<PAGE>


                          SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C.  20549

                                      FORM 10-Q
         (Mark One)
       [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15
                              OF THE SECURITIES EXCHANGE ACT OF 1934
       For the quarterly period ended SEPTEMBER 30, 1995

       [ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR
                        15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
       For the transition period from ________ to _________



                            Commission File No.   0-16970

                         CALIFORNIA FINANCIAL HOLDING COMPANY
               (Exact name of registrant as specified in its charter)

             DELAWARE                              68-0150457
     (State or other jurisdiction of             (I.R.S. Employer
      incorporation or organization)              Identification No.)

     501 W. WEBER AVENUE, STOCKTON, CALIFORNIA          95203
       (Address of principal executive offices)       (Zip Code)

     Registrant's telephone number, including area code (209) 948-6870

       Indicate by check mark whether the registrant (1) has filed all reports
     required to be filed by Section 13 or 15(d) of the Securities Exchange Act
     of 1934 during the preceding 12 months (or for such shorter period that
     the registrant was required to file such reports), and (2) has been
     subject to such filing requirements for the past 90 days.

                                                    Yes _X_ No ___

       Indicate the number of shares outstanding of each of the registrant's
     classes of common stock, as of the latest practicable date.

             CLASS                  OUTSTANDING AT SEPTEMBER 30, 1995

     Common Stock, $.01 par value            4,659,031 shares















                                        - 1 -
<PAGE>



     <TABLE>
     <CAPTION>
                                              Part 1. FINANCIAL INFORMATION
                                          CALIFORNIA FINANCIAL HOLDING COMPANY
                                                    AND SUBSIDIARIES
                                          Consolidated Statements of Condition
                                                       (Unaudited)
                                                               Dec. 31, 1994    Sept. 30, 1995     Sept. 30, 1994
                                                              --------------    --------------     --------------
       <S>                                                    <C>               <C>                <C>
       Cash, including noninterest-bearing deposits           $   15,523,626    $    9,540,517     $   12,685,842
       Interest-bearing deposits                                   3,313,882        11,071,947          2,515,428
       Other short-term investments                                   -                   -             5,225,357

       Investment securities:
         Securities available for sale                            50,438,489       120,160,755         52,225,324
         Securities held to maturity                              52,759,609              -            52,841,096

       Mortgage-backed securities:
         Securities available for sale                             7,154,572       138,510,291          7,323,726
         Securities held for investment, net of loss
           reserves of $250,000, $497,832 and $250,000
           respectively                                          159,436,288              -           154,935,070

       Loans held for sale, at lower of cost or market             2,655,408         6,412,805          2,484,038
       Loans receivable, net of loss reserves of 
        $7,725,500, $8,952,000 and $10,095,500
        respectively                                             948,202,864       954,906,524        941,766,828
       Less: loans in process                                     34,101,646        38,363,676         36,842,816
                                                              --------------    --------------     --------------
       Net loans receivable                                   $  914,101,218    $  916,542,848     $  904,924,012
                                                              --------------    --------------     --------------
       Investments in real estate held for development,
        net of loss reserves of $6,850,636, $6,393,418 and
        $5,967,098                                            $   25,233,861    $   15,457,511     $   21,339,579
       Net office property and equipment                          21,111,844        20,613,135         21,814,472
       Federal Home Loan Bank stock                                8,736,900        10,258,800          8,624,600
       Accrued interest and dividends receivable                   5,308,083         6,044,213          4,790,723
       Deposit base premium                                        2,219,999         1,348,833          2,510,388
       Other assets, net                                           7,133,371         7,390,111          5,496,144
                                                              --------------    --------------     --------------
       TOTAL ASSETS                                           $1,275,127,150    $1,263,351,766     $1,259,735,799
                                                              ==============    ==============     ==============

       LIABILITIES AND STOCKHOLDERS' EQUITY
       Liabilities
       Savings and checking accounts                          $1,001,070,420    $  983,717,108     $  973,904,435
       Advances from FHLB                                        110,000,000       121,000,000        115,800,000
       Collateralized mortgage obligation, net of
         discount of $85,456, $0 and $139,043                      7,897,795         6,966,252          8,077,422
       Reverse repurchase agreements                              64,978,000        59,807,000         70,712,900
       Accrued interest payable                                    1,610,640         1,772,127          1,380,900
       Other liabilities, net                                      6,352,805         6,006,658          7,030,210
                                                              --------------    --------------     --------------
       TOTAL LIABILITIES                                      $1,191,909,660    $1,179,269,145     $1,176,905,867




                                        - 2 -
<PAGE>



                                              Part 1. FINANCIAL INFORMATION
                                          CALIFORNIA FINANCIAL HOLDING COMPANY
                                                    AND SUBSIDIARIES
                                          Consolidated Statements of Condition
                                                       (Unaudited)
                                                               Dec. 31, 1994    Sept. 30, 1995     Sept. 30, 1994
                                                              --------------    --------------     --------------

       Stockholders'  Equity
       Serial preferred stock, 4,000,000 shares
        authorized, no shares outstanding                               -                 -                  -
       Capital stock, 12,000,000 shares authorized
        4,626,063, 4,659,031 and 4,620,723 shares
        outstanding                                           $       46,261    $       46,590     $       46,207
       Paid in capital in excess of par                           26,207,166        26,499,563         26,144,695
       Unrealized loss on securities available for sale, 
         net of tax effect                                        (1,186,069)         (646,177)          (855,947)
       Retained earnings, substantially restricted                58,150,132        58,182,645         57,494,977
                                                              --------------    --------------     --------------
       TOTAL STOCKHOLDERS' EQUITY                             $   83,217,490    $   84,082,621     $   82,829,932
                                                              --------------    --------------     --------------
       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY             $1,275,127,150    $1,263,351,766     $1,259,735,799
                                                              ==============    ==============     ==============




































                                        - 3 -
<PAGE>



                                          CALIFORNIA FINANCIAL HOLDING COMPANY 
                                                    AND SUBSIDIARIES
                                            Consolidated Statements of Income
                                                       (Unaudited)

                                                For the three months ended:          For the nine months ended:
                                             Sept. 30, 1995    Sept. 30, 1994    Sept. 30, 1995    Sept. 30, 1994
                                             --------------    --------------    --------------    --------------

