<PAGE>


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

                                    FORM 10-Q


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


               For the quarterly period ended: September 30, 2000

                         Commission file number: 1-12639

                CALIFORNIA FEDERAL PREFERRED CAPITAL CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


           Maryland                                   94-3254883
--------------------------------------------------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification No.)
 incorporation or organization)


200 Crescent Court, Suite 1350, Dallas, Texas                           75201
--------------------------------------------------------------------------------
   (Address of principal executive offices)                          (Zip Code)

                                  214-871-5131
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

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


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

     The number of shares outstanding of registrant's $0.01 par value common
stock, as of the close of business on November 3, 2000: 1,000 shares.



<PAGE>



                CALIFORNIA FEDERAL PREFERRED CAPITAL CORPORATION
                     THIRD QUARTER 2000 REPORT ON FORM 10-Q
                                TABLE OF CONTENTS


                                                                        PAGE NO.
                                                                        --------
PART I.       FINANCIAL INFORMATION

     Item 1.  Financial Statements

              Balance Sheets
              September 30, 2000 (unaudited) and December 31, 1999......    3

              Unaudited Statements of Income
              Nine months ended September 30, 2000 and 1999.............    4

              Unaudited Statements of Income
              Three months ended September 30, 2000 and 1999............    5

              Unaudited Statement of Stockholders' Equity
              Nine months ended September 30, 2000......................    6

              Unaudited Statements of Cash Flows
              Nine months ended September 30, 2000 and 1999.............    7

              Notes to Unaudited Financial Statements...................    8

     Item 2.  Management's Discussion and Analysis of
              Financial Condition and Results of Operations.............   11

     Item 3.  Quantitative and Qualitative Disclosures About Market Risk   16

PART II. OTHER INFORMATION

     Item 1.  Legal Proceedings.........................................   17

     Item 6.  Exhibits and Current Reports on Form 8-K..................   17

     Signature..........................................................   18





                                        2

<PAGE>



                CALIFORNIA FEDERAL PREFERRED CAPITAL CORPORATION

                                 BALANCE SHEETS
                    September 30, 2000 and December 31, 1999
                                   (Unaudited)
                  (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                     September 30,        December 31,
ASSETS                                                                                    2000                1999
                                                                                          ----                ----

<S>                                                                                 <C>                 <C>
Residential mortgage loans, net                                                      $     975,804       $      967,286
Cash and cash equivalents                                                                   19,273                5,485
Due from affiliates                                                                          9,974               18,065
Accrued interest receivable                                                                  5,518                4,649
Foreclosed real estate, net                                                                     81                1,037
                                                                                     -------------       --------------

     TOTAL ASSETS                                                                    $   1,010,650       $      996,522
                                                                                     =============       ==============


LIABILITIES AND STOCKHOLDERS' EQUITY


Due to affiliates                                                                    $          61       $           96
Accounts payable and accrued liabilities                                                       293                  245
                                                                                     -------------       --------------

     Total Liabilities                                                                         354                  341
                                                                                     -------------       --------------


Commitments and contingencies                                                                   --                   --

Stockholders' Equity:

Preferred stock, par value $0.01 per share, liquidation preference $500,000,
     30,000,000 shares authorized, 20,000,000 shares
     issued and outstanding                                                                500,000              500,000
Common stock, par value $0.01 per share, 30,000,000 shares authorized,
     1,000 shares issued and outstanding                                                        --                   --
Additional paid-in capital                                                                 500,000              500,000
Retained earnings (accumulated deficit)                                                     10,296               (3,819)
                                                                                     -------------       --------------

     Total Stockholders' Equity                                                          1,010,296              996,181
                                                                                     -------------       --------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $   1,010,650       $      996,522
                                                                                     =============       ==============
</TABLE>





           See accompanying notes to unaudited financial statements.




                                        3

<PAGE>


                CALIFORNIA FEDERAL PREFERRED CAPITAL CORPORATION

                              STATEMENTS OF INCOME
                  Nine Months Ended September 30, 2000 and 1999
                                   (Unaudited)
                                 (in thousands)


<TABLE>
<CAPTION>

                                                                                            2000            1999
                                                                                            ----            ----
<S>                                                                                     <C>             <C>
INTEREST INCOME

Residential mortgage loans                                                               $ 53,802        $  51,005
     Less: servicing fee expense                                                           (2,732)          (2,740)
                                                                                         --------        ---------
                                                                                           51,070           48,265

Short-term investments                                                                        811              624
                                                                                         --------        ---------
     Interest income, net of servicing fee expense                                         51,881           48,889


NONINTEREST EXPENSE


Director fees                                                                                  44               46
Professional fees                                                                              56               72
Foreclosed real estate operations, net                                                       (139)             (51)
Other                                                                                          86               93
                                                                                         --------        ---------

     Total noninterest expense                                                                 47              160
                                                                                         --------        ---------


NET INCOME                                                                                 51,834           48,729


Preferred stock dividends                                                                  34,219           34,219
                                                                                         --------        ---------

NET INCOME AVAILABLE TO COMMON STOCKHOLDER                                               $ 17,615        $  14,510
                                                                                         ========        =========
</TABLE>








           See accompanying notes to unaudited financial statements.



