HOMESIDE INC, S-1, 1996-12-12

HOMESIDE INC
S-1, 1996-12-12
MORTGAGE BANKERS & LOAN CORRESPONDENTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933

------------------------

HOMESIDE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 6162 59-3387041
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

------------------------

7301 BAYMEADOWS WAY
JACKSONVILLE, FL 32256
(904) 281-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

------------------------

ROBERT J. JACOBS, VICE PRESIDENT AND SECRETARY
HOMESIDE, INC.
7301 BAYMEADOWS WAY
JACKSONVILLE, FL 32256
(904) 281-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

------------------------

COPIES OF ALL COMMUNICATIONS TO:

<TABLE>
<S> <C> <C>
MARY ELLEN O'MARA AND JONATHAN B. MILLER
HUTCHINS, WHEELER & DITTMAR BROWN & WOOD LLP
A PROFESSIONAL CORPORATION ONE WORLD TRADE CENTER
101 FEDERAL STREET NEW YORK, NEW YORK 10048
BOSTON, MASSACHUSETTS 02110 (212) 839-5300
(617) 951-6600
</TABLE>

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.

------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]

<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
=====================================================================================================
PROPOSED MAXIMUM
AMOUNT PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE(1)(2) FEE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share........................... 6,785,000(1) $18.00 $122,130,000 $37,010
=====================================================================================================
</TABLE>
(1) Includes 885,000 shares which the Underwriters have the option to purchase
from the Company to cover over-allotments, if any.

(2) Estimated pursuant to Rule 457 under the Securities Act of 1933 solely for
the purpose of calculating the registration fee.

------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 12, 1996
PROSPECTUS
5,900,000 SHARES

[HOMESIDE LOGO]

COMMON STOCK
------------------------

All of the shares of Common Stock (the "Common Stock") offered hereby are
being sold by HomeSide, Inc. (the "Company"). Prior to this offering (the
"Offering") there has been no public market for the Common Stock. It is
currently estimated that the initial public offering price for the Common Stock
will be between $16.00 and $18.00 per share. See "Underwriting" for information
relating to the determination of the initial public offering price.

The Company intends to submit an application to list the Common Stock on
the New York Stock Exchange, subject to official notice of issuance, under the
symbol HLI.

SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
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- -------------------------------------------------------------------------------------------------
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share...................... $ $ $
- -------------------------------------------------------------------------------------------------
Total(3)....................... $ $ $
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- -------------------------------------------------------------------------------------------------
<FN>
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting estimated expenses of $2,000,000 payable by the Company.

(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to an aggregate of 885,000
additional shares of Common Stock at the initial price to public per share
less the underwriting discount, for the purpose of covering over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
</TABLE>
------------------------

The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by the
Underwriters and subject to approval of certain legal matters by counsel for the
Underwriters and certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that the delivery of certificates for the shares of Common Stock
will be made in New York, New York on or about , 1997.
------------------------

MERRILL LYNCH & CO. SMITH BARNEY INC.
------------------------
The date of this Prospectus is , 1997.

<PAGE> 3

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement," which term shall include all amendments, exhibits, annexes and
schedules thereto) pursuant to the Securities Act of 1933 (the "Act" or the
"Securities Act"), and the rules and regulations promulgated thereunder,
covering the Common Stock being offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the Commission
and to which reference is hereby made. Statements made in this Prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference. For
further information with respect to the Company, reference is made to such
Registration Statement. The Company is subject to the informational requirements
of the Securities Exchange Act of 1934 (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. The
Registration Statement and the reports and other information filed by the
Company with the Commission in accordance with the Exchange Act may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth St., N.W., Washington, D.C. 20549, and at
the Regional Offices of the Commission at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can be
obtained from the public reference facilities of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov.

The Company intends to furnish the holders of Common Stock with annual
reports containing financial statements audited by its independent certified
public accountants and with quarterly reports containing unaudited financial
statements for each of the first three quarters of each fiscal year.

------------------------

Unless otherwise referred to herein or the context otherwise requires,
references to "HomeSide" shall mean HomeSide, Inc., a Delaware corporation, and
its consolidated subsidiaries, including HomeSide Lending, Inc. ("HLI"),
formerly known as BancBoston Mortgage Corporation ("BBMC"), and HomeSide
Holdings, Inc. ("HHI"), formerly known as Barnett Mortgage Company ("BMC"). Both
BBMC and BMC operated on a fiscal year end of December 31. HomeSide was formed
in December 1995, but had no operations prior to its acquisition of BBMC on
March 15, 1996 (the "HLI Acquisition"), which was accounted for as a purchase
transaction. HomeSide acquired BMC on May 31, 1996 (the "HHI Acquisition"),
which was accounted for as a purchase transaction. HomeSide has adopted a
February 28 fiscal year end and all references herein to 1997 refer to the
fiscal year ending February 28, 1997. Unless otherwise stated, all 1996 interim
financial information for HLI is for the period January 1, 1996 to March 15,
1996. In addition, all interim financial information for HHI is for the period
January 1, 1996 to May 30, 1996 and April 1, 1996 to May 30, 1996.

All combined or pro forma financial information for HomeSide as of November
30, 1996 or for the period March 16, 1996 to November 30, 1996 has been prepared
using HomeSide information as of November 30, 1996 or for the period beginning
March 16, 1996 and HHI information beginning April 1, 1996 to May 30, 1996. All
information for HomeSide presented as of or for the period ended March 31, 1996
has been prepared by combining information for HLI for the period ended March
15, 1996 with information for HomeSide for the period March 16, 1996 to March
31, 1996. HomeSide's executive offices are located at 7301 Baymeadows Way,
Jacksonville, Florida 32256, telephone number (904) 281-3000.

------------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL ON THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE> 4
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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information, risk factors and financial
statements, including the related notes, appearing elsewhere in this Prospectus.
Unless otherwise indicated, all information in this Prospectus (i) assumes that
the over-allotment option granted to the Underwriters has not been exercised,
(ii) reflects the filing of an amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares of capital stock, and
(iii) gives effect to a for stock split which will occur immediately prior
to the closing of this Offering.

THE COMPANY

HomeSide is one of the largest full-service residential mortgage banking
companies in the United States, formed through the acquisition of the mortgage
banking operations of The First National Bank of Boston ("Bank of Boston" or
"BKB") and Barnett Banks, Inc. ("Barnett"). HomeSide's strategy emphasizes
variable cost mortgage origination and low cost servicing. On a combined basis
HomeSide's origination volume and servicing portfolio would have been $14.7
billion and $75.0 billion, respectively, for and as of the year ended December
31, 1995, ranking the Company as the 5th largest originator and 7th largest
servicer in the United States for 1995 based on data published by National
Mortgage News. For and as of the nine months ended November 30, 1996, HomeSide's
loan originations and acquisitions were $18.9 billion and its servicing
portfolio was $88.7 billion.

The residential mortgage market totaled over $3.6 trillion in 1995 and is
the second largest debt market in the world, exceeded only by the United States
Treasury market. The residential mortgage market has grown at a compound annual
rate of approximately 8% since 1985. HomeSide competes in a mortgage banking
market which is highly fragmented with no single company controlling or
dominating the market. In 1995 the largest originator represented 5.2% of the
market and the largest servicer represented 3.7%, while the top 25 originators
and servicers represented 38.1% and 39.1% of their markets, respectively.
Residential mortgage lenders compete primarily on the basis of loan pricing and
service, making effective cost management essential. The industry has
experienced rapid consolidation which has been accelerated by the introduction
of significant technology improvements and the economies of scale present in
mortgage servicing. The top 25 mortgage loan servicers have increased their
aggregate market share from 20.7% in 1990 to 39.1% in 1995.

HomeSide's business strategy is to increase the volume of its loan
originations and the size of its servicing portfolio while continuing to improve
operating efficiencies. In originating mortgages, HomeSide focuses on variable
cost channels of production, including correspondent, broker, consumer direct,
affinity, and co-issue sources. HomeSide also pursues strategic relationships
such as its existing 5-year agreements to acquire and service residential
mortgage loans from BKB and Barnett production sources, which, for the period
May 31, 1996 through November 30, 1996, represented 19.5% of HomeSide's loan
production. Management believes that these variable cost channels of production
deliver consistent origination opportunities for HomeSide without the fixed cost
investment associated with traditional retail mortgage branch networks. The
Company believes that its ongoing investment in technology will further enhance
and expand existing processing capabilities and improve its efficiency. Based on
independent surveys of direct cost per loan and loans serviced per employee,
management believes that the Company has been one of the industry's most
efficient mortgage servicers.

HomeSide plans to build its core operations through (i) improved economies
of scale in servicing costs; (ii) increased productivity using proprietary
technology; and (iii) expanded and diversified variable cost origination
channels. In addition, the Company intends to pursue additional loan portfolio
acquisitions and strategic origination relationships similar to the existing BKB
and Barnett arrangements.

HomeSide's business activities consist primarily of:

- Mortgage production: origination and purchase of residential single
family mortgage loans through multiple channels including
correspondents, strategic partners (BKB and Barnett), mortgage brokers,
co-issue partners, direct consumer telemarketing and affinity programs;

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3
<PAGE> 5
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- Servicing: administration, collection and remittance of monthly
mortgage principal and interest payments, collection and payment of
property taxes and insurance premiums and management of certain loan
default activities; and

- Secondary marketing: sale of residential single family mortgage loans
as pools underlying mortgage-backed securities guaranteed or issued by
governmental or quasi-governmental agencies or as whole loans or
private securities to investors;

- Risk management: management of a program designed primarily to
protect the economic performance of the servicing portfolio that could
otherwise be adversely affected by increased loan prepayments due to
declines in interest rates.

Ownership. Prior to the issuance of the Common Stock offered hereby,
Thomas H. Lee Equity Fund III, L.P. (the "Fund") and certain affiliates of
Thomas H. Lee Company (collectively, "THL") and Madison Dearborn Capital
Partners, L.P. ("MDP") collectively owned approximately 33% of HomeSide; Bank of
Boston and Siesta Holdings, Inc., an affiliate of Barnett ("Siesta"), each owned
approximately 33%; and management of HomeSide and certain unaffiliated investors
owned the remainder. THL, MDP, Bank of Boston and Siesta are collectively
referred to herein as the "Principal Shareholders." Immediately following the
Offering, the Principal Shareholders will own approximately [ ]% of the
outstanding Common Stock (approximately [ ]% if the Underwriters'
over-allotment option is exercised in full). See "Security Ownership of Certain
Beneficial Owners and Management."

THE OFFERING

COMMON STOCK OFFERED....... 5,900,000 shares(a)

COMMON STOCK TO BE
OUTSTANDING AFTER THE
OFFERING................. shares(b)(c)

PROPOSED NYSE SYMBOL....... HLI

USE OF PROCEEDS............ $77,875,000 of the net proceeds of this Offering
will be used to repay, at the applicable redemption
premium of 11 1/4%, $70,000,000 principal amount of
the Company's 11 1/4% Senior Secured Second
Priority Notes due 2003 (the "Notes") and
$14,407,000 of the net proceeds will be used to
reduce amounts outstanding under a bank credit
facility extended to certain of the Company's
subsidiaries. See "Use of Proceeds."
- ---------------

(a) If the Underwriters exercise their over-allotment option in full, the total
number of shares of Common Stock offered will be 6,785,000.

(b) Excludes an aggregate of shares of Common Stock reserved for
issuance upon the exercise of options granted under employee stock option
plans. See "Management -- Executive Compensation."

(c) If the Underwriters exercise their over-allotment option in full, the total
number of shares of Common Stock outstanding after the Offering will be
.

RISK FACTORS

See "Risk Factors" starting on page 11 for a discussion of certain factors
which should be considered by prospective investors in evaluating an investment
in the Common Stock.

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4
<PAGE> 6
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HOMESIDE
SUMMARY UNAUDITED HISTORICAL FINANCIAL AND OPERATING INFORMATION

The following table sets forth summary unaudited historical financial and
operating information for HomeSide for the period ended May 31, 1996 (which
includes only the results of HLI), for each of the three months ended August 31,
1996 and November 30, 1996 and for the period March 16, 1996 to November 30,
1996. The results of HHI, which HomeSide acquired as of May 31, 1996, are
included in results for HomeSide as of and for the period commencing May 31,
1996. Such information should be read in conjunction with, and is qualified in
its entirety by reference to, HomeSide's consolidated financial statements, pro
forma financial information and related notes included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE THREE FOR THE THREE FOR THE PERIOD
MARCH 16, 1996 MONTHS ENDED MONTHS ENDED MARCH 16, 1996
TO MAY 31, 1996 AUGUST 31, 1996 NOVEMBER 30, 1996 NOVEMBER 30, 1996
--------------- --------------- ----------------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Mortgage servicing fees.......... $ 41,485 $ 83,349 $ 91,636 $ 216,470
Amortization of mortgage
servicing rights............... (16,442) (40,464) (48,831) (105,737)
----------- ----------- ----------- -----------
Net servicing revenue.......... 25,043 42,885 42,805 110,733
Interest income.................. 12,719 22,270 25,241 60,230
Interest expense................. (14,962) (23,920) (22,321) (61,203)
----------- ----------- ----------- -----------
Net interest revenue........... (2,243) (1,650) 2,920 (973)
Net mortgage origination
revenue........................ 10,810 16,273 16,521 43,604
Other income..................... 107 355 79 541
----------- ----------- ----------- -----------
Total revenues......... 33,717 57,863 62,325 153,905
Expenses:
Salaries and employee benefits... 11,480 21,177 20,650 53,307
Occupancy and equipment.......... 1,846 3,084 3,337 8,267
Servicing losses on
investor-owned loans........... 3,938 4,058 4,957 12,953
Other expenses................... 5,345 12,523 11,711 29,579
----------- ----------- ----------- -----------
Total expenses......... 22,609 40,842 40,655 104,106
Income before income taxes....... 11,108 17,021 21,670 49,799
Income tax expense............... 4,554 6,954 9,015 20,523
----------- ----------- ----------- -----------
Net income(a).................... $ 6,554 $ 10,067 $ 12,655 $ 29,276
=========== =========== =========== ===========
Net income per share(a).......... $ $ $ $
Weighted average number of shares
outstanding....................
Pro forma net income per share... $ $ $ $
Pro forma weighted average shares
outstanding....................

SELECTED OPERATING DATA:
Volume of loans originated and
acquired....................... $ 3,780,236 $ 9,565,199(c) $ 5,540,875 $18,886,310(c)
Loan servicing portfolio
(at period end)................ 78,391,496 85,835,155(c) 88,706,478 88,706,478
Loan servicing portfolio
(average during the period).... 44,718,020(b) 82,247,794 87,537,188 70,667,798(d)
Weighted average interest rate
for the servicing portfolio (at
period end).................... 7.86% 7.92% 7.91% 7.91%
Weighted average servicing fee
for the servicing portfolio (at
period end).................... 0.367% 0.363% 0.359% 0.359%
</TABLE>

(footnotes on following page)
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5
<PAGE> 7
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<TABLE>
<CAPTION>
AT NOVEMBER 30, 1996
AT AT ----------------------------
MAY 31, 1996 AUGUST 31, 1996 ACTUAL AS ADJUSTED (e)
------------ --------------- ----------- ---------------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Mortgage loans held for sale.......... $ 974,484 $1,290,841 $1,101,229 $1,101,229
Mortgage servicing rights............. 1,235,708 1,428,117 1,339,819 1,339,819
Total assets.......................... 2,666,771 2,934,938 2,858,711 2,856,226
Warehouse credit facility............. 954,994 1,245,591 1,074,583 1,074,583
Long-term debt........................ 1,168,059 1,064,067 1,157,508 1,073,101
Total liabilities..................... 2,301,517 2,559,817 2,470,785 2,382,130
Total stockholders' equity............ 364,954 375,121 387,926 474,096
<FN>
- ---------------

(a) Adjusted to give effect to the HHI Acquisition and sale of Common Stock
offered hereby as if such transactions occurred on March 15, 1996.

(b) Period information is for the period March 1, 1996 through May 31, 1996.

(d) Period information is for the period March 1, 1996 through November 30,
1996.

(e) Adjusted to give effect to the sale of the Common Stock offered hereby and
the application of the proceeds therefrom as described under "Use of
Proceeds", as if such transactions had occurred on November 30, 1996. For
additional information see "Index to Financial Statements -- Unaudited Pro
Forma Consolidated Financial Information."
</TABLE>
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6
<PAGE> 8

HOMESIDE

SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING INFORMATION

The summary unaudited pro forma consolidated financial information for
HomeSide set forth below has been derived from financial information included
elsewhere in this Prospectus and all such information is presented on a pro
forma basis, giving effect to the HHI Acquisition and the HLI Acquisition by the
Company for income statement data as if each such transaction had occurred on
March 15, 1996. In addition, the summary pro forma consolidated income statement
information for the periods ended May 31, August 31 and November 30, 1996,
reflect the consummation of this Offering and the application of the proceeds
thereof as described under "Use of Proceeds" as if such transactions had
occurred on March 16, 1996. The unaudited pro forma consolidated financial
information does not purport to represent what HomeSide's results of operations
would have been if the HLI Acquisition and the HHI Acquisition had actually been
completed as of the dates indicated and is not intended to project HomeSide's
financial position or results of operations for any future period. The following
summary information should be read in conjunction with, and is qualified in its
entirety by reference to, the historical financial statements of HomeSide, HLI
and HHI and the unaudited pro forma consolidated financial information for
HomeSide and the related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS ADJUSTED FOR THE OFFERING
--------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
PERIOD THREE THREE PERIOD
FOR THE YEAR MARCH 16, MONTHS MONTHS MARCH 16,
ENDED 1996 ENDED ENDED 1996 TO
DECEMBER 31, TO MAY 31, AUGUST 31, NOVEMBER 30, NOVEMBER 30,
1995 1996 1996 1996 1996
------------ ---------- ---------- ------------ ------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Revenues:
Mortgage servicing fees........................ $ 301.5 $ 62.1 $ 83.3 $ 91.6 $ 237.0
Gain on risk management contracts(a)........... 108.7 -- -- -- --
Amortization of mortgage servicing rights...... (172.8) (26.2) (40.5) (48.8) (115.5)
------- ------- ------- ------- -------
Net servicing revenue........................ 237.4 35.9 42.8 42.8 121.5
Interest income................................ 66.9 19.3 22.3 25.2 66.8
Interest expense............................... (72.4) (18.0) (21.6) (19.9) (59.5)
------- ------- ------- ------- -------
Net interest revenue......................... (5.5) 1.3 0.7 5.3 7.3
Net mortgage origination revenue............... 0.7 11.8 16.3 16.5 44.6
Other income................................... 0.7 0.1 0.4 0.1 0.6
------- ------- ------- ------- -------
Total revenues........................ 233.3 49.1 60.2 64.7 174.0
Total expenses........................ 144.1 35.6 40.9 40.7 117.2
------- ------- ------- ------- -------
Income before income taxes..................... 89.2 13.5 19.3 24.0 56.8
Income tax expense............................. 36.5 5.5 8.0 10.0 23.5
------- ------- ------- ------- -------
Net income..................................... $ 52.7 $ 8.0 $ 11.3 $ 14.0 $ 33.3
======= ======= ======= ======= =======
Net income per share........................... $ -- $ $ $ $
Weighted average number of shares outstanding
(in millions)................................ --

SELECTED OPERATING DATA:
Volume of loans originated and acquired........ $14,652 $ 4,762 $ 9,565(c) $ 5,541 $19,868(c)
Loan servicing portfolio (at period end)....... 74,966 78,391 85,835(c) 88,706 88,706
Loan servicing portfolio (average during the
period)...................................... 69,953 77,763(b) 79,938 87,537 70,668(d)
Weighted average interest rate for the
servicing portfolio (at period end).......... 8.01% 7.86% 7.92% 7.91% 7.91%
Weighted average servicing fee for the
servicing portfolio (at period end).......... 0.351% 0.355% 0.363% 0.359% 0.359%
</TABLE>

(footnotes on following page)

7
<PAGE> 9

<TABLE>
<CAPTION>
AT NOVEMBER 30, 1996
-------------------------------
AS
ACTUAL ADJUSTED(E)
------------ ------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
SELECTED BALANCE SHEET DATA:
Total assets............................................................. $2,858,711 $2,856,226
Warehouse credit facility................................................ 1,074,583 1,074,583
Long-term debt........................................................... 1,157,508 1,073,101
Total liabilities........................................................ 2,470,785 2,382,130
Total stockholders' equity............................................... 387,926 474,096
</TABLE>

- ---------------

(a) The non-cash portion of gain on risk management contracts was $86.5 million
pro forma HomeSide for the HLI Acquisition and HHI Acquisition for the year
ended December 31, 1995. See Note 3 of HomeSide's November 30, 1996
financial statements on F-5 for a description of HomeSide's hedge accounting
policy.

(b) Period information is for the period March 1, 1996 through May 31, 1996.

(d) Period information is for the period March 1, 1996 through November 30,
1996.

(e) Adjusted to give effect to the sale of Common Stock offered hereby and the
application of the net proceeds therefrom as described under "Use of
Proceeds," as if such transactions had occurred on November 30, 1996. For
additional information see "Index to Financial Statements -- Unaudited Pro
Forma Consolidated Financial Information."

8
<PAGE> 10

HLI
SUMMARY HISTORICAL FINANCIAL AND OPERATING INFORMATION

The following table sets forth summary historical financial and operating
information for HLI (formerly BancBoston Mortgage Corporation). Such information
should be read in conjunction with, and is qualified in its entirety by
reference to, the consolidated financial statements, pro forma financial
information and related notes included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE THREE JANUARY 1,
YEARS ENDED DECEMBER 31, MONTHS ENDED 1996 TO MARCH
------------------------------------------------------------------- MARCH 31, 15,
1991 1992 1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- ----------- ------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues:
Mortgage servicing fees.... $ 92,362 $ 105,890 $ 111,822 $ 140,491 $ 173,038 $ 43,657 $ 38,977
Gain (loss) on risk
management contracts..... -- -- 6,688 (6,702) 108,702 3,612 (128,795)
Amortization of mortgage
servicing rights......... (37,213) (73,908) (112,492) (66,801) (108,013) (23,103) (7,245)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net servicing revenue.... 55,149 31,982 6,018 66,988 173,727 24,166 (97,063)
Interest income............ 41,252 46,865 50,156 31,585 24,324 4,122 8,423
Interest expense........... (27,686) (38,855) (44,199) (33,952) (27,128) (6,079) (10,089)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest revenue..... 13,566 8,010 5,957 (2,367) (2,804) (1,957) (1,666)
Net mortgage origination
revenue (expense)........ 6,508 1,123 6,173 4,983 3,417 (1,083) 7,638
Gain on sales of servicing
rights................... 12,034 14,769 651 10,862 10,230 4,285 --
Other income............... 52 17 50 147 511 13 253
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues..... 87,309 55,901 18,849 80,613 185,081 25,424 (90,838)
Expenses:
Salaries and employee
benefits............... 27,328 30,053 33,096 40,370 45,381 11,696 10,287
Occupancy and equipment.. 7,809 7,788 7,966 9,012 10,009 2,358 2,041
Servicing losses on
investor-owned loans... 2,880 8,138 2,770 7,177 9,981 733 5,560
Real estate acquired..... 1,195 1,124 1,600 253 1,054 218 291
Other expenses........... 17,552 20,461 22,058 19,326 21,896 4,713 7,377
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses..... 56,764 67,564 67,490 76,138 88,321 19,718 25,556
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes and cumulative
effects of changes in
accounting principles.... $ 30,545 $ (11,663) $ (48,641) $ 4,475 $ 96,760 $ 5,706 $ (116,394)
=========== =========== =========== =========== =========== =========== ===========
Net income (loss).......... $ 18,377 $ (7,834) $ (85,185) $ 5,405 $ 58,826 $ 3,429 $ (73,861)
=========== =========== =========== =========== =========== =========== ===========
SELECTED OPERATING DATA:
Volume of loans originated
and acquired............. $ 5,196,996 $ 9,705,875 $13,682,761 $14,473,000 $ 9,567,521 $ 1,181,642 $ 4,187,603(a)
Loan servicing portfolio
(at period end).......... 20,600,569 23,705,642 27,999,100 37,971,200 41,555,354 37,800,120 44,158,163(a)
Loan servicing portfolio
(average)................ 19,663,100 22,153,100 25,852,400 33,178,600 39,283,700 38,099,730 43,158,072(a)
Weighted average interest
rate (at period end)..... 9.65% 9.05% 8.07% 7.91% 7.97% 7.90% 7.92%(a)
Weighted average servicing
fee (average for
period).................. 0.400% 0.390% 0.372% 0.389% 0.383% 0.384% 0.380%(a)
SELECTED BALANCE SHEET
DATA (AT PERIOD END):
Mortgage loans held for
sale..................... $ 507,776 $ 495,455 $ 607,506 $ 271,215 $ 388,436 $ 70,978 $ 641,465
Mortgage servicing
rights................... 296,393 337,307 281,727 431,148 551,338 414,974 542,862
Total assets............... 1,034,269 1,073,686 1,193,583 1,006,887 1,254,303 858,001 1,512,902
Note payable to parent..... 748,827 799,992 1,019,011 779,021 966,000 648,499 1,256,000
Total liabilities.......... 818,890 866,141 1,071,223 879,122 1,067,712 726,807 1,400,172
Total stockholders'
equity................... 215,379 207,545 122,360 127,765 186,591 131,194 112,730
</TABLE>

- ---------------
(a) Period information is for the period January 1, 1996 to March 31, 1996 and
period end information is at March 31, 1996.