       <S>                                   <C>               <C>               <C>               <C>
       INTEREST INCOME
       Interest and fees on loans            $  18,548,677     $  16,337,328     $  53,663,189     $  49,137,380
       Interest and dividends on                 4,842,069         4,531,180        14,100,247        10,774,712
        investments                          -------------     -------------     -------------     -------------
       TOTAL INTEREST INCOME                 $  23,390,746     $  20,868,508     $  67,763,436     $  59,912,092
                                             -------------     -------------     -------------     -------------
       INTEREST EXPENSE
       Interest on savings                   $  12,283,277     $   9,780,059     $  35,980,585     $  27,537,536
       Interest on short-term borrowings         1,217,613           805,798         3,261,288         1,047,988
       Interest on long-term borrowings          1,925,780         1,892,762         5,496,326         5,513,674
                                             -------------     -------------     -------------     -------------
       TOTAL INTEREST EXPENSE                $  15,426,670     $  12,478,619     $  44,738,199     $  34,099,198
       Less: Interest capitalized                  (26,296)         (106,929)         (146,149)         (447,573)
                                             -------------     -------------     -------------     -------------
       NET INTEREST EXPENSE                  $  15,400,374     $  12,371,690     $  44,592,050     $  33,651,625
                                             -------------     -------------     -------------     -------------
       NET INTEREST INCOME                   $   7,990,372     $   8,496,818     $  23,171,386     $  26,260,467
                                             -------------     -------------     -------------     -------------
       Provision for loan losses                    67,300           740,000         1,633,500           781,000
                                             -------------     -------------     -------------     -------------
       NET INTEREST INCOME LESS PROVISION    $   7,923,072     $   7,756,818     $  21,537,886     $  25,479,467
         FOR LOAN LOSSES                     -------------     -------------     -------------     -------------
       OTHER INCOME
       Gain (loss) on sale of:
         Loans                               $      (3,154)    $      23,819     $      65,706     $      51,746
         Real estate held for investment
          or sale                                   32,289             3,681           (38,960)          541,501
         Trading and available for sale
          securities, net                          136,351           186,720           115,435          (251,525)
       Provision for losses on real
        estate                                    (180,000)       (2,550,000)       (3,725,324)       (4,035,000)
       Operating losses on foreclosed
        real estate                               (125,477)         (362,108)         (491,397)         (728,681)
       Loan servicing fee income                   376,690           339,608         1,122,413           917,630
       Fee income from operations                  971,391           904,533         2,832,075         2,715,885
       Writedown of other assets                  (260,924)         (410,000)         (816,413)         (470,000)
       Other loss, net                             (29,559)         (334,505)          (77,121)         (300,896)
                                             -------------     -------------     -------------       -----------
       TOTAL OTHER INCOME (LOSS)             $     917,607     $  (2,198,252)    $  (1,013,586)    $  (1,559,340)
                                             -------------     -------------     -------------     -------------
       NONINTEREST EXPENSE
       Compensation and related benefits     $   2,692,429     $   2,908,988     $   7,291,195     $   8,742,646
       Occupancy                                   815,375           787,591         2,330,366         2,249,559
       Advertising and promotion                   272,309           285,462           812,740           721,167
       Data processing                             506,415           482,653         1,576,053         1,435,121
       Insurance                                   702,066           627,255         2,044,183         1,997,429



                                        - 4 -
<PAGE>



                                          CALIFORNIA FINANCIAL HOLDING COMPANY 
                                                    AND SUBSIDIARIES
                                            Consolidated Statements of Income
                                                       (Unaudited)

                                                For the three months ended:          For the nine months ended:
                                             Sept. 30, 1995    Sept. 30, 1994    Sept. 30, 1995    Sept. 30, 1994
                                             --------------    --------------    --------------    --------------

       Other general & administrative
        expense                                    936,476           913,198         2,789,109         3,057,499
                                             -------------     -------------     -------------     -------------
       TOTAL GENERAL & ADMINISTRATIVE
        EXPENSE                              $   5,925,070     $   6,005,147     $  16,843,646     $  18,203,421
       Amortization of deposit base
        premium                                    290,389           191,552           871,166           871,166
                                             -------------     -------------     -------------     -------------
       TOTAL NONINTEREST EXPENSE             $   6,215,459     $   6,196,699     $  17,714,812     $  19,074,587
                                             -------------     -------------     -------------     -------------
       Income (loss) before taxes            $   2,625,220     $    (638,133)    $   2,809,488     $   4,845,540
       Income tax expense (benefit)              1,100,670          (758,299)        1,245,472         1,507,200
                                             -------------     -------------     -------------     -------------
       NET INCOME                            $   1,524,550     $     120,166     $   1,564,016     $   3,338,340
                                             =============     =============     =============     =============
       EARNINGS PER SHARE                    $        0.32     $        0.02     $        0.33     $        0.71
                                             =============     =============     =============     =============
       CASH DIVIDENDS PER SHARE              $        0.11     $        0.11     $        0.33     $        0.33
                                             =============     =============     =============     =============































                                        - 5 -
<PAGE>



                                          CALIFORNIA FINANCIAL HOLDING COMPANY
                                                    AND SUBSIDIARIES
                                          Consolidated Statements of Cash Flows
                                                       (Unaudited)
                                                                                 Sept. 30, 1995    Sept. 30, 1994
                                                                                 --------------    --------------

       <S>                                                                       <C>               <C>
       CASH FLOWS FROM OPERATING ACTIVITIES:
       Net Income                                                                $   1,564,016     $   3,338,340
       Adjustments to reconcile net income to net cash provided by operating
       activities:
         Amortization of:
           Loan premium                                                                   --             227,329
           Deferred loan fees                                                       (2,152,692)       (3,248,439)
           Discount amortization on mortgage-backed bonds                               85,456           434,757
           Deposit base premium                                                        871,166           871,166
         Net (gain) loss on sale of:
           Loans                                                                       (65,706)          (51,746)
           Real estate held for development or sale                                     38,960          (541,501)
           Securities                                                                 (115,435)          251,525
         Provision for losses on:
           Loans                                                                     1,633,500           781,000
           Real estate held for development or sale                                  3,725,324         4,035,000
         Depreciation and amortization                                               1,941,964         1,703,908
         Decrease in income taxes payable                                             (279,453)       (3,014,390)
         Net increase in accrued interest payable                                      161,487           621,157
         Net increase in accrued interest receivable                                  (736,130)         (306,687)
         Mortgage loans originated as held for sale                                (66,385,020)      (38,776,037)
         Proceeds from loans sold                                                   62,693,329        60,038,650
         Purchase of trading account securities                                           --         (38,468,442)
         Sale of trading account securities                                               --          41,186,243
         Other, net                                                                 (1,095,298)       (2,138,438)
                                                                                 -------------     -------------
       NET CASH PROVIDED BY OPERATING ACTIVITIES                                 $   1,885,468     $  26,943,395