                                        4

<PAGE>



                CALIFORNIA FEDERAL PREFERRED CAPITAL CORPORATION

                              STATEMENTS OF INCOME
                 Three Months Ended September 30, 2000 and 1999
                                   (Unaudited)
                                 (in thousands)



<TABLE>
<CAPTION>
                                                                 2000             1999
                                                                 ----             ----
<S>                                                          <C>               <C>
INTEREST INCOME

Residential mortgage loans                                    $  18,225         $ 16,583
     Less: servicing fee expense                                   (915)            (915)
                                                              ---------         --------
                                                                 17,310           15,668

Short-term investments                                              364              269
                                                              ---------         --------
     Interest income, net of servicing fee expense               17,674           15,937


NONINTEREST EXPENSE


Director fees                                                        34               34
Professional fees                                                    14               16
Foreclosed real estate operations, net                              (20)             (54)
Other                                                                 5               13
                                                              ---------         --------

     Total noninterest expense                                       33                9
                                                              ---------         --------


NET INCOME                                                       17,641           15,928


Preferred stock dividends                                        11,406           11,406
                                                              ---------         --------

NET INCOME AVAILABLE TO COMMON STOCKHOLDER                    $   6,235         $  4,522
                                                              =========         ========
</TABLE>







           See accompanying notes to unaudited financial statements.



                                        5

<PAGE>



                CALIFORNIA FEDERAL PREFERRED CAPITAL CORPORATION

                        STATEMENT OF STOCKHOLDERS' EQUITY
                      Nine Months Ended September 30, 2000
                                   (Unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                    Retained
                                                                                 Additional         Earnings            Total
                                                  Preferred         Common         Paid-in        (Accumulated      Stockholders'
                                                    Stock           Stock          Capital           Deficit)          Equity
                                                    -----           -----          -------           --------          ------

<S>                                            <C>              <C>             <C>               <C>              <C>
BALANCE AT DECEMBER 31, 1999                    $  500,000       $      --       $  500,000        $  (3,819)       $   996,181

Net income                                              --              --               --           51,834             51,834

Dividends paid on 9 1/8% noncumulative
     exchangeable preferred stock, series A             --              --               --          (34,219)           (34,219)

Dividends paid on common stock                                                           --           (3,500)            (3,500)
                                                ----------       ---------       ----------        ---------        -----------


BALANCE AT SEPTEMBER 30, 2000                   $  500,000       $      --       $  500,000        $  10,296        $ 1,010,296
                                                ==========       =========       ==========        =========        ===========
</TABLE>






           See accompanying notes to unaudited financial statements.



                                        6

<PAGE>




                CALIFORNIA FEDERAL PREFERRED CAPITAL CORPORATION

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

<TABLE>
<CAPTION>
                                                                                            2000             1999
                                                                                            ----             ----
<S>                                                                                      <C>             <C>
OPERATING ACTIVITIES:

Net income                                                                                $ 51,834        $  48,729
Adjustments to reconcile net income to net cash provided by operating
activities:
     Amortization of purchase discounts and premiums, net                                      704              859
     Provision for losses on foreclosed real estate                                             --               15
     Interest capitalized on negatively amortizing loans                                       (80)            (196)
     Gain on sales of foreclosed real estate, net                                             (139)             (66)
     Decrease in due from affiliates                                                           470               93
     (Increase)/decrease in accrued interest receivable                                       (342)           1,061
     Increase in accounts payable and accrued liabilities                                       48              317
     Decrease in due to affiliates                                                             (35)            (503)
                                                                                          --------        ---------


Net cash provided by operating activities                                                   52,460           50,309
                                                                                          --------        ---------


INVESTING ACTIVITIES:


Purchase of mortgage loans                                                                (122,233)        (263,587)
Mortgage loan principal repayments                                                         120,665          263,954
Purchase of accrued interest receivable                                                       (527)          (1,042)
Proceeds from sales of foreclosed real estate                                                1,142              674
                                                                                          --------        ---------


Net cash used in investing activities                                                         (953)              (1)
                                                                                          --------        ---------

FINANCING ACTIVITIES:

Common stock dividends paid                                                                 (3,500)              --
Preferred stock dividends paid                                                             (34,219)         (34,219)
                                                                                          --------        ---------
Net cash used in financing activities                                                      (37,719)         (34,219)
                                                                                          --------        ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                                   13,788           16,089


CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                             5,485            2,505
                                                                                          --------        ---------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                $ 19,273        $  18,594
                                                                                          ========        =========


Supplemental disclosure of cash flow information:
    Non-cash investing activities:
          Mortgage loan principal reductions due to foreclosure                           $     47        $   1,255
          Mortgage loan principal increase for timing difference between
               principal repayments received by servicer and related cash
               received by Company during the period                                         7,621           23,555
</TABLE>



           See accompanying notes to unaudited financial statements.


