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 MARCH 31, 1997

       [  ]    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 MARCH 31, 1997

  Common Stock, $.01 par value                 4,740,914 shares




<PAGE>




                          Part 1. FINANCIAL INFORMATION
                      CALIFORNIA FINANCIAL HOLDING COMPANY
                                AND SUBSIDIARIES
                       Consolidated Statement of Condition
                                   (unaudited)
<TABLE>
<CAPTION>
                                                           March 31, 1997       Dec. 31, 1996       March 31, 1996
                                                           --------------      --------------       --------------
<S>                                                        <C>                 <C>                  <C>           
Cash, including non-interest-bearing deposits              $    7,868,817      $   14,280,370       $    9,245,266
Interest-bearing deposits                                       3,836,011           2,697,244            8,266,395

Investments securities:
  Securities available for sale, at market                    186,322,617         201,059,141          170,932,719
Mortgage-Backed Securities:
  Available for sale, at market                                98,800,471         103,007,268          103,834,619

 Loans held for sale, at lower of cost or market                7,280,839           7,057,252            6,863,063
Loans receivable, net of loss reserves of
 $7,448,119, $7,276,710 and $8,178,214 respectively           996,460,729         983,900,530          959,972,054
Less: loans in process                                         39,989,909          31,549,075           37,654,694
                                                           --------------      --------------       --------------
Net loans receivable                                       $  956,470,820      $  952,351,455       $  922,317,360
                                                           --------------      --------------       --------------
Real estate held for development or sale,
 net of loss reserves of $2,190,589, $2,310,488 and
 $4,950,658 respectively                                   $    5,713,558      $    6,982,976       $   10,223,507
Office property and equipment                                  19,832,399          20,261,053           20,537,533
Federal Home Loan Bank stock                                   13,903,300          13,682,300           10,529,900
Accrued interest and dividends receivable                       7,650,363           7,117,645            6,416,040
Deposit base premium                                              386,883             424,515              768,056
Mortgage servicing rights                                         996,978             829,621              255,363
Other assets, net                                               5,988,563           7,628,460            7,378,155
                                                           --------------      --------------       --------------
TOTAL ASSETS                                               $1,315,051,619      $1,337,379,300       $1,277,567,976
                                                           ==============      ==============       ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Savings and checking accounts                              $  973,128,319      $  957,834,294       $  962,928,193
Advances from FHLB                                            231,000,000         263,500,000          177,500,000
Collateralized mortgage obligation                                  --                   --              5,985,373
Securities sold under agreements to repurchase                 12,293,000          19,550,000           37,506,000
Accrued interest payable                                        2,004,338           1,849,992            2,124,787
Other liabilities, net                                          5,088,566           4,768,262            5,255,991
                                                           --------------      --------------       --------------
TOTAL LIABILITIES                                          $1,223,514,223      $1,247,502,548       $1,191,300,344

Stockholders' Equity
Serial preferred stock, 4,000,000 shares
 authorized, no shares outstanding                                   -                   -                    -
Capital stock, 12,000,000 shares authorized
 4,765,793, 4,740,914 and 4,677,615 shares
 outstanding                                               $       47,627      $       47,409       $       46,776
Paid in capital in excess of par                               27,804,520          27,490,907           26,718,705
Unrealized (loss) gain on securities available for
 sale, net of tax                                              (1,322,267)           (504,200)            (541,095)
Retained earnings, substantially restricted                    65,007,516          62,842,636           60,043,246
                                                           --------------      --------------       --------------
TOTAL STOCKHOLDERS' EQUITY                                 $   91,537,396      $   89,876,752       $   86,267,632
                                                           --------------      --------------       --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $1,315,051,619      $1,337,379,300       $1,277,567,976
                                                           ==============      ==============       ==============