9
<PAGE> 11

HHI
SUMMARY HISTORICAL FINANCIAL AND OPERATING INFORMATION

The following table sets forth summary historical financial and operating
information for HHI (formerly Barnett Mortgage Company). Such information should
be read in conjunction with, and is qualified in its entirety by reference to,
the consolidated financial statements, pro forma financial information and
related notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FOR THE
THREE FOR THE
YEARS ENDED DECEMBER 31, MONTHS ENDED PERIOD APRIL
------------------------------------------------------- JUNE 30, 1, 1996 TO
1991 1992 1993 1994(A) 1995(B) 1995 MAY 30, 1996
------- -------- -------- -------- -------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Mortgage origination revenue:
Mortgage origination fees..... $ -- $ -- $ 358 $ 3,276 $ 17,104 $ 3,469 $ 1,646
Gain (loss) on sales of loans,
net......................... 3,184 8,187 5,688 692 (13,920) 995 (3,383)
------- ------- ------- -------- -------- -------- -------
Total mortgage
origination revenue.... 3,184 8,187 6,046 3,968 3,184 4,464 (1,737)
Interest income (expense):
Interest income............... 765 657 855 3,460 27,264 4,420 5,638
Interest expense,
substantially all to
affiliates.................. (568) (531) (1,415) (4,911) (20,427) (6,766) (3,480)
------- ------- ------- -------- -------- -------- -------
Net interest income
(expense).............. 197 126 (560) (1,451) 6,837 (2,346) 2,158
Mortgage servicing revenue:
Mortgage servicing income..... 10,143 13,427 20,560 27,130 83,502 22,439 15,709
Mortgage servicing income from
affiliates.................. 6,986 16,143 18,326 20,017 25,057 6,407 5,464
Amortization of capitalized
mortgage servicing rights... (2,453) (6,013) (11,547) (17,783) (48,282) (12,124) (8,456)
Gain on sales of servicing.... -- -- -- -- 9,096 -- --
------- ------- ------- -------- -------- -------- -------
Net mortgage servicing
revenue................ 14,676 23,557 27,339 29,364 69,373 16,722 12,717
Other income................... 2,860 7,750 6,296 4,492 2,592 6,203 1,678
------- ------- ------- -------- -------- -------- -------
Total revenues........... 20,917 39,620 39,121 36,373 81,986 25,043 14,816
Expenses:
Salaries and benefits......... 7,778 13,698 13,914 17,474 53,070 14,301 10,402
General and administrative.... 10,349 11,401 12,432 14,924 41,849 12,119 6,816
Affiliate profit sharing...... 1,699 12,471 10,774 3,534 6,242 -- --
Occupancy and equipment....... 1,091 1,167 1,810 2,702 5,960 2,424 1,569
Amortization of goodwill...... -- -- -- 259 4,840 1,673 928
------- ------- ------- -------- -------- -------- -------
Total expenses........... 20,917 38,737 38,930 38,893 111,961 30,517 19,715
------- ------- ------- -------- -------- -------- -------
Income (loss) before income
taxes......................... $ 0 $ 883 $ 191 $ (2,520) $(29,975) (5,474) (4,899)
======= ======= ======= ======== ======== ======== =======
Net income (loss).............. $ (34) $ 17 $ 104 $ (2,058) $(20,386) $ (3,356) $(3,985)
======= ======= ======= ======== ======== ======== =======
SELECTED OPERATING DATA
(DOLLARS IN MILLIONS):
Volume of loans originated and
acquired...................... $ 1,945 $ 3,507 $ 3,360 $ 3,410 $ 5,767 $ 1,330 $ 982
Loan servicing portfolio (at
period end)................... 10,034 11,524 13,085 18,411 33,411 33,070 (d)
Loan servicing portfolio
(average)..................... 9,639 10,779 12,305 15,748 30,669 32,839 33,057
Weighted average interest rate
(at period end)(c)............ -- -- 7.34% 7.44% 8.05% 7.98% (d)
Weighted average servicing fee
(average for period)(c)....... -- -- 0.259% 0.261% 0.299% 0.301% 0.346%
SELECTED BALANCE SHEET DATA (AT
PERIOD END):
Mortgage loans held for sale... $ -- $ -- $ -- $183,914 $465,880 $331,184 (e)
Mortgage servicing rights...... 12,959 25,458 48,941 92,461 250,788 259,796 (e)
Total assets................... 42,082 61,166 96,186 359,472 994,630 857,046 (e)
Notes payable.................. 16,107 20,325 63,329 248,214 653,056 503,000 (e)
Total liabilities.............. 22,676 38,541 69,930 274,570 762,802 612,311 (e)
Total stockholders' equity..... 19,406 22,625 26,257 84,902 231,828 244,735 (e)

FOR THE SIX
MONTHS ENDED FOR THE PERIOD
JUNE 30, JANUARY 1, 1996
1995 TO MAY 30, 1996
------------ ---------------

<S> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Mortgage origination revenue:
Mortgage origination fees..... $ 6,005 $ 7,288
Gain (loss) on sales of loans,
net......................... 1,514 482
-------- --------
Total mortgage
origination revenue.... 7,519 7,770
Interest income (expense):
Interest income............... 7,003 14,216
Interest expense,
substantially all to
affiliates.................. (9,685) (9,574)
-------- --------
Net interest income
(expense).............. (2,682) 4,642
Mortgage servicing revenue:
Mortgage servicing income..... 35,723 38,833
Mortgage servicing income from
affiliates.................. 12,503 13,626
Amortization of capitalized
mortgage servicing rights... (20,475) (25,467)
Gain on sales of servicing.... -- --
-------- --------
Net mortgage servicing
revenue................ 27,751 26,992
Other income................... 7,054 1,740
-------- --------
Total revenues........... 39,642 41,144
Expenses:
Salaries and benefits......... 23,433 25,173
General and administrative.... 20,403 20,748
Affiliate profit sharing...... -- --
Occupancy and equipment....... 3,941 3,720
Amortization of goodwill...... 2,226 2,324
-------- --------
Total expenses........... 50,003 51,965
-------- --------
Income (loss) before income
taxes......................... (10,361) (10,821)
======== ========
Net income (loss).............. $ (7,484) $ (8,343)
======== ========
SELECTED OPERATING DATA
(DOLLARS IN MILLIONS):
Volume of loans originated and
acquired...................... $ 2,886 $ 2,538
Loan servicing portfolio (at
period end)................... 33,070 (d)
Loan servicing portfolio
(average)..................... 28,153 33,182
Weighted average interest rate
(at period end)(c)............ 7.98% (d)
Weighted average servicing fee
(average for period)(c)....... 0.299% 0.337%
SELECTED BALANCE SHEET DATA (AT
PERIOD END):
Mortgage loans held for sale... $331,184 (e)
Mortgage servicing rights...... 259,796 (e)
Total assets................... 857,046 (e)
Notes payable.................. 503,000 (e)
Total liabilities.............. 612,311 (e)
Total stockholders' equity..... 244,735 (e)
</TABLE>

- ---------------
(a) Includes operations of Loan America Financial Corporation since its
acquisition in October 1994.
(b) Includes operations of BancPLUS Financial Corporation since its acquisition
in February 1995.
(c) Information not available for 1991 and 1992.
(d) BMC was acquired by HomeSide on May 31, 1996 and, accordingly, its servicing
portfolio is included in HomeSide's servicing portfolio as of May 31, 1996.
(e) BMC was acquired by HomeSide on May 31, 1996 and, accordingly, all of its
assets and liabilities are included in the consolidated balance sheet of
HomeSide as of May 31, 1996.

10
<PAGE> 12

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be carefully considered before investing in the Common Stock
offered hereby.

IMPACT OF CHANGES IN INTEREST RATES; RESULTS OF RISK MANAGEMENT ACTIVITIES

Changes in interest rates can have a variety of effects on HomeSide's
business. In particular, changes in interest rates affect the volume of loan
originations and acquisitions, the interest rate spread on loans held for sale,
the amount of gain or loss on the sale of loans and the value of HomeSide's
servicing portfolio.

During periods of declining interest rates, HomeSide typically experiences
an increase in loan originations because of increased home purchases and,
particularly, increased refinancing activity. During 1990 to 1993, a period of
generally declining interest rates, refinancing activity as a percentage of
total originations in the industry increased from 13% in 1990 to 55% in 1993. In
contrast, refinancing activity decreased to 32% of total originations in 1994
and 25% in 1995 as the result of generally increasing interest rates. Increases
in interest rates may adversely affect refinancing activity, which could have an
adverse effect on HomeSide's origination revenues.

HomeSide's loans held for sale are generally funded by borrowings under its
revolving warehouse credit line. HomeSide's net warehouse interest income is the
difference between the interest income it earns on loans held for sale
(generally based on long-term interest rates) and the interest it pays on its
borrowings (generally based on short-term interest rates). To the extent this
spread narrows or becomes negative, HomeSide's results of operations could be
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- HomeSide -- Liquidity and Capital
Resources."

Gain or loss on sales of mortgage loans may result from changes in interest
rates from the time the interest rate on the customer's loan application is
established to the time HomeSide sells the loan. To manage interest rate risk
HomeSide uses a hedging strategy that is designed to minimize the negative
effect of changes in interest rates on loans that have closed and loans for
which interest rate commitments have been given that are expected to close.
HomeSide then enters into forward sale commitments and option contracts with
Fannie Mae, Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac")
and the private investors to whom HomeSide sells loans based on this analysis.
To the extent that this strategy utilized by the Company is not successful, the
Company's profitability may be adversely affected. For each year since 1990,
HomeSide has not experienced secondary market losses.

In addition, the value of HomeSide's servicing portfolio may be adversely
affected if mortgage interest rates decline and loan prepayments increase. In
periods of declining interest rates, the economic advantages to borrowers of
refinancing their mortgage loans become greater. Increases in the rate of
mortgage loan prepayments reduce the period during which HomeSide receives
servicing income from such loans. HomeSide capitalizes the cost of the
acquisition of servicing rights from third parties and began in 1996 to
capitalize servicing rights on loans that it originates. The value of servicing
rights is based upon the net present value of future cash flows. If the rate of
prepayment of the related loans exceeds the rate assumed by HomeSide, due to a
significant reduction in interest rates or otherwise, the value of the servicing
portfolio will decrease and accelerated amortization of servicing rights may
become necessary. Interest rate changes can also adversely affect the ability to
sell servicing rights to a third party or the proceeds from such a sale. While
HomeSide has established a hedging program designed to protect the value of its
servicing portfolio from declines in economic value, the results of such hedging
depend on a variety of factors, including the relationship between mortgage
rates and Treasury securities, the hedge instruments used and other factors. See
"Business -- HomeSide -- Servicing Portfolio Hedging Program".

HLI recognized a gain on risk management contracts of $108.7 million in
1995, of which $86.5 million was unrealized. During the first calendar quarter
of 1996, long-term interest rates increased, reversing the declining trend which
prevailed during 1995. As a result, through the date of the acquisition of HLI
in March 1996, HLI recognized a loss on risk management contracts of $128.8
million, which included a reversal of such $86.5 million unrealized gain
recognized during 1995. From March 16, 1996 to August 31, 1996, long-term
interest rates continued to increase. Accordingly, the risk management contracts
declined in total value by $84.0 million from March 16, 1996 to August 31, 1996.
During the three months ended November 30, 1996, interest rates declined

11
<PAGE> 13

and the value of risk management contracts increased by $133.3 million. In both
1995 and 1996, changes in the value of HomeSide's mortgage servicing rights
substantially offset the gain and loss on the risk management contracts.
However, such changes in value were not fully recorded in the financial
statements of HomeSide because servicing rights are recorded at the lower of
amortized cost or market value. See "Business -- HomeSide -- Servicing Portfolio
Hedging Program".

LOAN DELINQUENCIES AND DEFAULTS ON LOANS

HomeSide's profitability may be negatively impacted by economic downturns
as the frequency of loan defaults tends to increase. From the time that HomeSide
funds the loans it originates to the time it sells the loans, generally 10 to 40
days, HomeSide is generally at risk for any loan defaults. Once HomeSide sells
the loans it originates, the risk of loss from loan defaults and foreclosure
generally passes to the purchaser or insurer of the loans. In connection
therewith, HomeSide typically makes certain representations and warranties to
the purchasers and insurers of loans and to the purchasers of servicing rights.
Such representations and warranties generally relate to the origination and
servicing of loans in substantial conformance with state and federal laws and
applicable investor guidelines. If a loan defaults and there has been a breach
of these representations and warranties, HomeSide becomes liable for the unpaid
principal and interest on the defaulted mortgage loan. In such a case, HomeSide
may be required to repurchase the loan and bear the subsequent loss, if any.
Historically, the impact of loans repurchased by HomeSide as the result of such
breaches of representations and warranties has not been material. However, the
number and amount of loans repurchased in the future could increase due to the
high volume of loans which HomeSide originates, acquires and sells. Accordingly,
HomeSide believes that future charges to net income relating to loan repurchases
may be necessary as loan origination volume increases. See
"Business -- HomeSide -- Secondary Marketing".

HomeSide is also affected by loan delinquencies and defaults on loans that
it services. Under certain types of servicing contracts, particularly contracts
to service loans that have been pooled or securitized, the servicer must advance
all or part of the scheduled payments to the owner of the loan, even when loan
payments are delinquent. Also, to protect their liens on mortgaged properties,
owners of loans usually require the servicer to advance mortgage and hazard
insurance and tax payments on schedule even if sufficient escrow funds are not
available. The servicer will be reimbursed, subject to certain limitations with
respect to Federal Housing Administration ("FHA") and Veterans Administration
("VA") loans, by the mortgage owner or from liquidation proceeds for payments
advanced that the servicer is unable to recover from the mortgagor, although the
timing of such reimbursement is typically uncertain. In the interim, the
servicer must absorb the cost of funds advanced during the time the advance is
outstanding. Further, the servicer must bear the increased costs of attempting
to collect on delinquent and defaulted loans. HomeSide also foregoes servicing
income from the time such loan becomes delinquent until foreclosure when, if any
proceeds are available, such amounts may be recovered.

HomeSide periodically incurs losses attributable to servicing FHA and VA
loans for investors, including actual losses for final disposition of loans that
have been foreclosed or assigned to the FHA or VA and accrued interest on such
FHA or VA loans for which payment has not been received. HLI's servicing losses
on investor-owned loans totaled $2.8 million, $7.2 million and $10.0 million for
the years 1993, 1994 and 1995, respectively, and $5.6 million for the period
January 1, 1996 to March 15, 1996, primarily representing losses on VA loans.
HomeSide's servicing losses on investor-owned loans were $13.0 million for the
period March 16, 1996 to November 30, 1996, also primarily representing losses
on VA loans. Because the total principal amount of FHA loans is guaranteed,
losses on such loans are generally limited to expenses of collection. HomeSide
has experienced minimal losses from FHA loans. With respect to VA loans, the VA
guarantees the initial losses on a loan. The guaranteed amount generally ranges
from 20% to 35% of the original principal balance. Before each foreclosure sale,
the VA determines whether to bid by comparing the estimated net sale proceeds to
the outstanding principal balance and the servicer's accumulated reimbursable
costs and fees. If this amount is a loss and exceeds the guaranteed amount, the
VA typically issues a no-bid and pays the servicer the guaranteed amount.
Whenever a no-bid is issued, the servicer absorbs the loss, if any, in excess of
the sum of the guaranteed principal and amounts recovered at the foreclosure
sale. HomeSide's historical delinquency and foreclosure rate experience on VA
loans has generally been consistent with that of the industry. There can be no
assurance that HomeSide's servicing losses on investor-owned loans will not be
greater in the future.

12
<PAGE> 14

Economic downturns in states in which the Company has a significant
concentration of business could have an adverse impact on the Company's results
of operations. Loans in Florida and California represented 19.6% and 15.6%,
respectively, of the Company's servicing portfolio at November 30, 1996.

AVAILABILITY OF FUNDING SOURCES; SUBSTANTIAL LEVERAGE

HomeSide requires substantial financing for its business operations. Such
financing is currently provided under the credit agreement entered into by
certain of the Company's subsidiaries on May 31, 1996 in connection with the HHI
Acquisition (the "Bank Credit Agreement") and the Notes. As of November 30,
1996, HomeSide had aggregate outstanding indebtedness of approximately $2.2
billion, and $449.3 million of additional availability under the Bank Credit
Agreement. See "Capitalization." HomeSide may incur additional indebtedness in
the future, subject to certain limitations contained in the instruments
governing its current indebtedness.

The degree to which HomeSide is leveraged could have important consequences
to holders of the Common Stock, including the following: (i) HomeSide's ability
to grow will depend on its ability to obtain additional financing in the future
for originating loans, investment in servicing rights, working capital, capital
expenditures and general corporate purposes, and that ability may be impaired;
(ii) a substantial portion of HomeSide's cash flow from operations must be
dedicated to the payment of the principal of and interest on its indebtedness,
thereby reducing the funds available to finance operations; and (iii) HomeSide
may be more highly leveraged than certain of its competitors, which may place
HomeSide at a competitive disadvantage and make it more vulnerable to economic
downturns.

To the extent that HomeSide is not successful in negotiating renewals of
its borrowings or in arranging new financing, it may have to curtail its
origination activities and/or sell significant portions of its servicing
portfolio, which would have a material adverse effect on HomeSide's business and
results of operations. Among the factors that will affect the Company's ability
to refinance its bank credit facilities or the Notes are financial market
conditions and the value and performance of the Company prior to the time of
such refinancing. There can be no assurance that any such refinancing can be
successfully completed. HomeSide intends to use a portion of the proceeds of
this Offering to pay down certain amounts outstanding under the Notes and the
Bank Credit Agreement. See "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Homeside --
Liquidity and Capital Resources," "Description of Bank Credit Agreement" and
"Description of the Notes."

COMPETITION

The mortgage banking business is highly competitive. HomeSide competes with
other mortgage banking companies, commercial banks, savings associations, credit
unions and other financial institutions in every aspect of its business,
including funding and purchasing loans from mortgage brokers, purchasing loans
from correspondents and acquiring loan servicing rights and origination
capabilities. HomeSide competes with mortgage banking companies and other
financial institutions that have substantially greater financial resources,
greater operating efficiencies and longer operating histories than HomeSide.
Furthermore, increasing consolidation in the mortgage industry is leading to an
increased market share for the largest mortgage companies. At the same time,
Fannie Mae and FHLMC are developing technologies and business practices that
could reduce their reliance on large mortgage companies for loan production and
enable them to access smaller producers for volume. To the extent that market
pricing becomes more competitive, HomeSide may be unable to achieve its planned
level of originations or consummate acquisitions of servicing rights at a
satisfactory cost. Retail mortgage banking companies have direct access to
borrowers and generally are able to sell their loans to the same entities that
purchase HomeSide's loans. HomeSide depends primarily on mortgage brokers and
correspondents for originating new loans. Competitors also seek to establish
relationships with mortgage brokers and correspondents, who are not obligated by
contract or otherwise to continue to do business with HomeSide.

REGULATION, POSSIBLE CHANGES AND RELATED MATTERS

HomeSide's mortgage banking business is subject to the rules and
regulations of the Department of Housing and Urban Development ("HUD"), FHA, VA,
Fannie Mae, FHLMC, Government National

13
<PAGE> 15

Mortgage Association ("GNMA") and other regulatory agencies with respect to
originating, processing, underwriting, selling, securitizing and servicing
mortgage loans. In addition, there are other federal and state statutes and
regulations affecting such activities. These rules and regulations, among other
things, impose licensing obligations on HomeSide, prohibit discrimination and
establish underwriting guidelines which include provisions for inspections and
appraisals, require credit reports on prospective borrowers and fix maximum loan
amounts. Moreover, lenders such as HomeSide are required annually to submit
audited financial statements to Fannie Mae, FHLMC, GNMA and HUD and to comply
with each regulatory entity's own financial requirements. HomeSide's business is
also subject to examination by Fannie Mae, FHLMC and GNMA and state regulatory
agencies at all times to assure compliance with applicable regulations, policies
and procedures.

Mortgage origination activities are subject to the provisions of various
Federal and state statutes including, among others, the Equal Credit Opportunity
Act, the Federal Truth-in-Lending Act, the Real Estate Settlement Procedures
Act, the Fair Housing Act, and the regulations promulgated thereunder, which,
among other provisions, prohibit discrimination, prohibit unfair and deceptive
trade practices, and require the disclosure of certain basic information to
mortgagors concerning credit terms and settlement costs, limit fees and charges
paid by borrowers and lenders, and otherwise regulate terms and conditions of
credit and the procedures by which credit is offered and administered. Many of
the aforementioned regulatory requirements are designed to protect the interests
of consumers, while others protect the owners or insurers of mortgage loans.
Failure to comply with these requirements can lead to loss of approved status,
termination of servicing contracts without compensation to the servicers,
demands for indemnification or loan repurchases, class action lawsuits and
administrative enforcement actions.

HomeSide's net income reflects a reduction in interest expense on its
borrowings with depository institutions for custodial balances placed with such
institutions. Net income could be adversely affected to the extent that proposed
revisions of applicable bank regulations cause these escrow accounts to be
recharacterized as demand deposit accounts, thereby requiring reserves to be
established with Federal Reserve Banks, which would reduce the amount of the
credit. Other regulatory changes or interpretations if applied retroactively to
change the ability of HomeSide to receive credit for escrow balances would
adversely affect HomeSide.

In addition, certain states require that interest be paid to mortgagors on
funds deposited by them in escrow to cover mortgage-related payments such as
property taxes and insurance premiums. Federal legislation has in the past been
introduced that would, if ever enacted, revise current escrow regulations and
establish a uniform interest payment requirement in all states. If such federal
legislation were enacted or if other states enact legislation relating to
payment of, or increases in the rate of, interest on escrow balances, or if such
legislation were retroactively applied to loans in HomeSide's servicing
portfolio, HomeSide's earnings would be adversely affected.

Prior to the HLI Acquisition, HLI was a wholly-owned operating subsidiary
of a national bank, and subject to substantially all of the regulations and
restrictions applicable to a national bank. Prior to the HHI Acquisition, HHI
was a wholly-owned subsidiary of a bank holding company. During the period that
BKB or Barnett, or any of their subsidiaries, retains a material ownership
interest in HomeSide, HomeSide and its subsidiaries (i) will continue to be
under the jurisdiction, supervision, and examining authority of the Office of
the Comptroller of the Currency ("OCC") and (ii) may only engage in activities
that are part of, or incidental to, the business of banking. The OCC has
specifically ruled that mortgage banking is a proper incident to the business of
banking.

In recent years, the mortgage banking industry has been subject to class
action lawsuits which allege violations of federal and state laws and
regulations, including the propriety of collecting and paying various fees and
charges and the calculation of escrow amounts. Class action lawsuits may
continue to be filed in the future against the mortgage banking industry
generally. See "Business -- HomeSide -- Litigation."

14
<PAGE> 16

Conventional mortgage operations may also be subject to state usury statutes.
FHA and VA loans are exempt from the effect of such statutes.

CONTINUATION OF FEDERAL PROGRAMS; AVAILABILITY OF ACTIVE SECONDARY MARKET

HomeSide's ability to sell mortgage loans and mortgage-backed securities is
largely dependent upon the continuation of programs of Fannie Mae, FHLMC and
private investors. These entities facilitate the sale of mortgage loans and
mortgage-backed securities. HomeSide's continued eligibility to participate in
such programs is also a necessary element to the ability to sell mortgage loans.
Although HomeSide is not aware of any proposed discontinuation of, or
significant reduction in, the various programs of Fannie Mae, FHLMC, or private
investors, any such discontinuation or reduction in the operation of such
programs could have a material adverse effect on HomeSide's operations. HomeSide
expects that it will continue to remain eligible to participate in such programs
but any significant impairment of such eligibility could also materially and
adversely affect its operations.

The requirements of loans accepted under such programs may be changed from
time to time by the sponsoring entity. The profitability of participating in
specific programs may vary depending on a number of factors, including the
administrative costs to HomeSide of originating and purchasing qualifying loans.

There can be no assurance that HomeSide will be successful in effecting the
sale of mortgage loans at the historic price or volume levels in any particular
future periods. Any significant change in the secondary market level of activity
or underwriting criteria of Fannie Mae, FHLMC or private investors could have a
material adverse effect on the gain or loss on sales of mortgage loans recorded
by HomeSide and therefore on HomeSide's results of operations.

LIMITED OPERATING HISTORY AS AN INDEPENDENT COMPANY; RELATIONSHIP WITH BKB AND
BARNETT

Prior to the consummation of the HLI Acquisition, HLI was a wholly-owned
subsidiary of BKB, and prior to the HHI Acquisition, HHI was a wholly-owned
subsidiary of Barnett. Each has engaged in various intercompany transactions and
arrangements with, and was provided certain administrative services by, its
parent. As a former subsidiary of a national bank and a bank holding company,
HLI and HHI, respectively, have benefitted from their ability to finance certain
acquisitions, their loan production funding and to a lesser extent, their
capital expenditure and working capital requirements, through borrowings from
their respective parents. Following the consummation of the HLI Acquisition,
certain arrangements, including all borrowing arrangements, with BKB were
terminated or modified and, following the consummation of the HHI Acquisition,
such arrangements with Barnett were similarly terminated or modified.
Accordingly, HomeSide no longer relies on such entities and there can be no
assurances that it will be able to successfully operate as an independent
company. See "Certain Relationships and Related Transactions."

PRINCIPAL SHAREHOLDERS

Immediately following the Offering, the Principal Shareholders of the
Company will collectively own approximately [ ]% of the outstanding shares of
Common Stock (or approximately [ ]% if the Underwriters exercise the
over-allotment option in full). Accordingly, following completion of the
Offering, the Principal Shareholders of the Company, if they act in concert,
will continue to be able to control the election of the Board of Directors of
the Company and thus the direction and future operations of the Company without
the supporting vote of any other stockholder of the Company, including decisions
regarding acquisitions and other business opportunities, the declaration of
dividends and the issuance of additional shares of Common Stock and other
securities. See "Security Ownership of Certain Beneficial Owners and
Management."

DILUTION

Purchasers of Common Stock in the Offering will experience immediate and
substantial dilution, and present stockholders will receive a substantial
increase in the book value of their shares of Common Stock. See "Dilution."

15
<PAGE> 17

ABSENCE OF PUBLIC MARKET; OFFERING PRICE DETERMINED BY AGREEMENT

Prior to the Offering, there has been no public market for shares of the
Common Stock and there can be no assurance that an active market for shares of
the Common Stock will develop or continue after the Offering. The initial public
offering price of the Common Stock has been determined by negotiation between
the Company and the Underwriters and may not be indicative of the market price
for shares of the Common Stock after the Offering. See "Underwriting."

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of the Offering, the Company will have outstanding
shares of capital stock, of which shares, representing
approximately %, will be owned by the Principal Shareholders, and will have
reserved an additional shares of Common Stock for issuance pursuant
to employee stock option plans. Of the then outstanding shares, the 5,900,000
shares of Common Stock offered hereby will be freely tradeable by non-affiliates
of the Company without restriction or registration under the Securities Act. All
of the remaining shares of capital stock are "restricted securities"
as that term is defined in Rule 144 promulgated under the Securities Act. None
of such securities will be eligible for sale under Rule 144 before March 14,
1998; provided however that holders thereof have registration rights which
entitle them to require, under certain circumstances, that the Company register
their shares for sale to the public at an earlier date. The Company, holders of
more than 5% of the outstanding shares of Common Stock, holders of Class B and
Class C Common Stock and the directors and executive officers of the Company
have agreed not to sell any shares of such stock or any rights to acquire such
stock for a period of at least 180 days following the date of this Prospectus
without the consent of Merrill Lynch & Co. See "Underwriting." Following this
Offering, sales of substantial amounts of the Company's Common Stock in the
public market under Rule 144 or otherwise, or the potential for such sales,
could adversely affect the prevailing market prices for the Company's Common
Stock and impair the Company's ability to raise capital through the sale of
equity securities.

16
<PAGE> 18

USE OF PROCEEDS

The net proceeds from the sale of Common Stock offered hereby are estimated
to be $92,282,000 million assuming an offering price to the public at the
mid-point of the range set forth on the cover of this Prospectus ($106,424,300
if the Underwriters' over-allotment option is exercised in full), after
deduction of the underwriting discount in and estimated expenses of the
Offering.

The Company intends to use $77,875,000 of the net proceeds of this Offering
to repay, at the applicable redemption premium of 11 1/4%, $70,000,000 principal
amount of the Company's outstanding 11 1/4% Senior Secured Second Priority Notes
due 2003. See "Description of the Notes." The proceeds of the Notes were used to
repay indebtedness incurred by the Company to acquire HLI and HHI. The Company
intends to use $14,407,000 of the net proceeds of this Offering to reduce
amounts outstanding under the Bank Credit Agreement. The loans under the Bank
Credit Agreement mature on May 31, 1999 and as of November 30, 1996 carry a
weighted average interest on amounts borrowed of 5.98% per annum. See
"Description of Bank Credit Agreement."

DIVIDEND POLICY

The Company does not anticipate paying dividends on its Common Stock in the
foreseeable future. The Company anticipates that all of its earnings will be
retained for the development and expansion of its business. Declaration of
dividends on the Common Stock will depend, among other things, upon levels of
indebtedness, future earnings, the operating and financial condition of the
Company, its capital requirements and general business conditions. The
agreements governing the Company's indebtedness contain provisions which will
effectively prohibit the Company from paying dividends on its Common Stock. See
"Description of Bank Credit Agreement" and "Description of the Notes."