                                        7

<PAGE>


                CALIFORNIA FEDERAL PREFERRED CAPITAL CORPORATION
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS


(1)  Basis of Presentation

     The accompanying financial statements of California Federal Preferred
     Capital Corporation (the "Company") were prepared in accordance with
     generally accepted accounting principles for interim financial information
     and with the instructions for meeting the requirements of Regulation S-X,
     Article 10 and therefore do not include all disclosures necessary for
     complete financial statements. In the opinion of management, all
     adjustments have been made that are necessary for a fair presentation of
     the financial position and results of operations and cash flows as of and
     for the periods presented. All such adjustments are of a normal recurring
     nature. The results of operations for the nine months ended September 30,
     2000 are not necessarily indicative of the results that may be expected for
     the entire fiscal year or any other interim period. Certain amounts from
     prior periods have been reclassified to conform with the current period's
     presentation.

     The accompanying financial statements should be read in conjunction with
     the financial statements included in the Company's Annual Report on Form
     10-K for the year ended December 31, 1999. All terms used but not defined
     elsewhere herein have meanings ascribed to them in the Company's Annual
     Report on Form 10-K.

     As the Company's common stock is wholly owned by California Federal Bank
     (the "Bank"), earnings per share data is not presented.

(2)  Residential Mortgage Loans, Net

     At September 30, 2000 and December 31, 1999, residential mortgage loans,
     net, consisted of the following (in thousands):

                                              September 30,        December 31,
                                                  2000                1999
                                                  ----                ----

1-4 unit residential mortgage loans            $   976,716         $   968,725
Purchase discounts and premiums, net                 6,891               6,444
                                               -----------         -----------
     Subtotal                                      983,607             975,169

Allowance for loan losses                           (7,803)             (7,883)
                                               -----------         -----------

Total residential mortgage loans, net          $   975,804         $   967,286
                                               ===========         ===========

     Residential mortgage loans consist primarily of adjustable rate mortgages
     ("ARMs") which adjust periodically based on changes in various indices
     including the FHLB Eleventh District Cost of Funds, the one-year Treasury
     rate and the six-month Treasury rate. Certain types of residential mortgage
     loans contain an option for the mortgagor to convert the ARM to a fixed
     rate loan for the remainder of the term.

(3)  Dividends

     Holders of Series A Preferred Shares (as defined herein) are entitled to
     receive, if, when and as authorized and declared by the Board of Directors
     of the Company out of funds legally available, noncumulative dividends at a
     rate of 9 1/8% per annum of the initial liquidation preference ($25.00 per
     share). Dividends on the Series A Preferred Shares, if authorized and
     declared, are payable quarterly in arrears on the last day of March, June,
     September and December. Dividends paid during each of the nine month
     periods ended September 30, 2000 and 1999 to the holders of the Series A
     Preferred Shares totalled approximately $34.2 million.



                                        8

<PAGE>


                CALIFORNIA FEDERAL PREFERRED CAPITAL CORPORATION
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

     Dividends on common stock are paid if, when and as authorized and declared
     by the Board of Directors out of funds legally available after all
     preferred dividends have been paid. Common dividends paid during the nine
     months ended September 30, 2000 totalled $3.5 million. There were no common
     stock dividends paid during the nine months ended September 30, 1999.

(4)  Related Party Transactions

     The Company entered into a servicing agreement with First Nationwide
     Mortgage Corporation ("FNMC") pursuant to which FNMC performs the actual
     servicing of the residential mortgage loans held by the Company in
     accordance with normal industry practice (the "Servicing Agreement"). The
     Servicing Agreement can be terminated without cause with at least 30 days
     prior written notice to FNMC and payment to FNMC of a termination fee equal
     to 2% of the outstanding principal balances of the loans. The servicing fee
     ranges from 0.25% to 0.50% per year of the outstanding principal balances.
     Servicing fee expense paid totalled $2.7 million for each of the nine month
     periods ended September 30, 2000 and 1999. Servicing fee expense paid
     totalled $915,000 for each of the three month periods ended September 30,
     2000 and 1999. FNMC is also entitled to a 1% disposition fee on the
     aggregate proceeds obtained in the sale of a defaulted residential mortgage
     loan. The Company recorded such disposition fees totalling approximately
     $11,000 and $13,000 during the nine months ended September 30, 2000 and
     1999. The Company recorded such disposition fees totalling approximately
     $1,000 and $5,000 during the three months ended September 30, 2000 and
     1999, respectively. These disposition fees are included in other
     noninterest expense in the accompanying statements of income.