</TABLE>

                                       2
<PAGE>




                      CALIFORNIA FINANCIAL HOLDING COMPANY
                                AND SUBSIDIARIES
                        Consolidated Statements of Income
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                          For the three months ended:
                                                                  March 31, 1997            March 31, 1996
                                                                  --------------            --------------
<S>                                                               <C>                       <C>          
INTEREST INCOME
Interest and fees on loans                                        $  20,005,870             $  18,948,219
Interest and dividends on investments                                 5,195,321                 4,628,406
                                                                  -------------             -------------
TOTAL INTEREST INCOME                                             $  25,201,191             $  23,576,625
                                                                  -------------             -------------
INTEREST EXPENSE
Interest on savings                                               $  10,918,845             $  11,397,806
Interest on short-term borrowings                                       210,445                   427,753
Interest on long-term borrowings                                      3,612,984                 2,526,682
                                                                  -------------             -------------
TOTAL INTEREST EXPENSE                                            $  14,742,274             $  14,352,241
Less: interest capitalized                                                 --                      (8,297)
                                                                  -------------             -------------
NET INTEREST EXPENSE                                              $  14,742,274             $  14,343,944
                                                                  -------------             -------------
NET INTEREST INCOME                                               $  10,458,917             $   9,232,681
                                                                  -------------             -------------
Provision for loan losses                                               350,000                   265,000
                                                                  -------------             -------------
NET INTEREST INCOME LESS PROVISION FOR LOAN LOSSES                $  10,108,917             $   8,967,681
                                                                  -------------             -------------
OTHER INCOME
Gain (loss) on sale of:
  Loans                                                           $     374,948             $     421,426
  Real estate held for investment or sale                                27,058                    39,609
  Provisions for losses on real estate                                  (89,000)                  (35,000)
  Available for sale securities, net                                    129,899                   464,233
Operating losses on foreclosed real estate                             (102,407)                 (181,676)
Loan servicing fee income                                               377,503                   309,316
Other fee income                                                      1,189,210                 1,036,345
Write down of other assets                                              (64,969)                  (40,224)
Other income, net                                                       (85,556)                  (20,493)
                                                                  -------------             -------------
TOTAL OTHER INCOME (LOSS)                                         $   1,756,686             $   1,993,536
                                                                  -------------             -------------
NON-INTEREST EXPENSE
Compensation and other related benefits                           $   3,470,271             $   3,027,033
Occupancy                                                               724,634                   712,842
Advertising and promotion                                               208,269                   210,962
Data processing                                                         555,654                   570,170
Insurance                                                               336,712                   780,235
SAIF insurance recapitalization                                         660,556                      --
Other general & administrative expense                                1,147,852                   986,244
                                                                  -------------             -------------
Total general & administrative expense                            $   7,103,948             $   6,287,486
Amortization of deposit base premium                                     37,632                   290,389
                                                                  -------------             -------------
TOTAL NON-INTEREST EXPENSE                                        $   7,141,580             $   6,577,875
                                                                  -------------             -------------
Income before taxes                                               $   4,724,023             $   4,383,342
Income tax expense                                                    2,036,492                 1,830,772
                                                                  -------------             -------------
NET INCOME                                                        $   2,687,531             $   2,552,570
                                                                  =============             =============
EARNINGS PER SHARE                                                $        0.55             $        0.54
                                                                  =============             =============
CASH DIVIDENDS PER SHARE                                          $        0.11             $        0.11
                                                                  =============             =============
</TABLE>

                                       3
<PAGE>
                      CALIFORNIA FINANCIAL HOLDING COMPANY
                                AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                     For the three months ended:
                                                                              March 31, 1997     March 31, 1996
                                                                              --------------     --------------
<S>                                                                           <C>                <C>          
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                    $   2,687,531      $   2,552,570
Adjustments to reconcile net income to net cash provided by operating
 activities:
  Amortization of:
    Mortgage servicing rights                                                         7,174             80,101
    Deferred loan fees                                                             (682,785)          (635,173)
    Deposit base premium                                                             37,632            290,389
  Net gain on sale of:
    Loans                                                                          (374,948)          (421,426)
    Real estate held for development or sale                                        (27,058)           (39,609)
  Net gain on securities activities                                                (129,899)          (464,233)
  Provision for losses on:
    Loans                                                                           350,000            265,000
    Real estate held for development or sale                                         89,000             35,000
  Depreciation and amortization                                                     600,412            654,634
 (Decrease) increase in income taxes payable                                      1,439,152             (9,851)
  Net increase in accrued interest payable                                          154,346            943,719
  Net increase in accrued interest receivable                                      (532,718)          (323,705)
  Mortgage loans originated as held for sale                                    (17,301,976)       (18,790,852)
  Proceeds from loans sold                                                       17,453,337         25,502,479
  Other, net                                                                         82,326         (2,178,030)
                                                                              -------------      -------------
                                                                              $   3,851,526      $   7,461,013
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
  Principal payments on loans                                                 $  57,085,359      $  51,241,875
  Mortgage loans originated as held for investment                              (62,328,338)       (59,785,856)
  Purchase of loan participations                                                   (95,370)        (6,722,316)
  Purchase of securities available for sale                                            --          (48,093,325)
  Maturity and payments of securities held for investment                         6,388,601          7,467,929
  Purchase of securities available for sale                                      11,866,552         26,088,803
  Purchase of office property and equipment, net                                   (171,758)          (422,309)
  Purchase of FHLB stock                                                           (221,000)          (134,700)
  Investment in real estate held for development or sale                             (9,794)          (558,276)
  Proceeds from sales of real estate held for development or sale                   616,287          1,846,610
  Proceeds from sale of foreclosed property                                       2,152,752          2,209,097
  Other, net                                                                        264,192              5,654
                                                                              -------------      -------------
                                                                              $  15,547,483      $ (26,856,814)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net (decrease) increase in deposit accounts                                 $  14,137,627      $    (773,949)
  Net increase in checking accounts                                               1,156,398          3,554,367
  Proceeds from FHLB advances                                                    71,000,000        116,300,000
  Repayments of FHLB advances                                                  (103,500,000)      (101,300,000)
  Securities sold under agreement to repurchase, net                             (7,257,000)         2,098,000
  Payments on mortgage-backed bonds                                                    --             (477,136)
  Proceeds from stock options exercised and dividends reinvested                    313,831            165,043
  Dividends paid to shareholders                                                   (522,651)          (512,909)
                                                                              -------------      -------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                           $ (24,671,795)     $  19,053,416
Net decrease in cash and cash equivalents                                        (5,272,786)          (342,385)
Cash and cash equivalents at the beginning of the year                           16,977,614         17,854,046
                                                                              -------------      -------------
CASH AND CASH EQUIVALENTS AT MARCH 31                                         $  11,704,828      $  17,511,661
                                                                              =============      =============
Supplemental disclosures of cash flow information:
  Interest paid                                                               $  14,547,928      $  13,408,522
  Cash payments of income taxes                                                      18,005            362,740
Supplemental disclosures of noncash investing and financing activities:
  Additions to real estate acquired through foreclosure                            1,551,769         1,236,146
  Unrealized losses on available for sale securities                                818,067          1,539,293