CAPITALIZATION

The following table sets forth the capitalization of HomeSide as of
November 30, 1996 and as adjusted to give effect to the sale of the Common Stock
offered hereby at an assumed per share price at the mid-point of the offering
range set forth on the cover page of this Prospectus and the anticipated
application of the net proceeds therefrom. The information in this table should
be read in conjunction with the consolidated financial statements and related
notes appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AT NOVEMBER 30, 1996 AS ADJUSTED
-------------------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Short-term debt:
Warehouse credit facility.................................... $1,074.6 $1,074.6
======== ========
Long-term debt:
Servicing secured credit facility............................ 936.2 921.8
Notes........................................................ 200.0 130.0
Other........................................................ 21.3 21.3
-------- --------
Total long-term debt................................. 1,157.5 1,073.1
Stockholders' equity (a)
Common Stock, par value $.01 per share, authorized
shares, issued and outstanding [2,048,576]
shares ( shares as adjusted).......................... --
Class B non-voting common stock, par value $.01 per share,
authorized [5,714] shares, issued and outstanding [5,714]
shares.................................................... -- --
Class C non-voting common stock, par value $1.00 per share,
authorized [5,714] shares, issued and outstanding [5,714]
shares....................................................
Additional paid-in capital................................... 360.5
Retained earnings............................................ 29.3 (b)
-------- --------
Less: Promissory notes received in payment for
capital stock...................................... (1.9) (1.9)
-------- --------
Total stockholders' equity...................... 387.9 474.1
-------- --------
Total capitalization............................ $1,545.4 $ 1,547.2
======== =========

<FN>
- ---------------

(a) Gives effect to an amendment of the Company's Certificate of Incorporation
and to a for stock split in the form of a % stock dividend, both of
which will occur immediately prior to the closing of this Offering.
(b) The decrease in retained earnings reflects the estimated extraordinary loss
of $10.4 million ($6.1 million net of tax) that will be recognized as a
result of the repayment of $70.0 million principal amount of Notes.
</TABLE>

17
<PAGE> 19

DILUTION

The net tangible book value of the Company's capital stock as of November
30, 1996 was approximately $387.9 million, or $ per share. Net tangible book
value per share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of capital stock outstanding and
assuming the full exercise of outstanding options to purchase Common Stock.
After giving effect to the sale of 5,900,000 shares of Common Stock offered
hereby at an estimated initial public offering price of $17.00 per share and the
application of the estimated net proceeds therefrom as set forth under "Use of
Proceeds" (after deducting the underwriting discount and estimated offering
expenses), the pro forma net tangible book value of the Company as of November
30, 1996 would have been $474.1 million or $ per share, representing an
immediate increase in net tangible book value of $ per share to existing
stockholders and an immediate dilution of $ per share to new investors
purchasing shares at the estimated initial public offering price. The following
table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Estimated initial public offering price per share.................. $17.00
------
Net tangible book value per share before Offering(a)..... $
------
Increase in net tangible book value per share
attributable to new investors.........................
Pro forma net tangible book value per share after the Offering.....
------
Dilution per share to new investors(b).............................
======
</TABLE>

If the Underwriters' over-allotment option is exercised in full and an
additional 885,000 shares of capital stock are sold by the Company, the increase
in pro forma net tangible book value per share attributable to the new
investors, the pro forma net tangible book value per share after giving effect
to the Offering and the dilution per share to new investors would be $ ,
$ and $ , respectively.

The following table sets forth on a pro forma basis at November 30, 1996
the number of shares of capital stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by the
existing stockholders and new investors purchasing shares of Common Stock in the
Offering at an estimated initial public offering price of $17.00 per share:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(a).................. $ $
--------- --- ------------ --- ------
New investors(b)(c)....................... 5,900,000 100,300,000 $17.00
--------- --- ------------ --- ------
Total........................... 100 $ 100 $
========= === ============ === ======
<FN>
- ---------------

(a) Assumes the exercise at $ per share of options to acquire shares
of Common Stock held by certain members of management.

(b) Dilution per share to new investors is determined by subtracting the pro
forma net tangible book value per share from the amount of cash paid by a
new investor for a share of Common Stock.

(c) Assuming no exercise of the Underwriters' over-allotment option. If such
option were exercised in full, the Number of Shares Purchased would be
6,785,000, the Percent of Shares Purchased would be approximately [ ]%, the
Amount of Total Consideration would be $115,345,000, the Percent of Total
Consideration would be [ ]% and the Average Price Per Share would be
$17.00.
</TABLE>

18
<PAGE> 20

THE COMPANY

The Company was formed on December 11, 1995 to acquire HLI, the mortgage
banking subsidiary of Bank of Boston. On March 15, 1996, the Company completed
the HLI Acquisition. On March 4, 1996, the Company entered into an agreement to
acquire HHI, the mortgage banking subsidiary of Barnett. On May 31, 1996, the
Company completed the HHI Acquisition. The Company's executive offices are
located at 7301 Baymeadows Way, Jacksonville, Florida 32256, telephone number
(904) 281-3000.

HomeSide is one of the largest full-service residential mortgage banking
companies in the United States, formed through the acquisition of the mortgage
banking operations of The First National Bank of Boston ("Bank of Boston" or
"BKB") and Barnett Banks, Inc. ("Barnett"). HomeSide's strategy emphasizes
variable cost mortgage origination and low cost servicing. On a combined basis
HomeSide's origination volume and servicing portfolio would have been $14.7
billion and $75.0 billion, respectively, as of and for the year ended December
31, 1995, ranking the Company as the 5th largest originator and 7th largest
servicer in the United States for 1995 based on data published by National
Mortgage News. As of and for the nine months ended November 30, 1996, HomeSide's
loan originations and acquisitions were $18.9 billion and the servicing
portfolio was $88.7 billion.

HomeSide's business activities consist primarily of:

19
<PAGE> 21

For the period March 16, 1996 to November 30, 1996, HomeSide purchased and
acquired loan production of $18.9 billion. Its servicing portfolio was $88.7
billion at November 30, 1996.

<TABLE>
The table below sets forth the historical production and servicing
portfolio volumes for HLI and HHI.

HLI AND HHI COMBINED PRODUCTION AND SERVICING SUMMARY

<CAPTION>
YEARS ENDED AND AT DECEMBER 31,
-----------------------------------------------
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
PRODUCTION
HLI................................ $ 4,437 $ 8,660 $11,371 $ 8,935 $ 8,885 $4,187(b)
HHI(a)............................. 1,945 3,507 3,360 3,410 5,767 2,538(c)
------- ------- ------- ------- ------- ------
Combined production.............. $ 6,382 $12,167 $14,731 $12,345 $14,652 $6,725
======= ======= ======= ======= ======= ======
SERVICING PORTFOLIO
HLI................................ $20,601 $23,706 $27,999 $37,971 $41,555
HHI................................ 10,034 11,524 13,085 18,411 33,411
------- ------- ------- ------- -------
Combined servicing portfolio..... $30,635 $35,230 $41,084 $56,382 $74,966
======= ======= ======= ======= =======
<FN>
- ---------------
(a) If Loan America Financial Corporation ("LAFC" or "Loan America") and
BancPLUS Financial Corporation loan production had been included for years
prior to their acquisitions, then production would have been $4,742 million,
$8,480 million, $9,589 million, $6,401 million and $5,767 million for 1991,
1992, 1993, 1994 and 1995, respectively.

(b) Period information is for January 1, 1996 through March 15, 1996.

(c) Period information is for January 1, 1996 through May 31, 1996.
</TABLE>
<TABLE>
The table below sets forth the servicing statistics for HomeSide:

HOMESIDE SERVICING STATISTICS

<CAPTION>
PRO FORMA
HOMESIDE FOR THE
HLI AND HHI
ACQUISITIONS AT ACTUAL AT
DECEMBER 31, 1995 NOVEMBER 30, 1996
----------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
FHA/VA............................................ $25,903 $32,425
Conventional...................................... 48,429 51,389
------- -------
Total serviced unpaid principal balance
("UPB")...................................... 74,332(a) 83,814(b)
ARM (adjustable rate mortgages)................... 23% 26%
Fixed............................................. 77% 74%
Weighted average coupon........................... 8.01% 7.91%
Weighted average servicing fee (% of UPB)......... 0.351%(c) 0.359%
Weighted average maturity (months)................ 278 279

<FN>
- ---------------
(a) Excludes loans purchased not yet on servicing system of approximately $0.6
billion.

(b) Excludes loans purchased not yet on servicing system of $4.9 billion.

(c) HHI's weighted average servicing fees are adjusted to reflect market rates
under contractual arrangements between HomeSide and Barnett.
</TABLE>
20
<PAGE> 22

SELECTED CONSOLIDATED FINANCIAL INFORMATION

SELECTED UNAUDITED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION OF
HOMESIDE

The selected unaudited consolidated financial and operating information of
HomeSide set forth below is for the period March 16, 1996 to May 31, 1996, each
of the three months ended August 31, 1996 and November 30, 1996 and the period
March 16, 1996 to November 30, 1996 and should be read in conjunction with, and
is qualified in its entirety by reference to, the Consolidated Financial
Statements and the notes thereto and in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
HomeSide included elsewhere in this Prospectus. See also "Unaudited Pro Forma
Consolidated Financial Information." The consolidated operating results for
these periods and the consolidated balance sheet data at November 30, 1996 are
unaudited but, in the opinion of management, contain all material adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation. The results of operations for the periods ended November 30, 1996
are not necessarily indicative of results to be expected for the full year.

FOR THE PERIOD FOR THE THREE FOR THE THREE FOR THE PERIOD
MARCH 16, 1996 MONTHS ENDED MONTHS ENDED MARCH 16, 1996 TO
TO MAY 31, 1996 AUGUST 31, 1996 NOVEMBER 30, 1996 NOVEMBER 30, 1996
-------------- -------------- --------------- ------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues:
Mortgage servicing fees............. $ 41,485 $ 83,349 $ 91,636 $ 216,470
Amortization of mortgage servicing
rights............................ (16,442) (40,464) (48,831) (105,737)
----------- ----------- ---------- -----------
Net servicing revenue............. 25,043 42,885 42,805 110,733
Interest income..................... 12,719 22,270 25,241 60,230
Interest expense.................... (14,962) (23,920) (22,321) (61,203)
----------- ----------- ---------- -----------
Net interest revenue.............. (2,243) (1,650) 2,920 (973)
Net mortgage origination revenue.... 10,810 16,273 16,521 43,604
Other income........................ 107 355 79 541
----------- ----------- ---------- -----------
Total revenues............ 33,717 57,863 62,325 153,905
Expenses:
Salaries and employee benefits...... 11,480 21,177 20,650 53,307
Occupancy and equipment............. 1,846 3,084 3,337 8,267
Servicing losses on investor-owned
loans............................. 3,938 4,058 4,957 12,953
Other expenses...................... 5,345 12,523 11,711 29,579
----------- ----------- ---------- -----------
Total expenses............ 22,609 40,842 40,655 104,106
Income before income taxes.......... 11,108 17,021 21,670 49,799
Income tax expense.................. 4,554 6,954 9,015 20,523
----------- ----------- ---------- -----------
Net income.......................... $ 6,554 $ 10,067 $ 12,655 $ 29,276
=========== =========== ========== ===========
Net income per share................ $ $ $ $
Weighted average shares
outstanding.......................
Pro forma net income per share...... $ $ $ $
Pro forma weighted shares
outstanding.......................

SELECTED OPERATING DATA:
Volume of loans originated and
acquired.......................... $ 3,780,236 $ 9,565,199(b) $ 5,540,875 $18,886,310(b)
Loan servicing portfolio (at period
end).............................. 78,391,496 85,835,155(b) 88,706,478 88,706,478
Loan servicing portfolio (average
outstanding during the period).... 44,718,020(a) 82,247,794 87,537,188 70,667,798(c)
Weighted average interest rate for
the servicing portfolio (at period
end).............................. 7.86% 7.92% 7.91% 7.91%
Weighted average servicing fee for
the servicing portfolio (at period
end).............................. 0.367% 0.363% 0.359% 0.359%
(footnotes on following page)
</TABLE>

21
<PAGE> 23

<TABLE>
<CAPTION>
AT NOVEMBER 30, 1996
-------------------------------
ACTUAL AS ADJUSTED(d)
---------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
SELECTED BALANCE SHEET DATA
Mortgage loans held for sale..................................... $1,101,229 $1,101,229
Mortgage servicing rights........................................ 1,339,819 1,339,819
Total assets..................................................... 2,858,711 2,856,226
Warehouse credit facility........................................ 1,074,583 1,074,583
Long-term debt................................................... 1,157,508 1,073,101
Total liabilities................................................ 2,470,785 2,382,130
Total stockholders' equity....................................... 387,926 474,096
<FN>

- ---------------

(a) Period information is for March 1, 1996 through May 31, 1996.

(b) Includes bulk purchases of $4.1 billion.

(d) Adjusted to give effect to the sale of Common Stock offered hereby and the
application of the net proceeds therefrom as described under "Use of
Proceeds", as if such transactions had occurred on November 30, 1996.

</TABLE>

22
<PAGE> 24

SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION OF HLI

<TABLE>
The selected consolidated financial information of HLI (formerly BancBoston
Mortgage Corporation) set forth below has been derived from the financial
statements of HLI and the related notes thereto. The selected consolidated
financial information should be read in conjunction with, and is qualified in
its entirety by reference to, HLI's Consolidated Financial Statements and the
Notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- HLI" included elsewhere in this Prospectus. See
also "Unaudited Pro Forma Consolidated Financial Information."

<CAPTION>
YEARS ENDED DECEMBER 31, FOR THE THREE FOR THE PERIOD
---------------------------------------------------------------- MONTHS ENDED JANUARY 1, 1996
1991 1992 1993 1994 1995 MARCH 31, 1995 TO MARCH 15, 1996
----------- ----------- ----------- ----------- ----------- -------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues:
Mortgage servicing fees.... $ 92,362 $ 105,890 $ 111,822 $ 140,491 $ 173,038 $ 43,657 $ 38,977
Gain (loss) on risk
management contracts..... -- -- 6,688 (6,702) 108,702 3,612 (128,795)
Amortization of mortgage
servicing rights......... (37,213) (73,908) (112,492) (66,801) (108,013) (23,103) (7,245)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net servicing revenue.... 55,149 31,982 6,018 66,988 173,727 24,166 (97,063)
Interest income............ 41,252 46,865 50,156 31,585 24,324 4,122 8,423
Interest expense........... (27,686) (38,855) (44,199) (33,952) (27,128) (6,079) (10,089)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest revenue..... 13,566 8,010 5,957 (2,367) (2,804) (1,957) (1,666)
Net mortgage origination
revenue (expense)........ 6,508 1,123 6,173 4,983 3,417 (1,083) 7,638
Gain on sales of servicing
rights................... 12,034 14,769 651 10,862 10,230 4,285 --
Other income............... 52 17 50 147 511 13 253
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues..... 87,309 55,901 18,849 80,613 185,081 25,424 (90,838)
Expenses:
Salaries and employee
benefits............... 27,328 30,053 33,096 40,370 45,381 11,696 10,287
Occupancy and
equipment.............. 7,809 7,788 7,966 9,012 10,009 2,358 2,041
Servicing losses on
investor-owned loans... 2,880 8,138 2,770 7,177 9,981 733 5,560
Real estate acquired..... 1,195 1,124 1,600 253 1,054 218 291
Other expenses........... 17,552 20,461 22,058 19,326 21,896 4,713 7,377
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses..... 56,764 67,564 67,490 76,138 88,321 19,718 25,556
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes and cumulative
effects of changes in
accounting principles.... 30,545 (11,663) (48,641) 4,475 96,760 5,706 (116,394)
Income tax expense
(benefit) before
cumulative effects of
changes in accounting
principles............... 12,168 (3,829) (17,284) 2,525 37,934 2,277 (42,533)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before
cumulative effects of
changes in accounting
principles............... 18,377 (7,834) (31,357) 1,950 58,826 3,429 (73,861)
Change in purchased
mortgage servicing
rights ("PMSR")
valuation method, net
of tax................. -- -- (59,921 (a) -- -- -- --
Change in accounting for
income taxes........... -- -- 6,093(b) -- -- -- --
Change in accounting for
mortgage servicing fee
income, net of tax..... -- -- -- 3,455(c) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss).......... $ 18,377 $ (7,834) $ (85,185) $ 5,405 $ 58,826 $ 3,429 $ (73,861)
=========== =========== =========== =========== =========== =========== ===========
SELECTED OPERATING DATA:
Volume of loans originated
and acquired............. $ 5,196,996 $ 9,705,875 $13,682,761 $14,473,000 $ 9,567,521 $ 1,181,642 $ 4,187,603(d)
Loan servicing portfolio
(at period end).......... 20,600,569 23,705,642 27,999,100 37,971,200 41,555,354 37,800,120 44,158,163(d)
Loan servicing portfolio
(average)................ 19,663,100 22,153,100 25,852,400 33,178,600 39,283,700 38,099,730 43,158,072(d)
Weighted average interest
rate (at period end)..... 9.65% 9.05% 8.07% 7.91% 7.97% 7.90% 7.92%(d)
Weighted average servicing
fee (average for
period).................. 0.400% 0.390% 0.372% 0.389% 0.383% 0.384% 0.380%(d)
SELECTED BALANCE SHEET DATA
(AT PERIOD END):
Mortgage loans held for
sale..................... $ 507,776 $ 495,455 $ 607,506 $ 271,215 $ 388,436 $ 70,978 $ 641,465
Mortgage servicing
rights................... 296,393 337,307 281,727 431,148 551,338 414,974 542,862
Total assets............... 1,034,269 1,073,686 1,193,583 1,006,887 1,254,303 858,001 1,512,902
Note payable to parent..... 748,827 799,992 1,019,011 779,021 966,000 648,499 1,256,000
Long-term debt............. 14,483 14,339 14,180 14,007 13,816 13,961 13,790
Total liabilities.......... 818,890 866,141 1,071,223 879,122 1,067,712 726,807 1,400,172
Total stockholders'
equity................... 215,379 207,545 122,360 127,765 186,591 131,194 112,730

<FN>
- ---------------
(a) On January 1, 1993, HLI changed its method of accounting for PMSR to conform
to the accounting rules adopted in 1993 by the banking regulators. Under
these new rules, the carrying value of PMSR is recorded at the lesser of
amortized cost or the discounted cash flows from servicing the underlying
mortgages. Previously, this valuation was performed on an undiscounted
basis. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 2 of Notes to Consolidated Financial
Statements on F-40.

(b) On January 1, 1993, HLI adopted SFAS No. 109, "Accounting for Income Taxes,"
which principally affects accounting for deferred taxes. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Notes 2 and 10 of Notes to Consolidated Financial Statements on F-40 and
F-47, respectively.

(c) On January 1, 1994, HLI changed its method of recognizing servicing fee
income to the accrual method. Previously, these fees were recorded as income
when the payments were received. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Note 2 of Notes to
Consolidated Financial Statements on F-40.

(d) Period information is for the period January 1, 1996 to March 31, 1996 and
period end information is at March 31, 1996.
</TABLE>
23
<PAGE> 25

SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION OF HHI

The selected consolidated financial information of HHI (formerly Barnett
Mortgage Company) set forth below has been derived from the financial statements
of HHI and the related notes thereto. The selected consolidated financial
information should be read in conjunction with, and is qualified in its entirety
by reference to, HHI's Consolidated Financial Statements and the Notes thereto
and in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- HHI" included elsewhere in this
Prospectus. See also "Unaudited Pro Forma Consolidated Financial Information."

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE SIX FOR THE PERIOD
YEARS ENDED DECEMBER 31, FOR THE THREE APRIL 1, 1996 MONTHS ENDED JANUARY 1,
-------------------------------------------------- MONTHS ENDED TO MAY 30, JUNE 30, 1996 TO MAY
1991 1992 1993 1994(A) 1995(B) JUNE 30, 1995 1996 1995 30, 1996
------- ------- -------- -------- -------- ------------- -------------- ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED
STATEMENTS OF
OPERATIONS
DATA:
Mortgage
Origination
Revenue:
Mortgage
origination
fees......... $ -- $ -- $ 358 $ 3,276 $ 17,104 $ 3,469 $ 1,646 $ 6,005 $ 7,288
Gain (loss) on
sales of
loans, net... 3,184 8,187 5,688 692 (13,920) 995 (3,383) 1,514 482
------- ------- -------- -------- -------- -------- -------- -------- --------
Total
mortgage
origination
revenue... 3,184 8,187 6,046 3,968 3,184 4,464 (1,737) 7,519 7,770
Interest Income
(expense):
Interest
income....... 765 657 855 3,460 27,264 4,420 5,638 7,003 14,216
Interest
expense,
substantially
all to
affiliates... (568) (531) (1,415) (4,911) (20,427) (6,766) (3,480) (9,685) (9,574)
------- ------- -------- -------- -------- -------- -------- -------- --------
Net
interest
income
(expense)... 197 126 (560) (1,451) 6,837 (2,346) 2,158 (2,682) 4,642
Mortgage
Servicing
Revenue:
Mortgage
servicing
income....... 10,143 13,427 20,560 27,130 83,502 22,439 15,709 35,723 38,833
Mortgage
servicing
income from
affiliates... 6,986 16,143 18,326 20,017 25,057 6,407 5,464 12,503 13,626
Amortization of
capitalized
mortgage
servicing
rights....... (2,453) (6,013) (11,547) (17,783) (48,282) (12,124) (8,456) (20,475) (25,467)
Gain on sales
of
servicing.... -- -- -- -- 9,096 -- -- -- --
------- ------- -------- -------- -------- -------- -------- -------- --------
Net mortgage
servicing
revenue.... 14,676 23,557 27,339 29,364 69,373 16,722 12,717 27,751 26,992
Other Income..... 2,860 7,750 6,296 4,492 2,592 6,203 1,678 7,054 1,740
------- ------- -------- -------- -------- -------- -------- -------- --------
Total
revenues... 20,917 39,620 39,121 36,373 81,986 25,043 14,816 39,642 41,144
Expenses:
Salaries and
benefits..... 7,778 13,698 13,914 17,474 53,070 14,301 10,402 23,433 25,173
General and
administrative... 10,349 11,401 12,432 14,924 41,849 12,119 6,816 20,403 20,748
Affiliate
profit
sharing...... 1,699 12,471 10,774 3,534 6,242
Occupancy and
equipment.... 1,091 1,167 1,810 2,702 5,960 2,424 1,569 3,941 3,720
Amortization of
goodwill..... -- -- -- 259 4,840 1,673 928 2,226 2,324
------- ------- -------- -------- -------- -------- -------- -------- --------
Total
expenses... 20,917 38,737 38,930 38,893 111,961 30,517 19,715 50,003 51,965
------- ------- -------- -------- -------- -------- -------- -------- --------
Income (loss)
before income
taxes.......... 0 883 191 (2,520) (29,975) (5,474) (4,899) (10,361) (10,821)
Income tax
provision
(benefit)...... 34 359 87 (462) (9,589) (2,118) (914) (2,877) (2,478)
------- ------- -------- -------- -------- -------- -------- -------- --------
Income (loss)
before changes
in accounting
principles..... (34) 524 104 (2,058) (20,386) -- -- -- --
Cumulative effect
of changes in
accounting
principles..... -- (507)(c) -- -- -- -- -- -- --
------- ------- -------- -------- -------- -------- -------- -------- --------
Net income
(loss)......... $ (34) $ 17 $ 104 $ (2,058) $(20,386) $ (3,356) $ (3,985) $ (7,484) $ (8,343)
======= ======= ======== ======== ======== ======== ======== ======== ========
SELECTED
OPERATING DATA
(DOLLARS IN
MILLIONS):
Volume of loans
originated and
acquired....... $ 1,945 $ 3,507 $ 3,360 $ 3,410 $ 5,767 $ 1,330 $ 982 $ 2,886 $ 2,538
Loan servicing
portfolio (at
period end).... 10,034 11,524 13,085 18,411 33,411 33,070 (e) 33,070 (e)
Loan servicing
portfolio
(average)...... 9,639 10,779 12,305 15,748 30,669 32,839 33,057 28,153 33,182
Weighted average
interest rate
(at period
end)(d)........ -- -- 7.34% 7.44% 8.05% 7.98% (e) 7.98% (e)
Weighted average
servicing fee
(average for
period)(d)..... -- -- 0.259% 0.261% 0.299% 0.301% 0.346% 0.299% 0.337%
SELECTED BALANCE
SHEET DATA (AT
PERIOD END):
Mortgage loans
held for
sale........... $ -- $ -- $ -- $183,914 $465,880 $ 331,184 (f) $331,184 (f)
Mortgage
servicing
rights......... 12,959 25,458 48,941 92,461 250,788 259,796 (f) 259,796 (f)
Total assets..... 42,082 61,166 96,186 359,472 994,630 857,046 (f) 857,046 (f)
Notes payable.... 16,107 20,325 63,329 248,214 653,056 503,000 (f) 503,000 (f)
Total
liabilities.... 22,676 38,541 69,930 274,570 762,802 612,311 (f) 612,311 (f)
Total
stockholder's
equity......... 19,406 22,625 26,257 84,902 231,828 244,735 (f) 244,735 (f)
(footnotes on following page)
</TABLE>

24
<PAGE> 26

- ---------------
(a) Includes Loan America since its acquisition in October 1994.
(b) Includes BancPLUS since its acquisition in February 1995.
(c) In 1992, HHI adopted two new accounting standards. Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes,"
changed HHI's accounting for income taxes to the asset/liability method from
the deferred method previously required by Accounting Principles Board
Opinion No. 11. HHI also adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," which requires that the
projected future cost of providing postretirement health care and other
benefits be recognized during the periods employees provide services to earn
those benefits. Prior to adopting SFAS No. 106, these costs were expensed as
incurred. HHI adopted both of these changes on a prospective basis effective
January 1, 1992. As permitted under SFAS No. 106, HHI chose to immediately
recognize the transition obligation for postretirement benefits other than
pensions in net income for 1992 rather than on a delayed basis over the
remaining average service period of active plan members.
(d) Information not available for 1991 and 1992.
(e) HHI was acquired by HomeSide on May 31, 1996 and, accordingly, its servicing
portfolio is included in HomeSide's servicing portfolio as of May 31, 1996.
(f) HHI was acquired by HomeSide on May 31, 1996 and, accordingly, all of its
assets and liabilities are included in the consolidated balance sheet of
HomeSide, Inc. as of May 31, 1996.

25
<PAGE> 27

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- HOMESIDE

MARCH 16, 1996 TO NOVEMBER 30, 1996
AND THE THREE MONTHS ENDED NOVEMBER 30, 1996

GENERAL

HomeSide, Inc. ("HomeSide" or the "Company") is a holding company, owning
100% of the outstanding common stock of HomeSide Holdings, Inc., which in turn
owns 100% of the outstanding common stock of HomeSide Lending, Inc. HomeSide was
formed on December 11, 1995 by an investor group, consisting of Thomas H. Lee
Company and its affiliates and Madison Dearborn Partners (collectively, the
"Investors"), and signed a definitive stock purchase agreement with The First
National Bank of Boston ("Bank of Boston" or "BKB") for the purpose of acquiring
certain assets and liabilities of the mortgage banking business ("HLI") owned by
Bank of Boston. The transaction closed on March 15, 1996 and HomeSide began
operations on March 16, 1996 through its operating subsidiary, HomeSide Lending,
Inc.