     In its capacity as servicer, FNMC holds mortgage loan payments received on
     behalf of the Company in a custodial account at the Bank. The balance of
     this account totalled approximately $10.0 million and $18.1 million at
     September 30, 2000 and December 31, 1999, respectively, and is included in
     due from affiliates. Substantially all of such payments were passed through
     to the Company in October 2000 and January 2000, respectively, as provided
     in the Servicing Agreement. At September 30, 2000 and December 31, 1999,
     trust funds of approximately $2.6 million and $1.5 million, respectively,
     representing escrows received from borrowers, were on deposit in a trust
     account at the Bank and are not included in the accompanying financial
     statements.

     As of September 30, 2000 and December 31, 1999, the Company owed the Bank
     approximately $61,000 and $96,000, respectively, in connection with the
     settlement of loans purchased from the Bank, advances related to foreclosed
     real estate and expenses incurred by the Company to be reimbursed to the
     Bank. These amounts were paid to the Bank during October 2000 and January
     2000, respectively.

(5)  Newly Issued Accounting Pronouncements

     In June 1998, the FASB issued Statement of Financial Accounting Standards
     No. 133, Accounting for Derivative Instruments and Hedging Activities
     ("SFAS No. 133"). SFAS No. 133 establishes standards for derivative
     instruments and for hedging activities, and requires that an entity
     recognize all derivatives as either assets or liabilities in the balance
     sheet and measure those instruments at fair value. Under SFAS No. 133, an
     entity that elects to apply hedge accounting is required to establish at
     the inception of the hedge the method it will use for assessing the
     effectiveness of the hedging derivative and the measurement approach for
     determining the ineffective aspect of the hedge.

     SFAS No. 133 applies to all entities and amends SFAS No. 107, Disclosures
     About Fair Values of Financial Instruments, to include in SFAS No. 107 the
     disclosure provisions about concentrations of credit risk from SFAS No.
     105. SFAS No. 133 supersedes SFAS No. 80, Accounting for Futures Contracts,
     SFAS No. 105, Disclosure of Information about Financial Instruments with
     Off-Balance Sheet Risk and Financial Instruments with Concentrations of
     Credit Risk, and SFAS No. 119, Disclosure about Derivative Financial
     Instruments and Fair Value of Financial Instruments. SFAS No. 133 also
     nullifies or modifies the consensuses reached in a number of issues
     addressed by the Emerging Issues Task Force.


                                        9

<PAGE>


                CALIFORNIA FEDERAL PREFERRED CAPITAL CORPORATION
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

SFAS No. 133 as amended by SFAS No. 137, Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133 and by SFAS No. 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activities, an amendment of FASB Statement No. 133, is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000. Initial
application of this statement, as amended, should be as of the beginning of an
entity's fiscal quarter. On that date, hedging relationships must be designated
anew and documented pursuant to the provisions of this statement. Earlier
application of all of the provisions of SFAS No. 133 is encouraged, but is
permitted only as of the beginning of any fiscal quarter that begins after
issuance of this statement. SFAS No. 133 should not be applied retroactively to
financial statements of prior periods. The Company owns no derivative
instruments and was involved in no hedging activities at September 30, 2000;
accordingly, SFAS No. 133 is expected to have no impact on the Company's
financial statements.

On September 29, 2000, the FASB issued Statement of Financial Accounting
Standards No. 140, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities ("SFAS No. 140"). SFAS No. 140 replaces SFAS
No. 125, which was issued in June of 1996. It revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over most of the
provisions of SFAS No. 125 without reconsideration. In general, SFAS No. 140 is
effective for transfers of financial assets occurring after March 31, 2001 and
for disclosures relating to securitization transactions and collateral for
fiscal years ending after December 15, 2000. The implementation of SFAS No. 140
is not expected to materially impact the Company's financial results.




                                       10

<PAGE>



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

The statements contained in this Quarterly Report on Form 10-Q that are not
purely historical are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, including statements regarding the Company's expectations, intentions,
beliefs or strategies regarding the future. Forward-looking statements include
the Company's statements regarding liquidity, provision for loan losses, capital
resources and investment activities in "Management's Discussion and Analysis of
Financial Condition and Results of Operations." In addition, in those and other
portions of this document, the words "anticipate," "believe," "estimate,"
"deem," "expect," "intend," and other similar expressions, as they relate to the
Company or the Company's management, are intended to identify forward-looking
statements. Such statements reflect the current views of the Company with
respect to future events and are subject to certain risks, uncertainties and
assumptions. It is important to note that the Company's actual results could
differ materially from those described herein as anticipated, believed,
estimated or expected. Among the factors that could cause results to differ
materially are the risks discussed in the "Risk Factors" section included in the
Company's Registration Statement on Form S-11(File No. 333-11609), with respect
to the Series A Preferred Shares declared effective by the Securities and
Exchange Commission on January 24, 1997. The Company assumes no obligation to
update any such forward-looking statements.