</TABLE>
                                       4
<PAGE>



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


GENERAL

         California  Financial  Holding  Company   ("California   Financial"  or
"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
$1.8 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.

         On December 9, 1996, California Financial and Temple-Inland Inc. ("TI")
announced the signing of a definitive  Agreement and Plan of Merger (the "Merger
Agreement")  under which  California  Financial will merge with and into TI. The
transaction  is expected to close during the second  quarter of 1997.  Under the
terms of the Merger Agreement,  California Financial's shareholders will receive
a  combination  of TI stock and cash  valued at $30 per share for each  share of
California  Financial  stock  they  hold,  for  a  total  transaction  value  of
approximately  $150  million.  Immediately  following  the  consummation  of the
Merger, Stockton Savings will merge with and into Guaranty Federal Bank, F.S.B.,
a wholly owned  subsidiary of TI. The  transaction was approved by the Company's
shareholders at the Annual Meeting held on April 28, 1997.

FINANCIAL CONDITION

         Total assets increased by $37.5 million over the past year primarily as
a result of increases in loans and  investments  outstanding.  The components of
interest-bearing  liabilities  changed  somewhat as deposits  increased by $10.2
million,  reverse  repurchase  agreements  declined by $25.2 million and Federal
Home Loan Bank advances  increased by $53.5 million.  The Company's total assets
have  decreased by $22.3  million in the first  quarter of 1997 as a result of a
decline in the investment portfolio.  Interest-bearing  liabilities decreased by
$24.5 million in the first  quarter of 1997 despite a $15.3 million  increase in
savings deposits,  as Federal Home Loan Bank advances declined by $32.5 million.
The lack of asset growth over the past quarter was  primarily  the result of the
planned merger.

         Loan  origination  volume for the first  three  months of 1997  totaled
$79.0 million  compared to volume of $78.6 million for the first three months of
1996.  Increases  in  short-term  construction  loans  offset the  decreases  in
fixed-rate  single-family  originations in the first quarter of 1997 as compared
to the first quarter of 1996.

         A breakout  of lending  volume by type is shown  below for the  periods
indicated:

                     Originations through
                           March 31
                         (in millions)
                                           1997        1996
Short-term construction loans                $42.9        $33.8
Permanent fixed-rate loans                    18.0         30.0
Permanent adjustable-rate loans               18.1         14.8
                                            ------       ------
TOTAL ORIGINATIONS                           $79.0        $78.6
                                            ======       ======

                                       5
<PAGE>

         The improving  economy in the Bank's  lending area led to the increases
in the  origination  of  presold  speculative  construction  loans in the  first
quarter of 1997.  While loans  originated  for the  purchase  of existing  homes
remained constant between the two periods,  refinances declined by $11.1 million
in 1997. The reduced interest rate environment early in 1996 led to increases in
the origination and refinance of permanent fixed-rate loan originations relative
to adjustable-rate mortgages during that period.  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 rising  interest  rates.  Loan sale
activity of $17.5 million in the current year was down from the $25.5 million in
sales recorded in the first three months of 1996,  consistent  with the decrease
in fixed-rate mortgages originated this year.

