments they make to the RTC or FDIC to settle the Second RTC Action, and
      (2) retention by them of their respective  indemnification  claims against
      CityFed for legal fees and expenses incurred in the Second RTC Action. The
      settlement payments agreed to be made by Messrs. Kean, Criser,  Hedden and
      Roessner to the RTC or FDIC, and thus the amount of indemnification  claim
      assigned by them to the RTC or FDIC, are $1,200,000 for Mr. Kean, $400,000
      for Mr. Criser, $250,000 for Mr. Hedden and $335,000 for Mr. Roessner. The
      RTC agreed to allow a $70,000  credit  toward the amount to be paid by Mr.
      Roessner as a means of resolving Mr.  Roessner's claim against the RTC for
      lost earnings on deferred  compensation  amounts Mr.  Roessner claims were
      withheld from him by the RTC. In their  settlements with the FDIC,  Gordon
      Allen and Peter Kellogg retained their rights to seek indemnification from
      CityFed for settlement payments they made to the FDIC as well as for legal
      fees and  expenses  incurred by them in the Second RTC Action.  Mr.  Allen
      agreed to pay  $250,000  to settle the  Second RTC Action and Mr.  Kellogg
      agreed  to pay  $3,000,000.  CityFed  understands  also  that the FDIC has
      settled with George Mikula, James McTernan, John W. Atherton, Jr., Richard
      Simmons and Michael  DeFreytas for $5,000 each and they each have retained
      their rights to seek  indemnification  from  CityFed for their  settlement
      payments.

      Pursuant to the  Settlement,  the FDIC  assigned any rights it acquired in
      the settlements  described above to CityFed. See "Indemnification  Claims"
      above.

      SUPERVISORY  GOODWILL ACTION - The United States Supreme Court held in the
      Winstar  case  that the loss by a  financial  institution  of  supervisory
      goodwill  carried on its books as a  consequence  of  earlier  supervisory
      mergers, as a result of the Financial  Institutions  Reform,  Recovery and
      Enforcement  Act of 1989,  constituted  a breach of contract by the United
      States.  On  August  7,  1995,  CityFed,  acting  in its own  right and as
      shareholder  of City  Federal,  filed a civil action in the United  States
      Court of Federal Claims seeking  damages for loss of supervisory  goodwill
      on its  books as a result  of  various  acquisitions  by City  Federal  of
      troubled  depository  institutions.  CITYFED  FINANCIAL  CORP., IN ITS OWN
      RIGHT AND IN ITS  CAPACITY AS  SHAREHOLDER  OF CITY  FEDERAL  SAVING BANK,
      BEDMINSTER, NEW JERSEY V. UNITED STATES OF AMERICA, No. 95-508c.

      Pursuant to the Settlement,  CityFed assigned to the FDIC all of CityFed's
      interest in its  supervisory  goodwill case,  ceased to be a party to that
      case, and has no right to share in the recovery in that case, should there
      be one.


                                       12
<PAGE>


      CLAIM OF A FORMER  DIRECTOR AND OFFICER - As a result of the  receivership
      of City Federal,  City Federal failed to pay Gilbert G. Roessner, a former
      director  and officer of CityFed,  the amounts  owed to him under  various
      deferred  compensation  arrangements  City Federal had with him. He claims
      that CityFed is responsible for this amount (approximately $1.1 million as
      of November 1989). On April 30, 1991,  special counsel to the Compensation
      Committee of CityFed's  Board of Directors  recommended  to the full Board
      that no payments  be made to Mr.  Roessner  currently,  but that the Board
      keep Mr. Roessner's claim under advisement, to be reconsidered in light of
      then existing  circumstances  and any additional  evidence provided by Mr.
      Roessner in support of his claim. The full Board of Directors received the
      report of special counsel to the Compensation Committee.

      Pursuant to Mr.  Roessner's  settlement  with the RTC as  discussed  under
      "Second  RTC  Action"  above,  CityFed  believes  Mr.  Roessner's  current
      deferred  compensation  claim is in the amount of $169,365.60 plus accrued
      interest thereon, if any.

      INDEMNIFICATION  CLAIMS  RELATING  TO  DEFERRED  COMPENSATION  PLANS  - In
      September 1990, the RTC, as receiver for City Federal (and the new Federal
      mutual   savings   bank  created  to  acquire  all  of  the  deposits  and
      substantially all of the assets and indebtedness of City Federal),  caused
      an  action  to  be  filed  in  the  N.J.   Court  seeking  the  return  of
      approximately  $3.1 million  (since  reduced to $1.9  million) in deferred
      compensation  paid by City  Federal to  certain  officers,  directors  and
      employees  of  City  Federal,  some of whom  are or  were  also  officers,
      directors  or  employees  of  CityFed.  Pursuant to the  Delaware  General
      Corporation  Law and the Bylaws of CityFed,  CityFed paid the  defendants'
      legal fees in connection with their defense of the litigation.