       CASH FLOWS FROM INVESTING ACTIVITIES:
         Principal payments on loans                                             $ 139,725,900     $ 185,701,902
         Mortgage loans originated as held for investment                         (145,320,834)     (254,354,184)
         Purchase of loan participations                                              (559,629)      (15,587,894)
         Purchase of securities held for investment or sale                        (38,710,969)     (144,048,609)
         Maturity and payments of securities held for investment or sale            18,555,547        13,741,103
         Sale of securities available for sale                                      31,388,769         9,090,889
         Purchase of office property and equipment, net                             (1,443,255)       (3,606,729)
         Purchase of FHLB stock and FHLMC preferred stock                           (1,521,900)         (511,717)
         Investment in real estate held for development or sale                     (5,936,086)       (5,881,534)
         Proceeds from sales of real estate held for development or sale             8,639,825        10,365,291
         Proceeds from sale of foreclosed property                                   7,540,452         4,292,081
         Other, net                                                                  1,311,757        (1,807,770)
                                                                                 -------------     -------------
       NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                       $  13,669,577     $(202,607,171)

       CASH FLOWS FROM FINANCING ACTIVITIES:
         Net (decrease) increase in deposit accounts                             $ (12,699,107)    $  87,429,099
         Net (decrease) increase in checking accounts                               (4,654,205)        1,417,452
         Proceeds from FHLB advances                                                84,300,000       183,000,000
         Repayments of FHLB advances                                               (73,300,000)     (178,000,000)
         Securities sold under agreement to repurchase, net                         (5,171,000)       70,712,900

                                        - 6 -
<PAGE>



                                          CALIFORNIA FINANCIAL HOLDING COMPANY
                                                    AND SUBSIDIARIES
                                          Consolidated Statements of Cash Flows
                                                       (Unaudited)
                                                                                 Sept. 30, 1995    Sept. 30, 1994
                                                                                 --------------    --------------

         Payments on mortgage-backed bonds                                          (1,016,999)       (6,504,438)
         Bank and other borrowings, net                                                   --            (396,236)
         Proceeds from stock options exercised and dividends reinvested                292,726           342,364
         Dividends paid to shareholders                                             (1,531,504)       (1,520,054)
                                                                                 -------------     -------------
       NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                       $ (13,780,089)    $ 156,481,087
       Cash and cash equivalents at the beginning of the year                       18,837,508        39,609,316
                                                                                 -------------     -------------
       CASH AND CASH EQUIVALENTS AT SEPTEMBER 30                                 $  20,612,464     $  20,426,627
                                                                                 =============     =============
       Supplemental disclosures of cash flow information:
         Interest paid                                                           $  44,576,712     $  30,854,010
         Cash payments of income taxes                                               1,835,852         3,372,090
       Supplemental disclosures of noncash investing and financing activities:

         Additions to real estate acquired through foreclosure                       4,232,125         4,578,015
         Transfer of securities from trading to held to maturity portfolio                --           4,875,000
         Transfer of securities from trading to available for sale portfolio              --          10,014,089
         Transfer of securities from held to maturity to available for sale        223,766,211              --
     </TABLE>
































                                        - 7 -
<PAGE>






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


     FINANCIAL CONDITION

       California Financial Holding Company ("Company") was incorporated in
     1988 in the State of Delaware.  Its principal asset is Stockton Savings
     Bank ("Stockton Savings" or "Bank") a wholly-owned subsidiary which has
     been in existence since 1887.  The investment in Stockton Savings is the
     Company's primary asset with the only other asset consisting of $2.2
     million in cash, the result of dividends paid by the Bank to the Company. 
     Because the Bank represents the Company's major asset, discussion in this
     text will focus primarily on the activities of Stockton Savings.

       Total assets decreased by $12 million this year as a result of declines
     in the balance of securities and real estate.  In an effort to restructure
     the balance sheet, the Bank sold $31 million in fixed-rate mortgage-backed
     securities held as available for sale.  A $10 million reduction in the
     balance of real estate held was also responsible for the decline in
     assets.

       Loan origination volume for the first nine months of 1995 totalled
     $211.7 million compared to volume of $293.1 million for the first nine
     months of 1994. The decrease in refinance activity was the largest single
     factor affecting volume this year as it only represented $49 million of
     total originations this year compared to $109 million for the first nine
     months of 1994.  The increase in interest rates, beginning in the second
     quarter of 1994, was primarily responsible for the decline in originations
     due to refinancings.  Construction loan originations declined by $8
     million for the first nine months of this year compared to the previous
     year, also contributing to the decline in lending volume.  The continued
     weakness in the housing market is the primary cause of the reduced
     construction lending activity.  Loan volume is expected to remain fairly
     flat for the remainder of the year.

       A breakout of lending volume by type is shown below for the periods
     indicated:
                                                   Originations through
                                                       September 30
                                                      (in millions)
                                                     1995         1994
             Short-term construction loans        $  100.8      $ 109.0
             Permanent fixed-rate loans               41.9         69.8
             Permanent adjustable-rate loans          69.0        114.3
                                                  --------      -------
                     TOTAL ORIGINATIONS           $  211.7      $ 293.1
                                                  ========      =======





                                        - 8 -
<PAGE>






       In addition to the reduced permanent lending volume caused by a
     reduction in refinance activity, the declining rate environment in the
     current year led to increases in the origination of fixed-rate mortgage
     lending relative to adjustable.  Historically, adjustable-rate mortgages
     have been more popular in periods of rising interest rates, due
     particularly to attractive start rates offered on this product. 
     Alternatively, fixed-rate mortgages have been more popular in low rate
     environments as the borrower seeks to lock in a low fixed rate.  The Bank
     has traditionally retained most adjustable-rate product in portfolio and
     sold most permanent fixed-rate mortgages in an effort to limit exposure to
     the interest rate risk inherent in the balance sheet.  Loan sale activity
     of $63 million was roughly equivalent to the prior year volume of $60
     million.  Lower prepayment and refinance activity on loans in the current
     year have led to an increase in the balance of loans serviced for others
     to $538.9 million from $506.9 million a year ago. 

       The balance of real estate held for development or sale has declined by
     $6.7 million from a year ago and by $6.2 million in the current year. 
     Real estate held by the Bank at quarter-end consisted of $6.9 million in
     real estate owned through foreclosure and $8.5 million in real estate held
     for investment purposes.  The Bank is currently in the process of
     disposing of its real estate investments due to regulatory constraints. 
     As a result, the balance has declined steadily over the past several
     years.  Although real estate investment sales have totalled $8.6 million
     this year, the continued build-out of projects requiring the disbursement
     of additional funds has somewhat reduced the benefit of these sales.  
     Some of the decline in the balance of real estate investments this year
     has come about through the establishment of $2.9 million in additional
     loss reserves.  The balance of real estate investments should continue to
     decline through the end of 1995 as current sales contracts exist that
     anticipate the bulk sale of additional lots by year end.  The Bank will
     provide the financing on these sales at market terms.  It is anticipated
     that the Bank will be out of its real estate investments by mid-1996.

