California Financial reports earnings of $6.9 million or $1.44 per share.

STOCKTON, Calif.--(BUSINESS WIRE)--Jan. 24, 1997--

Merger with Temple-Inland proceeding on schedule

Despite the third quarter recording of a $6.6 million expense that represented Stockton Savings Bank's share of an industry-wide assessment, California Financial Holding Company (NASDAQ:CFHC), the holding company for Stockton Savings Bank, today reported net income more than tripled to $6.9 million or $1.44 per share for the year ended December 31, 1996, compared to $1.9 million or $.40 per share in 1995.

Excluding the industry-wide assessment to recapitalize the Savings Association Insurance Fund (SAIF), net income would have been $10.8 million, or $2.25 per share, representing a record year for the Bank.

California Financial's net income totaled $2.5 million or $.52 per share in the quarter ended December 31, 1996 compared to net income of $333,493 or $.07 per share in the like quarter a year ago. Fourth quarter 1996 earnings per share were below expectations due to $600,000 in charges incurred relating to the announced merger of the Bank. Without this expense, earnings would have been $2.8 million or $.59 per share for the quarter. Merger costs will continue to have a negative impact on earnings in 1997.

"Our results this year reflect improved margins, solid asset growth, stronger asset quality, and higher fee income," said Robert Kavanaugh, President and Chief Operating Officer. "We have accomplished all that we said we should do. We have a great team that has worked through a tough real estate market over the past four years to bring this institution back into a very profitable position." Net interest income after loan loss provisions rose to $38.6 million in 1996 compared to $30.1 million in 1995. In the fourth quarter, net interest income after loan loss provisions increased to $9.9 million, compared to $8.6 million in the fourth quarter of 1995. Fourth quarter net interest margin was 3.14%, well above the 2.88% margin of a year ago.

"Total noninterest income rebounded to $7.1 million for all 1996 from a loss of $1.9 million a year ago, when results were impacted by nearly $8 million in write-offs against real estate held for development and other assets," noted Jane Butterfield, Senior Vice President and Treasurer. "Noninterest expense, including the special $6.6 million SAIF assessment, increased to $33.6 million for the year versus $24.8 million a year ago and was well covered by the Bank's $38.6 million in 1996's net interest income after provision for losses. Our financial health remains solid. The Bank is considered 'well capitalized' by regulatory definition with a risk-based capital ratio of 12.69%."

California Financial recorded $326.6 million in loan originations for all 1996 compared to $283.3 million in 1995. Loan originations were $63.0 million in the fourth quarter of 1996 compared to $87.6 million in the third quarter of this year and $71.6 million one year ago.

Total nonperforming assets declined to $14.8 million or 1.11% of total assets at December 31, 1996, compared to $16.2 million or 1.21% at the end of the previous quarter and $17.5 million or 1.39% of total assets one year ago. "Improving asset quality has been one of our highest priorities this year," Butterfield stated.

"We are relieved the SAIF recapitalization is finally resolved, despite its painful short-term costs," Kavanaugh said. "This issue has been overhanging our industry for several years. Our FDIC premiums will be significantly reduced, which will have a positive effect on future earnings." On September 30, 1996, the government mandated the assessment to recapitalize SAIF, which is part of the Federal Deposit Insurance Corporation (FDIC). The special assessment, charged to every savings and loan with deposits insured by SAIF, was part of the US Congressional omnibus appropriations package. It was calculated at .657% of insured deposits as of March 31, 1995.

California Financial's assets were $1.34 billion at December 31, 1996, approximately $80 million above the $1.26 billion in assets a year ago. Deposits remained fairly flat to a year ago. Shareholder equity rose to $89.9 million from $85.6 million. Tangible book value per share rose to $18.87 at December 31, 1996 from $18.13 at the end of 1995. The Company regularly pays a cash dividend of $.11 a share per quarter.

"Our merger with Temple-Inland is proceeding on schedule. Shareholders will vote on the merger proposal at the regular annual meeting, which will be held April 28," Kavanaugh said. If approved, Temple-Inland Inc. (NYSE:TIN) will acquire California Financial for common stock and cash valued at $30 per share under terms of an agreement announced on December 9. Total value of the transaction is approximately $150 million. Temple-Inland manufactures paper, corrugated packaging and building products and also has financial services operations in mortgage and consumer banking. It is the parent of Guaranty Federal, based in Austin, TX, which operates 113 banking centers in Texas with over $9 billion in assets and more than $6.3 billion of deposits.

California Financial is the parent of Stockton Savings Bank, an institution founded in 1887. It currently operates 26 offices throughout the Central San Joaquin Valley and the Sierra Foothills. The Bank is known as the hometown bank , offering its customers highly personalized service in the many communities it serves. CFHC shares closed the trading day yesterday, January 23, at $28.75 per share.