      A settlement  agreement,  under which the defendants were to pay $790,000,
      was entered into by the parties in June 1993 (of which $114,000 was in the
      form of  promissory  notes from two  defendants  payable over four years).
      This settlement agreement concluded the case.

      Several  defendants  have  requested  that CityFed  reimburse them for the
      settlement payments made by them under the settlement  agreement.  CityFed
      has not  responded to the request.  It is likely that CityFed will receive
      similar  requests  from the other  parties  to the  settlement.  CityFed's
      liability to the individuals  remains to be determined;  however,  CityFed
      has  included in its  contingency  reserve the full  settlement  amount of
      $790,000.

      TAX  LIABILITIES - CityFed's  liability  for federal  income taxes for tax
      years through 1990 was calculated on the basis of CityFed's inclusion in a
      consolidated   group  that   includes   City  Federal  and  the  successor
      institutions  created by the OTS to acquire the assets and  liabilities of
      City Federal. Under the applicable provisions of the Internal Revenue Code
      of 1986, as amended ("Code"), and the regulations thereunder,  all members
      of the consolidated  group,  including CityFed,  are jointly and severally
      liable for any income  taxes owed by the group.  CityFed has not  included
      City  Federal and the  successor  institutions  in the Federal  income tax
      returns  CityFed  filed for its tax years  1991  through  1999.  CityFed's
      position is not free from challenge,  although  CityFed  believes that its
      position is reasonable under the current tax law.


                                       13
<PAGE>


      CONTINGENCY  RESERVE - As noted above,  the Company is subject to a number
      of loss  contingencies  for which it is  currently  unable  to  reasonably
      assess the  probability  or range of loss.  At  September  30,  2000,  the
      Company had a $4.2 million  contingency  reserve that includes amounts for
      claims  asserted  for  indemnification  of  expenses  in the  OTS  Action,
      expenses and settlements in the Second RTC Action and the claims described
      above under  "Indemnification  Claims  Relating  to Deferred  Compensation
      Plans." The reserve also includes amounts representing the current minimum
      legal  expenses  estimated  to be incurred  related to these  claims.  The
      charges for the nine months ended  September  30, 2000 include  $3,169,115
      relating to the Settlement.  The following is an analysis of the Company's
      contingency reserve:

             Balance - December 31, 1999                $ 6,353,000

             Charges                                     (3,197,000)
             Provision                                    1,037,000
                                                        -----------

             Balance - September 30, 2000               $ 4,193,000
                                                        ===========

Item 2.  Management's Discussion and Analysis or Plan of Operation.

General

         On December 7, 1989,  the Office of Thrift  Supervision  appointed  the
         Resolution  Trust  Corporation  ("RTC") as  receiver  for City  Federal
         Savings Bank ("City Federal"), the sole subsidiary of CityFed Financial
         Corp. ("CityFed" or the "Company").  A new federal mutual savings bank,
         City Savings Bank, F.S.B. ("City Savings"), was created, which acquired
         all deposits and  substantially  all of the assets and  liabilities  of
         City  Federal.  CityFed  no longer  controls  City  Federal  and has no
         control over City Savings.

         As a result of this  action,  the  financial  statements  of CityFed at
         December 31, 1989, for the year then ended, and for subsequent  periods
         reflect CityFed's interest in City Federal as discontinued operations.

         Because City Federal was placed in receivership,  CityFed's interest in
         City  Federal  was a claim  against  the  receivership  estate  for the
         proceeds,  if any,  of the  receivership  estate of City  Federal  that
         remain after all  creditors,  including the RTC, have been paid.  For a
         fuller  description  of the  receivership,  see Item 1.,  "Business" in
         CityFed's 1999 Form 10-KSB. In the Settlement relating to In the Matter
         of CityFed Financial Corporation, OTS Order No. AP 94-26 (June 2, 1994)
         ("Settlement"),  CityFed conveyed its interest, if any, in City Federal
         to the  Federal  Deposit  Insurance  Corporation  and gave up any claim
         against  the  receivership  estate of City  Federal.  See Note 4 to the
         Notes to Financial  Statements for the Nine Months Ended  September 30,
         2000 in this Form  10-QSB  ("Notes")  under "In the  Matter of  CityFed
         Financial   Corporation"   for  further   information   regarding   the
         Settlement.