FINANCIAL HIGHLIGHTS

The following information is presented as of September 30, 2000 and for the nine
and three months ended September 30, 2000 and 1999 (dollars in thousands):

                                                            2000          1999
                                                            ----          ----
Statements of Income - Nine Months Ended September 30:

Net interest income                                      $   51,881    $  48,889
Net income                                               $   51,834    $  48,729
Average yield on mortgage loans                               6.86%        6.47%

Statements of Income - Three Months Ended September 30:

Net interest income                                      $   17,674    $  15,937
Net income                                               $   17,641    $  15,928
Average yield on mortgage loans                               6.98%        6.31%

Balance Sheet as of September 30, 2000:

Residential mortgage loans, net                          $  975,804
Total assets                                             $1,010,650
Total stockholders' equity                               $1,010,296


OVERVIEW

The Company's principal business objective is to acquire, hold and manage
residential mortgage loans that will generate net income for distribution to
stockholders. The Company currently intends to invest in residential mortgage
loans only. The Company's current policy prohibits the acquisition of any
mortgage loan which is delinquent at the time of the proposed acquisition or
which meets certain criteria for non-performance during the preceding 12 months.
The Company currently expects that substantially all of the residential mortgage
loans to be acquired will be adjustable rate loans; however, the Company may
from time to time acquire fixed interest rate residential mortgage loans. The
Company anticipates it will continue to acquire all of its residential mortgage
loans from the Bank or affiliates of the Bank as whole loans secured by first
mortgages or deeds of trust on 1-4 unit residential real estate properties,
although mortgage loans may be acquired from unaffiliated third parties. The
Company may from time to time acquire fixed rate or variable rate
mortgage-backed securities issued or guaranteed by agencies of the federal
government or government sponsored agencies. The mortgage loans underlying the
mortgage-backed securities will be secured by single-family residential,
multifamily or commercial real estate properties located throughout the United
States.



                                       11

<PAGE>



On January 31, 1997, the Company commenced its operations upon the initial
public offering of 20,000,000 shares of the Company's 9.125% Noncumulative
Exchangeable Preferred Stock, Series A (the "Series A Preferred Shares"), which
raised $500 million. The Series A Preferred Shares are traded on the New York
Stock Exchange under the trading symbol "CFP." Concurrent with the sale of the
Series A Preferred Shares, the Bank contributed additional capital of $500
million to the Company. All common shares are held by the Bank.


RESULTS OF OPERATIONS

       Nine months ended September 30, 2000 versus nine months ended
       September 30, 1999

 Net Income. The Company reported net income for the nine months ended September
30, 2000 of $51.8 million compared with net income of $48.7 million for the
corresponding period in 1999. This increase in 2000 compared with 1999 is
attributable to an increase in net interest income.

During each of the nine month periods ended September 30, 2000 and 1999, the
Company declared and paid dividends of $34.2 million on the outstanding Series A
Preferred Shares. Net income available to the common stockholder for the nine
months ended September 30, 2000 and 1999 totalled $17.6 million and $14.5
million, respectively. The Company declared and paid common stock dividends of
$3.5 million during the nine month period ended September 30, 2000. There were
no common stock dividends paid during the nine months ended September 30, 1999.

Interest Income. The Company reported net interest income for the nine months
ended September 30, 2000 of $51.9 million compared with net interest income of
$48.9 million for the nine month period ended September 30, 1999. This increase
in interest income is attributed to a higher average yield on the residential
mortgage loan portfolio. The higher yield of 6.86% on residential mortgage loans
during the nine month period ended September 30, 2000 as compared to the 6.47%
yield for the same period in 1999 is primarily due to the repricing of variable
rate loans resulting from comparatively higher market rates during the nine
months ended September 30, 2000 versus the same period in 1999 and the purchase
of new loans at higher current market rates. The average outstanding balance of
residential mortgage loans during the nine month period ended September 30, 2000
was $1.5 million lower than during the same period in 1999. Net interest income
during the nine months ended September 30, 2000 is comprised of $51.1 million
($53.8 million gross interest less $2.7 million servicing fee expense) from
residential mortgage loans and $811,000 from short-term investments,
representing an average yield after servicing fees on residential mortgage loans
of 6.86% and on earning assets of 6.84%, based on average outstanding asset
balances of $992.7 million and $1,011.5 million, respectively. Net interest
income during the nine months ended September 30, 1999 is comprised of $48.3
million ($51.0 million gross interest less $2.7 million servicing fee expense)
from residential mortgage loans and $624,000 from short-term investments,
representing an average yield after servicing fees on residential mortgage loans
of 6.47% and on earning assets of 6.44%, based on average outstanding asset
balances of $994.2 million and $1,012.5 million, respectively.