Statements concerning future performance, developments or events, concerning successful completion of merger plans as well as expectations for lower deposit insurance premiums, growth and market forecasts, and any other guidance on future periods, constitute forward-looking statements which are subject to a number of risks and uncertainties including interest rate fluctuations, weather-related expenses, and shareholder, government and regulatory actions which might cause actual events and results to differ materially from stated expectations. -0-

FINANCIAL HIGHLIGHTS
 (unaudited)                   Fourth Quarter Ended      Year Ended
(in thousands except per share)   December 31,           December 31,
                                  1996        1995     1996       1995

Total Interest Income         $  25,217   $  23,365  $  98,762 $  91,129
Net Interest Expense          $  15,128   $  14,781  $  58,944 $  59,373
Provision for Losses on Loans      (215)  $   -0-    $  (1,261)$  (1,634)
Net Interest Income After
  Provision for Losses on
  Loans                       $   9,874   $   8,584  $  38,557 $  30,122
Other Operating Income (Loss) $   1,623   $    (862) $   7,096 $  (1,876)
Other Operating Expense:
   General & Administrative
     Expense                  $   7,092   $   6,814  $  26,188 $   23,657
   SAIF Recapitalization
     Charges                  $   --      $   --     $   6,614 $   --
   Amortization of Deposit
     Base Premium             $      33   $     290  $     844 $    1,161
        Total Operating
          Expense             $   7,125   $   7,104  $  33,646 $   24,818
Income Taxes                  $   1,877   $     285  $   5,102 $    1,530
Net Income                    $   2,495   $     333  $   6,905 $    1,898
Earnings Per Share            $     .52   $     .07  $    1.44 $      .40
Earnings Per Share Excluding
 SAIF Charge                  $     .52   $     .07  $    2.25 $      .40
Earnings Per Share Excluding
 SAIF and Acquisition Charges $     .59   $     .07  $    2.31 $      .40
Weighted Average Shares
 Outstanding                      4,825       4,736      4,796      4,722


                                   December 31, 1996   December 31, 1995
Total Assets                          $   1,337,379       $   1,257,585
Shareholders' Equity                  $      89,877       $      85,602
Book Value per Share                  $       18.96       $       18.36
Tangible Book Value per Share         $       18.87       $       18.13

Loan Originations:                    $     326,559       $     283,290


FINANCIAL STATISTICS
(ratios annualized)           Fourth Quarter Ended   Twelve Months Ended
                                   December 31,          December 30,
                             1996   Pre SAIF  1995   1996   Pre SAIF  1995
Return on Average Assets     0.75%   0.75%   0.11%   0.53%   0.83%    0.15%
Return on Average Equity    11.18%  10.71%   1.56%   7.89%  12.17%    2.26%
Efficiency Ratio            61.03%  61.03%  67.89%  71.73%  57.27%   63.66%
 (operating expense/revenue)
Operating Expense/Assets     2.12%   2.12%   2.18%   2.51%   2.01%   1.86%
Spread (yield, less cost of
 funds)                      2.95%   2.12%   2.71%   2.99%           2.49%
Net Interest Margin          3.14%           2.88%   3.18%           2.63%
Avg. Financial Assets/     104.10%         103.50% 103.89%         102.67%
 Avg. Financial Liabilities

Note: Performance ratios for 1996 are presented both including and
excluding the effect of the Federally mandated SAIF recapitalization
assessment for comparative purposes.

-0-

FINANCIAL STATISTICS (continued)
($ in thousands)

LOANS:                               Year Ended           Year Ended
                                  December 31, 1996     December 31, 1995

LOANS BY COLLATERAL TYPE:
Residential real estate              $   748,325           $   745,793
Multifamily real estate              $    45,326           $    38,130
Commercial real estate               $    68,322           $    55,518
Construction                         $    82,261           $    88,431
Land                                 $    46,658           $    39,401
Total                                $   990,892           $   967,273



                             Fourth Quarter Ended     Fourth Quarter Ended
                              December 31, 1996        December 31, 1995
ALLOWANCE FOR LOAN LOSSES:
Balance at beginning of quarter      $     7,393           $    8,952
Provision for loan losses            $       215           $      -0-
Charge offs (net of recoveries)      $       331           $      778
Balance at end of quarter            $     7,277           $    8,174
Loan loss allowance /
 Non-performing loans                      72.03%               59.00%

NONPERFORMING ASSETS:
Accruing Loans - 90 Days Past Due    $       -0-           $       -0-
Non-accrual Loans                    $     7,301           $    4,892
Restructured Loans on accrual        $     1,465           $    6,632
Total Nonperforming Loans            $     8,766           $   11,524
Real Estate Owned (REO)              $     5,994           $    5,977
Total Nonperforming Assets           $    14,760           $   17,501
Total Nonperforming Assets /
 Total Assets                               1.11%                1.39%
Loan and REO Loss Allowance as a %
  of Nonperforming Assets                  42.78%               38.85%
Loan Loss Allowance / Net Loans              .65%                 .74%

CONTACT: CALIFORNIA FINANCIAL

Jane Butterfield

Senior Vice President/Treasurer

Chief Financial Officer

[phone]