         Since the receivership of City Federal, CityFed has been, and currently
         is, in the  process  of  determining  its  liabilities,  including  its
         contingent  liabilities  described in Note 4 to the Notes.  To maintain
         the  principal  value of its  existing  assets  while  this  process is
         ongoing,  CityFed has invested  substantially  all of its funds in high
         grade money market  instruments with a maturity of one year or less and
         money market mutual funds. Since the receivership of City Federal,  the


                                       14
<PAGE>


         operating  expenses of CityFed  have  consisted  of the salaries of the
         employees of CityFed,  the expenses of the two small offices maintained
         by CityFed and the related office operating expenses, expenses relating
         to the audit of its financial  statements by its independent  auditors,
         and expenses of its outside legal counsel.  Currently,  CityFed has one
         full-time employee and one office.

         Due to the nature of its assets at and  subsequent to December 8, 1989,
         CityFed may be deemed to fall within the  definition of an  "investment
         company"  under the  Investment  Company Act of 1940, as amended ("1940
         Act"), from that date to the present. To resolve any question regarding
         its current status under the 1940 Act,  CityFed filed an application on
         October 19,  1990 with the  Division of  Investment  Management  of the
         Securities and Exchange  Commission  ("SEC") for an order  exempting it
         from  certain  provisions  of  the  1940  Act  and  certain  rules  and
         regulations  thereunder.  This application was amended on September 23,
         1993,  January 18, 1994 and March 1, 1994. The  application was granted
         under  Sections  6(c) and (e) of the 1940 Act on March 15, 1994.  Under
         the order granting the application ("1940 Act Order"),  CityFed was not
         required to register as an  investment  company.  However,  CityFed and
         other persons in their  transactions  and  relations  with CityFed are,
         under the terms of the 1940 Act Order,  subject to  Sections  9, 17(a),
         17(d),  17(e),  17(f), 36 through 45 and 47 through 51 of the 1940 Act,
         and the rules  thereunder,  as if CityFed were a registered  investment
         company,  except  insofar as permitted by the 1940 Act Order.  The 1940
         Act Order  exempted  CityFed  from having to register as an  investment
         company  until the  earlier  of March 15,  1995 or such time as CityFed
         would no longer be required to register as an  investment  company.  On
         February  28,  1995,  an  Order  was  issued  extending  the  requested
         exemption  until  February 28, 1996, on February 21, 1996, an order was
         issued  extending the requested  exemption  until February 21, 1997, on
         February  12,  1997,  an  Order  was  issued  extending  the  requested
         exemption  until  February 12, 1999, on February 12, 1999, an Order was
         issued extending the requested  exemption until February 12, 2000, and,
         on  February  9, 2000,  an order was  issued  extending  the  requested
         exemption until February 9, 2001.

Liquidity and Capital Resources

         At September 30, 2000,  CityFed had  approximately  $6,510,000 in total
         assets,  $8,637,000  in total  liabilities  and  $2,127,000 in negative
         stockholders'  equity. At December 31, 1999,  CityFed had approximately
         $9,652,000  in  total  assets,  $10,857,000  in total  liabilities  and
         $1,205,000 in negative  stockholders' equity.  However, as discussed in
         Note  4  to  the  Notes  and  under  Item  1.,  "Business  -  Potential
         Obligations  of CityFed" in  CityFed's  1999 Form  10-KSB,  a number of
         claims have been asserted against CityFed.  If the claimants under some
         or all of these claims are  successful,  their claims  against  CityFed
         could greatly exceed CityFed's assets.  Consequently,  CityFed's assets
         are currently being invested short term, and expenses have been reduced
         to a level that  management  believes is  commensurate  with  CityFed's
         current activities pending resolution of these claims.

         While  CityFed's  liquidity is expected to be  sufficient to meet legal
         and   administrative   expenses  over  the  next  twelve  months,   any
         substantial  indemnification  expense could reduce liquidity to a level
         that would jeopardize the continuation of the Company's activities.  As
         a result of additions to the contingency reserve, CityFed currently has


                                       15
<PAGE>


         a negative  net worth and it is unlikely  that  CityFed will be able to
         achieve a positive net worth in the foreseeable future.

         As discussed  above,  since the  receivership of City Federal,  CityFed
         initially  marshaled its assets and has been,  and currently is, in the
         process  of  determining  its  liabilities.  To  maintain  the value of
         CityFed's  existing  assets while this process is ongoing,  CityFed has
         invested in income  producing  instruments.  Funds are invested so that
         they are convertible into cash in a reasonably short time with minimal,
         if any, loss of principal.