         The balance of real estate held for development or sale has declined by
$4.5  million  from a year ago and by $1.3  million in the  current  year.  Real
estate held by the Bank at quarter-end  consisted of $5.3 million in real estate
owned  through  foreclosure  and  $385,000 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.

         The balance of real estate owned  through the  foreclosure  process has
increased  by $319,000  from a year ago,  however the balance has  decreased  by
$665,000 as compared to December 31, 1996.

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

                           Real Estate Held for Development
                                     or Sale, net
                                    (in thousands)

                                         3/31/97      12/31/96        3/31/96

Real estate owned through foreclosure    $ 5,329     $   5,994      $   5,010
Real estate held for development             385           989          5,214
                                       ---------     ---------      ---------
TOTAL                                  $   5,714       $ 6,983       $ 10,224
                                       =========     =========      =========

         At  March  31,  1997,  the Bank  held  investment  and  mortgage-backed
securities with an amortized cost basis of $287.5 million.  Under the guidelines
of FAS  No.  115,  "Accounting  for  Certain  Investments  in  Debt  and  Equity
Securities",  all debt and equity securities are to be classified as either held
to  maturity,  available  for  sale or held  for  trading.  The  Bank  currently
classifies  its entire  investment  portfolio as available  for sale.  Under the
provisions of FAS No. 115, all securities  classified as available for sale must
be carried at market value with the  unrealized  gains or losses  recorded as an
adjustment to  stockholders'  equity.  At March 31, 1997, the Bank's  investment
portfolio  was  adjusted  to  market  value  with a net  after  tax loss of $1.3
million.

         The  amortized  cost and  estimated  market  values of  investment  and
mortgage-backed  securities as of March 31, 1997 are as follows (in thousands of
dollars):




                                       6
<PAGE>

<TABLE>
<CAPTION>
                                                                   GROSS             GROSS        
                                               AMORTIZED         UNREALIZED       UNREALIZED        ESTIMATED 
                                                  COST             GAINS            LOSSES        MARKET VALUE
                                                  ----             -----            ------        ------------
AVAILABLE FOR SALE:

<S>                                             <C>               <C>               <C>              <C>         
Investment securities:
U.S. Government & Agency Securities             $     42,536      $          2      $       440      $     42,098
CMO'S                                                145,316               731            1,832           144,215
Other securities                                          10                 -                -                10
                                                ------------      ------------       ----------      ------------
Total investment securities                     $    187,862      $        733      $     2,272      $    186,323
                                                ------------      ------------      -----------      ------------
Mortgage-backed securities:
FHLMC                                           $     52,098      $        127      $       590      $     51,635
FNMA                                                  27,658                 -              153            27,505
GNMA                                                  13,681                40                -            13,721
SBA Pools                                              4,306                10               38             4,278
FHA Title One                                          1,858                 -              197             1,661
                                                ------------      ------------      -----------      ------------
Total mortgage-backed securities:               $     99,601      $        177      $       978      $     98,800
                                                ------------      ------------      -----------      ------------
Total available for sale portfolio              $    287,463      $        910      $     3,250      $    285,123
                                                ============      ============      ===========      ============

</TABLE>

                  NOTE:  Above adjustments are on a pre-tax basis.


RESULTS OF OPERATIONS

         The Company earned $2.7 million or $.55 per share for the first quarter
of 1997  compared  to  earnings  of $2.6  million or $.54 per share for the like
quarter of 1996.  Earnings in the current  quarter were  hindered by $661,000 in
merger related expenses.

         Improved  earnings the current  quarter over last year's first  quarter
can be attributed to stronger core earnings from increased  interest margins and
an increase  in fee income net of  merger-related  costs.  Earnings in the first
quarter of 1996 were aided by large gains realized on the sale of assets.

         The table  below  breaks out the  components  of the Bank's  margin and
spread for the periods indicated:
<TABLE>
<CAPTION>
                                             Average for the quarter       *Weighted average as of
                                                 ended March 31,                   March 31,
                                            -------------------------      -------------------------
                                                               Basis-                         Basis-
                                                               Point                          Point
                                            1997      1996     Change      1997      1996     Change
<S>                                         <C>       <C>       <C>        <C>       <C>      <C>    
Yield on interest-earning assets:
  Loan portfolio yield                      8.33%     8.23%     0.10%      7.93%     7.98%    (0.05)%
  Yield on marketable investments           6.66      6.59      0.07       6.67      6.58      0.09
  Weighted yield on assets                  7.92      7.84      0.08       7.63      7.64     (0.01)
Cost of funds:
  Cost of deposits                          4.52%     4.74%    (0.22)%     4.56      4.68%    (0.12)%
  FHLB advances & other borrowings          6.01      5.97      0.04       6.02      5.81      0.21
  Weighted cost of funds                    4.83      4.95     (0.12)      4.86      4.89     (0.03)