The computation of the average yield on residential mortgage loans and on
earning assets is based on daily average outstanding asset balances that include
nonaccruing loans and the amount of principal payments collected by FNMC but not
yet remitted to the Company, which is included in due from affiliates on the
balance sheets.

Provision for Loan Losses. The Company recorded no provision for loan losses in
either of the nine month periods ended September 30, 2000 and 1999. The
determination to record no provision for loan losses during these periods is the
result of management's evaluation of the adequacy of the allowance for loan
losses based on, among other things, the Bank's and the Company's past loan loss
experience, known and inherent risks in the residential mortgage loan portfolio,
adverse situations that have occurred but are not yet known and that may affect
the borrower's ability to repay, the estimated value of the underlying
collateral, and economic conditions.

       Three months ended September 30, 2000 versus three months ended
September 30, 1999

Net Income. The Company reported net income for the three months ended September
30, 2000 of $17.6 million compared with net income of $15.9 million for the
corresponding period in 1999. This increase in 2000 compared with 1999 is
attributable to an increase in net interest income.



                                       12



<PAGE>


During each of the three month periods ended September 30, 2000 and 1999, the
Company declared and paid dividends of $11.4 million on the outstanding Series A
Preferred Shares. Net income available to the common stockholder for the three
months ended September 30, 2000 and 1999 totalled $6.2 million and $4.5 million,
respectively. The Company declared and paid common stock dividends of $3.5
million during the three month period ended September 30, 2000. There were no
common stock dividends paid during the three months ended September 30, 1999.

Interest Income. The Company reported net interest income for the three months
ended September 30, 2000 of $17.7 million compared with net interest income of
$15.9 million for the three month period ended September 30, 1999. This increase
in interest income is attributed to a higher average yield on the residential
mortgage loan portfolio. The higher yield of 6.98% on residential mortgage loans
during the three month period ended September 30, 2000 as compared to the 6.31%
yield for the same period in 1999 is primarily due to the repricing of variable
rate loans resulting from comparatively higher market rates during the three
months ended September 30, 2000 versus the same period in 1999 and the purchase
of new loans at higher current market rates. The average outstanding balance of
residential mortgage loans during the three month period ended September 30,
2000 was $1.2 million lower than during the same period in 1999. Net interest
income during the three months ended September 30, 2000 is comprised of $17.3
million ($18.2 million gross interest less $915,000 servicing fee expense) from
residential mortgage loans and $364,000 from short-term investments,
representing an average yield after servicing fees on residential mortgage loans
of 6.98% and on earning assets of 6.96%, based on average outstanding asset
balances of $992.5 million and $1,015.4 million, respectively. Net interest
income during the three months ended September 30, 1999 is comprised of $15.7
million ($16.6 million gross interest less $915,000 servicing fee expense) from
residential mortgage loans and $269,000 from short-term investments,
representing an average yield after servicing fees on residential mortgage loans
of 6.31% and on earning assets of 6.26%, based on average outstanding asset
balances of $993.7 million and $1,017.4 million, respectively.

The computation of the average yield on residential mortgage loans and on
earning assets is based on daily average outstanding asset balances that include
nonaccruing loans and the amount of principal payments collected by FNMC but not
yet remitted to the Company, which is included in due from affiliates on the
balance sheets.

Provision for Loan Losses. The Company recorded no provision for loan losses in
either of the three month periods ended September 30, 2000 and 1999. The
determination to record no provision for loan losses during these periods is the
result of management's evaluation of the adequacy of the allowance for loan
losses based on, among other things, the Bank's and the Company's past loan loss
experience, known and inherent risks in the residential mortgage loan portfolio,
adverse situations that have occurred but are not yet known and that may affect
the borrower's ability to repay, the estimated value of the underlying
collateral, and economic conditions.

RESIDENTIAL MORTGAGE LOANS

The Company reinvests principal collections in additional residential mortgage
loans purchased from either the Bank or its affiliates on a periodic basis.

It is the Company's policy to place a loan on nonaccrual when a borrower is 90
days or more delinquent. There were no accruing loans contractually past due 90
days or more at September 30, 2000 or December 31, 1999.