On May 31, 1996, Barnett Banks, Inc. ("Barnett") sold certain of its
mortgage banking operations ("HHI"), primarily its servicing portfolio and
proprietary mortgage banking software systems, to HomeSide. Barnett received
cash and an ownership interest in HomeSide. For more information on these
acquisitions see Note 4 of Notes to Consolidated Financial Statements of
HomeSide on F-9. Since May 31, 1996, each of the Investors as a group, Bank of
Boston and Barnett has owned approximately one-third of HomeSide. Barnett
Mortgage Company was subsequently renamed HomeSide Holdings, Inc.

HomeSide has adopted a February 28 fiscal year end. The consolidated
financial statements of HomeSide have been prepared for the period March 16,
1996 to November 30, 1996 to coincide with the end of the Company's third
quarter of fiscal 1997. HomeSide did not have any operations prior to March 16,
1996. The purchase method of accounting was used for the HLI and HHI
acquisitions and, accordingly, assets acquired and liabilities assumed were
recorded at their estimated fair values at the date of acquisition.

Comparative financial statements for the same period in the prior year have
not been presented due to a lack of comparability between HomeSide and HLI and
HHI. As noted above, the assets acquired and liabilities assumed by HomeSide in
each of the acquisitions were recorded at their estimated fair values as of the
date of acquisition. As a result, HomeSide's operating results are not directly
comparable to HLI and BMC historical operating results due, in part, to
different balance sheet valuations (estimated fair value as compared to
historical cost). In addition, certain production channels were retained by HLI
and all of BMC's production channels were retained by Barnett. The results of
operations for the three months ended November 30, 1996 are, therefore, most
directly comparable to the results of operations for the three months ended
August 31, 1996. Results of operations prior to May 31, 1996 do not include the
results of operations of HHI, which was acquired by the Company on May 31, 1996.

Mortgage banking is a specialized branch of the financial services industry
which primarily involves (i) originating and purchasing mortgage loans
("origination" and/or "production"); (ii) selling the originated mortgages to
third parties either as mortgage-backed securities or as whole loans ("secondary
marketing"); (iii) servicing of mortgage loans on behalf of the ultimate
purchasers, which includes the collection and disbursement of payments of
mortgage principal and interest, the collection of payments of taxes and
insurance premiums to pay property taxes and insurance premiums, and management
of certain loan default activities (collectively, "servicing"); and (iv) the
purchase and sale of the rights to service mortgage loans.

Mortgage bankers originate loans generally through two channels: wholesale
and direct. Wholesale origination involves the origination of mortgage loans
from sources other than homeowners, including mortgage brokers and other
mortgage lenders. Direct origination typically includes (i) networks of retail
loan offices with sales staff that solicit business from homeowners, realtors,
builders, and other real estate professionals, (ii) centers that use
telemarketing, direct mail, and advertising to market loans directly to home
buyers or homeowners, (iii) affinity and co-branding partnerships, and (iv)
corporate relocation programs. Once originated or purchased, mortgage bankers
hold the loans temporarily ("warehousing") until they are

26
<PAGE> 28

sold, typically earning an interest spread equal to the difference between the
loan's interest rate and the cost of financing the loan. Each loan is sold
either excluding or including the associated right to service the loan
("servicing retained" or "servicing released," respectively).

Mortgage bankers rely mainly on short-term borrowings, such as warehouse
lines, to finance the origination of mortgages that are then typically sold.
Mortgage bankers also borrow on a longer term basis to finance their servicing
assets and working capital requirements. Revenues consist primarily of those
related to servicing and, to a lesser extent, fees and interest spreads from
originations. The major expenses of a mortgage banker include costs of
financing, operating costs related to origination and servicing and the
amortization of mortgage servicing rights.

Mortgage bankers typically seek to retain the rights to service the loans
they originate and to acquire rights to service additional loans in order to
generate recurring fee income. The purchase and sale of servicing rights can
occur on a loan by loan basis ("flow") or on a portfolio (group of loans) basis
("bulk" or "mini-bulk"). Prices for servicing rights are typically stated as a
multiple of the servicing fee or as a percentage of the outstanding UPB for a
group of mortgage loans. Values of servicing portfolios are determined on the
basis of the present value of the servicing fee income stream (net of servicing
costs) expected to be received over the estimated life of the loans. The assets
of a mortgage banking company consist primarily of loans in warehouse and the
value of the servicing rights purchased ("purchased mortgage servicing rights"
or "PMSR") or originated ("originated mortgage servicing rights" or "OMSR").

The following operating statistics for HomeSide are presented to aid in
understanding the results of operations and financial condition of HomeSide for
the period March 16, 1996 to May 31, 1996, and each of the three months ended
August 31, 1996 and November 30, 1996 and the period March 16, 1996 to November
30, 1996. References to the first quarter of fiscal 1997 relate to the period
March 16, 1996 to May 31, 1996. References to the second quarter of fiscal 1997
relate to the three months ended August 31, 1996 and references to the third
quarter of fiscal 1997 relate to the three months ended November 30, 1996.

Loan Production Activities

FOR THE PERIOD FOR THE THREE FOR THE THREE FOR THE PERIOD
MARCH 16, 1996 MONTHS ENDED MONTHS ENDED MARCH 16, 1996 TO
TO MAY 31, 1996 AUGUST 31, 1996 NOVEMBER 30, 1996 NOVEMBER 30, 1996
--------------- --------------- ----------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Correspondent (includes BKB and
Barnett)....................... $1,893 $2,950 $3,249 $ 8,092
Co-issue (a)..................... 1,419 2,208 1,985 5,612
Broker........................... 220 155 168 543
------ ------ ------ -------
Total wholesale.................. 3,532 5,313 5,402 14,247
Direct........................... 248 179 139 566
------ ------ ------ -------
Total purchases.................. 3,780 5,492 5,541 14,813
Bulk acquisitions................ -- 4,073 -- 4,073
------ ------ ------ -------
Total purchases and
acquisitions................... $3,780 $9,565 $5,541 $18,886
====== ====== ====== =======
</TABLE>
- ---------------

(a) Co-issue production represents the purchase of servicing rights from a
correspondent under contracts to deliver specified volumes on a monthly or
quarterly basis. The substance of this transaction is the purchase of a
loan and mortgage servicing right with the instantaneous sale of the loan
with the servicing right retained. Amounts represent the unpaid principal
balance of mortgage debt to which the acquired servicing rights relate.

During each of the second and third quarters of fiscal 1997, HomeSide's
loan production totaled approximately $5.5 billion. Total loan production
increased from $3.8 billion in the period March 16, 1996 to May 31, 1996 to $5.5
billion for the three months ended August 31, 1996. This increase was due to the
additional production resulting from the acquisition of HHI on May 31, 1996 and
growth in HomeSide's existing wholesale channel. In addition, HomeSide made bulk
servicing acquisitions of $4.1 billion during the second quarter of fiscal 1997.

27
<PAGE> 29

Servicing Portfolio

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE THREE FOR THE THREE FOR THE PERIOD
MARCH 1, 1996 TO MONTHS ENDED MONTHS ENDED MARCH 1, 1996 TO
MAY 31, 1996 AUGUST 31, 1996 NOVEMBER 30, 1996 NOVEMBER 30, 1996
---------------- --------------- ----------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Balance at beginning of period....... $42,907 $78,391 $85,835 $42,907
Acquisition of HHI................... 33,082 -- -- 33,082
Other additions...................... 4,102 9,842 5,244 19,188
------- ------- ------- -------
Total additions................. 37,184 9,842 5,244 52,270
------- ------- ------- -------
Scheduled amortization............... 235 494 517 1,246
Prepayments.......................... 1,321 1,702 1,529 4,552
Foreclosures......................... 130 137 106 373
Sale of servicing.................... 14 65 221 300
------- ------- ------- -------
Total reductions................ 1,700 2,398 2,373 6,471
------- ------- ------- -------
Balance at end of period............. $78,391 $85,835 $88,706 $88,706
======= ======= ======= =======
</TABLE>

At November 30, 1996, HomeSide's servicing portfolio stood at $88.7 billion
compared to $85.8 billion at August 31, 1996, $78.4 billion at May 31, 1996 and
$42.9 billion at March 1, 1996. The number of loans being serviced at November
30, 1996 was 1,085,000, compared to 1,059,000 as of August 31, 1996, 984,000 as
of May 31, 1996 and 510,000 as of March 1, 1996. HomeSide's strategy is to build
its mortgage servicing portfolio and benefit from the economies of scale
inherent in the business.

RESULTS OF OPERATIONS

Summary

HomeSide reported net income of $12.7 million during the third quarter of
fiscal 1997 compared to net income of $10.1 million during the second quarter of
fiscal 1997 and $6.6 million during the first quarter of fiscal 1997. Net income
for the period March 16, 1996 to November 30, 1996 was $29.3 million. Total
revenue for the third quarter of fiscal 1997 was primarily comprised of net
servicing revenue of $42.8 million, net interest revenue of $2.9 million, and
net mortgage origination revenue of $16.5 million. These revenues were partially
offset by operating expenses of $40.7 million and income taxes of $9.0 million.
The primary reason for the growth in revenues was increased net interest revenue
during the third quarter of fiscal 1997 as compared to the second quarter of
fiscal 1997. Higher average balances of mortgage loans held for sale during the
third fiscal quarter compared to the second fiscal quarter contributed to the
$3.0 million increase in interest income. Lower short-term interest rates and
the improved pricing on borrowings under the Bank Credit Agreement lowered the
interest expense for third quarter of fiscal 1997 compared to the second fiscal
quarter.

HomeSide reported net income of $10.1 million during the second quarter of
fiscal 1997 compared to net income of $6.6 million during the first quarter of
fiscal 1997. Total revenue for the second quarter was primarily comprised of net
servicing revenue of $42.9 million and net mortgage origination revenue of $16.3
million. These revenues were partially offset by operating expenses of $40.8
million, net interest expense of $1.7 million and income tax expense of $7.0
million. The primary reason for the increase in revenues and expenses during the
second quarter as compared to the first quarter was the acquisition of HHI on
May 31, 1996. Results of operations for HHI are included from the date of
acquisition and, therefore, are not included in HomeSide's first quarter of
fiscal 1997 results.

Net Servicing Revenue

During the third quarter of fiscal 1997, HomeSide had net servicing revenue
of $42.8 million, compared to net servicing revenue of $42.9 million during the
second quarter of fiscal 1997. Net servicing revenue during the third quarter of
fiscal 1997 was comprised of mortgage servicing fees of $91.6 million, offset by
mortgage servicing rights amortization of $48.8 million. Mortgage servicing fees
generally range from 0.25% to 0.50% of the declining principal balances of the
loans per annum. HomeSide's weighted average servicing fee

28
<PAGE> 30

during the third quarter of fiscal 1997 was 0.368% compared to 0.367% during the
second quarter of fiscal 1997. Amortization of mortgage servicing rights is
recorded over the estimated servicing period in proportion to estimated
servicing revenue and increased from $40.5 million in the second quarter of
fiscal 1997 to $48.8 million in the third quarter of fiscal 1997 as a result of
a higher average servicing portfolio balance and higher projected mortgage loan
prepayment speeds.

During the second quarter of fiscal 1997, HomeSide had net servicing
revenue of $42.9 million, compared to net servicing revenue of $25.0 million
during the first quarter of fiscal 1997. Net servicing revenue during the second
quarter of fiscal 1997 was comprised of mortgage servicing fees of $83.3
million, offset by mortgage servicing rights amortization of $40.5 million.
HomeSide's weighted average servicing fee during the second quarter of fiscal
1997 was 0.367% compared to 0.389% during the first quarter of fiscal 1997. The
decrease in the weighted average servicing fee was due to the servicing rights
acquired from HHI. These servicing rights generally had lower servicing fees due
to the lower proportion of government loans in HHI's servicing portfolio.
Amortization of mortgage servicing rights is recorded over the estimated
servicing period in proportion to estimated servicing revenue and increased from
$16.4 million in the first quarter of fiscal 1997 to $40.5 million in the second
quarter of fiscal 1997 as a result of a higher average servicing portfolio.

Risk Management Activities

HomeSide has a risk management program designed to protect the economic
value of its mortgage servicing portfolio from declines in value due to
increases in estimated loan prepayment speeds, which are primarily influenced by
declines in interest rates. When loans prepay faster than anticipated, the cash
flow HomeSide expects to receive from servicing such loans is reduced. The value
of mortgage servicing rights is based on the present value of the cash flows to
be received over the life of the loan and therefore, the value of the servicing
portfolio declines as prepayments increase.

During the period March 16, 1996 to November 30, 1996, HomeSide purchased
options on U.S. Treasury bond futures to protect a significant portion of the
market value of its mortgage servicing portfolio from a decline in value. The
option contracts used by HomeSide have characteristics such that they tend to
increase in value as interest rates decline. Conversely, these option contracts
tend to decline in value as interest rates rise. Accordingly, changes in value
of these securities will tend to move inversely with changes in value of
HomeSide's mortgage servicing rights.

These option contracts are designated as hedges on the purchase date and
such designation must be at a level at least as specific as the level at which
mortgage servicing rights are evaluated for impairment. The option contracts are
marked-to-market with changes in market value deferred and recognized as an
adjustment to the cost of the related mortgage servicing right asset being
hedged. As a result, any changes in market value that are deferred are amortized
and evaluated for impairment in the same manner as the related mortgage
servicing rights. The effectiveness of HomeSide's hedging activity can be
measured by the correlation between changes in the value of the option and
changes in the value of HomeSide's mortgage servicing rights. This correlation
is assessed on a quarterly basis to ensure that high correlation is maintained
over the term of the hedging program. During the periods presented, HomeSide has
experienced a high measure of correlation between changes in the value of
mortgage servicing rights and the option contracts. However, in periods of
rising interest rates, the increase in value of mortgage servicing rights may
outpace the decline in value of the option contracts since the loss on the
options is limited to the premium paid.

Since HomeSide's inception, cumulative gains and losses on risk management
contracts resulted in a $60.2 million net gain which reduced the cost basis of
mortgage servicing rights at November 30, 1996. Of the $60.2 million of net
gains included in the carrying value of HomeSide's mortgage servicing rights
portfolio, $133.3 million of gains occurred during the third quarter of fiscal
1997 and offset deferred losses of $74.7 million recorded during the first and
second quarters of fiscal 1997. HomeSide's future cash needs as they relate to
its hedging program will be influenced by such factors as long-term interest
rates, loan production levels and growth in the mortgage servicing portfolio.
The fair value of open risk management contracts at November 30, 1996 was $162.4
million, which was equal to their carrying amount because the options are
marked-to-market at each reporting date. See "-- Liquidity and Capital
Resources" for further discussion of

29
<PAGE> 31

HomeSide's sources and uses of cash. See Note 3 of Notes to Consolidated
Financial Statements on F-5 for a description of HomeSide's accounting policy
for its risk management contracts. See Notes 10 and 11 of Notes to Consolidated
Financial Statements on pages F-12 through F-15 for additional fair value
disclosures with respect to HomeSide's risk management contracts.

Net Interest Expense

Net interest expense was $1.7 million during the second quarter of fiscal
1997 compared to net interest revenue of $2.9 million during the third quarter
of fiscal 1997. Net interest revenue during the third quarter of fiscal 1997 was
comprised of interest income of $25.2 million, which was offset by interest
expense of $22.3 million on the Company's borrowings. Interest income and
expense during the second quarter of fiscal 1997 were $22.3 million and $23.9
million, respectively. The increase in interest income during the third quarter
of fiscal 1997 was the result of an increase in the average balance of loans
held for sale from $1.3 billion in the second quarter of fiscal 1997 to $1.4
billion during the third quarter of fiscal 1997. Interest expense decreased from
$23.9 million in the second quarter of fiscal 1997 to $22.3 million during the
third quarter of fiscal 1997. Lower short-term interest rates and the improved
pricing on borrowings under the Bank Credit Agreement contributed to this
reduction.

Net interest expense decreased from $2.2 million during the first quarter
of fiscal 1997 to $1.7 million during the second quarter of fiscal 1997, or 23%.
Net interest expense during the second quarter was comprised of interest income
of $22.3 million and was exceeded by interest expense of $23.9 million on the
Company's borrowings. Interest income and expense during the first quarter of
fiscal 1997 were $12.7 million and $15.0 million, respectively. The increases in
interest income and interest expense during the second quarter are the result of
an increase in the average balance of mortgage loans held for sale from $770
million in the first quarter of fiscal 1997 to $1.3 billion during the second
quarter of fiscal 1997 and an increase in the average balance of notes payable
to banks from $1.3 billion to $2.0 billion, from the first quarter to the second
quarter of fiscal 1997, respectively. HomeSide's acquisition of HHI on May 31,
1996 generally contributed to the increased balances of mortgage loans held for
sale and borrowings. Interest income during the second quarter was also
positively affected by a general increase in long-term interest rates during the
second quarter. Interest expense during the second quarter also included $5.7
million of interest incurred on the $200.0 million principal amount of Notes
issued on May 15, 1996. Interest expense on the Notes during the first quarter
of fiscal 1997 was $2.3 million. First quarter interest expense also included
interest on $90.0 million of bridge financing, which was outstanding from March
16, 1996 to May 15, 1996 and incurred interest at 9.25%. The bridge financing
was paid off with a portion of the proceeds from the Notes. The Company intends
to use a portion of the proceeds of the Offering to retire $70.0 million
principal amount of the Notes. See "Use of Proceeds."

Net Mortgage Origination Revenue

Net mortgage origination revenue was $16.5 million during the third quarter
of fiscal 1997 compared to $16.3 million during the second quarter of fiscal
1997, a $0.2 million increase. Net mortgage origination revenue is comprised of
fees earned on the origination of mortgage loans, gains and losses on the sale
of loans, gains and losses resulting from hedges of secondary marketing activity
and fees charged to correspondents for the review of loan documents. Net
mortgage origination revenue also includes gains from excess mortgage servicing
receivables. As noted above, loan production, exclusive of bulk servicing
acquisitions, was $5.5 billion for the third quarter of fiscal 1997, slightly
higher than the second quarter of fiscal 1997 loan production, excluding bulk
acquisitions. HomeSide's primary origination activities during the second and
third quarters of fiscal 1997 took place through correspondent and co-issue
channels. Currently, HomeSide expects these channels to continue to be the
primary loan origination sources in the future.

Net mortgage origination revenue was $16.3 million during the second
quarter of fiscal 1997 compared to $10.8 million during the first quarter of
fiscal 1997, a 51% increase. As noted above, loan production, exclusive of bulk
servicing acquisitions, was $5.5 billion for the second quarter of fiscal 1997,
$1.7 billion, or 45% higher than the first fiscal quarter loan production of
$3.8 billion. The increase in loan production is reflective of the production
from the preferred seller relationship with HHI established as part of the HHI
Acquisition. HomeSide's primary origination activities during the first and
second quarters of fiscal 1997 were through

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<PAGE> 32

correspondent and co-issue channels. HomeSide expects these channels to continue
to be the primary loan origination sources in the future.

Salaries and Employee Benefits

Salaries and employee benefits expense decreased $0.5 million, or 2.5%,
from $21.2 million in the second quarter of fiscal 1997 to $20.7 million during
the third quarter of fiscal 1997. The decrease was due to the continuing
integration of the Barnett servicing operations. The average number of full time
equivalent employees fell from 1,879 during the second quarter of fiscal 1997 to
1,708 during the third quarter of fiscal 1997.

Salaries and employee benefits expense increased $9.7 million, or 84%, from
$11.5 million in the first quarter of fiscal 1997 to $21.2 million during the
second quarter of fiscal 1997. The increase was due to growth in the number of
employees as a result of the acquisition of HHI on May 31, 1996. The average
number of full time equivalent employees grew from 1,096 during the first
quarter of fiscal 1997 to 1,879 during the second quarter of fiscal 1997.

Occupancy and Equipment Expense

Occupancy and equipment expense increased $0.2 million from $3.1 million
during the second quarter of fiscal 1997 to $3.3 million during the third
quarter of fiscal 1997. Occupancy and equipment expense primarily includes
rental expense, repairs and maintenance costs, certain computer software
expenses and depreciation of HomeSide's premises and equipment.

Occupancy and equipment expense increased $1.3 million, or 67%, from $1.8
million during the first quarter to $3.1 million during the second quarter of
fiscal 1997. The increase in occupancy and equipment expense was due to certain
premises and equipment acquired from HHI and increases in information systems
required to handle the growing mortgage servicing portfolio.

Servicing Losses on Investor-Owned Loans

Servicing losses on investor-owned loans increased from $4.1 million for
the second quarter of fiscal 1997 to $5.0 million for the third quarter of
fiscal 1997, a 22% increase. Servicing losses on investor-owned loans primarily
represent anticipated losses primarily attributable to servicing FHA and VA
loans for investors. These amounts include actual losses for final disposition
of loans, accrued interest for which payment has been denied, and estimates for
potential losses based on HomeSide's experience as a servicer of government
loans.

Servicing losses on investor-owned loans increased slightly from $3.9
million for the first quarter of fiscal 1997 to $4.1 million for the second
quarter of fiscal 1997, a 3% increase.

Included in the balance of accounts payable and accrued liabilities at
November 30, 1996 is a reserve for estimated servicing losses on investor-owned
loans of $21.7 million. The reserve has been established for potential losses
related to the mortgage servicing portfolio. Increases to the reserve are
charged to earnings as servicing losses on investor-owned loans. The reserve is
decreased for actual losses incurred related to the mortgage servicing
portfolio. HomeSide's historical loss experience on VA loans generally has been
consistent with industry experience.

Other Expense

Other expense decreased $0.8 million from $12.5 million for the second
quarter of fiscal 1997 to $11.7 million during the third quarter of fiscal 1997.
Other expense consists mainly of professional fees, communications expense,
advertising and public relations and certain loan origination expenses. The
level of other expense will fluctuate in part based upon the level of HomeSide's
mortgage servicing portfolio and loan production volumes. Future production
levels are dependent on the level of long-term interest rates and other economic
factors, which are difficult to accurately predict.

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<PAGE> 33

Other expense increased $7.2 million from $5.3 million for the first
quarter of fiscal 1997 to $12.5 million during the second quarter of fiscal
1997.

Provision for Income Taxes

HomeSide's provision for income taxes was $9.0 million during the third
quarter of fiscal 1997, an increase of $2.0 million over the $7.0 million
provision recorded during the second quarter of fiscal 1997. The provision for
income taxes for the period March 16, 1996 to May 31, 1996 was $4.6 million. The
effective income tax rates for the first, second and third quarters of fiscal
1997 was approximately 41%.

LIQUIDITY AND CAPITAL RESOURCES

Operations

Net cash used in operations was $181.8 million for the period March 16,
1996 to November 30, 1996. The primary uses of cash in operations were to fund
loan originations and pay corporate expenses. These uses of cash were partially
offset by cash provided from servicing fee income, loan sales and principal
repayments. Cash flows from loan originations are dependent upon current
economic conditions and the level of long-term interest rates. Decreases in
long-term interest rates generally result in higher loan refinancing activity
which results in higher cash demands to meet increased loan production levels.
Cash needs in times of increased production are primarily met through borrowings
and loan sales.

Investing

Net cash used in investing activities was $675.7 million during the period
March 16, 1996 to November 30, 1996. Cash used in investing activities was
primarily used for the purchase and origination of mortgage servicing rights and
the purchase of options on U.S. Treasury bond futures as part of the Company's
hedging program. During the period March 16, 1996 to November 30, 1996, HomeSide
also used cash of $133.4 million and $106.2 million to purchase certain mortgage
banking operations of HLI and HHI, respectively (see Note 4 of Notes to
Consolidated Financial Statements). Future uses of cash for investing activities
will be dependent on the mortgage origination market and the Company's hedging
needs. HomeSide is not able to estimate the timing and amount of cash uses for
future acquisitions of other mortgage banking entities, if such acquisitions
were to occur.

Financing

During the period March 16, 1996 to November 30, 1996, HomeSide had $858.7
million of net cash provided by financing activities. The primary sources of
cash from financing activities during the period were $152.8 million from the
issuance of common stock of HomeSide, the issuance of $200.0 million of Notes
and increases in the Company's line of credit borrowings. Cash used in financing
activities was used to repay a $90.0 million bridge loan and the payment of debt
issue costs related to the Notes and the Bank Credit Agreement.

The bridge financing was used to finance a portion of the HLI Acquisition
and was repaid with a portion of the proceeds from the Notes. The Notes were
issued on May 14, 1996, pay interest semiannually at 11.25% and are due May 15,
2003. Proceeds of $87.5 million were held in escrow until the close of the HHI
Acquisition and an additional $6.5 million were used to pay underwriting fees
and expenses. During the third quarter of fiscal 1997, the Notes were registered
under the Securities Act. The holders have exchanged unregistered Notes for
registered Notes. The registered Notes are identical in all respects to the
terms of the unregistered Notes, except that the registered Notes will generally
be freely transferable by the holders thereof. The registered Notes will be
recorded at the carrying value of the unregistered Notes that were exchanged.
The proceeds from common stock issuances were received upon the close of the HLI
Acquisition on March 15, 1996. Additional proceeds were received upon the
issuance of stock as part of the HHI Acquisition on May 31, 1996. For additional
information regarding the Notes and the issuance of common stock, see Notes 6
and 7 of Notes to Consolidated Financial Statements of HomeSide on F-10 and
F-11.

Cash from financing activities was also provided by the three-year senior
secured revolving credit facility that was entered into by certain of HomeSide's
subsidiaries on March 15, 1996 and re-issued as part of the

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<PAGE> 34

Bank Credit Agreement on May 31, 1996. The line of credit is subject to a $2.5
billion limit and is secured by primarily all of the assets of HomeSide. The
$2.5 billion commitment is comprised of a servicing secured credit facility,
capped at $950 million, and a warehouse loan commitment. Drawings under the line
of credit bear interest at rates per annum based on, at HomeSide's option, (A)
the highest of (i) the lead bank's prime rate, (ii) the secondary market rate of
certificates of deposit plus 100 basis points, and (iii) the federal funds rate
in effect from time to time plus 0.5%, or (B) a eurodollar rate. Cash provided
by the Company's line of credit facility is the result of borrowings needed to
finance loan origination activity. In periods of higher loan origination
activity, cash needs are greater and, accordingly, HomeSide must borrow under
the credit facility in order to meet production demand. In periods of reduced
loan demand, proceeds from loan sales can be used to pay down the credit
facility. In future periods, it is expected that cash financing needs will
primarily be met from drawings on the credit facility as opposed to further
issuances of notes or common stock. See "Description of Bank Credit Agreement".

HomeSide does not expect to pay dividends for the foreseeable future. The
ability of HomeSide to pay dividends is restricted by covenants in the indenture
governing the Notes. See "Description of the Notes." The ability of HomeSide's
subsidiaries to pay dividends to HomeSide is restricted by covenants contained
in the Bank Credit Agreement. See "Description of Bank Credit Agreement."

During the period March 16, 1996 to November 30, 1996, net cash used in
operations and investing activities was $181.8 million and $675.7 million,
respectively, while cash provided by financing activities was $858.7 million,
resulting in a net increase in cash of $1.2 million. HomeSide expects that to
the extent cash generated from operations is inadequate to meet its liquidity
needs, those needs can be met through financing from its bank credit facility.
Accordingly, HomeSide does not currently anticipate that it will make sales of
servicing rights to any significant degree for the purpose of generating cash.
Nevertheless, in addition to its cash and mortgage loans held for sale balances,
HomeSide's servicing rights portfolio provides a potential source of funds to
meet liquidity requirements, especially in periods of rising interest rates when
loan origination volume slows. Future cash needs are highly dependent on future
loan production and servicing results, which are influenced by changes in
long-term interest rates.