       Although the balance of real estate owned through the foreclosure
     process has remained fairly flat from a year ago, it has dropped by
     $3.6 million from year-end 1994.  Additions to real estate owned have
     totalled $4.2 million this year while sales have been roughly $7.5
     million.  The balance of real estate owned through the foreclosure process
     is anticipated to decline further as the level of troubled assets appears
     to have leveled out and is beginning to decline.  (See "Asset Quality" for
     further discussion.)  

       A breakdown of the Bank's portfolio of real estate held is shown below
     as of the dates indicated:








                                        - 9 -
<PAGE>








                                            Real Estate Held for Development
                                                        or Sale, net
                                                       (in thousands)
                                           
                                               12/31/94   9/30/95   9/30/94
         Real estate owned through foreclosure $  10,543 $   6,931 $   6,156
         Real estate held for development         14,691     8,527    15,184
                                               --------- --------- ---------
         TOTAL                                 $  25,234 $  15,458 $  21,340
                                               ========= ========= =========

       Effective January 1, 1994, the Bank implemented FAS No. 115, "Accounting
     for Certain Investments in Debt and Equity Securities".  FAS 115 requires
     that debt and equity securities be classified as either held to maturity,
     available for sale or held for trading.  The new pronouncement severely
     restricts the transfer of assets between classifications.  At September
     30, 1995, the Bank held $120.2 million in investment securities designated
     as available for sale and $138.5 million in mortgage-backed securities
     with a similar designation.  During the third quarter, the Bank made a
     decision to restructure its balance sheet by selling $31 million in fixed-
     rate mortgage-backed securities.  As a result, the Bank's entire
     investment portfolio, originally classified as held for investment, was
     redesignated as available for sale as of quarter-end.   At quarter-end,
     the investment portfolio was adjusted to market value with the after-tax
     net loss of $646,000 shown as a deduction from stockholders' equity.  In
     the past, the Bank designated certain investments under active management
     as held for trading purposes.  The Bank discontinued the active management
     of these funds in the second quarter of 1994, eliminating the designation
     of assets as held for trading purposes.  

       The $11.8 million decline in assets that occurred this year  
     corresponded with a $49.1 million decline in the balance of brokered
     deposits outstanding offset by $31.7 million of growth in retail deposits. 
     In addition, the level of borrowings outstanding decreased by $4.9
     million.  


     RESULTS OF OPERATIONS

       The Company earned $1.6 million or $.33 per share for the first nine
     months of 1995 compared to earnings of $3.3 million or $.71 per share for
     the first nine months of 1994.  The Company earned $1.5 million in the
     current quarter or $.32 per share.  Earnings for the third quarter of 1994
     totalled $120,000 or $.02 per share.

       Improved earnings in the current quarter over the second quarter can be
     attributed to increased margins, reduced losses taken on assets and steady
     noninterest expense.  Year to date earnings consist almost entirely of
     profits generated in the third quarter as earnings in the first quarter
     were eliminated by writedowns taken on real estate in the second quarter.

                                        - 10 -
<PAGE>






       The table below breaks out the components of the Bank's margin and
     spread for the periods indicated:
     <TABLE>
     <CAPTION>
                                   Average for the quarter      Average for the Nine      *Weighted average as of
                                       ended Sept. 30           Months ended Sept. 30             Sept. 30
                                   -----------------------      ---------------------      ----------------------

                                                    Basis-                      Basis-                     Basis-
                                                    point                       point                       point
                                   1995     1994    change    1995     1994     change    1995     1994    change
                                   ----     ----    ------    ----     ----     ------    ----     ----    ------
       <S>                         <C>      <C>      <C>      <C>      <C>      <C>       <C>      <C>     <C>    
       Yield on interest- 
        earning assets:
          Loan portfolio yield     8.00%    7.31%    0.69%    7.70%    7.55%     0.15%    7.72%    6.98%    0.74% 
          Yield on marketable
           investments             6.67     6.32     0.35     6.58     6.02      0.56     6.70     6.29     0.41  
          Weighted yield on
           assets                  7.68     7.07     0.61     7.44     7.22      0.22     7.48     6.80     0.68  

       Cost of funds:
          Cost of deposits         4.99%    4.10%    0.89%    4.82%    4.00%     0.82%    4.98%    4.16%    0.82% 
          FHLB advances &
           other borrowings        6.29     5.49     0.80     6.13     5.50      0.63     6.13     5.47     0.66  
          Weighted cost of
           funds                   5.20     4.30     0.90     5.02     4.17      0.85     5.17     4.38     0.79  

       Interest rate spread        2.48%    2.77%   (0.29)%   2.42%    3.05%    (0.63)%   2.32%    2.47%   (0.15)%
       Net yield on interest-
        earning assets             2.62%    2.88%   (0.26)%   2.54%    3.17%    (0.63)%   2.45%    2.55%   (0.10)%
     </TABLE>

     * Does not consider the effect of amortization of loan fees.

       Reduced net interest income caused by declining spreads in the current
     year and quarter was partially offset by increases in the average balance
     of interest earning assets over the same time frames as well as by an
     improvement in the level of interest-earning assets relative to interest-
     bearing liabilities.    

       Due to the nature and composition of the Bank's balance sheet, yields on
     assets tend to lag the general market, while the cost of interest-bearing
     liabilities are somewhat more responsive to current market interest rates. 
     As a result, spreads are positively impacted in periods of falling
     interest rates and negatively impacted in rising rate environments.  For
     the first half of 1995, asset yields remained fairly flat as the Bank
     continued to add lower-yielding adjustable mortgages to the earning asset
     portfolio.  At the same time, interest-bearing liabilities continued to
     steadily increase.  During the third quarter, spreads began to improve as



                                        - 11 -
<PAGE>






     a result of the declining rate environment.  Asset yields increased as
     adjustable mortgages repriced upwards while funding costs remained flat.

       Loan interest income increased by roughly $4.5 million for the first
     nine months of 1995 compared to 1994 and increased by $2.2 million for the
     quarter relative to 1994's third quarter.  A 15-basis point increase in
     the average yield on the loan portfolio in the current year, having a
     $949,000 positive impact on loan interest income, as well as a $61.3
     million increase in the average balance of loans outstanding, benefiting
     interest income by $3.6 million, led to the increase in income reported. 
     The average yield on the loan portfolio increased by 69-basis points this
     quarter compared to the third quarter of last year, benefiting interest
     income by $1.5 million.  In addition, the average balance of loans
     outstanding increased by $34.2 million for the quarter, adding $641,000 to
     interest income.  The upward repricing on 6-month adjustable rate
     mortgages indexed to COFI was primarily responsible for the improved yield
     this year compared to the previous year.