The following table reflects residential mortgage loans with past due principal
and interest payments as of September 30, 2000 and December 31, 1999:

<TABLE>
<CAPTION>
                                        September 30, 2000                         December 31, 1999
                                        ------------------                         -----------------

                              Principal Balance          Percent         Principal Balance           Percent
                               (in thousands)        of Total Loans       (in thousands)         of Total Loans
                               --------------        --------------       --------------         --------------
<S>                               <C>                    <C>                 <C>                     <C>
30 to 59 days past due             $2,817                 0.29%               $  950                  0.10%

60 to 89 days past due             $  654                 0.07%               $1,199                  0.12%

90 days or more past due           $1,497                 0.15%               $1,042                  0.11%

</TABLE>






                                       13

<PAGE>



ALLOWANCE FOR LOAN LOSSES

As of September 30, 2000, the Company has allocated $186,000 of its allowance
for loan losses against specific problem loans, with the remaining $7.6 million
available to absorb potential loan losses from the entire residential mortgage
loan portfolio. The Company deems its allowance for loan losses as of September
30, 2000 to be adequate. Although the Company believes that it has sufficient
allowances to absorb losses which currently exist in the portfolio, the precise
loss is subject to continuing review based on quality indicators, industry and
geographic concentrations, changes in business conditions, and other external
factors such as competition, legal and regulatory requirements. The Company will
continue to periodically reassess the adequacy of the allowance for loan losses.

The following table reflects the activity in the Company's allowance for loan
losses for the nine months ended September 30, 2000 and 1999 (in thousands):

                                              2000             1999
                                              ----             ----

     Balance - January 1                   $  7,883          $  8,413
     Provision for loan losses                   --                --
     Charge-offs                                (80)             (304)
                                           --------          --------
     Balance - September 30                $  7,803          $  8,109
                                           ========          ========

The Company's allowance coverage ratio (allowance for loan losses to loans) at
September 30, 2000 and December 31, 1999 was 0.79% and 0.81%, respectively.

INTEREST RATE RISK

The Company's income consists primarily of interest payments on residential
mortgage loans. The Company anticipates that most of its residential mortgage
loans will bear interest at adjustable rates. If there is a decline in interest
rates (as measured by the indices upon which the interest rates of the
residential mortgage loans are based), then the Company will experience a
decrease in income available to be distributed to its stockholders. In such an
interest rate environment the Company may experience an increase in prepayments
on its residential mortgage loans and may find it more difficult to purchase
additional residential mortgage loans bearing rates sufficient to support
payment of the dividends on the Series A Preferred Shares. In addition, certain
residential mortgage loan products which the Company holds will allow borrowers
in such an interest rate environment to convert an adjustable rate mortgage to a
fixed rate mortgage, thus "locking in" a lower fixed interest rate. Because the
dividend rate on the Series A Preferred Shares is fixed, there can be no
assurance that an interest rate environment in which there is a significant
decline in interest rates would not adversely affect the Company's ability to
pay such dividends.

Residential mortgage loans which have interest rates that adjust monthly based
upon the FHLB Eleventh District Cost of Funds limit payment changes to no more
than 7.5% of the payment amount per year. This may lead to monthly payments
which are less than the amount necessary to amortize the loan to maturity at the
interest rate in effect for any particular month. In the event that the monthly
payment is not sufficient to pay interest accruing on the loan during the month,
this deficiency is added to the loan's principal balance (i.e., negative
amortization). The total outstanding principal balance for a particular loan is
generally not allowed to exceed 125% of the original loan amount as a result of
negative amortization. Every five years and at any time the loan reaches its
maximum amount, the loan payment is recalculated to the payment sufficient to
repay the unpaid balance in full at the maturity date. Approximately $182.9
million and $208.6 million of the residential mortgage loans held by the Company
at September 30, 2000 and December 31, 1999, respectively, had the potential to
negatively amortize, while approximately $22.5 million and $31.9 million of the
residential mortgage loans had negatively amortized such that the current
principal balance of the loan exceeded the original principal balance at
September 30, 2000 and December 31, 1999, respectively. The current principal
balance exceeded the original principal balance on those loans by approximately
$843,000 and $1.0 million as of September 30, 2000 and December 31, 1999,
respectively. If there is an increase in interest rates on such residential
mortgage loans (as measured by the indices upon which the interest rates of the
residential mortgage loans are based), where such increase in the interest rate
does not coincide with a corresponding adjustment of the borrower's monthly
payment, the Company may experience a decrease in cash available to be
distributed to its common stockholder.



                                       14


<PAGE>


SIGNIFICANT CONCENTRATION OF CREDIT RISK

Certain geographic regions of the United States from time to time may experience
natural disasters or weaker regional economic conditions and housing markets
and, consequently, may experience higher rates of loss and delinquency on
residential mortgage loans generally. Any concentration of the residential
mortgage loans in such a region may present risks in addition to those generally
present with respect to residential mortgage loans.