         Since the  receivership of City Federal,  CityFed has invested and will
         continue to invest  substantially  all its funds in  securities  with a
         maturity  of one year or less.  These  consist  of U.S.  government  or
         agency  securities,  commercial  paper,  bank  certificates of deposit,
         money market mutual funds and corporate  debt  obligations.  Repurchase
         agreements may only be entered into using U.S. government securities as
         collateral.  Non-governmental  or agency investments are purchased only
         if  they  are  rated  in  one  of  the  two  highest  categories  by an
         established rating agency. Investments in the corporate debt securities
         of any one issuer are limited to $2,500,000.

         Under the terms of the 1940 Act  Order,  CityFed  may not  purchase  or
         otherwise acquire any additional  securities other than securities that
         are  rated  investment  grade  or  higher  by a  nationally  recognized
         statistical  rating  organization  or,  if  unrated,  deemed  to  be of
         comparable  quality  under  guidelines  approved by CityFed's  Board of
         Directors, subject to two exceptions:

                  (a) CityFed may make an equity  investment in issuers that are
            not investment  companies as defined in Section 3(a) of the 1940 Act
            (including  issuers that are not investment  companies  because they
            are  covered  by  a  specific   exclusion  from  the  definition  of
            investment  company  under  Section  3(c) of the 1940 Act other than
            Sections  3(c)(1)  and  3(c)(7))  in  connection  with the  possible
            acquisition  of an  operating  business as evidenced by a resolution
            approved by CityFed's Board of Directors; and

                  (b)  CityFed  may  invest in one or more money  market  mutual
            funds that limit their investments to "Eligible  Securities"  within
            the meaning of Rule 2a-7(a)(10) promulgated under the 1940 Act.

         The financial  statements of CityFed at December 31, 1989, for the year
         then ended, and for subsequent periods reflect that CityFed maintains a
         contingency  reserve which,  at September 30, 2000, was $4,193,000 and,
         at December 31,  1999,  was  $6,353,000.  The  contingency  reserve was
         reduced by $3,197,000  during the nine months ended  September 30, 2000
         as a result of the Settlement.

         The  current   reserves   include   amounts  for  claims  asserted  for
         indemnification of expenses in the OTS Action, expenses and settlements
         in  the  Second  RTC  Action  and  the  claims  described  above  under
         "Indemnification  Claims Relating to Deferred  Compensation Plans." The
         reserve also includes  amounts  representing  the current minimum legal
         expenses  estimated to be incurred in connection  with the claims.  See
         Note 4 to the Notes, and Item 1., "Business - Potential  Obligations of
         CityFed" in CityFed's  1999 Form 10-KSB for a description  of the major
         claims that may give rise to expected future costs. Although management


                                       16
<PAGE>


         believes that  CityFed's  current  level of reserves are  sufficient to
         cover the costs of pending claims,  no assurances can be given that the
         reserves established will be adequate,  that any ultimate resolution of
         the claims will not result in  substantial  amounts  being  incurred or
         that further claims will not be asserted.

         On  October  26,  1994,  CityFed  and the OTS  entered  into an  escrow
         agreement  ("Escrow  Agreement")  with CoreStates Bank, N.A., now First
         Union Bank  ("First  Union"),  pursuant  to which  CityFed  transferred
         substantially  all of its  assets to First  Union for  deposit  into an
         escrow account to be maintained by First Union.  Under the  Settlement,
         CityFed is no longer subject to the terms of the Escrow Agreement.

         Results of Operations

         CityFed recorded income from continuing  operations for the nine months
         ended  September  30, 2000 of  $115,000.  This  compares to income from
         continuing  operations  in the amount of  $203,000  for the nine months
         ended  September 30, 1999. No addition to the  contingency  reserve was
         made during the nine months ended  September 30, 1999 while an addition
         of $1,037,000 was made for the nine months ended September 30, 2000.

         CityFed recorded income from continuing operations for the three months
         ended  September  30,  2000 of  $39,000.  This  compares to income from
         continuing  operations  in the amount of $98,000  for the three  months
         ended  September 30, 1999. No addition to the  contingency  reserve was
         made during the three months ended September 30, 1999 or 2000.

         Interest  on  investments  was  $360,000  for  the  nine  months  ended
         September  30,  2000  compared to  $383,000  for the nine months  ended
         September 30, 1999 due primarily to the lower amount of funds invested.
         In 2000,  CityFed  received a distribution of $24,000 from CX Partners,
         L.P.  See Item 1.,  "Description  of Business - Boesky  Settlement"  in
         CityFed's  1999 Form  10-KSB.  Total  expenses of $269,000 for the nine
         months ended  September  30, 2000 were higher than the $180,000 for the
         same period in 1999 due  primarily  to a higher  level of  professional
         service fees.