New Accounting Standard

In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS
125"). This Statement, among other things, provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities. SFAS 125 requires that after a transfer of financial assets, an
entity recognize the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control has been
surrendered, and derecognizes liabilities when extinguished. SFAS 125 also
requires that liabilities and derivatives incurred or obtained by transferors as
part of a transfer of financial assets be initially measured at fair value. This
Statement is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1996 and is to be
applied prospectively. Management expects that the impact of this Statement on
the results of operations, financial condition, or liquidity of HomeSide will be
immaterial.

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<PAGE> 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- HLI

JANUARY 1, 1996 TO MARCH 15, 1996
AND
JANUARY 1, 1995 TO MARCH 31, 1995

GENERAL

On March 15, 1996, the HLI Acquisition was consummated. On May 31, 1996,
the HHI Acquisition was consummated. See "The Acquisitions".

The interim financial statements of HLI have been prepared for the period
January 1, 1996 to March 15, 1996 to coincide with the closing of the HLI
Acquisition. Results of operations for periods subsequent to March 15, 1996 are
included in the financial statements of HomeSide. Results of operations for the
three months ended March 31, 1995 have been presented for comparative purposes.
Unless otherwise noted, for purposes of the Management's Discussion and Analysis
of Financial Condition and Results of Operations -- HLI, references to the first
quarter 1996 pertain to the period January 1, 1996 to March 15, 1996. The
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- HLI for the first quarter of 1996 and 1995 should be read in
conjunction with the Management's Discussion and Analysis of Financial Condition
and Results of Operations for the three years ended December 31, 1995 appearing
elsewhere in this Prospectus.

RESULTS OF OPERATIONS

For purposes of this "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- HLI" the term "HLI" means HLI prior to
the closing of the HLI Acquisition.

Summary

Long-term interest rates declined through mid-February 1996, the
continuation of a trend which began in 1995. This decline led to an increase in
loan production to $4.2 billion during the first quarter of 1996 from $1.2
billion during the first quarter of 1995, and resulted in growth in HLI's
servicing portfolio, which increased from $41.6 billion at December 31, 1995 to
$44.2 billion at March 31, 1996. Beginning in late February and continuing
through March 1996, long-term interest rates increased and negatively impacted
HLI's results of operations for the first quarter. HLI reported a net loss of
$73.9 million during the first quarter of 1996, compared to net income of $3.4
million in the first quarter of 1995. The decrease in net income was primarily
due to losses on HLI's risk management contracts of $128.8 million during the
first quarter of 1996 as a result of increasing interest rates in late February
and March 1996.

Net Servicing Revenue

Servicing activities include collection of mortgage principal, interest and
escrow payments; remitting these payments to investors, maintaining records of
loans and escrows and management of certain loan default activities. Servicing
fees are typically expressed as a percentage of UPB and are collected from the
monthly remittances of the borrower before being paid to the investor. HLI is
one of the largest servicers of government insured and guaranteed loans. These
loans receive a higher servicing fee as compared to conventional loans to
compensate for the additional risks associated with FHA/VA loans (see
"-- Servicing Losses on Investor-Owned Loans").

During the first quarter of 1996, HLI had servicing expenses in excess of
servicing revenues ("net servicing expense") of $97.1 million, as compared to
servicing revenues in excess of servicing expenses ("net servicing revenue") of
$24.2 million in the first quarter of 1995. The net servicing expense in 1996
was primarily due to losses on HLI's risk management contracts. Excluding the
effect of risk management contracts, net servicing revenue increased from $20.6
million in the first quarter 1995 to $31.7 million in the first quarter 1996. In
the first quarter of 1995, HLI recorded gains on risk management contracts of
$3.6

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<PAGE> 36

million. Due to an increase in long-term interest rates in late February and
early March 1996, HLI experienced losses on risk management contracts of $128.8
million during the quarter. Changes in the value of HLI's mortgage servicing
rights substantially offset the loss on risk management contracts. However, such
changes in value were not fully recorded in the financial statements of HLI
because servicing rights were recorded at the lower of amortized cost or market
value.

The decrease in net servicing revenue was partially offset by a reduction
in amortization of mortgage servicing rights from $23.1 million in the first
quarter of 1995 to $7.2 million in the first quarter of 1996. The reduction in
amortization was due to the increase in long-term interest rates noted above,
which had a favorable effect on prepayment estimates used in calculating HLI's
periodic amortization expense. Since mortgage servicing rights are amortized
over the expected period of service fee revenues, a reduction in prepayment
activity typically results in a longer amortization period and, accordingly,
lower amortization expense for each reporting period. Amortization charges are
highly dependent upon the level of prepayments during the period and the change
in prepayment expectations, which are significantly influenced by the direction
and level of long-term interest rate movements.

Risk Management Activities

HLI has a risk management program designed to protect the economic value of
its mortgage servicing portfolio from declines in value due to increases in
estimated prepayments speeds, which are primarily influenced by declines in
interest rates. When loans prepay faster than anticipated, the cash flow HLI
expects to receive from servicing such loans is reduced. The value of mortgage
servicing rights is based on the present value of the cash flows to be received
over the life of the loans. Therefore, the value of the servicing portfolio
declines as prepayments increase.

To implement its risk management objectives, HLI purchases risk management
contracts that are designed to increase in value when long-term interest rates
decline, or when prepayment speeds increase above a specified level. During the
period ended March 15, 1996, HLI purchased options on U.S. Treasury bond futures
to protect a significant portion of the market value of its mortgage servicing
portfolio from a decline in value. The option contracts used by HLI have
characteristics such that they tend to increase in value as interest rates
decline. Conversely, these option contracts tend to decline in value as interest
rates rise. Accordingly, changes in value of these contracts will tend to move
inversely with changes in value of HLI's mortgage servicing rights. For a
discussion of the results of HLI's risk management activities for the period
ended March 15, 1996, see the previous subsection entitled "Net Servicing
Revenue."

Net Interest Expense

Net interest expense represents interest earned on warehouse loans and on
mortgage loans held for investment purposes, less interest expense incurred to
fund such loans and certain other assets including mortgage servicing rights.
Net interest expense decreased from $2.0 million in the first quarter of 1995 to
$1.7 million in the first quarter of 1996, primarily due to an increase in
long-term interest rates during February and March 1996 without a corresponding
increase in short term interest rates on its credit facility. This increase in
long-term interest rates had a positive impact on HLI's interest spread, which
was the difference between interest revenue and interest expense, by increasing
HLI's yield on its loans held for sale. The increase in interest income was
impacted by an increase in the average balance of HLI's loans held for sale from
$124.6 million during the first quarter of 1995 to $535.6 million during the
first quarter of 1996. An increase in the average balance of loans held for
sale, therefore, increased HLI's interest revenue during the first quarter of
1996 as compared to 1995. Interest expense was incurred on HLI's credit facility
with Bank of Boston, which was primarily influenced by short-term interest
rates. For the periods presented, interest earned on loans held for sale was
less than interest expense on borrowings, thereby creating net interest expense
for HLI.

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<PAGE> 37

Net Mortgage Origination Revenue (Expense)

Net mortgage origination revenue (expense) increased from ($1.1) million in
the first quarter of 1995 to $7.6 million in the first quarter of 1996. The
following table sets forth HLI's origination activity for the three months ended
March 31, 1995 and 1996:

<TABLE>
<CAPTION>
FIRST FIRST
QUARTER QUARTER
1995 1996
------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Correspondent.......................................... $ 314 $2,031
Co-issue(a)............................................ 755 1,597
Broker................................................. 28 191
------ ------
Total wholesale........................................ 1,097 3,819
Retail................................................. 85 368
------ ------
Total production....................................... $1,182 $4,187
====== ======
</TABLE>
- ---------------

(a) Represents the acquisition of servicing rights, not the underlying loans.
Amounts represent UPB of mortgage debt to which the acquired servicing
rights relate.

The increase in net origination revenue during the first quarter of 1996
was partially due to the adoption of Statement of Financial Accounting Standards
No. 122, "Accounting for Mortgage Servicing Rights" ("SFAS 122") as of January
1, 1996, which had the effect of increasing net mortgage origination revenue by
$2.1 million. In previous periods, the cost of mortgage servicing rights on a
loan originated by HLI was included in the basis of the related loan. SFAS 122
requires that the cost of an originated loan that is sold with servicing
retained be allocated between the loan sold and the servicing rights retained.
Consequently, the cost basis of loans originated in 1996 by HLI was lower than
the basis that would have been recorded prior to the adoption of SFAS 122 and
resulted in additional gain on the sale of loans. The remaining increase was due
to increases in origination income resulting from higher loan production
volumes.

Gain on Sales of Servicing Rights

Gain on sales of servicing rights during the first quarter of 1995 were
$4.3 million. The gain was due to the sale of servicing rights on loans with a
principal balance of $1.1 billion. There were no sales of servicing rights
during the first quarter of 1996, since the factors that would have made such a
sale advantageous were not present. HLI's decision to sell mortgage servicing
rights depends on a variety of factors, including the available markets and
current prices for such servicing rights and the working capital requirements of
HLI. The likelihood of future sales of mortgage servicing rights, or the
profitability on such sales, cannot be predicted.

Salaries and Employee Benefits

Salaries and employee benefits decreased $1.4 million, or 12.1%, from $11.7
million in the first quarter of 1995 to $10.3 million in the first quarter of
1996. Direct loan origination costs, principally salary and employee benefit
costs, were included in the cost basis of the mortgage loans and, therefore,
they were not recognized until the sale of the loans. Including these
capitalized loan costs, salaries and employee benefits increased $0.7 million,
or 5.8%, from $12.8 million in the first quarter of 1995 to $13.5 million in the
first quarter of 1996. The increase reflected general salary and benefit
increases as compared to the first quarter of 1995 and a slight increase in the
number of full-time equivalent employees from 1,117 as of March 31, 1995 to
approximately 1,120 as of March 15, 1996.

Occupancy and Equipment Expense

Occupancy and equipment expense decreased $0.4 million, from $2.4 million
for the first quarter of 1995 to $2.0 million for the first quarter of 1996. The
decrease was primarily due to a decline in equipment repair and maintenance
expenses in the first quarter of 1996 as compared to the first quarter of 1995.

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<PAGE> 38

Servicing Losses on Investor-Owned Loans

Servicing losses on investor-owned loans increased from $0.7 million in the
first quarter of 1995 to $5.6 million in the first quarter of 1996. The increase
was primarily due to a change in the VA's method of calculating the amount it
will guarantee on any loan, coupled with planned military base closings in
California that may have an impact on the performance of certain VA loans
serviced by HLI. The increase in the VA marketing rate effectively represents a
potential increase in HLI's exposure on properties conveyed to the VA. HLI
analyzed the effect of these factors on the level of its reserve for estimated
servicing losses and recorded a higher provision in the first quarter of 1996 in
order to bring the reserve to an acceptable level.

Real Estate Owned Expense

Real estate owned expense is incurred from foreclosed properties on which
HLI has taken title and includes declines in the value of the property, as well
as the incurrence of property holding and maintenance costs. Real estate owned
expense increased from $0.2 million in the first quarter of 1995 to $0.3 million
in the first quarter of 1996. The change was due to an increase in the average
balance of real estate owned from $1.2 million during the first quarter of 1995
to $2.6 million during the first quarter of 1996.

Other Expense

Other expense increased $2.7 million, from $4.7 million during the first
quarter of 1995 to $7.4 million in the first quarter of 1996. The increase was
the result of a $0.5 million increase in communications expense and a $0.4
million increase in loan expense, coupled with a decrease in expense credits
resulting from a decline in early pool buyout activity in 1996. These increases
are reflective of the increase in HLI's servicing portfolio, $44.2 billion at
March 31, 1996 as compared to $37.8 billion at March 31, 1995, and higher loan
production levels in the first quarter of 1996 as compared to the first quarter
of 1995.

Provision for (benefit from) Income Taxes

HLI's benefit from income taxes was $42.5 million during the first quarter
of 1996 as compared to a provision for income taxes of $2.3 million in the first
quarter of 1995. The change in HLI's income tax provision was the result of a
decline in pre-tax income during the first quarter of 1996 as compared to the
first quarter of 1995, and a decrease in the effective tax rate from 39.9%
during the first quarter of 1995 to 36.5% during the first quarter of 1996.

LIQUIDITY AND CAPITAL RESOURCES

Overview

HLI's primary sources of cash are revenues earned from the servicing of
mortgage loans and cash generated from the origination and sale of mortgage
loans, as well as borrowings under HLI's line of credit. HLI has entered into a
new credit facility (see "-- Post-Acquisition Financing" below). HLI anticipates
that these sources of cash will be sufficient to meet its liquidity needs and
accordingly, does not currently anticipate that it will make sales of servicing
rights to any significant degree for the purpose of generating cash. HLI's
primary uses of cash are to fund loan originations and purchases, purchase bulk
servicing rights, repay its line of credit and pay general corporate expenses.

Operations

Net cash used in operations was $112.5 million for the first quarter of
1996 as compared to net cash provided by operations of $197.6 million for the
first quarter of 1995. The decrease in net cash provided by operating activities
was principally the result of a $453.3 million increase in net cash used in the
origination and purchase of loans held for sale. This is evidenced by the
increase in loan production from $1.2 billion during the first quarter of 1995
to $4.2 billion during the first quarter of 1996. The increase in cash used in
loan production activities was partially offset by a $62.6 million increase in
collection of accounts and mortgage claims receivable.

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<PAGE> 39

Investing

Net cash used in investing activities increased $83.7 million to $155.1
million in the first quarter of 1996 from $71.4 million during the first quarter
of 1995. The increase in cash used in investing activities was due to a $53.2
million increase in cash used for the purchase and origination of mortgage
servicing rights and a $66.7 million increase in the purchase of risk management
contracts. These increases were the result of higher loan production levels and
an increasing loan servicing portfolio. The increases noted above were partially
offset by a $40.0 million decrease in net originations of loans held for
investment.

Financing

During the first quarter of 1996, HLI had $290.0 million of net cash
provided by financing activities as compared to net cash used in financing
activities of $130.6 million during the first quarter of 1995. During the first
quarter of 1995, HLI had net repayments on its line of credit with Bank of
Boston of $130.5 million, as opposed to net borrowings of $290.0 million during
the first quarter of 1996. The level of borrowings is highly dependent on loan
production and servicing activity. As loan production and servicing increases,
HLI draws more from its credit line, and conversely, as production and servicing
levels decrease, HLI is able to use excess cash to pay down the credit line. The
net borrowings for the first quarter of 1996, therefore, are the result of
increased loan production and held for sale balances as compared to the first
quarter of 1995.

Post-Acquisition Financing

In connection with the HLI Acquisition, HomeSide entered into a $1.5
billion three year senior secured revolving credit facility maturing on March
15, 1999 that replaced the former line of credit with BKB. In connection with
the HHI Acquisition, HLI, together with its wholly-owned subsidiary, Honolulu
Mortgage Company ("Honolulu Mortgage"), entered into a $2.5 billion three year
senior secured revolving credit facility maturing on May 31, 1999 that replaced
the line of credit entered into by HLI on March 15, 1996 in connection with the
HLI Acquisition and HHI's former line of credit with Barnett. The new facility
is comprised of a $2.5 billion warehouse commitment and a $950 million servicing
commitment sublimit and is funded by independent third party financial
institutions. HLI's and Honolulu Mortgage's total borrowing capacity under the
new facility is $2.5 billion, with the servicing commitment portion capped at
$950 million. The new credit facility provides financing for HLI's and Honolulu
Mortgage's ongoing operations, including the origination and servicing of
residential mortgage loans, other working capital and general corporate
purposes. The facility is secured primarily by all of HLI's and Honolulu
Mortgage's assets. See "Description of Bank Credit Agreement".

On May 14, 1996, the Company issued $200 million principal amount of the
Notes. The Notes mature May 15, 2003 and pay interest semiannually in arrears on
May 15 and November 15 of each year, commencing November 15, 1996. The Notes are
redeemable at the option of the Company, in whole or in part, at any time on or
after May 15, 2001, at certain pre-set redemption prices. Upon issuance, $90.0
million of the proceeds were used to pay-off bridge financing incurred in the
HLI Acquisition, $87.5 million was placed into escrow pending completion of the
HHI Acquisition, $6.5 million was used to pay underwriting expenses and the
remaining $16.0 million was used to repay borrowings under HLI's former credit
facility. The $87.5 million was released from escrow on May 31, 1996
concurrently with the completion of the HHI Acquisition.

HLI also has a mortgage note payable with interest at 9.50% maturing in
2017. HomeSide's main office building is pledged as collateral for such note,
and certain restrictions and/or penalties apply with respect to HLI's ability to
refinance this note.

For the period January 1, 1996 through March 15, 1996 net cash used in
operating activities and in investing activities was $112.4 million and $155.1
million, respectively, while cash provided by financial activities amounted to
$289.9 million, resulting in a net increase in cash of $22.3 million. HLI
expects that to the extent cash generated from operations is inadequate to meet
its liquidity needs, those needs can be met through financing from its credit
facility. Accordingly, HLI does not currently anticipate that it will make sales
of servicing rights to any significant degree for the purpose of generating
cash. Nevertheless, in addition to its cash and loans held for sale balances,
HLI's servicing rights portfolio provides a potential source of funds to meet
liquidity requirements, especially in periods of rising interest rates when loan
origination volume slows.

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<PAGE> 40

Future cash needs are highly dependent on future loan production and servicing
results, which are influenced by changes in long-term interest rates.

THREE YEARS ENDED DECEMBER 31, 1995

GENERAL

Prior to March 15, 1996, HLI was a wholly-owned subsidiary of Bank of
Boston, a subsidiary of Bank of Boston Corporation ("BKBC"). In December 1995,
Bank of Boston signed an agreement to sell HLI to HomeSide, Inc. At the closing
of the HLI Acquisition, Bank of Boston received cash and approximately a 45%
equity interest in HomeSide, Inc. Also at the closing of the HLI Acquisition,
THL and MDP collectively acquired approximately a 55% interest in HomeSide, Inc.

On March 4, 1996, HomeSide, Inc. signed an agreement to acquire from
Barnett all of the outstanding stock of HHI. At the closing of the HHI
Acquisition, certain assets and liabilities of HHI were retained by Barnett,
including those assets of HHI and its subsidiaries (other than Honolulu
Mortgage) associated with the loan origination or production activities of such
entities. Upon closing of the HHI Acquisition, Barnett received cash and Siesta,
an affiliate of Barnett, acquired an ownership interest in HomeSide, Inc. such
that each of (i) Siesta, (ii) BKB, and (iii) THL and MDP collectively, own
approximately a 33% interest in HomeSide, Inc.

On June 1, 1995, HLI purchased certain assets and assumed certain
liabilities of Bell Mortgage Company ("Bell Mortgage"), a privately-held
mortgage origination company located in Minneapolis, Minnesota. The acquisition
of Bell Mortgage was accounted for under the purchase method of accounting.
Results of operations of Bell Mortgage are included in the 1995 consolidated
financial statements from the date of acquisition. See Note 16 of Notes to
Consolidated Financial Statements of HLI on F-54 for further discussion.

HLI operates as a full-service mortgage banking firm emphasizing wholesale
mortgage originations and low cost mortgage servicing. Servicing activities
represent HLI's primary revenue source. HLI also generates revenue, to a lesser
extent, from mortgage loan origination fees. HLI incurs expenses for
amortization of mortgage servicing rights, interest on its line of credit and
general corporate activities.

RESULTS OF OPERATIONS

For purposes of this "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- HLI" the term "HLI" means HLI prior to
the closing of the HLI Acquisition.

Summary

HLI reported net income of $58.8 million in 1995, $5.4 million in 1994 and
a net loss of $85.2 million in 1993. Net income in 1994 included an after tax
positive effect of $3.5 million from a change in the accounting for mortgage
servicing fee income. The net loss in 1993 includes an after tax charge of $59.9
million for a change in HLI's method of valuing purchased mortgage servicing
rights, which was partially offset by an after tax benefit of $6.1 million
resulting from the cumulative effect on prior years of adopting Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" as of
January 1, 1993. Prior to the effect of the adjustments noted above, HLI had
income of $58.8 million in 1995, $2.0 million in 1994 and a loss of $31.4
million in 1993. See Notes 2 and 10 of Notes to Consolidated Financial
Statements for further discussion of HLI's accounting changes.

The increase in net income in 1995 as compared to 1994 was primarily due to
factors that resulted from a decrease in interest rates coupled with growth in
HLI's servicing portfolio. The lower interest rate environment resulted in a
gain related to HLI's risk management activities in 1995 as compared to a loss
in 1994. See "-- Risk Management Activities." HLI also benefited from a 9%
increase in its residential servicing portfolio from $38.0 billion at December
31, 1994 to $41.6 billion at December 31, 1995. The increases were partially

39
<PAGE> 41

offset, however, by higher mortgage servicing rights amortization charges as a
result of increased servicing volumes and higher prepayment activity in 1995.
The loss before the cumulative effect of changes in accounting principles in
1993 was primarily due to unscheduled mortgage servicing rights amortization
that resulted from a declining interest rate environment.

Net Servicing Revenue

Servicing activities include collection of mortgage principal, interest and
escrow payments; remitting these payments to investors; and maintaining records
of loans and escrows. Servicing fees are typically expressed as a percentage of
UPB and are collected from the monthly remittances of the borrower before being
paid to the investor. HLI is one of the largest servicers of government insured
and guaranteed loans. These loans receive a higher servicing fee as compared to
conventional loans to compensate for the additional risks associated with FHA/VA
loans (see "-- Servicing Losses on Investor-Owned Loans").

The following table sets forth the composition of HLI's servicing portfolio
by UPB:

<TABLE>
<CAPTION>
AT DECEMBER 31,(A)
------------------------------------
1993 1994 1995
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
FHA/VA.................................... $12,524 $15,695 $19,880
Conventional.............................. 14,130 20,113 21,041
------- ------- -------
Total........................... $26,654 $35,808 $40,921
======= ======= =======
</TABLE>

- ---------------

(a) Excludes loans purchased not yet on servicing system.

Net servicing revenue increased from $67.0 million to $173.7 million, an
increase of $106.7 million or 159.3%, from 1994 to 1995. This increase was
comprised of a $115.4 million rise in gain on risk management contracts and a
$32.5 million increase in mortgage servicing fees, offset by a $41.2 million
increase in amortization of mortgage servicing rights. The gain on risk
management contracts resulted primarily from a decline in interest rates in the
fourth quarter of 1995 and was substantially offset by a related decrease in the
economic value of the servicing portfolio, which was not reflected in earnings
for the period. The cost of acquiring the right to service mortgage loans
originated by others is capitalized and amortized as a reduction of servicing
fee revenue over the estimated servicing period. The increases in mortgage
servicing fees and amortization of mortgage servicing rights were primarily due
to growth in the HLI's average servicing portfolio during 1995. Average
servicing fees decreased slightly from 0.389% in 1994 to 0.383% in 1995.

At December 31, 1995, HLI serviced approximately 510,000 loans, including
loans purchased not yet on HLI's servicing system, with UPB of $41.6 billion,
compared to approximately 484,000 loans with UPB of $38.0 billion at December
31, 1994, an increase of $3.6 billion, or 9.5%. The average servicing volume
increased from $33.2 billion in 1994 to $39.3 billion in 1995, an increase of
$6.1 billion or 18.4%. Growth in HLI's servicing portfolio has been primarily
generated by wholesale loan production, which includes correspondent, co-issue
and broker channels. HLI also purchases servicing rights in bulk from other
mortgage servicing entities. Bulk purchases totalled $2.3 billion, $5.5 billion
and $0.7 billion in 1993, 1994 and 1995, respectively.

In addition to growth in the servicing portfolio, an increase in late fee
income contributed to the rise in mortgage servicing revenue during 1995. Late
fees are included in the consolidated statement of operations as a component of
mortgage servicing revenue. HLI instituted efforts to improve the collection of
ancillary fee income during the year which contributed to an increase in late
fee charges collected from $10.5 million in 1994 to $14.4 million in 1995. Late
fee income also increased as a result of increases in HLI's servicing portfolio
and average loan balance. The higher average loan balance translates into higher
loan payments on which late fees are based. There was little or no change in the
rate on which late fees were computed during 1995 as compared to 1994.

Net servicing revenue increased from $6.0 million to $67.0 million from
1993 to 1994, an increase of $61 million. This increase was comprised of a $28.7
million growth in mortgage servicing revenue and a $45.7

40
<PAGE> 42

million decrease in amortization of mortgage servicing rights, offset by a $13.4
million reduction in gain on risk management contracts. The growth in servicing
revenue was due to an increase in HLI's average servicing portfolio from 1993 to
1994, as a result of loan production and an increase in the average servicing
fee rate from 0.372% to 0.389%. At December 31, 1993, HLI serviced approximately
368,000 loans with UPB of $28.0 billion, including loans purchased not yet on
HLI's servicing system, compared to approximately 484,000 loans with UPB of
$38.0 billion at December 31, 1994, an increase of $10.0 billion, or 35.7%. The
average servicing volume was $33.2 billion in 1994, as compared to $25.9 billion
in 1993. The decrease in amortization of $45.7 million was due to an increase in
interest rates during 1994 which reduced refinancing activities below the levels
of 1993 and helped to reduce prepayments on HLI's servicing portfolio. High loan
prepayment activity shortens the estimated life of the associated mortgage
servicing right and, accordingly, accelerates the rate of mortgage servicing
amortization. The slower prepayment activity during 1994 increased the value of
HLI's servicing rights and reduced the amount of amortization required in 1994
as compared to 1993.

Risk Management Activities

HLI has a risk management program designed to protect the economic value of
its mortgage servicing portfolio from declines in value due to increases in
estimated prepayment speeds, which are primarily influenced by declines in
interest rates. When loans prepay faster than anticipated, the cash flow HLI
expects to receive from servicing such loans is reduced. Since the value of the
mortgage servicing rights is based on the present value of the cash flows to be
received over the life of the loan, the value of the servicing portfolio
declines as prepayments increase. Prior to 1994, risk management of the mortgage
servicing rights value was principally conducted by BKB as part of a
consolidated risk management program. Through the third quarter of 1995, BKB
continued to manage a portion of the risk associated with the servicing
portfolio.

To implement its risk management objectives, HLI purchases risk management
contracts that increase in value when long-term interest rates decline, or when
prepayment speeds increase above a specified level. During 1994 and 1995, HLI
purchased options on long-term United States Treasury bond futures to protect a
significant portion of the market value of its mortgage servicing portfolio from
a decline in value. The value of HLI's risk management position is designed to
perform inversely with changes in value of mortgage servicing rights due to the
effects of the changes in interest rates. The options were marked to market at
each reporting date with changes in value reported in revenues. HLI recognized a
gain on risk management contracts of $108.7 million in 1995. While the value of
the servicing portfolio declined, the full effect of such decline was not
reflected in HLI's financial results because its value exceeded its book value.
Due to a rising interest rate environment, HLI experienced a $6.7 million loss
related to its risk management contracts in 1994. In 1993, the decline in the
value of mortgage servicing rights substantially exceeded gains on risk
management contracts realized by HLI. The value of the servicing rights was
included in BKB's consolidated risk management program.

HLI recognized a gain on risk management contracts of $108.7 million in
1995, of which $86.5 million was unrealized. During the first quarter of 1996,
long-term interest rates increased, reversing the declining trend which
prevailed during 1995. As a result, through the date of the sale of HLI in March
1996, HLI recognized a loss on risk management contracts of $128.8 million,
which included a reversal of such $86.5 million unrealized gain recognized
during 1995. In 1995 and 1996, changes in the value of HLI's mortgage servicing
rights substantially offset the gain and loss on the risk management contracts.
However, such changes in value were not fully recorded in the financial
statements of HLI because servicing rights are recorded at the lower of
amortized cost or market value.