Interest rate spread                        3.09%     2.90%     0.19%      2.77%     2.75%     0.02%

Net yield on interest-earning assets        3.29%     3.07%     0.22%      2.96%     2.90%     0.06%
                                                                                            ----
</TABLE>

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

                                       7
<PAGE>

         Improved net interest  income in the current year relative to the first
three months of 1996 was primarily  the result of increasing  yields on the loan
portfolio,  decreasing  cost  of  funds,  increases  in the  balance  of  assets
outstanding as well as an  improvement in the level of average  interest-earning
assets relative to average interest-bearing liabilities.

         Loan  interest  income  increased by roughly $1.1 million for the first
quarter of 1997 compared to 1996. A $39 million  increase in the average balance
of loans  outstanding  in the first  quarter of the current  year was  primarily
responsible for the earnings  improvement  although a 10-basis point increase in
average  yield of the  portfolio  also  contributed  to the  increase.  A larger
percentage  of  construction  and  non-single  family  residential  loans in the
portfolio  resulted  in the  improvement  of the  yield in the  current  year as
compared to the previous year.

         Investment  interest income increased by $567,000 this quarter relative
to the first quarter of 1996.  Interest income has increased due primarily to an
increase in the average  balance of  investments  outstanding.  During 1996, the
Bank purchased $129.0 million in securities with only $83.3 million in sales and
payoffs to provide  for the  increase  in the average  balance.  The  securities
purchased  consisted  primarily  of  adjustable-rate   collateralized   mortgage
obligations tied to current indices CMT that reprice monthly.

         Interest  expense  increased  by $390,000  for the three  month  period
compared  to the same period in 1996.  A $10.2  million  dollar  increase in the
average  balance of  interest-bearing  liabilities,  including  $53.5 million in
borrowings,  more than  offset  the  22-basis  point drop in the cost of savings
deposits.  The reduction of deposit costs  resulted from a change in Bank policy
during 1996 to price less  competitively  in an effort to reduce future interest
costs.

         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 the Federal Home Loan Bank's  Eleventh  District  Cost of Funds Index
"COFI" on the same notional amount. This structure is designed to act as a hedge
in period 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 $105,000 to interest expense
in 1997 compared to $119,000 for the first three months of 1996.

         Declines  in the cost of  savings  of  22-basis  points  for the  first
quarter 1997  relative to the prior year  reduced  savings  interest  expense by
$526,000.  The  declining  rate  environment  during 1996 as well as a concerted
effort by the Bank to reduce deposit costs through less competitive pricing, are
the primary  reasons for the  decline in deposit  costs in the first  quarter of
1997 as compared to 1996.

         Borrowing  costs  increased by $869,000  for the first  quarter of 1997
relative  to the  prior  year.  Increased  costs  were  entirely  the  result of
borrowing  growth that occurred  between the two years.  The average  balance of
borrowings  outstanding  for the first quarter of 1997 was $56.4 million  higher
than the  first  quarter  of last  year.  The  increase  in  average  borrowings
outstanding  in the  current  year as  compared  to 1996 was the result of asset
growth,  particularly  in the second  quarter of 1996 as well as to replace  the
runoff of brokered and retail funds during that period.

                                       8
<PAGE>

         Interest  rate spreads are expected to remain  stable for the remainder
of the year, reflecting stabilized deposit costs and a flat COFI index.

         The Bank's  average  margin  continued to exceed  average  spread by 20
basis points for the first quarter of 1997.  The Bank's  success in reducing its
level of  nonperforming  assets  over the past  year,  as well as the  increased
sell-off  of real  estate  held  for  development  purposes,  has  provided  the
improvement  from the first quarter of 1996 when average margin exceeded average
spread by 17 basis points.

         Loan loss provisions  established  during the quarter totaled  $350,000
which were somewhat higher than the level of loan loss provisions established in
the first quarter of 1996,  reflecting a slight  increase in  charge-offs in the
current year.

         Noninterest  income  of $1.8  million  was  reported  for  the  quarter
compared to noninterest  income of $2.0 million reported in the first quarter of
1996. Fee income increased  $221,000 in the first quarter of 1997 as compared to
the first  quarter  of 1996,  however  gains  realized  on the sale of loans and
investment securities were $381,000 higher in the first quarter of 1996.