         Interest  on  investments  was  $105,000  for the  three  months  ended
         September  30,  2000,  compared to $156,000  for the three months ended
         September 30, 1999 due primarily to the lower amount of funds invested.
         Total  operating  expenses  of  $66,000  for  the  three  months  ended
         September  30, 2000 were higher than the $58,000 for the same period in
         1999 due to the higher level of compensation expense.

         CityFed's  contingency  reserve was established in 1989 and is intended
         to include reserves for CityFed's legal and  indemnification  expenses.
         See Note 4 to the Notes and Item 1., "Business - Potential  Obligations
         of CityFed" in  CityFed's  1999 Form  10-KSB for a  description  of the
         major claims that may give rise to expected  future costs.  An addition
         of  $1,037,000  was  made to the  reserve  for the  nine  months  ended
         September 30, 2000.  Due to the addition to the reserve less charges of
         $28,000 and the settlement payment in the OTS Action of $3,169,115, the
         contingency  reserve  decreased from $6,353,000 at December 31, 1999 to
         $4,193,000 at September 30, 2000.


                                       17
<PAGE>


         The basic loss per share from continuing  operations of $0.11 and $0.34
         for the three and nine months ended  September 30, 2000,  respectively,
         compares  to $0.11  and  $0.34  for the  three  and nine  months  ended
         September 30, 1999.  The basic net loss per share of $0.40 for the nine
         months  ended  September  30, 2000 is after the loss from  discontinued
         operations of $0.06 per share.  In all periods,  the basic net loss per
         share  is  after  the  deduction  of  unpaid  preferred  dividends.  No
         preferred or common  dividends  have been paid since the second quarter
         of 1989 and none are  expected  to be paid  until  CityFed's  situation
         changes significantly.

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

         See  Note  4 to  the  Notes  for a  description  of  currently  pending
         litigation.

Item 2.  Changes in Securities.

         None.

Item 3.  Defaults Upon Senior Securities.

         (a)  None.

         (b)  CityFed's $2.10 Cumulative Convertible  Preferred Stock, Series B,
         par value  $25.00  per share  ("Series B Stock"),  is  required  to pay
         quarterly  dividends  at a rate of $0.525 per share on March 1, June 1,
         September  1 and  December 1 of each year.  CityFed's  Series C, Junior
         Preferred  Stock,  Cumulative,  par value  $0.01 per share  ("Series  C
         Stock"),  is required to pay quarterly dividends at a rate of $0.10 per
         share on March 15, June 15,  September 15 and December 15 of each year.
         The  dividends  on both  the  Series  B and  the  Series  C  Stock  are
         cumulative.  The  Series C Stock is junior to the Series B Stock in the
         payment of dividends.

         Beginning  with the payment due on September  1, 1989,  CityFed has not
         paid any  quarterly  dividends  on the  Series B  Stock.  Beginning  on
         September 15, 1989,  CityFed also has not paid any quarterly  dividends
         on the Series C Stock.  Because  CityFed has failed to pay at least six
         quarterly  dividends  on the Series B Stock,  the holders of such stock
         have the exclusive right,  voting  separately as a class, to elect, and
         have elected, two directors of CityFed.  Until the aggregate deficiency
         is  declared  and fully  paid on the  Series B Stock  and the  Series C
         Stock,  CityFed  may  not  declare  any  dividends  or make  any  other
         distributions  on or redeem  the  Common  Stock.  Until  the  aggregate
         deficiency  is declared  and fully paid on the Series B Stock,  CityFed
         may not declare any  dividends  or make any other  distributions  on or
         redeem the Series C Stock.  As of  September  30, 2000,  the  aggregate
         deficiency  on the Series B Stock was  approximately  $60.0 million and
         the aggregate  deficiency on the Series C Stock was approximately $37.2
         million.


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<PAGE>


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

         None.

Item 5.  Other Information.

         None.

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

         (a)  Exhibits

         11.  Statement Regarding the Computation of Per Share Loss.
         27.  Financial Data Schedule

         (b)  Reports on Form 8-K.

         None.


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<PAGE>


                                   SIGNATURES

      In accordance  with the  requirements  of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                      CITYFED FINANCIAL CORP.

                                        By: /s/ John W. Atherton, Jr.
                                            --------------------------
                                            John W. Atherton, Jr.
                                            President, Chief Executive Officer
                                              and Treasurer (Principal Executive
                                              and Financial Officer)

Date:  November 14, 2000


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