Net Interest Revenue/Expense

Net interest revenue represents interest earned on warehouse loans and on
mortgage loans held for investment purposes, less interest expense incurred to
fund such loans and certain other assets, including mortgage servicing rights.
HLI's net interest position was negatively impacted by a compression of its net
interest spread from 3.60% in 1993 to 2.57% in 1994 and 1.49% in 1995. In
addition, HLI's net interest revenue and expense position is affected by the
volume of loan originations, which have a direct effect on interest earned on
warehouse loans and interest paid on borrowings. During periods of reduced
production

41
<PAGE> 43

volume, HLI will have lower average balances of interest earning loans and
interest bearing warehouse debt. The entire mortgage loan origination industry
experienced a decline in production from 1993 to 1995. As reported by Fannie
Mae, United States total residential mortgage originations declined from $1,020
billion in 1993 to $769 billion in 1994 and $654 billion in 1995.

During 1994 and 1995, HLI incurred net interest expense of $2.4 million and
$2.8 million, respectively. Interest revenue decreased $7.3 million during 1995
primarily as a result of a decrease in the average rate earned on warehouse
loans from 9.52% in 1994 to 7.78% in 1995. The reduction in interest revenue on
warehouse loans was partially offset by a $2.1 million increase in interest
earned on mortgage loans held for investment and a decrease in interest expense
of $6.8 million resulting from a decline in the average rate paid on HLI's
borrowings from 7.14% in 1994 to 6.89% in 1995.

HLI earned $6.0 million of net interest revenue during 1993 as compared to
$2.4 million of net interest expense in 1994. The change from 1993 to 1994 was
comprised of a decrease in interest revenue of $18.6 million partially offset by
a reduction in interest expense of $10.2 million. The decrease in interest
income was due to a decrease in the average balance of warehouse loans from
$529.7 million in 1993 to $272.0 million in 1994. The impact of decreased
average balances was partially mitigated by an increase in the average rate
earned on warehouse loans from 8.84% in 1993 to 9.52% in 1994 and a $2.2 million
increase in interest revenue on mortgage loans held for investment. The decrease
in interest expense from 1993 to 1994 was due to a reduction in borrowings on
the warehouse line of credit as a result of weaker loan production during 1994.

Net Mortgage Origination Revenue

HLI maintains various loan origination channels, including correspondent
flow and co-issue, brokered, telemarketing, affinity programs and retail
branches. Additionally, HLI purchases servicing rights in bulk from time to
time. HLI has continued to deemphasize its retail branch network in favor of
wholesale production. By primarily relying on wholesale originations, HLI avoids
high fixed costs in periods of lower market volumes as well as the high start-up
costs associated with entering new markets through retail expansion. This shift
to a more variable cost structure is expected to continue as HLI actively
reduces its retail production network. In connection with the sale of HLI, Bank
of Boston agreed to retain its retail production facilities in New England, and
HLI has sold or closed most of its remaining retail branches.

The following table sets forth HLI's origination activity:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1993 1994 1995
------- ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Wholesale:
Correspondent.................................. $ 4,955 $3,364 $3,778
Co-Issue(a).................................... 2,860 4,285 3,901
Broker......................................... 1,431 498 291
------- ------ ------
Total wholesale........................... 9,246 8,147 7,970
Retail.............................................. 2,125 788 915
------- ------ ------
Total production.......................... $11,371 $8,935 $8,885
======= ====== ======

</TABLE>
- ---------------
(a) Represents the acquisition of servicing rights, not the underlying loans.
Amounts represent the UPB of mortgage debt to which the acquired servicing
rights relate.

Through its correspondent production channel, HLI buys loans from
approximately 500 financial intermediaries. Co-issue loan production is the
purchase of servicing rights from a correspondent subject to contracts to
deliver specified volumes on a monthly or quarterly basis. Under its broker
program, HLI funds loans at closing from a network of approximately 450 mortgage
brokers nationwide.

Net mortgage origination revenue includes gains and losses from sales of
mortgage loans, deferred origination fees and expenses (see "-- Salaries and
Employee Benefits") and the gains from excess servicing rights. Net mortgage
origination revenue decreased from $5.0 million in 1994 to $3.4 million in 1995,
or 31.4%, and from $6.2 million in 1993 to $5.0 million in 1994, or 19.0%.

42
<PAGE> 44

During 1995 and 1994, HLI's loan production, excluding co-issue volume, was
$5.0 billion and $4.7 billion, respectively. The majority of these loans were
purchased through HLI's correspondent channel.

The decrease in net mortgage origination revenue from 1993 to 1994 was due
to a decrease in mortgage production during 1994. Loan production volume
decreased from $8.5 billion in 1993 to $4.7 billion in 1994, or 44.7%. The
declining interest rate environment in 1993 prompted a record number of
homeowners to refinance existing mortgages.

Gain on Sales of Servicing Rights

Gain on sales of servicing rights decreased $0.7 million from $10.9 million
in 1994 to $10.2 million in 1995 and increased $10.2 million from $0.7 million
in 1993. HLI sold servicing rights on loans of $1.9 billion, $0.8 billion and
$0.5 billion during 1995, 1994 and 1993, respectively. The sales of servicing
rights during 1994 consisted of primarily retail originated loans, for which a
servicing right asset was not recognized, and therefore there was little or no
basis in the servicing rights sold. The servicing rights sales in 1995 consisted
of a higher percentage of servicing on purchased loans, which had a higher basis
because servicing rights on purchased loans are capitalized. Since gain on sales
of servicing rights is determined as the excess of proceeds from the sale over
HLI's cost basis in the asset, gains will tend to be higher on sales of
servicing rights with little or no cost basis, as was the case for the sales in
1994. HLI's decision to sell mortgage servicing rights depends on a variety of
factors, including the available markets and current prices for such servicing
rights and the working capital requirements of HLI. The likelihood of future
sales of mortgage servicing rights, or the profitability on such sales, cannot
be predicted. HomeSide anticipates that the sale of servicing rights by HLI will
not be a significant component of its business strategy in the future.

Salaries and Employee Benefits

Salaries and employee benefits increased from $40.4 million in 1994 to
$45.4 million in 1995, or 12.4%, and from $33.1 million in 1993 to $40.4 million
in 1994, or 22.1%. Direct loan origination costs, principally salary and
employee benefit costs, are included in the cost basis of the mortgage loans
and, therefore, they are not recognized until the sale of the loans. Including
these capitalized costs, salaries and employee benefits increased from $51.5
million to $56.5 million from 1994 to 1995, or 9.7% and decreased from $56.2
million to $51.5 million from 1993 to 1994, or 8.3%.

The $5.0 million increase, including capitalized costs, in 1995 over 1994
included a $3.9 million increase in salaries and a $1.1 million increase in
benefits. The salary and benefit increases were the result of a larger
production staff needed to support HLI's growing servicing portfolio. Loan
production headcount grew from 498 full time equivalent ("FTE") employees at
December 31, 1994 to 523 FTE employees at December 31, 1995. The increases to
salaries and benefits were partially offset by the outsourcing of certain
default administration and tax payment administration activities during 1995.
HLI determined that the performance of these services on a contracted basis was
more cost effective than maintaining the personnel and infrastructure necessary
to carry out these functions in-house.

The decrease in salaries and benefits from 1993 to 1994 was due to a
reduction of loan production during 1994 and lower incentive compensation
expenses. Loan production headcount fell from 806 at December 31, 1993 to 498 at
December 31, 1994. The decrease in salaries and employee benefits due to reduced
loan demand was partially offset by the assumption of certain risk management
functions formerly provided by BKB and an increased staff required to service a
larger portfolio.

Occupancy and Equipment Expense

Occupancy and equipment expense increased from $9.0 million in 1994 to
$10.0 million in 1995, or 11.1%, due primarily to the acquisition of Bell
Mortgage and the larger servicing operations.

Occupancy and equipment expense increased from $8.0 million in 1993 to $9.0
million in 1994, or 13.1%. This increase included a leasehold reserve of $0.3
million recorded in December 1994 for the planned closing of certain broker
branches that were subsequently closed during 1995.

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<PAGE> 45

Servicing Losses on Investor-Owned Loans

HLI periodically incurs losses attributable to servicing FHA and VA loans
for investors, including actual losses for final disposition of loans that have
been foreclosed or assigned to the FHA or VA and accrued interest on such FHA or
VA loans for which payment has not been received. Servicing losses on investor-
owned loans totaled $2.8 million, $7.2 million and $10.0 million for 1993, 1994
and 1995, respectively, primarily representing losses on VA loans. Because the
total principal amount of FHA loans is guaranteed, losses on such loans are
generally limited to expenses of collection. HLI has experienced minimal losses
from FHA loans. In respect of VA loans, the VA guarantees the initial losses on
a loan. The guaranteed amount generally ranges from 20% to 35% of the original
principal balance. Before each foreclosure sale, the VA determines whether to
bid by comparing the estimated net sale proceeds to the outstanding principal
balance and the servicer's accumulated reimbursable costs and fees. If this
amount is a loss and exceeds the guaranteed amount, the VA typically issues a
no-bid and pays the servicer the guaranteed amount. Whenever a no-bid is issued,
the servicer absorbs the loss, if any, in excess of the sum of the guaranteed
principal and the amounts recovered at the foreclosure sale. HLI's historical
loss experience on VA loans has generally been consistent with industry
experience.

In 1994 and 1995, HLI recorded provisions in excess of actual foreclosure
losses. Management believes that HLI has an adequate level of reserve based on
its servicing volume, portfolio composition, credit quality and historical loss
rates, as well as estimated future losses. For an analysis of changes in the
reserve for estimated servicing losses on investor-owned loans for each of the
three years ended December 31, 1995, see Note 4 of Notes to Consolidated
Financial Statements of HLI.

Real Estate Owned Expense

Real estate owned expense increased from $0.3 million in 1994 to $1.1
million in 1995, and decreased from $1.6 million in 1993 to $0.3 million in
1994. Real estate owned expense is incurred from foreclosed properties on which
HLI has taken title and includes declines in the value of the property, as well
as the incurrence of property holding and maintenance costs. The change in real
estate owned expense in 1995 was due primarily to an increase in the average
balance of real estate owned from $1.4 million in 1994 to $1.6 million in 1995.
The decrease from 1993 to 1994 was due to a decline in the average balance of
real estate owned from $3.4 million in 1993 to $1.4 million in 1994. As part of
the HLI Acquisition, BKB retained all real estate owned.

Other Expense

Other expense increased from $19.3 million to $21.9 million, or 13.3%, from
1994 to 1995 and decreased from $22.1 million to $19.3 million, or 12.4%, from
1993 to 1994. The increase in other expense from 1994 to 1995 included increases
of $1.1 million in advertising and public relations, $1.0 million in contracted
services, $0.9 million in software costs and $0.6 million in communication
expenses. These increases were partially offset by a $0.7 million reduction in
loan related expenses. The increase in advertising and public relations expense
was due to a $1.0 million major advertising campaign carried out during 1995 in
addition to normal advertising activity. Contracted services increased due to an
increase in bank service charges for loan payment processing, which increased
with the rise in HLI's servicing volume. Software costs increased as HLI
continued to expand and redesign its computer platform in order to deliver more
efficient and reliable service. The increase in communications expense was due
to higher telephone postage and delivery expenses resulting from higher loan
production levels.

The decline in other expense from 1993 to 1994 was principally due to a
$2.0 million increase in gains from the disposition of foreclosed property.
Gains and losses on the sale of foreclosed property are netted and included as a
component of other expense. Gains and losses on the disposition of foreclosed
property result from the difference between the amount received in satisfaction
of the borrower's obligation upon sale of the property and the amount at which
the property was recorded on HLI's books at the time of the sale. Gains and
losses on the disposition of real estate fluctuate based on regional and
national market conditions at the time each property is being marketed.

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<PAGE> 46

Provision for Income Taxes

HLI recorded a provision for income taxes of $2.5 million and $37.9 million
for 1994 and 1995, respectively, and an income tax benefit of $17.3 million in
1993. The effective income tax rate was 39.2%, 56.4% and 35.5% for 1995, 1994
and 1993, respectively. The difference between these rates and the statutory
federal tax rate was primarily due to state income taxes, net of federal tax
benefit, and the effect on deferred taxes of a change in the federal statutory
rate in 1993. The changes in the provisions for, and benefit from, income taxes
were the result of variances in HLI's pre-tax income and loss for each of the
years presented. For additional information regarding income taxes, refer to
Note 10 of Notes to Consolidated Financial Statements of HLI on F-47 and F-48.

Accounting Changes

Effective January 1, 1993, HLI elected to change its method of valuing
mortgage servicing rights from an undiscounted basis to a discounted basis to
conform its financial reporting to the regulatory accounting rules adopted by
bank regulators in 1993. HLI also adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" on January 1, 1993. On January
1, 1994, HLI changed its method of accounting for mortgage servicing fees from
the cash basis to the accrual basis. See Notes 2 and 10 of Notes to Consolidated
Financial Statements of HLI on F-40 and F-47 for further discussion of HLI's
accounting changes. See "-- Liquidity and Capital Resources -- New Accounting
Standard" for a discussion of Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage Servicing Rights," which was adopted by HLI in
1996.

LIQUIDITY AND CAPITAL RESOURCES

Overview

HLI's primary sources of cash are revenues earned from the servicing of
mortgage loans, sales of mortgage loans and servicing rights and borrowings
under HLI's warehouse line of credit. HLI has entered into a new credit facility
(see "-- Post-Acquisition Financing"). HomeSide anticipates that cash provided
by servicing and sales of mortgage loans and borrowings will be sufficient to
meet its liquidity needs and, accordingly, does not anticipate that sales of
servicing rights will be a significant component of its business strategy in the
future. HLI's primary uses of cash are to fund loan originations and purchases,
purchase bulk servicing rights, repay its warehouse line of credit and pay
general corporate expenses. HLI had a net increase (decrease) in cash of ($4.8
million), $0.3 million and ($0.8 million) in 1995, 1994 and 1993, respectively.

Operations

Net cash provided by (used in) operating activities was ($65.9 million) in
1995, $394.6 million in 1994, and ($110.2 million) in 1993. The decrease in cash
provided by operating activities from 1994 to 1995 was attributable to cash
needed to meet growth in loan origination volume coupled with a reduction in
proceeds on sales of mortgage loans. The increase in cash provided by operating
activities from 1993 to 1994 was due to a reduction in loan demand during 1994,
which diminished HLI cash needs for funding loan production.

Investing

Cash used in investing activities was $125.7 million in 1995, $154.2
million in 1994 and $109.5 million in 1993. The decrease in cash used in
investing activities from 1994 to 1995 was comprised primarily of a $36.8
million increase in proceeds from risk management contracts and a $17.8 million
increase in proceeds from sales of mortgage servicing rights. These cash inflows
were partially offset by a $29.0 million increase in purchases of mortgage
servicing rights. The increase in proceeds from risk management contracts was a
result of a decline in interest rates during 1995 that increased the value of
HLI's risk management contracts and, accordingly, the proceeds received by HLI
upon settlement. The increase in proceeds from sales of mortgage servicing
rights was principally due to an increase in sales activity in 1995 as compared
to 1994. HLI sold servicing rights of $1.9 billion in 1995 as compared to $0.8
billion in 1994. The increase in cash used to purchase mortgage servicing rights
during 1995 was related to an increase in mortgage loans purchased

45
<PAGE> 47

through HLI's warehouse channels as a result of declining interest rates that
increased loan production across the industry.

The increase in cash used in investing activities in 1994 as compared to
1993 was comprised of a $39.4 million increase in purchases of mortgage
servicing rights and a $16.3 million decrease in proceeds from risk management
contracts. The decreases in cash flow were partially mitigated by a $10.2
million increase in proceeds from the sale of mortgage servicing rights. The
increase in cash used to purchase mortgage servicing rights was part of HLI's
overall strategy to increase its servicing portfolio and benefit from economies
of scale. The decrease in proceeds from risk management contracts was a result
of an increase in interest rates during 1994 which negatively impacted the value
of the contracts. The increase in proceeds from the sale of mortgage servicing
rights from 1993 to 1994 was due to an improvement in the market for mortgage
servicing rights during 1994. The low interest rate environment in 1993
depressed the value of the mortgage servicing right market since loans were
being prepaid with a higher frequency.

Financing

Cash provided by (used in) financing activities was $186.8 million in 1995,
($240.2 million) in 1994 and $218.9 million in 1993. Prior to the HLI
Acquisition, the primary source and use of cash related to financing activities
was attributable to the line of credit with Bank of Boston. This line of credit
was used to fund the origination and purchase of mortgage loans until the loans
were sold to investors. The proceeds of such sales were typically used to pay
down the related warehouse debt with any excess retained by HLI. Maximum
borrowings under the line of credit were $1.25 billion. The higher level of
borrowings in 1995 and 1993 were indicative of higher loan production and
purchase volumes during these years as compared to 1994.

Impact of Inflation

Inflation affects HLI primarily through its effect on interest rates since
interest rates normally increase during periods of high inflation and decrease
during periods of low inflation. See "Risk Factors -- Impact of Changes in
Interest Rates; Results of Risk Management Activities".

New Accounting Standard

In May 1995, FASB issued Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage Servicing Rights." This Statement, among other
provisions, requires that the value of mortgage servicing rights associated with
mortgage loans originated by an entity be capitalized as assets, which results
in an increase in mortgage origination revenues. The value of originated
mortgage servicing rights is determined by allocating the total costs of the
mortgage loans between the loans and the mortgage servicing rights based on
their relative fair values. Also, the Statement requires that capitalized
servicing rights be evaluated for impairment based on the fair value of these
rights. For the purposes of determining impairment, mortgage servicing rights
that are capitalized after the adoption of this Statement are stratified based
on one or more of the predominant risk characteristics of the underlying loans.
Impairment is recognized through a valuation allowance for each impaired
stratum. HLI adopted this Statement effective January 1, 1996.

46
<PAGE> 48

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- HHI

FOR THE PERIOD APRIL 1, 1996 TO MAY 30, 1996
AND THREE MONTHS ENDED JUNE 30, 1995

GENERAL

HHI, based in Jacksonville, Florida, is the wholly-owned mortgage banking
subsidiary of Barnett and operates as a full service mortgage banking company,
engaged in the origination, sale and servicing of first mortgage loans secured
by residential properties. On March 4, 1996, Barnett entered into an agreement
to sell HHI to HomeSide, Inc. ("HomeSide"). Under the terms of the sale,
HomeSide acquired HHI's and its subsidiaries' servicing portfolio and servicing
platform, its proprietary mortgage servicing software, and Honolulu Mortgage
Company ("Honolulu Mortgage"), a full service mortgage banking company in
Honolulu, Hawaii.

HHI acquired Loan America, a wholesale mortgage banking company with a $4.0
billion servicing portfolio in October 1994. Headquartered in Miami, Florida,
Loan America originates loans through brokers in twelve states. The acquisition
of Loan America represented HHI's first entry into the wholesale origination
business.

In February 1995, HHI acquired BancPLUS Financial Corporation ("BPFC"); a
full service mortgage company with a $13.9 billion servicing portfolio.
Headquartered in San Antonio, Texas, BancPLUS Mortgage Company ("BancPLUS"), a
wholly-owned subsidiary of BPFC, was primarily a retail originator with thirty-
six branch offices in seventeen states. HHI's acquisition of BPFC also included
Honolulu Mortgage, with its $1.7 billion servicing portfolio.

The BancPLUS and Loan America acquisitions were accounted for as purchases
and, accordingly, their results are only included in HHI's results since the
dates of their acquisitions.

On May 31, 1996, Barnett Banks, Inc. ("Barnett") sold certain of its
mortgage banking operations, primarily its servicing portfolio and proprietary
mortgage banking software systems to HomeSide, as discussed above. Barnett
received cash and an ownership interest in HomeSide. As a result of the
acquisition of HHI by HomeSide, HHI ceased to originate loans as a separate
company and operations for periods subsequent to that date will be included in
the results of operations of the Company. Accordingly, statement of operations
data does not include periods subsequent to May 30, 1996. Comparative
information in the prior year is presented through June 30, 1995 because this
was the end of HHI's 1995 second quarter. Reasons for variances which are not
attributed solely to differences in the number of months in the periods
presented have been discussed where appropriate. Reasons for variances due to
differences in the number of months in the periods presented have been noted
where applicable.

RESULTS OF OPERATIONS

HHI reported a net loss of $4.0 million for the period April 1, 1996 to May
30, 1996 and a net loss of $3.4 million for the quarter ended June 30, 1995. The
period April 1, 1996 to May 30, 1996 loss was mainly attributable to servicing
hedging costs, while the second quarter 1995 loss was attributable to costs
associated with the BancPLUS acquisition.

Net Servicing Revenue

HHI's revenues are primarily earned from servicing mortgage loans for
investors. Servicing activities include collection of mortgage principal,
interest and escrow payments; remitting these payments to investors; and
maintaining records of loans and escrows. Servicing fees are typically expressed
as a percentage of UPB and are collected from the monthly remittances of the
borrower before being paid to the investor. Mortgage servicing income also
includes late charges for delinquent customer payments.

47
<PAGE> 49

The following table sets forth the composition of HHI's servicing
portfolio.

<TABLE>
<CAPTION>
AT MAY 30,
1996
----------
(DOLLARS IN
MILLIONS)
<S> <C>
FHA/VA......................................................... $ 5,588
Conventional................................................... 27,494
-------
Total................................................ $33,082
=======
</TABLE>

Net servicing revenue was $12.7 million for the period April 1, 1996 to May
30, 1996 and $16.7 million for the three months ended June 30, 1995. Mortgage
servicing fees are earned for servicing mortgage loans owned by investors. The
cost of acquiring the right to service mortgage loans originated by others is
capitalized and amortized as a reduction of servicing fee revenue over the
estimated servicing period. The increases in mortgage servicing fees and
amortization of mortgage servicing rights were primarily due to growth in the
servicing portfolio related to the BancPLUS acquisition. The average servicing
fee increased from 0.307% at June 30, 1995 to 0.337% at May 30, 1996.

At May 30, 1996, before the acquisition by HomeSide, HHI serviced
approximately 440,000 loans with UPB of $33.1 billion, compared to approximately
446,000 loans with UPB of $33.1 billion at June 30, 1995 and approximately
243,000 loans with UPB of $18.4 billion at December 31, 1994. Growth in HHI's
servicing portfolio has been primarily generated from the acquisition of
BancPLUS.

Servicing Values

HHI's operating results can be affected by changes in the economic value of
its mortgage servicing portfolio due to increases in prepayment speeds, which
are primarily influenced by interest rates. When loans prepay faster than
anticipated, the estimated future cash flow HHI expected to receive from
servicing such loans is reduced. Since the value of the mortgage servicing
rights is based on the present value of the cash flows to be received over the
life of the loan, the value of the servicing portfolio declines as prepayments
increase.

During second quarter 1995, hedging of the mortgage servicing rights value
was handled by Barnett as part of its overall risk management program. During
this period, no hedges were specifically implemented for risk management of
mortgage servicing rights. During fourth quarter 1995, Barnett and HHI evaluated
the risks, benefits and costs related to servicing hedges and in December 1995
commenced a partial hedging program which continued into the second quarter of
1996. The results of HHI's hedging activities did not have a material effect on
its financial statements for the periods presented.

Secondary Marketing Gain/Loss

Gains or losses on the sales of loans result primarily from two factors.
First, HHI may make a loan to a borrower at a price (i.e., interest rate and
discount) which is higher or lower than its would receive if it immediately sold
the loan in the secondary market. HHI adjusts the pricing on its loans depending
on competitive pressure.

HHI had losses on the sale of loans of $3.4 million for the period April 1,
1996 to May 30, 1996, compared to gain on sales of loans of $1.0 million for the
three months ended June 30, 1995. The losses incurred during the period April 1,
1996 to May 30, 1996 were due to an increase in long-term interest rates, which
negatively impacted the market value of loans in HHI's pipeline, and competitive
pricing pressures.

48
<PAGE> 50

Net Interest Revenue/Expense

HHI recorded net interest expense of $2.3 million and net interest revenue
of $2.2 million for the second quarter ended June 30, 1995 and the period April
1, 1996 to May 30, 1996, respectively. HHI's net interest results are derived
from interest earned on warehouse loans originated by the BancPLUS and Loan
America branches, less interest expense incurred to fund such loans. The
interest expense, following the acquisition of BancPLUS on February 28, 1995,
was incurred at a rate reduced by the benefit for the escrow balances maintained
in the Barnett banks for the servicing portfolio.

Net Mortgage Origination Revenue

HHI has built a multi-channel production network as part of its strategy to
become a national participant in the mortgage banking business. HHI maintains
several channels, including Barnett's retail bank franchise, a national retail
network obtained from BancPLUS, a national wholesale broker group obtained from
the Loan America traditional correspondent business and production from Honolulu
Mortgage. This varied production base is designed to provide flexibility,
allowing HHI to shift production focus to the most attractive source given
specific market conditions.

The following table sets forth HHI origination activity:

<TABLE>
<CAPTION>
THREE MONTHS ENDED FOR THE PERIOD APRIL 1, 1996
JUNE 30, 1995 TO MAY 30, 1996
------------------ ----------------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Barnett bank branch retail................ $ 516 $418
BancPLUS retail(a)........................ 143 131
Loan America broker(a).................... 251 302
Honolulu Mortgage(a)...................... 76 59
Correspondent............................. 344 72
------ ----
Total Production..................... $1,330 $982
====== ====
</TABLE>

- ---------------

(a) Since date of acquisition by HHI.

Net mortgage origination revenue includes origination fees received from
borrowers, gains and losses from mortgage sales, and capitalized originated
mortgage servicing rights ("OMSR"). OMSR income results from the January 1, 1996
implementation of SFAS 122. The requirements of SFAS 122 are discussed in Note 3
to the Consolidated Financial Statements of HHI on F-34. Net mortgage
origination revenue was $4.5 million for the second quarter 1995 compared to net
mortgage origination expense of $1.7 million for the period April 1, 1996 to May
30, 1996. The decrease was attributable to a $10.2 million decline in gain on
sale of loans, offset by a $5.9 million increase in OMSR income. The decline in
gains on sales of loans, excess servicing gains and pricing subsidies was due to
an increase in loan origination and sales from the second quarter 1995 compared
to the period April 1, 1996 to May 30, 1996. This volume increase was due to
additional loan origination channels resulting from the acquisition of BancPLUS.

Salaries and Employee Benefits

Salaries and employee benefits decreased from $14.3 million during second
quarter 1995 to $10.4 million during the period April 1, 1996 to May 30, 1996.
The decline is due to the comparison of the two months data versus three months
data, which is a result of the sale of HHI to HomeSide on May 31, 1996.

Occupancy and Equipment Expense

Occupancy and equipment expense decreased from $2.4 million to $1.6 million
from second quarter 1995 to the period April 1, 1996 to May 30, 1996. The
decline is due to the comparison of the two months data versus three months
data, which is a result of the sale of HHI to HomeSide on May 31, 1996.

49
<PAGE> 51

GENERAL AND ADMINISTRATIVE EXPENSE

General and administrative expenses decreased from $12.1 million to $6.8
million from second quarter 1995 to the period April 1, 1996 to May 30, 1996.
The decline was due to the comparison of the two months data versus three months
data, which was a result of the sale of HHI to HomeSide on May 31, 1996.