         In the  first  quarter  of 1996,  the  Bank  implemented  Statement  of
Financial Accounting Standards No. 122 (SFAS 122) which requires that the rights
to service mortgage loans for others be recognized as a separate asset,  however
those rights are acquired.  Implementation  of SFAS 122 requires the recognition
of a  servicing  asset  (and  thus,  income)  at the point of sale of a loan and
therefore has the impact of increasing  income  compared to what would have been
recognized had  implementation  not occurred.  Servicing gains recognized in the
first  quarter of 1997  totaled  $175,000,  representing  47% of total loan sale
gains recorded. This compares to $178,000 recognized during the first quarter of
1996  representing  42% of total  loan sale  gains  recorded.  A  present  value
calculation model was utilized to compute the present value of future cash flows
of the  servicing  rights based upon  current  assumptions  including:  costs of
servicing  the loans,  the discount  rate,  prepayment  speeds,  float value and
delinquency  rates.  Servicing  fee  income  was  reduced by $7,000 in the first
quarter of 1997 as compared  to $80,000 in the first  quarter of 1996 to reflect
declines in value on the servicing  asset.  The  calculation  of impairment  was
derived utilizing the same methods as described above for computing the original
servicing asset by segregating  the asset portfolio into major risk  categories,
predominately  property type, loan term and interest rate.  Capitalized mortgage
servicing  rights  are  amortized  in  proportion  to,  and over the  period of,
estimated future net servicing income.

         The Bank sold $11.9 million in adjustable-rate  collateralized mortgage
obligations  "CMO"  investments  classified  as available  for sale in the first
quarter of 1997,  recognizing gains of $130,000.  This compares to $26.1 million
in sales in the first  quarter of 1996,  recognizing  net gains of  $464,000.  A
majority of  investments  sold in 1996 were for the purpose of reducing  balance
sheet   sensitivity  to  rising  rates  and  consisted  of  15-year   fixed-rate
mortgage-backed securities.

         Fee income from  operations  of $1.2 million has been  recorded for the
first quarter of 1997, up 14.8% compared to fees of $1.0 million reported in the
like period of 1996. An increased number of checking  accounts and corresponding
fees are responsible for most of the earnings improvement.

         Fee income is expected to remain  relatively  consistent  in the second
quarter.  The  level  of loan  sale  gains is  expected  to  remain  the same as
originations  of  fixed-rate  mortgages  are  expected  to remain  constant  and
interest  rates  are  relatively  flat.  Due  to  the  merger,  investment  sale
activities will continue to be minimal.

                                       9
<PAGE>

         Excluding  merger  related  costs  of  $661,000,   noninterest  expense
decreased by $97,000 this year compared to the first quarter of 1996.  The lower
expense resulted from a $418,000 reduction in deposit insurance expense.  In the
third quarter of 1996, the Bank incurred a $6.6 million  one-time  assessment to
recapitalize the SAIF insurance fund, thereby reducing the regular premium on an
ongoing basis.  Compensation  expense increased $443,000 in the first quarter of
1997 as compared to the first quarter of 1996 as the Bank added two branches and
an FHA lending operation during the latter part of 1996.

         The  effective  tax rate for the first  three  months of 1997 was 43.1%
compared to a rate of 41.8% for the first three months of 1996.  The higher rate
this year results from the merger related expenses incurred by the company which
are not tax deductible.

ASSET QUALITY

         The Bank has steadily reduced its level of nonperforming  assets in the
current quarter relative to year-end, 1996 and March 31, 1996.

         Detail on  nonperforming  assets  is shown in the  table  below for the
dates indicated:

                                        Nonperforming Assets
                                           (in thousands)
<TABLE>
<CAPTION>

                                                   March 31, 1997      Dec. 31, 1996       March 31, 1996
<S>                                                      <C>                <C>                <C>  
Loans 90 days or more delinquent                     $   6,722            $ 7,300            $ 6,129
Troubled debt restructurings                             1,565              1,466              6,605
Real estate owned through foreclosure                    5,329              5,994              5,010
                                                     ---------           --------           --------
Net nonperforming assets                              $ 13,616           $ 14,760           $ 17,744
                                                     =========           ========           ========
Nonperforming assets/total assets                         1.04%              1.11%              1.39%

</TABLE>

         As indicated above, the level of nonperforming  assets has decreased by
roughly $4.1 million from the prior year.  Non-performing assets as a percentage
of total assets was 1.04% at March 31, 1997, an improvement  from 1.39% at March
31, 1996, and 1.11% at year end.