       The steady increase in COFI this year, combined with the increase in
     starting rates on new adjustable product added to the portfolio, added 8-
     10 basis points to the Bank's loan portfolio on a monthly basis this
     quarter.  The benefits from the continued upward repricing of this
     portfolio should continue throughout 1995 regardless of the direction of
     rates. The increase in the average balance of loans outstanding this year
     as well as this quarter relative to the third quarter of last year was the
     result of a conscious effort by the Bank to leverage equity in mid-1994.

       Investment interest has increased by $3.3 million during the current
     year relative to the first nine months of 1994.  A 56-basis point increase
     in portfolio yields led to increased earnings of $1.1 million and an
     increase in the average balance of investments outstanding of $47.5
     million benefited earnings by an additional $2.3 million.  Investment
     interest increased by $311,000 this quarter compared to the third quarter
     of 1994, again due primarily to the 35-basis point increase in the average
     yield on the portfolio.  The Bank held a significantly larger portfolio of
     overnight funds during the first half of 1994 which were replaced with
     higher-yielding investments during the latter half of last year,
     accounting for much of the increase in yields.

       The Bank's cost of funds has continued to increase in 1995 in response
     to the increase in rates that began in March of 1994.  The interest costs
     associated with deposits are up this year by $8.4 million from 1994
     levels, due primarily to an 82-basis point increase in average deposit
     costs, increasing expense by $6.0 million, as well as to a $77.3 million
     increase in the average balance of deposits, increasing expense by $2.4
     million.  Deposit costs are also up by $2.5 million this quarter compared
     to the third quarter of 1994, $2.2 million due to an 89-basis point
     increase in average deposit costs and $325,000 due to a $29.9 million
     increase in the average balance of deposits outstanding.   Roughly 30% or
     $22 million of the increase in the average balance of deposits outstanding
     relates to brokered funds.  During the second half of 1994, the Bank
     undertook a growth strategy which was partially funded through the use of

                                        - 12 -
<PAGE>






     brokered deposits.  The remaining growth in deposits occurred through
     retail operations.  Deposit costs flattened out considerably in the third
     quarter and are expected to decline in the fourth quarter, corresponding
     to the roll of a considerable balance of high-costing accounts.

       The Bank's deposit costs include the negative impact of interest rate
     swaps.  The swaps are structured for the Bank to pay a fixed amount of
     interest on a notional principal amount and to receive a variable amount
     of interest indexed to COFI on the same notional amount.  This structure
     is designed to act as a hedge in periods of rising interest rates.  As a
     result, as the general interest rate environment increases, the Bank
     receives a benefit from the swaps while the reverse holds true in periods
     of falling rates.  It should be noted that since the swaps are tied to
     COFI, which is a lagging index, the impact of any changes in the index
     will lag the general interest rate market, thereby providing a lagging
     benefit in periods of rising interest rates with the reverse holding true
     in falling rate environments.  The swaps added $1.1 million to interest
     expense in 1995 compared to $2.5 million for the first nine months of
     1994.  Swap costs of $279,000 were incurred for the third quarter of this
     year compared to $813,000 for the third quarter of 1994.  The decline in
     the impact of interest rate swaps on deposit expense this year is due to
     the steady increase in COFI this year as well as to the maturity in
     February of a $25 million high-costing swap.  It is anticipated that,
     although the swaps will continue to have a negative impact on deposit
     costs in the future (as COFI appears to have peaked), the impact will be
     reduced due to the scheduled maturity of an additional $25 million in
     swaps later this year.

       Interest costs on borrowings increased by $2.2 million this year
     compared to the first nine months of 1994 and increased by $445,000 this
     quarter relative to the third quarter of 1994.  An increase in the average
     cost of borrowings of 63-basis points was responsible for $556,000 of the
     increase on a year to date basis and an 80-basis point increase in the
     cost of borrowings in the third quarter relative to the third quarter last
     year added $291,000 to borrowing costs this quarter.  Additionally, a
     $31.6 million increase in the average balance of borrowings outstanding on
     a year to date basis added $1.6 million to interest expense in the current
     year compared to the first nine months of 1994.  Average borrowings
     increased by $3.3 million this quarter compared to the third quarter of
     1994, adding just $56,000 to borrowing costs in the current quarterly
     period.   The average borrowing balances increased on a year to date basis
     due to the growth strategy discussed above and consisted primarily of
     reverse repurchase agreements.  The increase in the average cost of
     borrowings this year related primarily to the increase in the rates on the
     Bank's COFI-based advances as well as to the addition in the current year
     of higher-costing fixed-rate advances.   
         
       Spreads began to increase in the third quarter and are predicted to
     continue to widen as the current declining rate environment has stabilized
     funding costs while asset yields continue to reprice upwards in relation
     to COFI.


                                        - 13 -
<PAGE>






       The Bank's average margin relative to spread began increasing in the
     current quarter.  The Bank's success in reducing its level of
     nonperforming assets over the past six months as well as the increased
     sell-off of real estate held for development purposes has provided the
     improvement.  The continued sell-off of real estate investments in the
     fourth quarter should lead to further improvement.

       Loan loss provisions established during the year totaled  $1.6 million. 
     Roughly $260,000 of the total reserves established were general in nature
     with the remainder specific, relating primarily to a construction loan
     made to facilitate the sale of real estate investments in a market area
     that is currently suffering from a rapid decline in value. Minimal
     reserves were established in the current quarter. 

       Noninterest income of $918,000 was reported for the quarter compared to
     noninterest losses of $2.2 million reported in the third quarter of 1994. 
     On a current year to date basis, noninterest losses totalled $1.0 million
     with noninterest losses of $1.6 million recorded in 1994.  Losses of $3.5
     million taken in the second quarter of 1995 on real estate held for
     development or sale purposes were responsible for most of the noninterest
     losses taken during the current year.  Writedowns of $476,000 taken in the
     first quarter on FHA Title I securities added to the level of losses
     incurred on a year to date basis.  Fee income, consisting primarily of
     servicing spreads on sold loans as well as fees earned on deposit and loan
     products, increased by 8.9% this year due to increased efforts by the Bank
     to market fee-generating products. 

       Noninterest income, with the exception of fee and servicing income,
     which have proven to be steady, consistent sources of revenue for the
     Bank, is expected to remain minimal for the remainder of the year due to
     the lack of margins on the sale of real estate and loans.  