PROVISION FOR INCOME TAXES

HHI's results of operations are included in Barnett's consolidated income
tax return. HHI's income tax provision and related asset or liability are
computed based on income tax rates as if HHI filed a separate income tax return.
Pursuant to a tax-sharing agreement with Barnett, HHI is reimbursed for the tax
effect of current operating losses utilized in the consolidated return.

During second quarter 1995, HHI recorded a benefit for income taxes of $2.1
million compared to a tax benefit of $0.9 million for the period April 1, 1996
to May 30, 1996. For further information regarding the reconciliation between
statutory federal tax rate and the effective tax rate, refer to Note 4 of Notes
to Consolidated Financial Statements of HHI on F-64 and F-65 for the year ended
December 31, 1995.

THE PERIOD JANUARY 1, 1996 TO MAY 30, 1996 AND SIX MONTHS ENDED JUNE 30, 1995

RESULTS OF OPERATIONS

During the six-month period ended June 30, 1995, HHI experienced
significant growth in loan servicing and production through its acquisition of
BancPLUS. From December 31, 1994 to May 30, 1996, the servicing portfolio
increased by 80% and production volume increased by 13% from the six months
ended June 30, 1995 to the period January 1, 1996 to May 30, 1996.

HHI reported a net loss of $8.3 million for the period January 1, 1996 to
May 30, 1996 and a net loss of $7.5 million for the six months ended June 30,
1995. The loss for the first five months of 1996 was mainly attributable to
servicing hedging costs, while the loss for the first six months of 1995 was
attributable to costs associated with the BancPLUS acquisition.

Net servicing revenue was $27.8 million for the first six months of 1995
compared to $27.0 million for the period January 1, 1996 to May 30, 1996.
Mortgage servicing fees are earned for servicing mortgage loans owned by
investors. The cost of acquiring the right to service mortgage loans originated
by others is capitalized and amortized as a reduction of servicing fee revenue
over the estimated servicing period. The increases in mortgage servicing fees
and amortization of mortgage servicing rights were primarily due to growth in
the servicing portfolio related to the BancPLUS acquisition. The average
servicing fee increased from 0.307% at June 30, 1995 to 0.337% at May 30, 1996.

Net Interest Revenue/Expense

HHI recorded net interest expense of $2.7 million and net interest revenue
of $4.6 million for the six months ended June 30, 1995 and the period January 1,
1996 to May 30, 1996, respectively. HHI's net interest results are derived from
interest earned on warehouse loans originated by the BancPLUS and Loan American
branches, less interest expense incurred to fund such loans. The interest
expense, following the acquisition of BancPLUS on February 28, 1995, was
incurred at a rate reduced by the benefit for the escrow balances maintained in
the Barnett banks for the servicing portfolio.

50
<PAGE> 52

Net Mortgage Origination Revenue

The following table sets forth HHI's origination activity:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED FOR THE PERIOD JANUARY 1,
JUNE 30, 1995 1996 TO MAY 30, 1996
------------- -------------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Barnett bank branch retail........................ $1,053 $ 955
BancPLUS retail(a)................................ 335 323
Loan America broker(a)............................ 629 680
Honolulu Mortgage(a).............................. 159 142
Correspondent..................................... 710 438
------ ------
Total production........................ $2,886 $2,538
====== ======

</TABLE>
- ---------------

(a) Since date of acquisition by HHI.

Net mortgage origination revenue includes origination fees received from
borrowers, gains and losses from mortgage sales, and capitalized OMSR. OMSR
income results from the January 1, 1996 implementation of SFAS 122. The
requirements of SFAS 122 are discussed in Note 3 to the Consolidated Financial
Statements of HHI on F-64. Net mortgage origination revenue increased from $7.5
million to $7.8 million from the first six months of 1995 to the period January
1, 1996 to May 30, 1996. This volume increase was due to additional loan
origination volume resulting from the acquisition of BancPLUS.

Salaries and Employee Benefits

Salaries and employee benefits increased from $23.4 million during the
first six months of 1995 to $25.2 million during the period January 1, 1996 to
May 30, 1996. The salary and benefit increased was the result of an increase in
loan origination activity from the first six months of 1995 versus the period
January 1, 1996 to May 30, 1996. For the first six months of 1995, origination
volume was $2,250 million versus $2,538 million for the period January 1, 1996
to May 30, 1996.

Occupancy and Equipment Expense

Occupancy and equipment expense decreased from $3.9 million to $3.7 million
for the first six months of 1995 compared to the period January 1, 1996 to May
30, 1996.

General and Administrative Expense

General and administrative expenses increased from $20.4 million to $20.7
from the first six months of 1995 to the period January 1, 1996 to May 30, 1996.

Provision for Income Taxes

During the first six months of 1995, HHI recorded a benefit for income
taxes of $2.9 million compared to a tax benefit of $2.5 million for the period
January 1, 1996 to May 30, 1996. For further information regarding the
reconciliation between the statutory federal tax rate and the effective tax
rate, refer to Note 4 of Notes to Consolidated Financial Statements of HHI on
F-64 for the year ended December 31, 1995.

LIQUIDITY AND CAPITAL RESOURCES

Overview

HHI's primary sources of cash are revenues earned from the servicing of
mortgage loans, sales of mortgage loans and servicing rights, which historically
have offered a high measure of liquidity, and borrowings under HHI's line of
credit. HHI's primary uses of cash are to fund loan originations and purchases,
repay its lines of credit and pay general corporate expenses. HHI had a net
increase in cash of $9.6 million for the six months ended June 30, 1995 and a
net decrease in cash of $3.8 million for the period January 1, 1996 to May 30,
1996.

51
<PAGE> 53

Operations

Net cash used in operating activities was $57.0 million for the six months
ended June 30, 1995 and net cash provided by operating activities was $211.0
million for the period January 1, 1996 to May 30, 1996. The cash used in
operating activities during the first six months of 1995 was attributable to
cash needed to meet growth in loan origination volume which related to the
acquisition of BancPLUS in February 1995. The cash provided from operating
activities for the period January 1, 1996 to May 30, 1996 was attributable to an
increase in loan sales.

Investing

Cash used in investing activities was $171.5 million the first six months
of 1995, primarily due to the acquisition of BancPLUS, and $9.3 million for the
period January 1, 1996 to May 30, 1996, primarily due to an increased servicing
portfolio.

Financing

Cash provided by financing activities was $238.2 million during the first
six months of 1995 compared to cash used in financing activities of $205.4
million for the period January 1, 1996 to May 30, 1996. The primary sources and
uses of cash related to financing activities were the lines of credit with
Barnett and its affiliates, to which some of HHI's assets were pledged as
collateral. These lines of credit were used to fund the origination and purchase
of mortgage loans until the loans were sold to investors. The proceeds of such
sales were typically used to pay down the related warehouse debt with any excess
retained by HHI. There was a net increase of $70.8 million in the lines of
credit for the six months ended June 30, 1995. Additionally, cash provided as
capital contributions from Barnett were $167.3 million for the six months ended
June 30, 1995 and $28.2 million for the period January 1, 1996 to May 30, 1996,
respectively. The 1995 contribution was to fund the acquisition of BancPLUS and
the 1996 contribution was primarily to fund servicing hedging activities.

THREE YEARS ENDED DECEMBER 31, 1995

GENERAL

Prior to May 31, 1996, HHI was a wholly-owned mortgage banking subsidiary
of Barnett and a full service mortgage banking company, engaged in the
origination, sale and servicing of first mortgage loans secured by residential
properties. On March 4, 1996, Barnett entered into an agreement to sell HHI to
the Company. At the closing of the HHI Acquisition, the Company acquired HHI's
and its subsidiaries' $33.4 billion servicing portfolio and servicing platform,
its proprietary mortgage servicing software and Honolulu Mortgage, a full
service mortgage banking company in Honolulu, Hawaii.

HHI acquired Loan America, a wholesale mortgage banking company with a $4.0
billion servicing portfolio in October 1994. Headquartered in Miami, Florida,
Loan America originated loans through brokers in twelve states. The acquisition
of Loan America represented HHI's first entry into the wholesale origination
business.

In February 1995, HHI acquired BPFC, a full-service mortgage company with a
$13.9 billion servicing portfolio. Headquartered in San Antonio, Texas,
BancPLUS, a wholly-owned subsidiary of BPFC, was primarily a retail originator
with thirty-six branch offices in seventeen states. HHI's acquisition of BPFC
also included Honolulu Mortgage, with its $1.7 billion servicing portfolio.

The BancPLUS and Loan America acquisitions were accounted for as purchases
and, accordingly, their results are only included in HHI's results since the
dates of their acquisitions. On May 31, 1996, BPFC was merged into BancPLUS,
which in turn was merged, together with Loan America, into HLI.

In connection with the HHI Acquisition, HHI transferred all of its
servicing rights to HLI, except for the servicing of GNMA loans, which it
retained. HomeSide currently believes that HHI will not in the future acquire
any additional servicing rights.

52
<PAGE> 54

RESULTS OF OPERATIONS

For purposes of this "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- HHI" the term "HHI" means HHI and its
subsidiaries prior to the closing of the HHI Acquisition.

During 1993, 1994 and 1995, HHI experienced significant growth through its
acquisitions of BancPLUS and Loan America. From 1993 to 1995, the servicing
portfolio increased by 155% and production volumes increased by 72%.

HHI reported a net loss of $20.4 million in 1995, a net loss of $2.1
million in 1994 and net income of $0.1 million in 1993. The net loss in 1995 was
mainly attributable to costs associated with the BancPLUS acquisition and
secondary market losses, partially offset by a $9.1 million gain on the sales of
servicing rights.

Net Servicing Revenue

HHI's revenues were primarily earned from servicing mortgage loans for
investors. Servicing activities include collection of mortgage principal,
interest and escrow payments; remitting these payments to investors; and
maintaining records of loans and escrows. Servicing fees are typically expressed
as a percentage of UPB and are collected from the monthly remittances of the
borrower before being paid to the investor. Mortgage servicing income also
includes late charges assessed for delinquent customer payments.

The following table sets forth the composition of HHI's servicing
portfolio:

<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------
1993 1994 1995
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
FHA/VA....................................... $ 1,032 $ 1,082 $ 6,023
Conventional................................. 12,053 17,329 27,388
------- ------- -------
Total.............................. $13,085 $18,411 $33,411
======= ======= =======
</TABLE>

Net servicing revenue increased from $29.4 million to $69.4 million, or
136% from 1994 to 1995. This increase was comprised of a $9.1 million increase
in gain on the sales of servicing and a $61.4 million growth in mortgage
servicing fees, offset by a $30.5 million increase in amortization of mortgage
servicing rights. Mortgage servicing fees are earned for servicing mortgage
loans owned by investors. The cost of acquiring the right to service mortgage
loans originated by others is capitalized and amortized as a reduction of
servicing fee revenue over the estimated servicing period. The increases in
mortgage servicing fees and amortization of mortgage servicing rights were
primarily due to growth in HHI's servicing portfolio during 1995. The average
servicing fee increased from 0.259% in 1993 to 0.261% in 1994 and to 0.277% in
1995.

At December 31, 1995, HHI serviced approximately 446,000 loans with UPB of
$33.4 billion, compared to approximately 243,000 loans with UPB of $18.4 billion
at December 31, 1994. Growth in HHI's servicing portfolio was primarily
generated from the acquisition of BancPLUS.

The 1995 gain on the sales of servicing is a result of two servicing sales
totalling $1.2 billion of UPB. There were no servicing sale gains during 1994 or
1993. HHI's decision to sell mortgage servicing rights depended on a variety of
factors, including the available markets and current prices for such servicing
rights and the working capital requirements of HHI.

Net servicing revenue increased from $27.3 million in 1993 to $29.4 million
in 1994, or 8%. This increase was partially due to the acquisition of Loan
America and its $4.0 billion servicing portfolio in October 1994. At December
31, 1993, HHI serviced approximately 193,000 loans with UPB of $13.1 billion.

Risk Management Activities

HHI has actively monitored and managed risk of loss related to the value of
its mortgage servicing portfolio and its origination and subsequent sale of
loans into the secondary market.

53
<PAGE> 55

Servicing Values

HHI's operating results have been affected by changes in the economic value
of its mortgage servicing portfolio due to increases in prepayment speeds, which
are primarily influenced by interest rates. When loans prepay faster than
anticipated, the estimated cash flow HHI expected to receive from servicing such
loans is reduced. Since the value of the mortgage servicing rights is based on
the present value of the cash flows to be received over the life of the loan,
the value of the servicing portfolio declines as prepayments increase.

During 1993, 1994 and most of 1995, hedging of the mortgage servicing
rights value was handled by Barnett as part of its overall risk management
program. During this period, no hedges were specifically implemented for risk
management of mortgage servicing rights. During 1995, Barnett and HHI evaluated
the risks, benefits and costs related to servicing hedges and in December 1995
commenced a partial hedging program. While the market value of HHI's servicing
portfolio declined, such decline was not reflected in HHI's financial results
because its market value exceeded its book value.

Secondary Marketing Gain/Loss

Gains or losses on the sales of loans result primarily from two factors.
First, HHI may have made a loan to a borrower at a price (i.e., interest rate
and discount) which is higher or lower than it would have received if it
immediately sold the loan in the secondary market. HHI adjusted the pricing on
its loans depending on competitive pressure. Generally, prior to the acquisition
of Loan America at the end of 1994 and BancPLUS in the beginning of 1995, HHI
priced its loans based on interest rate levels prevalent in the secondary
market. After the acquisition of those companies, HHI began aggressively
competing in national markets where pricing below the secondary market often
occurred, especially for loans sourced through wholesale brokers. Price
competition intensified in 1994 due to the sharp decline in origination volumes
and industry overcapacity and aggressive price pressure continued through 1995.

Second, gains or losses may result from changes in interest rates which
result in changes in the market value of the loans, or commitments to purchase
loans, from the time the price commitment is given to the borrower until the
time that the loan is sold to investors. HHI has employed sophisticated
modelling tools to provide information to hedge this latter interest rate risk.
HHI has employed forward delivery contracts for mortgage-backed securities and
whole loan sales as hedging instruments. There is close correlation of risk as
the borrower's loan was used to satisfy the forward delivery contract. HHI's
secondary marketing activities have been generally negatively impacted during
periods of high interest rate volatility and periods when there is a significant
overall change in the direction of interest rates, both of which occurred in
1994 and 1995. Additionally, during the period following the integration of
BancPLUS' secondary marketing operations during 1995, the magnitude of the
conversion task caused a temporary operational delay in selling borrowers' loans
into the secondary market, reducing the normally close correlation of loans to
forward delivery contracts. This condition had an additional temporary negative
impact on results from sales of mortgages.

Net Interest Revenue/Expense

In 1995, HHI recorded net interest revenue of $6.8 million, an increase
from net interest expense of $1.5 million in 1994. The net interest revenue was
mainly derived from interest earned on warehouse loans originated by the
BancPLUS and Loan America branches, less interest expense incurred to fund such
loans. The interest expense for 1995 was incurred at a rate reduced by the
benefit for the escrow balances maintained in the Barnett banks for the
servicing portfolio. Prior to 1995, when the primary origination source was the
Barnett bank branches, HHI's net interest revenue was comprised of interest
income on a small portfolio of mortgage loans that HHI held for investment
purposes, offset by interest expense on a line of credit from Barnett to fund
servicing acquisitions and servicing advances since Barnett banks held loans
until they were sold by HHI.

54
<PAGE> 56

Net Mortgage Origination Revenue

HHI has built a multi-channel production network as part of its strategy to
become a national participant in the mortgage banking business. Until the HHI
Acquisition, HHI maintained several channels, including Barnett's retail bank
franchise, a national retail network obtained from BancPLUS, a national
wholesale broker group obtained from the Loan America, traditional correspondent
business and production from Honolulu Mortgage. This varied production base was
designed to provide flexibility, allowing HHI to shift production focus to the
most attractive source given specific market conditions. The following table
sets forth HHI's origination activity:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1993 1994 1995
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Barnett bank branch retail...................... $3,360 $2,559 $1,932
BancPLUS retail(a).............................. -- -- 606
Loan America broker(a).......................... -- 401 1,386
Honolulu Mortgage(a)............................ -- -- 244
Correspondent................................... -- 450 1,599
------ ------ ------
Total production........................... $3,360 $3,410 $5,767
====== ====== ======
</TABLE>

- ---------------
(a) Since date of acquisition by HHI.

Net mortgage origination revenue includes origination fees received from
borrowers and gains and losses from sales of mortgage loans. Net mortgage
origination revenue decreased from $4.0 million to $3.2 million, or 20% from
1994 to 1995. The decrease was comprised of a $14.6 million decrease in gains on
sales of loans, offset by a $13.8 million increase in loan origination fees. The
decline in gains on sales of loans, excess servicing gains and pricing subsidies
was due to an increase in loan originations and sales over 1994. This volume
increase was driven by the acquisitions of BancPLUS and Loan America. Prior to
October 1994, the primary source of loan originations was the Barnett bank
retail network, and related origination fees were recognized by such banks. The
BancPLUS acquisition in February 1995 resulted in HHI collecting and recording
the origination fee income for loans originated through these channels. Net
mortgage origination revenue decreased from $6.0 million to $4.0 million, or
33%, from 1993 to 1994. The acquisition of Loan America in late 1994 resulted in
a $3.0 million increase in origination fees from 1993; however, this was offset
by a $5.0 million decrease in gain on the sale of loans.

Salaries and Employee Benefits

Salaries and employee benefits increased from $17.5 million in 1994 to
$53.1 million in 1995 and increased from $13.9 million in 1993 to $17.5 million
in 1994. The salary and benefit increases were the result of additional
employees assumed in the 1994 Loan America and 1995 BancPLUS acquisitions. Total
employee headcount grew from 464 FTE employees at December 31, 1993 to 555 FTE
employees at December 31, 1994 to 1,341 FTE employees at December 31, 1995. The
increase in the 1995 headcount was net of approximately 200 job eliminations
resulting from the consolidation of the administrative and operational functions
of the three mortgage companies that occurred throughout the year.

Occupancy and Equipment Expense

Occupancy and equipment expense increased from $2.7 million in 1994 to $6.0
million in 1995 due to the increases in rental and depreciation expense related
to assets and production offices acquired in the acquisition of BancPLUS in
February 1995.

Occupancy and equipment expense increased from $1.8 million in 1993 to $2.7
million in 1994 due to the increases in rental and depreciation expense related
to assets and production offices acquired in the acquisition of Loan America in
October 1994.

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<PAGE> 57

General and Administrative Expense

General and administrative expenses increased from $14.9 million in 1994 to
$41.8 million in 1995, and increased from $12.4 million in 1993 to $14.9 million
in 1994. The increases in both 1995 and 1994 were largely a result of the
acquisition of Loan America and BancPLUS.

Provision for Income Taxes

In 1995, HHI recorded a benefit for income taxes of $9.6 million compared
to a tax benefit of $0.5 million for 1994. The increased benefit was
attributable to the significantly higher operating loss reported in 1995.
Comparatively, a tax provision of $0.1 million was recorded in 1993 due to the
reported $0.2 million net income before income taxes. For additional information
regarding the reconciliation between the statutory federal tax rate and the
effective tax rate, refer to Note 4 of Notes to Consolidated Financial
Statements of HHI on F-64.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Prior to the HHI Acquisition, HHI's primary sources of cash were revenues
earned from the servicing of mortgage loans, sales of mortgage loans and
servicing rights, which historically have offered a high measure of liquidity,
and borrowings under HHI's lines of credit. Prior to the HHI Acquisition, HHI's
primary uses of cash are to fund loan originations and purchases, repay its
lines of credit and pay general corporate expenses. HHI had a net increase of
cash of $11.1 million and $2.4 million in 1995 and 1994, respectively.

Operations

Net cash used in operating activities was $185.5 million in 1995, $39.0
million in 1994 and $6.3 million in 1993. The increase in cash used in operating
activities from 1994 to 1995 was attributable to cash needed to meet growth in
loan origination volume which was related to the acquisition of BancPLUS, a full
year impact of the October 1994 acquisition of Loan America, and increased
correspondent business. The $32.7 million increase from 1993 to 1994 was
similarly attributable to increased loan origination volume from Loan America in
the fourth quarter of 1994 and the first time entry into the correspondent
business.

Investing

Cash used in investing activities was $182.3 million in 1995, $83.3 million
in 1994 and $36.3 million in 1993. The increase in cash used is primarily due to
the cost of the acquisitions of BancPLUS in 1995 and Loan America in 1994. The
increase in cash used to purchase BancPLUS and Loan America was part of HHI's
overall strategy to increase its servicing portfolio and nationwide loan
originations.

Financing

Cash provided by financing activities was $378.9 million in 1995, $124.8
million in 1994 and $43.0 million in 1993. Prior to the HHI Acquisition, the
primary source and use of cash related to financing activities was attributable
to the lines of credit with Barnett and its affiliates. The net increase in the
lines of credit with Barnett was $211.7 million in 1995, $65.0 million in 1994,
and $43.0 million in 1993. The higher level of borrowings in 1995 and 1994 are
indicative of increasingly higher loan production and purchase volumes during
these years.

Additionally, cash provided as capital contributions from Barnett increased
from $0 in 1993 to $59.8 million in 1994 and $167.2 in 1995. These contributions
were provided primarily for the acquisitions of BancPLUS in 1995 and Loan
America in 1994.

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<PAGE> 58

Impact of Inflation

Inflation has affected HHI primarily through its effect on interest rates
since interest rates normally increase during periods of high inflation and
decrease during periods of low inflation. See "Risk Factors -- Impact of Changes
in Interest Rates; Results of Risk Management Activities".

New Accounting Standard

In May 1995, FASB issued Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage Servicing Rights." This Statement, among other
provisions, requires that the value of mortgage servicing rights associated with
mortgage loans originated by an entity be capitalized as assets, which results
in an increase in mortgage origination revenues. The value of originated
mortgage servicing rights is determined by allocating the total costs of the
mortgage loans between the loans and the mortgage servicing rights based on
their relative fair values. Also, the Statement requires that capitalized
servicing rights be evaluated for impairment based on the fair value of these
rights. For purposes of determining impairment, mortgage servicing rights that
are capitalized after the adoption of this Statement are stratified based on one
or more of the predominant risk characteristics of the underlying loans.
Impairment is recognized through a valuation allowance for each impaired
stratum. HHI adopted this Statement effective January 1, 1996. The actual effect
of implementing this Statement on HHI's financial position and results of
operations will depend on factors determined at the end of a reporting period,
including the amount and mix of originated and purchased production, the level
of interest rates and market estimates of future prepayment rates.

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<PAGE> 59

INDUSTRY OVERVIEW

MORTGAGE MARKET

Mortgage bankers operate in the second largest debt market in the world,
which is exceeded only by the United States Treasury market. One to four family
residential mortgage debt in the United States grew to over $3.6 trillion in
1995 from $1.7 trillion in 1985, approximately an 8% compound annual growth
rate. Management believes that the industry category of one-to-four family
residential mortgage debt is relevant to HomeSide as that is the industry
category on which substantially all of HomeSide's business is based.

Over the past five years mortgage bankers have emerged as the dominant
players in the United States' mortgage origination and servicing business.
Mortgage bankers held market shares of 55% and 41%, respectively, of the United
States' residential mortgage origination and servicing markets in 1995, up from
35% and 37% in 1990. The bulk of the remaining origination and servicing market
share is held by commercial banks and thrifts. The mortgage bankers' market
share improvement began in the late 1980s and early 1990s when the thrift
industry, historically the largest provider of residential mortgage loans,
experienced serious financial difficulties. Mortgage bankers expanded market
share not only by supplanting thrifts as the primary mortgage originators and
servicers in the marketplace but also by purchasing the mortgage banking
operations and assets of certain of these entities. Mortgage bankers gained
additional momentum and increased their market share during the decline in
interest rates in the early 1990s.

Although mortgage loan demand is affected by a number of factors, including
economic conditions, demographics and consumer confidence, it is most heavily
influenced by interest rates and correlates inversely with interest rate
movements. When mortgage rates dropped below 10% in 1990, mortgagors began to
seek mortgages at lower interest rates, resulting in a growing refinancing boom
that lasted through 1993.

TOTAL RESIDENTIAL MORTGAGE ORIGINATIONS

<TABLE>
<CAPTION>
PURPOSE OF MORTGAGE(B)
-----------------------------
TOTAL PURCHASE REFINANCING FIXED ADJUSTABLE
ORIGINATIONS(A) (% OF TOTAL) (% OF TOTAL) RATE(B)(C)(E) RATE(B)(D)(E)
--------------------- ------------ -------------- ------------- --------------
(DOLLARS IN BILLIONS)
<S> <C> <C> <C> <C> <C>
1985...................... $290 82% 18% 12.42% 10.04%
1986...................... 499 68 32 10.18 8.42
1987...................... 507 71 29 10.20 7.82
1988...................... 446 82 18 10.33 7.90
1989...................... 453 81 19 10.32 8.80
1990...................... 458 87 13 10.13 8.36
1991...................... 562 70 30 9.25 7.10
1992...................... 894 52 48 8.40 5.63
1993...................... 1,020 45 55 7.33 4.59
1994...................... 769 68 32 8.36 5.33
1995...................... 636 75 25 N/A N/A
</TABLE>

- ---------------
(a) Source: Fannie Mae
(b) Sources: Board of Governors of the Federal Reserve System; FHLMC; Federal
Home Loan Bank of San Francisco.
(c) 30-year conventional contract loan rate with 20% down payment.
(d) 1-year Treasury-indexed conventional contract loan rate with 20% down
payment.
(e) Figures are annual averages of monthly data.

SECONDARY MORTGAGE MARKETS

The secondary mortgage market and its evolution have been significantly
influenced by two government-sponsored enterprises, Fannie Mae and FHLMC, and
one government agency, GNMA (collectively, the "Agencies"). Through these
entities, the United States government provides support and liquidity to the
market for residential mortgage debt.

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<PAGE> 60

Mortgage originators sell their loans directly to Fannie Mae and FHLMC
either as whole loans or, more typically, as pools of loans used to
collateralize mortgage-backed securities ("MBS") issued or guaranteed by these
entities. Similarly, the originators can issue MBS collateralized by pools of
loans that are guaranteed by GNMA. In order to effect these sales or obtain
these guarantees, the originator must underwrite its loans to conform
("conforming loans") with standards established by Fannie Mae or FHLMC or by the
FHA or VA in the case of GNMA. All loans other than FHA and VA loans
("government loans") are considered conventional loans. Loans with principal
balances exceeding Agency guidelines ("jumbo loans"), currently in excess of
$214,600, are sold to private investors or aggregated into pools and sold as
MBS.

The role of the Agencies has grown substantially over the past ten years.
In 1994, Fannie Mae, FHLMC, and GNMA mortgage-backed securities accounted for,
in the aggregate, $1.4 trillion, or 42.0% of total residential mortgage debt
outstanding, approximately a fivefold increase from $287 billion ten years
earlier. The mortgage banking industry relies heavily on these Agencies to
provide liquidity.

There are a number of other participants in the market that primarily
purchase MBS. These participants include institutional investors such as life
insurance companies, pension funds and mutual funds. More recently, investors
that purchase pools of loans to collateralize MBS issued in their own name
("private investor securities") have entered the market. The development of the
private investor securities market has provided mortgage bankers the liquidity
essential to effect the sale of the loans the mortgage banker originates that do
not conform ("non-conforming") to Agency guidelines.

MORTGAGE BANKING MARKET CHARACTERISTICS

The mortgage banking market is highly fragmented. Despite the market share
growth of the industry as a whole, no single company controls or dominates the
market. In 1995 the largest originator represented 5.2% of the market and the
largest servicer represented 3.7%, while the top 25 originators and servicers
represented 38.1% and 39.1% of their markets, respectively.