The Company's exposure to geographic concentrations directly affects the credit
risk of the residential mortgage loans within the portfolio. The following table
shows the residential mortgage loan portfolio by geographical area as of
September 30, 2000:

<TABLE>
<CAPTION>
                                                                          Book Value
                                                                        (in thousands)   Percent
                                                                        --------------   -------
<S>                                                                      <C>             <C>
California                                                                $ 820,134       83.4%
Florida                                                                      29,262        3.0
New York                                                                     18,344        1.9
Nevada                                                                       15,820        1.6
Hawaii                                                                       14,056        1.4
Texas                                                                        11,780        1.2
Other states (35 states and Washington, D.C.; no state has more than 1%)     74,211        7.5
                                                                          ---------      -----
                                                                          $ 983,607      100.0%
                                                                          =========      =====
</TABLE>

The 83.4% of the Company's total residential mortgage loan portfolio comprised
of loans secured by residential real estate properties located in California may
be subject to a greater risk of default than other comparable residential
mortgage loans in the event of natural hazards or other adverse conditions in
California that may affect the ability of residential property owners in
California to make payments of principal and interest on underlying mortgages.

LIQUIDITY RISK MANAGEMENT

The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all of the Company's financial commitments and to
capitalize on opportunities for the Company's business expansion. In managing
liquidity, the Company takes into account various legal limitations placed on a
Real Estate Investment Trust ("REIT"). See " -- Other Matters."

The Company's principal liquidity needs are to maintain the current portfolio
size through the acquisition of additional residential mortgage loans and to pay
dividends on the Series A Preferred Shares. The acquisition of additional
residential mortgage loans is funded with the proceeds obtained from repayment
of principal balances by individual mortgagees. The payment of dividends on the
Series A Preferred Shares will be made from legally available funds, principally
arising from the operating activities of the Company. The Company's cash flows
from operating activities principally consist of the collection of interest on
the residential mortgage loans. The Company does not have and does not
anticipate having any material capital expenditures.

In order to remain qualified as a REIT, the Company must distribute annually at
least 95% of its adjusted REIT taxable income, as provided for under the
Internal Revenue Code ("IRC"), to its common and preferred stockholders. The
Company currently expects to distribute dividends annually to satisfy these REIT
requirements.

The Company anticipates that cash and cash equivalents on hand and the cash flow
from the residential mortgage loans will provide adequate liquidity for its
operating, investing and financing needs.

As presented in the accompanying statement of cash flows, the primary sources of
funds during the nine months ended September 30, 2000 were $52.5 million
provided by operating activities and $120.7 million provided by mortgage loan
principal repayments. The primary uses of funds were $122.2 million in purchases
of mortgage loans, $34.2 million in preferred stock dividends paid and $3.5
million in common stock dividends paid.




                                       15

<PAGE>


OTHER MATTERS

As of September 30, 2000, the Company was in full compliance with the REIT tax
rules and believes that it will continue to qualify as a REIT under the
provisions of the IRC. The Company calculates:

a.  its Qualified REIT Assets, as defined in the Code, to be 97% of its total
    assets, as compared to the Federal tax requirements that at least 75% of its
    total assets must be Qualified REIT assets; and

b.  that 99% of its revenue qualifies for the 75% source of income test and 99%
    of its revenue qualifies for the 95% source of income test under the REIT
    rules.

The Company also met all REIT requirements regarding the ownership of its stock
and anticipates meeting the annual distribution requirements.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in reported market risks faced by the
Company since the Company's report in Item 7A of its Form 10-K for the year
ended December 31, 1999.



                                       16

<PAGE>



PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is not the subject of any material litigation. None of the Company,
the Bank or any of its affiliates is currently involved in nor, to the Company's
knowledge, is currently threatened with, any material litigation with respect to
the residential mortgage loans included in the portfolio other than routine
litigation arising in the ordinary course of business, most of which is covered
by liability insurance.


ITEM 6. EXHIBITS AND CURRENT REPORTS ON FORM 8-K

        (a)   Exhibits:

              3.1   Amended and Restated Charter of the Registrant (Incorporated
                    by reference to Exhibit 3.1 to the Registrant's Quarterly
                    Report on Form 10-Q for the quarter ended March 31, 1997).

              3.2   By-laws of the Registrant, as amended (Incorporated by
                    reference to Exhibit 3(b) to Amendment No. 2 to the
                    Registrant's Registration Statement on Form S-11 (File No.
                    333-11609)).

              27.1  Financial Data Schedule

        (b)   Reports on Form 8-K:

              No Current Reports on Form 8-K were filed during the quarter
              ended September 30, 2000.





                                       17


<PAGE>


                                    SIGNATURE

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

                California Federal Preferred Capital Corporation


                                    /s/ Richard H. Terzian
                --------------------------------------------------------------
          By:   Richard H. Terzian
                Executive Vice President, Chief Financial Officer and Director

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


November 7, 2000



                                       18