       Noninterest expense has decreased by $1.4 million this year compared to
     the first nine months of 1994.  On a quarterly basis, expenses are down
     $80,000 from the third quarter of 1994.  The decline in expenses on a year
     to date basis is primarily due to a $1.5 million reversal of pension
     expense in the second quarter of 1995 to reflect the Bank's change from a
     defined benefit pension plan to a 401(k) profit sharing plan for its
     employees.  The change has resulted in somewhat reduced benefit expenses
     in the third quarter of 1995.  Excluding the one time benefit received on
     pension expense, noninterest expense on a year to date basis increased by
     only a minimal amount.  Although deferred salary expense (a reduction from
     compensation expense) has declined this year due to reduced loan
     origination volume, it has been more than offset by declines in other
     compensation expenses.

       The effective tax rate for the first nine months of 1995 was 44.3%
     compared to a rate of 31.1% for the first nine months of 1994.  The high
     rate this year is due to the low level of income in the current year
     combined with a flat tax paid to the state of Delaware.  The effective
     rate for 1994 included a $500,000 one-time tax benefit taken in the third


                                        - 14 -
<PAGE>






     quarter which was the result of a settlement with the IRS regarding the
     tax treatment for the amortization of core deposit intangibles.

     ASSET QUALITY

       The Bank continued to improve its level of nonperforming assets in the
     current quarter, due largely to a decline in 90 day delinquent loans.  
     Sales of foreclosed property in the current year totalled $7.5 million
     compared to sales of $4.3 million through the first nine months of 1994.   


       Detail on nonperforming assets is shown in the table below for the dates
     indicated:
                                                  Nonperforming Assets
                                                      September 30
                                                     (in thousands)
                                                    1995            1994
       Loans 90 days or more delinquent        $   4,994         $  9,560
       Troubled debt restructurings                7,551           17,957
       Real estate owned through foreclosure       6,931            7,273
                                               ---------         --------
       Net nonperforming assets                $  19,476         $ 34,790
                                               =========         ========
       Nonperforming assets/Total assets            1.54%        2.76%

       As indicated above, the level of nonperforming assets has decreased by
     roughly $15.3 million from the prior year. Non-performing assets as a
     percentage of total assets was 1.54% at quarter end compared to 2.76% a
     year ago.

       Nonperforming assets as of September 30, 1995 consisted of the following
     asset types:
                                                  Nonperforming Assets by Type
                                                         (in thousands)
                                                         Sept. 30, 1995
       Commercial and multi-family real estate          $   3,588
       Construction                                         3,890
       1-4 family homes                                     7,609
       Land                                                 4,389
                                                          -------
                                                          $19,476
                                                          =======
       By policy, the Bank does not accrue interest on loans that are 90 days
     or more delinquent.  Interest on troubled debt restructurings is recorded
     on a cash basis only.  Foregone interest on nonperforming loans through
     the first nine months of 1995 totaled $575,000.  Life-to-date unrecorded
     interest on these same loans totaled $2.5 million through quarter-end.  A
     total of $394,000 in interest income has been recorded on these loans so
     far this year.




                                        - 15 -
<PAGE>






       Troubled debt restructurings represent loans that have been modified,
     usually as a result of financial difficulties experienced by the borrower,
     to terms that are more favorable than what would normally be offered. 
     These modifications usually involve either a reduction in rates to below
     market, capitalization of interest due or the requirement that monthly
     payments equate to the level of cashflow on the underlying property.  The
     Bank's largest restructured assets are $4.7 million on two construction
     projects where loans were made to facilitate the sale of real estate
     investments.  The underlying properties have experienced a significant
     decline in value and the borrowers have limited financial resources. 
     Specific loan loss reserves on these two assets total $1.0 million.  A
     majority of the restructured speculative development loans are in some
     stage of delinquency.  At quarter-end, $3.6 million in restructured debt
     was more than 90 days delinquent.  The restructured debt total includes
     $1.1 million in interest that has been capitalized but has not been
     recognized in income.  An additional $362,000 in interest has been accrued
     at quarter-end but not included in income.

       As of quarter end, the Bank had roughly $2.2 million in potential
     problem loans which are currently in a performing status.  There is some
     doubt as to whether these loans will continue in performing status,
     however.  All potential problem loans have been classified for regulatory
     purposes.
       
       The Bank's level of general loan loss reserves has declined since a year
     ago.  The level of general loss reserves outstanding at any point in time
     is largely dependent on the amount and type of loans outstanding, level of
     classified and nonperforming loans and historical loss experience.  An
     excess of general loss reserves on loans was identified last year which
     was transferred to general reserves on real estate.  The general reserves
     on real estate have been utilized as specific reserves on certain
     properties or have been taken as writedowns.

       The following table identifies the Bank's general loan loss reserve at
     September 30, 1995 by loan type:
                                           Reserves       Percent of loans
                                        (in thousands)    in each category
                                          at 9/30/95       to total loans
       1-4 family permanent loans            $  1,888           76.5
       Multi-family loans                       1,011            3.9
       Commercial real estate loans             1,265            5.9
       Land, construction and                   3,108           13.7
       development loans                     --------         ------
       TOTAL                                 $  7,272          100.0%
                                             ========         ======
      
       Although total general loan loss reserves have declined by $878,000 from
     a year ago, the level of general loss reserves to nonperforming assets has
     increased from 26.64% to 37.34%.




                                        - 16 -
<PAGE>






       There were no general loss reserves on real estate owned through
     foreclosure or for investment purposes at September 30, 1995.   General
     loss reserves on real estate owned totalled $1.1 million at September 30,
     1994 and general reserves on real estate held for investment purposes
     totalled $700,000.  

       Activity in the allowances for both loans and real estate for the first
     nine months of 1995 is summarized below:

                                            Loss Reserves
                                            (in thousands)
                                        Loans       Real Estate
       Balance, December 31, 1994    $   7,726       $   6,851
       Provision for losses              1,634           3,725
       Charge-offs                        (407)         (4,183)
       Recoveries                           --              --
                                     ---------       ---------
       Balance, September 30, 1995   $   8,952       $   6,393
                                     =========      ==========

       The Bank is required by regulation to classify and monitor all assets
     exhibiting a defined weakness.  The Bank's level of classified assets is
     summarized in the following table for the dates indicated:
                                  Classified Assets
                                    (in thousands)
                                        as of
                          12/31/94    9/30/95     9/30/94
       Substandard        $ 56,844   $ 43,987    $ 55,900
       Doubtful                 --         --         150
       Loss                  6,237     11,159       6,140
                          --------   --------    --------
       TOTAL              $ 63,081   $ 55,146    $ 62,190
                          ========   ========    ========

       The level of total classified assets declined by $7.0 million from the
     previous year due primarily to the improved performance of a $5 million
     troubled debt restructuring and the successful sale of foreclosed real
     estate.  The level of assets classified as "loss" increased by $5.0
     million as a result of the significant reserves established on real estate
     investments in the second quarter of this year.  Alternatively, the level
     of "substandard" assets declined by $11.9 million due to the above-
     mentioned reasons.  