         Nonperforming assets as of quarter-end consisted of the following asset
types:

                Nonperforming Assets by Type
                       (in thousands)
                       March 31, 1997

Commercial and multi-family real estate             $     976
Construction                                            1,048
1-4 family homes                                       10,168
Land                                                    1,424
                                                    ---------
                                                    $  13,616
                                                    =========

         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
three months of 1997 totaled $172,000. Life-to-date unrecorded interest on these
same loans  totaled  $1.5  million  through  quarter-end.  A total of $91,000 in
interest income has been recorded on these loans so far this year.

         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


                                       10
<PAGE>

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  restructured
assets are land and construction  loans totaling $1.6 million  originated during
the peak of real estate values.  The underlying  properties  have  experienced a
significant decline in value and the borrowers have limited financial resources.
Approximately one third of the balance of restructured  speculative  development
loans are in excess of 90 days  delinquent,  and the property  underlying one of
these loans is expected  to revert back to the Bank in the second  quarter.  The
restructured  debt total  above does not include  $331,000 in interest  that has
been capitalized but has not been recognized in income.  An additional  $173,000
in interest on these loans has been accrued at  quarter-end  but not included in
income.

         The Bank's level of loan loss reserves has declined since a year ago as
a large number of loans with specific reserves have been charged-off.  The level
of 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.

         The following  table  identifies the Bank's loan loss reserves at March
31, 1997 by loan type:

                                              Reserves         Percent of loans
                                           (in thousands)      in each category
                                             at 3/31/97         to total loans

1-4 family permanent loans                     $ 2,330               74.0%
Multi-family loans                               1,474                 4.8
Commercial real estate loans                     2,042                 7.3
Land, construction and development loans         1,602                13.9
TOTAL                                         --------               -----
                                               $ 7,448               100.0%
                                              ========               =====

         Although total loan loss reserves have declined by $730,000 from a year
ago, the level of loan loss reserves to  nonperforming  loans has increased from
52.9% to 78.3%.

         Activity in the allowances for both loans and real estate for the first
three months of 1997 is summarized below:

                               Loss Reserves
                               (in thousands)

                                          Loans       Real Estate
Balance, December 31, 1996            $   7,277         $   2,310
Provision for losses                        350                89
Charge-offs                               (179)             (208)
Recoveries                                   --                --
                                      ---------         ---------
Balance, March 31, 1997               $   7,448         $   2,191
                                      =========         =========

         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:


                                       11
<PAGE>

                               Classified Assets
                                (in thousands)
                                     as of
                        3/31/97     12/31/96        3/31/96
Substandard            $ 24,509     $ 22,579       $ 36,116
Doubtful                     --           --             --
                       --------     --------       --------
TOTAL                  $ 24,509     $ 22,579       $ 36,116
                       ========     ========       ========


         The level of total classified assets declined by $11.6 million from the
previous  year due  primarily  to a $5.0 million  improvement  in the balance of
troubled debt  restructurings and the reduced balances of foreclosed real estate
and real estate held for development purposes. The increase in classified assets
from year end is  attributable  to a $2.5 million land loan that as of March 31,
1997 was 60 days delinquent.

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 have been
in the  form of  long-term,  fixed-rate  mortgages  or  lagging-index  six-month
repricing  adjustable  loans  which  are  funded  with  short-term,   frequently
repricing  deposits.  During the past year, a concerted  effort has been made to
portfolio more adjustable-rate  loans, sell off fixed-rate loans and investments
as well as purchase current-index floating-rate investments.  Restructuring also
occurred  on the  liability  side as  deposit  maturities  were  lengthened  and
additional long-term  fixed-rate advances were added. In addition,  the Bank has
become less  competitive  in the pricing of its deposit base,  which has further
reduced the level of sensitivity to changing rates. The interest rate protection
received  from  floating-rate  assets is somewhat  limited by lifetime rate caps
which would take effect in high-rate environments.  Similarly,  benefits derived
from  current-  index  adjustable-rate  mortgages  are limited by  periodic  and
lifetime  interest  rate  caps as  well  as by six  month  to one  year  average
repricing periods. The level of fixed-rate loans and mortgage-backed  securities
declined by $3.1  million from the previous  year while  adjustable-rate  assets
increased by $30.9 million.


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.  For the month of March,  1997, the average  liquidity ratio was
5.06% despite a 4.97% ratio on March 31, 1997.

         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 March 31, 1997,  the Bank had $47.1 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.
Additional  short-term  cash needs can also be met  through the use of a line of
credit with the FHLB. At  quarter-end,  approximately  $119.3  million was still
available through this borrowing source.