       It is anticipated that the level of classified assets will continue to
     decline due to the projected liquidation of the Bank's portfolio of real
     estate held for investment purposes.







                                        - 17 -
<PAGE>






     INTEREST RATE SENSITIVITY

       The Bank's balance sheet has historically been exposed to some level of
     interest rate risk in a rising rate environment as most of its assets were
     in the form of long-term, fixed-rate mortgages which were funded with
     short-term, frequently repricing deposits.  During the past several years,
     a concerted effort has been made to portfolio more adjustable-rate loans,
     selling off fixed-rate product.  This effort has helped in reducing
     interest rate exposure in rising rate environments although the benefits
     are somewhat mitigated by the lagging effects of the index used on the
     adjustable product as well as by the six month average repricing period
     and periodic rate caps inherent in these loans.  The negative impact of
     the lagging characteristics of these assets on net interest income in a
     rising rate environment is not as significant in a gradually rising rate
     environment as it is in a period when rates accelerated as rapidly as they
     did in 1994.

       The Bank made a conscious decision to grow assets during 1994,
     purchasing roughly $84.5 million in 15-year, fixed-rate, mortgage-backed
     securities and $15.9 million in 15-year, fixed-rate mortgages in the first
     and second quarters of the year.  The growth was taken on as a result of a
     desire by Bank management to leverage excess regulatory capital, after
     experiencing virtually no growth over the prior four years due to capital
     constraints related to investments in real estate.  The growth was funded
     with a combination of long-term, fixed-rate borrowings and short-term
     reverse repurchase agreements.  The growth strategy has increased the
     interest rate risk inherent in the balance sheet.  Management felt that
     the assumption of additional risk was warranted given the Bank's balance
     sheet structure prior to the decision to grow assets and management's
     long-term view regarding the future direction of interest rates.  

       The decline in net interest income over the past year, in spite of
     strong asset growth, is indicative of the Bank's continued exposure to
     rising interest rates.  As a result, additional balance sheet
     restructuring occurred in the third quarter.  More specifically, the Bank
     sold $31 million of the fixed-rate mortgage-backed securities during the
     quarter, using the cash to repay short-term borrowings.  The securities
     were originally designated as held for investment purposes and the sale
     "tainted" the Bank's remaining investment portfolio, requiring the
     reclassification of the portfolio to available for sale.  At September 30,
     1995, $258.7 million in investments were designated as available for sale,
     requiring a $646,000 deduction from capital to reflect the after-tax
     unrealized loss on the mark-to-market of the available for sale investment
     portfolio.

       It is anticipated that further restructuring will occur in the fourth
     quarter through the sale of additional fixed-rate mortgage-backed
     securities, replacement of short-term borrowings with long-term fixed-rate
     advances and the replacement of fixed- rate assets sold with more rate-
     sensitive products.



                                        - 18 -
<PAGE>






     LIQUIDITY AND CAPITAL RESOURCES

       The Bank is required by regulation to maintain cash and certain short-
     term eligible investments equal to 5% of the average daily balance of net
     withdrawable accounts and certain short-term borrowings during the
     preceding calendar month.  At September 30, 1995, this liquidity ratio was
     5.60%.

       The Bank generally has the ability to originate more loans than it can
     portfolio and has relied heavily on loan prepayment and sale activity to
     maintain desired growth levels.  Asset growth is generally funded through
     the Bank's internal retail branch system and, on occasion, through the
     acquisition of branches from other depository institutions within the
     Bank's market area.  Growth is also funded to a lesser degree with
     advances from the Federal Home Loan Bank and through the use of short-term
     reverse repurchase agreements and brokered deposits.

       As of September 30, 1995, the Bank had approximately $155.3 million in
     collateral still available for short-term reverse repurchase agreements. 
     These agreements are generally utilized on a short-term basis to meet
     daily operating needs.  However, beginning in the second quarter of last
     year, Bank management initiated a balance sheet growth strategy
     incorporating the use of these short-term borrowings on a longer-term
     basis.  For a further discussion of this strategy, see "Interest Rate
     Sensitivity".  Additional short-term cash needs can also be met through
     the use of a line of credit with the FHLB.  At quarter-end,  approximately
     $196.8 million was still available through this borrowing source.  


     REGULATION

       Under the Financial Institutions Reform, Recovery and Enforcement Act
     signed into law on August 9, 1989, financial institutions were required to
     meet three regulatory capital requirements:  a tangible capital
     requirement, a core capital requirement and a risk-based capital
     requirement.

       Tangible capital is defined as common stock, retained earnings,
     noncumulative preferred stock less intangibles and a specified phase-out
     of certain real estate and equity investments and must equal 1.5% of
     tangible assets.  Core capital is defined as tangible capital plus certain
     intangibles and must equal 3% of tangible assets.  Risk-based capital is
     core capital plus general loan loss reserves and must equal 8% of risk-
     weighted assets.

       The Bank's regulatory capital position at September 30, 1995 is
     identified in the following schedule:






                                        - 19 -
<PAGE>






                                               Regulatory capital position
                                                      (in thousands)
                                            Tangible       Core      Risk-based
       Book capital                       $ 81,814      $ 81,814      $ 81,814
       Real estate investment deduction     (5,234)       (5,234)       (5,234)
       Intangible deduction                 (1,349)       (1,349)       (1,349)
       General loan loss reserves               --            --         7,272
       Miscellaneous                           636           636           294
                                          --------      --------      --------
         Net regulatory capital           $ 75,867      $ 75,867      $ 82,797
       Minimum required                     18,965        37,931        55,189
                                          --------      --------      --------
         Excess over minimum              $ 56,902      $ 37,936      $ 27,608
                                          ========      ========      ========
       Excess over "well capitalized"     $ 12,649         N/A        $ 13,811
                                          ========                    ========
       Capital Ratio                          6.00%         6.00%        12.00%

       The Bank is currently considered "well capitalized" by regulatory
     definition which has a positive impact on the level of deposit insurance
     premiums assessed and provides the Bank additional operating flexibility. 
     There are several adjustments made to the level of capital reported on a
     financial basis as compared to capital reported on a regulatory basis. 
     Certain intangible assets such as core deposit premiums are excluded from
     regulatory capital.  In addition, any investments in nonincludable
     subsidiaries are also deducted from capital, subject to a phase-out rule. 
     Any adjustments made to capital due to the mark to market of the available
     for sale portfolio are also excluded from capital.  Regulation also limits
     the amount of general loan loss reserves includable in risk-based capital
     to 1.25% of risk-weighted assets.  At September 30, 1995, the Bank had not
     hit this maximum and as a result, the full amount of general loan loss
     reserves was included in risk-based capital.  