                                       12
<PAGE>


REGULATION

         Under the Financial  Institutions Reform,  Recovery and Enforcement Act
signed into law on August 9, 1989,  financial  institutions are required to meet
three primary  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 certain intangibles and a specified phase-out
of certain  real estate and equity  investments  and must equal at least 1.5% of
tangible  assets.  Core  capital is defined as  tangible  capital  plus  certain
intangibles and must equal at least 3% of tangible assets. Risk-based capital is
core  capital  plus  supplementary  capital,  which  includes  general loan loss
reserves  up to  1.25% of  risk-weighted  assets  and must  equal at least 8% of
risk-weighted assets.

         The Bank's  regulatory  capital position at March 31, 1997 is set forth
in the following schedule:


                                Regulatory capital position
                                       (in thousands)

                                        Tangible        Core        Risk-based
                                        --------        ----        ----------
Book capital                           $ 88,764      $ 88,764       $ 88,764
Unrealized losses on securities           1,322         1,322          1,322
Real estate investment deduction         (1,073)       (1,073)        (1,073)
Intangible deduction                       (487)         (487)          (487)
Loan loss reserves                            -             -          6,486
                                       --------      --------        -------
  Net regulatory capital               $ 88,526      $ 88,526       $ 95,012
Minimum required                         19,916        39,832         58,410
                                       --------      --------       --------
  Excess over minimum                  $ 68,610      $ 48,694       $ 36,602
                                       ========      ========       ========
Excess over "well capitalized"         $ 22,139           N/A       $ 22,000
                                       ========                     ========
Capital Ratio                             6.67%         6.67%         13.01%


         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 non-includable  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.

         The Bank is currently  considered "well  capitalized"  under applicable
regulatory  definitions,  which has a  positive  impact on the level of  deposit
insurance   premiums  assessed  and  provides  the  Bank  additional   operating
flexibility.  The "well capitalized"  designation requires that an institution's
total  risk-based  capital  to  risk-weighted  assets  exceed  10%,  its  Tier 1
risk-based  capital  ratio (which is similar to the total  risk-based  ratio but
excludes the inclusion of general loan loss reserves) exceed 6% of risk-weighted
assets,  and its core capital ratio exceed 5% of total adjusted assets. At March
31, 1997, the Bank's total risk-based capital, Tier 1 risk-based and core ratios
were 13.01%, 12.12% and 6.67%, respectively. The Bank's risk-based capital ratio
is currently $22.0 million above the minimum to be considered "well capitalized"
and $36.6 million above the 8% regulatory minimum.



                                       13
<PAGE>

         Pursuant  to  recently   enacted  Federal  tax   legislation,   savings
institutions such as the Bank will receive, subject to a number of conditions, a
"fresh  start" with respect to the  potential  recapture of certain tax bad debt
reserves.  However, certain other reserves are required to be treated as taxable
income over a six-year period  beginning in 1996, which may be delayed up to two
years if a savings  association  meets a newly developed  mortgage  originations
test. Beginning in 1996, savings associations became subject to the same federal
income tax treatment as  commercial  banks with the same levels of total assets.
This  legislation  has eliminated the  long-standing  tax impediments to savings
association  conversions  to  commercial  bank  charters  and  should  lower the
after-tax cost of bank  acquisitions of savings  associations and the conversion
or merger of these associations into commercial banks.


                                       14
<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

         On April 28, 1997, the  Stockholders of the Company approved the merger
         of California  Financial into  Temple-Inland,  Inc. The  transaction is
         expected  to close  during  the  second  quarter  of 1997,  subject  to
         regulatory   approval.   Under  the  terms  of  the  Merger  Agreement,
         California  Financial's  shareholders  will receive a combination of TI
         stock and cash  valued at $30 per  share for each  share of  California
         Financial   stock  they  hold,  for  a  total   transaction   value  of
         approximately $150 million. Subject to certain limitations,  California
         Financial   stockholders  will  be  given  the  election  to  have  the
         consideration  for their shares paid in TI stock, cash or a combination
         of the two. TI, however, will issue no more than 1,692,000 shares of TI
         stock in the  transaction.  The  Merger  Agreement  permits  California
         Financial to terminate  the  transaction  if the price of TI stock,  as
         calculated,  is below $40 per share, provided that the number of shares
         of TI stock issued in the transaction has not been increased.


ITEM 5.  OTHER INFORMATION

      NONE


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

                  27   Financial Data Schedule





                                       15
<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: May 12, 1997        BY: /s/   ROBERT V. KAVANAUGH
                              --------------------------------
                               ROBERT V. KAVANAUGH
                               President, Chief Operating Officer




     DATE: May 12, 1997        BY: /s/   JANE R. BUTTERFIELD
                              --------------------------------
                               JANE R. BUTTERFIELD
                               Senior Vice President, Treasurer,
                                Chief Financial Officer
                                 (Principal Financial Officer and
                                 Principal Accounting Officer)












                                       16