       The well capitalized designation requires that an institution's risk-
     based capital to risk-weighted assets exceeds 10%, its Tier 1 risk-based
     capital ratio (which is similar to the risk-based ratio but excludes the
     inclusion of general loan loss reserves) must exceed 6% of risk-weighted
     assets and its core capital ratio must exceed 5% of total adjusted assets. 
     At September 30, 1995, the Bank's risk-based capital, Tier 1 risk-based
     and core ratios were 12.00%, 11.00% and 6.00%, respectively.

       Currently, as part of a phase-out schedule, 60% of loans to and
     investments in subsidiaries invested in real estate development is
     deducted from regulatory capital.  At September 30, 1995, the Bank's fully
     phased-in, risk-based capital ratio (deducting all $8.7 million in
     subsidiary investments) was 11.57%, $24.1 million above the 8% minimum
     requirement and $10.3 million above the 10% requirement to be considered
     "well capitalized". Based on the above and the Bank's current strategy to
     accelerate the sale of real estate held for investment purposes, it is not
     anticipated that the Bank will have any problems in meeting future
     scheduled phase-out requirements, the next one to take effect on July 1,


                                        - 20 -
<PAGE>






     1996, increasing the phase-out percentage from the current 60% to 100% of
     loans to and investments in subsidiaries.

       The Office of Thrift Supervision ("OTS") has issued a rulemaking that
     was initially to take effect on September 30, 1994 which was designed to
     ensure that a savings association's risk-based capital requirement is
     based, in part, on the level of its exposure to interest rate risk. This
     has been accomplished by adding an interest rate risk component to the
     risk-based capital requirement. However, implementation of the rule has
     been delayed several times by the OTS and it is uncertain when the rule
     will become effective.  The rule would require that a savings institution
     must deduct from its risk-based capital an amount equal to 50% of the
     decline in the market value of its portfolio equity in excess of 2% of the
     current market value of its assets that would result from either a 200-
     basis point instantaneous increase or decrease in rates, whichever is
     greater.  Based on the most recent calculation performed by OTS on the
     Bank's interest rate risk position,  there is no excess change in the
     market value of portfolio equity over 2% of the market value of assets. 

       The Treasury Department, the OTS, and the Federal Deposit Insurance
     Corporation have all recommended to Congress that institutions with SAIF-
     assessable deposits pay a special assessment in an amount sufficient to
     increase the SAIF reserve ratio to 1.25 percent.  It is anticipated that
     the issues raised by this recommendation will be addressed in certain
     legislation, known as the Budget Reconciliation Bill, now being considered
     in the Congress and that such legislation will be enacted before the end
     of this calendar year.  Representatives from the Senate and House Banking
     Committees have agreed on a proposal under which it is anticipated that,
     in order to recapitalize SAIF, SAIF-insured institutions such as the Bank,
     will pay, on January 2, 1996 or on another date prescribed by the FDIC, a
     one-time special assessment of approximately 80-basis points on all SAIF
     insured deposits held by them as of March 31, 1995.  It is anticipated
     that this proposal will be added to the Budget Reconciliation Bill.  This
     assessment would approximate $8.1 million for the Bank, assuming the
     foregoing assessment rate and measurement date.  SAIF-insured institutions
     would have the option of paying the assessment on or prior to December 31,
     1995.  Until the legislative consideration of this proposal is more
     advanced, the Bank will not determine definitely whether to treat any such
     one-time assessment as a 1995 or a 1996 expense.  Under a bill reported by
     the House Ways and Means Committee, the amount of such special assessment
     would be fully deductible for federal corporate income tax purposes by
     SAIF-insured institutions as an ordinary and necessary business expense. 
     If the above-described legislation is enacted, it is anticipated to have a
     significant negative impact on the Bank's earnings.

       If the proposal agreed upon between the representatives from the Senate
     and House Banking Committees becomes law, and depending on subsequent FDIC
     decisions, the average SAIF insurance premium rate for 1996 is anticipated
     to be approximately 5-basis points and the average BIF insurance premium
     rate for 1996 is anticipated to be lower and may even be zero.  If such a
     lower premium rate were payable by the Bank, this would have a positive
     effect on the Bank's net income in 1996.

                                        - 21 -
<PAGE>






       If the proposal agreed upon between the representatives from the Senate
     and House Banking Committees becomes law, BIF and SAIF would be merged on
     January 1, 1998, but only if, at that time, no depository institution that
     is insured by the FDIC is a savings institution.  In addition, pursuant to
     a bill reported by the House Ways and Means Committee that may be added to
     the Budget Reconciliation Bill, savings institutions such as the Bank
     would receive, subject to a number of conditions, a "fresh start" with
     respect to the potential recapture of certain tax bad debt reserves.  This
     may affect the Bank's competitive environment by facilitating
     consolidation between the banking and thrift sectors.

       No assurance can be given as to the ultimate resolution of the matters
     described in the previous four paragraphs.  However, even after the
     payment of a special assessment of the magnitude described above, the Bank
     would still be classifed as well capitalized under the relevant total
     risk-based capital, Tier 1 capital and core capital tests based on its
     regulatory capital position at quarter-end.




































                                        - 22 -
<PAGE>







                             PART II - OTHER INFORMATION


     ITEM 1.  LEGAL PROCEEDINGS

           NONE


     ITEM 2.  CHANGES IN SECURITIES

           NONE


     ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

           NONE


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

           NONE


     ITEM 5.  OTHER INFORMATION

           NONE


     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  See the Exhibit Index on Page 25 of the Form 10-Q.

     (b)  There were no reports filed on Form 8-K during the quarter ended
     September 30, 1995.


















                                        - 23 -
<PAGE>






                                     SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) of the Securities
     Exchange Act of 1934, the registrant has duly caused this report to be
     signed on its behalf by the undersigned, thereunto duly authorized.


                          CALIFORNIA FINANCIAL HOLDING COMPANY
                          ____________________________________
                                       Registrant             


     DATE:  November 10, 1995  BY: /s/   ROBERT V. KAVANAUGH
                              ________________________________
                               ROBERT V. KAVANAUGH       
                               President, Chief Operating Officer  




     DATE:  November 10, 1995  BY: /s/   JANE R. BUTTERFIELD       
                              ________________________________
                               JANE R. BUTTERFIELD       
                               Senior Vice President, Treasurer,
                                Chief Financial Officer
                                 (Principal Financial Officer and
                                 Principal Accounting Officer)


























                                        - 24 -
<PAGE>







     ITEM 6(a) List of Exhibits
     __________________________



                                    EXHIBIT INDEX



                                                   Location of
     Exhibit                                   Exhibit in Sequential
     Number      Description of Document         Numbering System
     _______     _______________________       _____________________



      27         Financial Data Schedule



































                                        - 25 -
<PAGE>