<TABLE>
TOP 10 ORIGINATORS AND SERVICERS
(DOLLARS IN BILLIONS)
<CAPTION>
1995 ORIGINATIONS SERVICING PORTFOLIO AT DECEMBER 31, 1995
<C> <S> <C> <C> <C> <C>
1 Norwest Mortgage................. $34.2 1 Countrywide Funding.............. $134.0
2 Countrywide Funding.............. 31.5 2 General Electric Mortgage........ 109.5
3 Prudential Home Mortgage......... 15.7 3 Norwest Mortgage................. 107.4
4 Fleet Mortgage................... 14.9 4 Fleet Mortgage................... 105.5
5 Chase Manhattan Mortgage......... 13.9 5 Prudential Home Mortgage......... 81.8
6 Chemical Mortgage................ 13.3 6 NationsBank...................... 81.4
7 NationsBank...................... 11.0 7 Bank of America.................. 63.1
8 Bank of America.................. 10.3 8 Home Savings of America.......... 60.7
9 BancBoston Mortgage.............. 8.9 9 Chase Manhattan Mortgage......... 59.4
10 North American Mortgage.......... 7.6 10 Chemical Mortgage................ 57.2
<FN>
- ---------------
Source: National Mortgage News.
</TABLE>

Mortgage bankers operate in a highly competitive market. The underwriting
guidelines and servicing requirements set by the participants in the secondary
markets are standardized. As a result, mortgage banking products (i.e., mortgage
loans and the servicing of those loans) have become difficult to differentiate.
Therefore, mortgage bankers compete primarily on the basis of price or service,
making effective cost management essential.

Mortgage bankers generally seek to develop cost efficiencies in one of two
ways: economies of scale or specialization. Large full-service national or
regional mortgage bankers have sought economies of scale through an emphasis on
wholesale originations, the introduction of automated processing systems and

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<PAGE> 61

expansion through acquisition. Smaller companies frequently identify and pursue
a particular expertise or customer base in an attempt to create a market niche.

RECENT TRENDS

The introduction of significant technological improvements to the mortgage
banking industry began in the mid 1980s. From the use of laptop computers for
originations to the electronic scanning of loan documents, technological
advances have allowed mortgage bankers to accommodate higher volumes of
business. This trend has continued, contributing to the consolidation in
mortgage banking. The automation of many functions in mortgage banking,
especially those related to servicing, has reduced costs significantly for
industry participants.

Just as declining interest rates contributed to the growth of the mortgage
bankers' role in the early 1990s, rising interest rates in 1994 caused a
reduction in overall demand for mortgage loans, particularly refinancings. Many
mortgage bankers had expanded their operations in response to the increased
refinancing activities of 1992 and 1993. The contraction of the refinancing
demand in 1994 created substantial excess capacity in the industry, resulting in
further industry consolidation.

Many mortgage bankers that were not low cost, high volume producers or did
not operate in a low cost specialized field experienced earnings declines during
this period, causing many to exit the business or to be acquired. Surviving cost
effective firms purchased servicing portfolios or other companies to expand
their servicing economies of scale, while others acquired market niche
operations. As evidence of this consolidation, the top 25 mortgage loan
servicers increased their market share from 20.7% in 1990 to 39.1% in 1995.

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<PAGE> 62

BUSINESS

HOMESIDE

HomeSide is one of the largest full-service residential mortgage banking
companies in the United States, formed through the acquisition of the mortgage
banking operations of The First National Bank of Boston ("Bank of Boston" or
"BKB") and Barnett Banks, Inc. ("Barnett"). See "The Acquisitions." HomeSide's
strategy emphasizes variable cost mortgage origination and low cost servicing.
On a combined basis HomeSide's origination volume and servicing portfolio would
have been $14.7 billion and $75.0 billion, respectively, for and as of the year
ended December 31, 1995, ranking the Company as the 5th largest originator and
7th largest servicer in the United States for 1995 based on data published by
National Mortgage News. For and as of the nine months ended November 30, 1996,
HomeSide's loan originations and acquisitions were $18.9 billion and its
servicing portfolio was $88.7 billion.

HomeSide's business strategy is to increase the volume of its loan
originations and the size of its servicing portfolio while continuing to improve
operating efficiencies. In originating mortgages, HomeSide focuses on variable
cost channels of production, including correspondent, broker, consumer direct,
affinity, and co-issue sources. HomeSide pursues strategic relationships such as
its existing 5-year agreements to acquire residential mortgage loans from BKB
and Barnett production sources, which, for the period May 31, 1996 through
November 30, 1996, represented 19.5% of HomeSide's loan production. Management
believes that these variable cost channels of production deliver consistent
origination opportunities for HomeSide without the fixed cost investment
associated with traditional retail mortgage branch networks. The Company
believes that its ongoing investment in technology will further enhance and
expand existing processing capabilities and improve its efficiency. Based on
independent surveys of direct cost per loan and loans serviced per employee,
management believes that the Company has been one of the industry's most
efficient mortgage servicers.

HomeSide's business activities consist primarily of:

- Risk management: management of a program designed primarily to
protect the economic performance of the servicing portfolio that could
otherwise be adversely affected by loan prepayments due to declines in
interest rates.

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<PAGE> 63

PRODUCTION

HomeSide participates in several origination channels, with a focus on
wholesale originations. Since HomeSide's formation, wholesale channels
(correspondent, co-issue and broker) have represented more than 95% of
HomeSide's total production. No single source within the correspondent or broker
channels accounted for more than 2% of total production during the period March
16, 1996 to November 30, 1996. HomeSide's other origination channels include
telemarketing, affinity programs and retail branches. HomeSide also purchases
servicing rights in bulk from time to time. This multi-channel production base
provides access to and flexibility among production channels in a wide variety
of market and economic conditions. The table below details production by
HomeSide's origination channels:

RESIDENTIAL LOAN PRODUCTION BY CHANNEL

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE THREE FOR THE THREE FOR THE PERIOD
MARCH 16, 1996 MONTHS ENDED MONTHS ENDED MARCH 16, 1996
TO MAY 31, 1996 (B) AUGUST 31, 1996 NOVEMBER 30, 1996 TO NOVEMBER 30, 1996
------------------- --------------- ----------------- --------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Wholesale:
Correspondent (includes
BKB and Barnett....... $ 1,893 $ 2,950 $ 3,249 $ 8,092
Co-issue(a).............. 1,419 2,208 1,985 5,612
Broker................... 220 155 168 543
------- ------- ------- -------
Total wholesale....... 3,532 5,313 5,402 14,247
Direct..................... 248 179 139 566
------- ------- ------- -------
Total production...... 3,780 5,492 5,541 14,813
Bulk acquisitions(a)....... -- 4,073 -- 4,073
------- ------- ------- -------
Total production and
acquisitions........ $ 3,780 $ 9,565 $ 5,541 $18,886
======= ======= ======= =======
</TABLE>

- ---------------
(a) Represents the acquisition of servicing rights, not the underlying loans.
Amounts represent the UPB of mortgage debt to which the acquired servicing
rights relate.

(b) Homeside acquired HHI on May 31, 1996 and therefore HHI's loan production is
not included in these amounts. During the three months ended May 31, 1996,
HHI's loan production totaled $1.5 billion.

HomeSide competes nationwide by offering a wide variety of mortgage
products designed to respond to consumer needs and tailored to address market
competition. HomeSide is primarily an originator of fixed rate 15- and 30-year
mortgage loans, which collectively represented 78% of the total production in
the period March 16, 1996 to November 30, 1996. HomeSide also offers other
products, such as ARMs and balloon and jumbo mortgages.

HomeSide's national loan production operation has resulted in
geographically diverse originations, enabling HomeSide to diversify its risk
across many markets in the United States. HomeSide's largest markets by state in
the period ended November 30, 1996 were California (17.5% of UPB of production),
Florida (9.1%), Texas (7.5%), Georgia (5.7%), and Maryland (5.5%).

HomeSide's production strategy is to maintain and improve its reputation as
one of the largest, most cost effective originators of mortgage loans
nationwide. HomeSide pursues this strategy through an emphasis on wholesale and
centralized direct production, the use of contract and delegated underwriters, a
high degree of automation in its processing and direct originations and quality
control. HomeSide plans to expand production through its low cost wholesale and
direct channels and to continue to streamline its production operation. HomeSide
plans to continue to pursue bulk acquisitions in the secondary market for
mortgage servicing rights on an opportunistic basis.

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<PAGE> 64

WHOLESALE PRODUCTION

Correspondent Production

Through its correspondent program, HomeSide purchases loans from
approximately 500 commercial banks, savings and loan associations, licensed
mortgage lenders and other financial intermediaries. The correspondent takes the
mortgage application and processes the loan, which is either underwritten
through contract underwriters or, in some cases, the correspondent to whom
underwriting authority has been delegated. Closing documents are submitted to
HomeSide for legal review and funding. The participants in this program are
prequalified and monitored on an ongoing basis by HomeSide. If a correspondent
subsequently fails to meet HomeSide's requirements, HomeSide typically
terminates the relationship. Correspondents are also required to repurchase
loans in the event of fraud or misrepresentation in the origination process and
for certain other reasons.

Co-Issue Production

Co-issue production, which represents the purchase of servicing rights from
a correspondent under contracts to deliver specified volumes on a monthly or
quarterly basis, is another main source of HomeSide's production. The co-issue
correspondent controls the entire loan process from application to closing. This
arrangement particularly suits large originators who have the ability to deliver
on an automated basis. Reflecting this delegated underwriting authority,
co-issue correspondents are subject to more extensive credit and quality control
reviews. Contractually, the co-issue correspondent is obligated to make certain
representations and warranties and is required to repurchase loans in the event
of fraud or misrepresentation in the origination process or for certain other
reasons.

Broker Production

Under its broker program, HomeSide funds loans at closing from a network of
approximately 450 mortgage brokers nationwide. The broker controls the process
of application and loan processing. A preclosing quality control review is
performed by HomeSide to verify the borrower's credit. All loans originated
through brokers are underwritten by HomeSide's approved contract underwriters.
Loans are funded by HomeSide and may be closed in either the broker's name or
HomeSide's name. Participants in this program prequalify on the basis of
creditworthiness, mortgage lending experience and reputation. Each broker is
subject to annual and ongoing reviews by HomeSide.

DIRECT PRODUCTION

HomeSide's direct production includes the use of telemarketing to solicit
loans from several sources, including refinancings of mortgage loans in
HomeSide's existing servicing portfolio, leads generated from direct mail
campaigns and other advertising, and mortgages related to affinity group and
co-branding partnerships. HomeSide acquired HLI's telemarketing system which was
established in May 1995. HomeSide believes that these efforts will have a
significant effect on increasing the percentage of loans captured by the direct
division from loan prepayments in HomeSide's servicing portfolio. Refinancing
retention represents the percentage of loans refinanced through HomeSide's
direct channel that were serviced by HomeSide prior to refinancing.

In April 1996, pursuant to a two-year agreement, HomeSide began offering
mortgage loans through the American Airlines AAdvantage Program, which
encompasses approximately 14 million households. Under this program, a borrower
receives one frequent flyer mile for every dollar of interest paid on time.
HomeSide offers loans in four out of five geographic regions in the United
States, along with two other lenders in each region. Each lender receives one
third of the referrals from the AAdvantage program, or prospective borrowers may
contact the lender directly. HomeSide pays American Airlines a fee for each mile
earned by a borrower. Under the program, such fees are paid to American Airlines
on a monthly basis as the borrower earns miles by making monthly interest
payments. The program is in its infancy and fees paid to American Airlines by

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<PAGE> 65

HomeSide for miles earned have thus far been insignificant. HomeSide plans to
establish additional affinity relationships.

Under the terms of the HLI and HHI Acquisitions, BKB has retained all of
its retail production facilities in the New England area and Barnett retained
all of its loan production facilities except for Honolulu Mortgage. Upon selling
HLI and HHI to HomeSide, BKB and Barnett entered into an exclusive five-year
agreements to sell, subject to certain limitations, all loans originated from
these sources to HomeSide on a broker or correspondent basis at market rates. In
1996, HomeSide sold or closed HLI's remaining retail branches.

BULK ACQUISITION

Bulk acquisition is the large scale purchase of mortgage servicing rights.
In connection with such acquisitions, HomeSide does not purchase the underlying
mortgage loans which were originated by other originators. HomeSide may purchase
servicing rights on an exclusive basis or through a competitive bidding process
and plans to continue this practice on an opportunistic basis in order to grow
its servicing portfolio and benefit from economies of scale.

UNDERWRITING AND QUALITY CONTROL

Underwriting

HomeSide's loans are underwritten in accordance with applicable Fannie Mae,
FHLMC, VA, and FHA guidelines, as well as certain private investor requirements.
The underwriting process is organized by origination channel and by loan type.
HomeSide currently employs underwriters with an average of ten years of
underwriting experience.

HomeSide requires approximately 80% of its correspondent lenders to have
their loans underwritten by third party contract underwriters prior to purchase.
These contract underwriters are designated by HomeSide and include General
Electric Capital Corp., Mortgage Guaranty Insurance Corp., and Private Mortgage
Insurance Corp. HomeSide grants delegated underwriting status to the remaining
approximately 20% of correspondents which enables the correspondent to submit
conventional loans to HomeSide without prior underwriting approval. Generally,
HomeSide grants delegated underwriting status to its larger correspondents who
meet financial strength, delinquency, underwriting and quality control
standards, and such correspondents are monitored regularly. The FHA and VA
require that loans be underwritten by the originating lender on an
Agency-approved or delegated basis. If issuance of FHA guarantees or VA
insurance certificates is denied, the correspondent must repurchase the loan.

HomeSide implemented an automated underwriting process for its retail
production operation in 1994. The automated underwriting technology incorporates
credit scoring and appraisal evaluation systems. These systems employ
rules-based and statistical technologies to evaluate the borrower, the property
and salability of the loan to the secondary market. HomeSide believes that these
technologies have contributed to improved productivity and reduced underwriting
and processing turnaround time.

Quality Control

HomeSide maintains a compliance and quality assurance department that
operates independently of the production, underwriting, secondary marketing and
loan administration departments. For its production compliance process, HomeSide
randomly selects a statistical sample of all closed loans monthly for review.
The sample generally comprises 3 1/2% - 4% of all loans closed each month. This
review includes a credit scoring and reunderwriting of such loans; ordering
second appraisals on 10% of the sample; reverifying funds, employment and final
applications; and reordering credit reports on all loans selected. In addition,
a full underwriting review is conducted on (i) all jumbo loans that go into
default during the first thirty-six months from the date of origination and (ii)
all other loans that go into default during the first six months from the date
of origination. Document and file reviews are also undertaken to ensure
regulatory compliance. In addition, random reviews of the servicing portfolio,
covering selected aspects of the loan administration process, are conducted.

HomeSide monitors the performance of the underwriting department through
quality assurance reports, HUD/VA reports and audits, reviews and audits by
regulatory agencies, investor reports and mortgage insurance company audits.
According to HomeSide's quality control findings, less than 1% of its loans have
underwriting issues that affect salability to the secondary market. Flaws in
these loans are generally corrected;

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<PAGE> 66

otherwise, the holder of the MBS is indemnified against future losses resulting
from such flaws by HomeSide or, ultimately, the originating correspondent.
Correspondents or co-issue partners are required to repurchase any flawed loans
originated by them. See "Risk Factors -- Loan Delinquencies and Defaults on
Loans."

SECONDARY MARKETING

HomeSide customarily sells all loans that it originates while retaining the
servicing rights to such loans. HomeSide aggregates mortgage loans into pools
and sells these pools, as well as individual mortgage loans, to investors
principally at prices established under forward sales commitments. HomeSide's
FHA and VA loans are generally pooled and sold in the form of GNMA MBS.
Conforming conventional mortgage loans are generally pooled and exchanged under
the purchase and guarantee programs sponsored by Fannie Mae and FHLMC for Fannie
Mae MBS or FHLMC participation certificates, respectively. HomeSide pays certain
guarantee fees to the Agencies in connection with these programs and then sells
the GNMA, Fannie Mae and FHLMC securities to securities dealers. A limited
number of mortgage loans (i.e. non-conforming loans) are sold to private
investors. In the period March 16, 1996 to November 30, 1996, approximately 92%
of the mortgage loans originated by HomeSide were sold to GNMA (48%), Fannie Mae
(31%) or FHLMC (13%). The remaining approximately 8% were sold to private
investors.

The sale of mortgage loans may generate a gain or loss to HomeSide. Gains
or losses result primarily from two factors. First, HomeSide may purchase a loan
at a price that may be higher or lower than HomeSide would receive if it
immediately sold the loan in the secondary market. These pricing differences
occur principally as a result of competitive pricing conditions in the primary
loan origination market. Second, gains or losses may result from fluctuations in
interest rates that create changes in the market value of the loans or
commitments to purchase loans, from the time the interest rate commitment is
given to the mortgagor until the loan is sold to an investor.

HomeSide assesses the interest rate risk associated with outstanding
commitments that it has extended to fund loans and hedges the interest rate risk
of these commitments based upon a number of factors, including the remaining
term of the commitment, the interest rate at which the commitment was provided,
current interest rates and interest rate volatility. HomeSide constantly
monitors these factors and adjusts its hedging on a daily basis as needed.
HomeSide uses the Quantitative Risk Management system, a sophisticated hedging,
reporting and evaluation system, which has the ability to perform analyses under
various interest rate scenarios. HomeSide's interest rate risk is currently
hedged using a combination of forward sales of MBS and over-the-counter options,
including both puts and calls, on fixed income securities. HomeSide generally
commits to sell to investors for delivery at a future time for a stated price
all its closed loans and a percentage of the mortgage loan commitments for which
the interest rate has been established. HomeSide aims to price loans
competitively, hedge the interest rate risk of loan originations and sell loans
on a break-even basis. For the period March 16, 1996 to November 30, 1996,
HomeSide has not experienced secondary marketing losses on an aggregate basis.

HomeSide's policy is to sell mortgage loans on a non-recourse basis.
However, in the case of VA loans used to form GNMA pools, the VA's loan
guarantees do not cover the entire principal balance of the loan and HomeSide is
responsible for losses which exceed the VA's guaranteed limitations. See
"-- Loan Servicing Credit Issues". In connection with HomeSide's loan exchanges
and sales, HomeSide makes representations and warranties customary in the
industry relating to, among other things, compliance with laws, regulations and
program standards, and to accuracy of information. In the event of a breach of
these representations and warranties, HomeSide typically corrects such flaws,
but, if the flaws cannot be corrected, may be required to repurchase such
loans. In cases where loans are originated by a correspondent, HomeSide may
sell the flawed loan back to the correspondent under a repurchase obligation.

LOAN SERVICING

HomeSide derives its revenues predominantly from its servicing operations.
HomeSide anticipates that the sale of servicing rights will not be a significant
component of its business strategy in the future. Since its formation, HomeSide
has also maintained a risk management program designed to protect, within
certain

65
<PAGE> 67

parameters, the economic value of its servicing portfolio, which is subject to
prepayment risk when interest rate declines provide mortgagors with refinancing
opportunities.

<TABLE>
CHANGES IN SERVICING PORTFOLIO

<CAPTION>
FOR THE PERIOD FOR THE THREE FOR THE THREE FOR THE PERIOD
MARCH 1, 1996 MONTHS ENDED MONTHS ENDED MARCH 1, 1996
TO MAY 31, 1996 AUGUST 31, 1996 NOVEMBER 30, 1996 TO NOVEMBER 30, 1996
--------------- ---------------- ------------------ --------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Balance, beginning of
period...................... $42,907 $78,391 $85,835 $42,907
Total additions............. 37,184 9,842 5,244 52,270
Scheduled amortization........ 235 494 517 1,246
Prepayments................... 1,321 1,702 1,529 4,552
Foreclosures.................. 130 137 106 373
Servicing sales............... 14 65 221 300
------- ------- ------- -------
Total reductions............ 1,700 2,398 2,373 6,471
------- ------- ------- -------
Balance, end of period........ $78,391 $85,835 $88,706 $88,706
======= ======= ======= =======
</TABLE>

Loan servicing includes collecting payments of principal and interest from
borrowers, remitting aggregate loan payments to investors, accounting for
principal and interest payments, holding escrow funds for payment of mortgage
related expenses such as taxes and insurance, making advances to cover
delinquent payments, inspecting the mortgaged premises as required, contacting
delinquent mortgagors, supervising foreclosures and property dispositions in the
event of unremedied defaults, and other miscellaneous duties related to loan
administration. HomeSide collects servicing fees from monthly mortgage payments.
These fees generally range from 0.25% to 0.50% of the declining principal
balances of the loans per annum. HomeSide's weighted average servicing fee was
0.359% at November 30, 1996. HomeSide also maintains certain subservicing
relationships whereby servicing is performed by another servicer under an
agreement with HomeSide, which remains contractually responsible for servicing
the loans. Subservicing relationships are often entered into as part of a bulk
servicing acquisition where the selling institution continues to perform
servicing until the loans are transferred to the purchasing institution.

HomeSide's servicing strategy is to continue to build its mortgage
servicing portfolio and benefit from the economies of scale inherent in the
business. HomeSide services substantially all of the mortgage loans that it
originates. In addition, HomeSide purchases the rights to service mortgage loans
originated by other lenders.

As part of the HHI Acquisition, HomeSide acquired a full service mortgage
company in Hawaii, Honolulu Mortgage. Honolulu Mortgage's servicing portfolio
totaled $1.9 billion at November 30, 1996 and its loan production was $257.4
million since its acquisition on May 31, 1996. HomeSide is currently in
negotiations to sell this company. This sale is not expected to materially
affect HomeSide's financial results.

HomeSide's servicing strategy is also to enhance the profitability of its
servicing revenue through low cost and efficient processes. This strategy is
pursued through highly automated, cost effective processing systems, strategic
outsourcing of selected servicing functions and effective control of
delinquencies and foreclosures. HomeSide outsources to third party vendors
functions related to insurance, taxes and default management, contributing to
HomeSide's ability to maintain a highly variable cost structure. Using a variety
of factors, including loans serviced per employee and direct cost per loan,
management believes that HomeSide is one of the nation's most efficient
servicers based on industry surveys. Management believes that its low cost
servicing provides it with a competitive advantage in the industry.

SERVICING PORTFOLIO COMPOSITION

HomeSide originates and purchases servicing rights for mortgage loans
nationwide. The broad geographic distribution of HomeSide's servicing portfolio
reflects the national scope of HomeSide's originations and bulk

66
<PAGE> 68

servicing acquisitions. The nine largest states accounted for 64.7% of
outstanding UPB of the total servicing portfolio of HomeSide at November 30,
1996, while the largest volume by state is Florida with a 19.6% share of the
total portfolio at November 30, 1996. HomeSide actively monitors the geographic
distribution of its servicing portfolio to maintain a mix that it deems
appropriate and makes adjustments as it deems necessary.

At November 30, 1996, HomeSide's servicing portfolio consisted of $32.4
billion of FHA/VA servicing and $51.4 billion of conventional servicing.

SERVICING PORTFOLIO BY STATE(A)

<TABLE>
<CAPTION>
AT NOVEMBER 30, 1996
------------------------
STATE UPB % OF UPB
----- ----------- --------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Florida...................................................... $16,457 19.6%
California................................................... 13,089 15.6
Texas........................................................ 5,142 6.1
Massachusetts................................................ 4,249 5.1
Maryland..................................................... 3,911 4.7
Georgia...................................................... 3,290 3.9
Virginia..................................................... 3,124 3.7
Illinois..................................................... 2,724 3.3
Colorado..................................................... 2,267 2.7
Other(b)..................................................... 29,561 35.3
------- -----
Total........................................................ $83,814 100.0%
======= =====
</TABLE>

- ---------------
(a) Servicing statistics are based on loans serviced by HomeSide and exclude
loans purchased not yet on servicing system.

(b) No other state represents more than 2.7% of HomeSide's servicing portfolio.

SERVICING PORTFOLIO BY COUPON(A)

<TABLE>
<CAPTION>
AT NOVEMBER 30, 1996
---------------------------------------
CUMULATIVE
INTEREST RATE UPB % OF UPB % OF UPB
------------- ----------- -------- ----------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Less than 6.0%............................................ $ 1,028 1.2% 1.2%
6.0% to 6.9%.............................................. 9,365 11.2 12.4
7.0% to 7.9%.............................................. 35,114 41.9 54.3
8.0% to 8.9%.............................................. 27,165 32.4 86.7
9.0% to 9.9%.............................................. 7,284 8.7 95.4
10.0% to 10.9%............................................ 2,999 3.6 99.0
Over 11.0%................................................ 859 1.0 100.0
------- -----
Total........................................... $83,814 100.0%
======= =====
</TABLE>

- ---------------
(a) Servicing statistics are based on loans serviced by HomeSide and exclude
loans purchased not yet on servicing system.

67
<PAGE> 69

LOAN SERVICING CREDIT ISSUES

HomeSide is affected by loan delinquencies and defaults on loans that it
services. Under certain types of servicing contracts, particularly contracts to
service loans that have been pooled or securitized, HomeSide must forward all or
part of the scheduled payments to the owner of the loan, even when loan payments
are delinquent. Also, to protect their liens on mortgaged properties, owners of
loans usually require a servicer to advance scheduled mortgage and hazard
insurance and tax payments even if sufficient escrow funds are not available.
HomeSide is generally reimbursed, subject to certain limitations with respect to
FHA/VA loans as described below, by the mortgage owner or from liquidation
proceeds for payments advanced that the servicer is unable to recover from the
mortgagor, although the timing of such reimbursement is typically uncertain. In
the interim, HomeSide absorbs the cost of funds advanced during the time the
advance is outstanding. Further, HomeSide bears the increased costs of
collection activities on delinquent and defaulted loans. HomeSide also foregoes
servicing income from the time such loan becomes delinquent until foreclosure,
when, if any proceeds are available, it may recover such amounts.

HomeSide periodically incurs losses attributable to servicing FHA and VA
loans for investors, including actual losses for final disposition of loans that
have been foreclosed or assigned to the FHA or VA and accrued interest on such
FHA or VA loans for which payment has not been received. For HomeSide, servicing
losses on investor-owned loans totaled $13.0 million for the period March 16,
1996 to November 30, 1996, primarily representing losses on VA loans. Because
the total principal amount of FHA loans is guaranteed, losses on such loans are
generally limited to expenses of collection. HomeSide experiences minimal losses
from FHA loans. In respect of VA loans, the VA guarantees the initial losses on
a loan. The guaranteed amount generally ranges from 20% to 35% of the original
principal balance. Before each foreclosure sale, the VA determines whether to
bid by comparing the estimated net sale proceeds to the outstanding principal
balance and the servicer's accumulated reimbursable costs and fees. If this
amount is a loss and exceeds the guaranteed amount, the VA typically issues a
no-bid and pays the servicer the guaranteed amount. Whenever a no-bid is issued,
the servicer absorbs the loss, if any, in excess of the sum of the guaranteed
principal and amounts recovered at the foreclosure sale. HomeSide's historical
delinquency and foreclosure rate experience on VA loans has generally been
consistent with that of the industry.

HomeSide's management believes that it has an adequate level of reserve
based on HomeSide's servicing volume, portfolio composition, credit quality and
historical loss rates, as well as estimated future losses.

Set forth below is HomeSide's delinquency and foreclosure experience.

SERVICING PORTFOLIO DELINQUENCIES
(PERCENT BY LOAN COUNT)

<TABLE>
<CAPTION>
TOTAL FORECLOSURE
30 DAYS 60 DAYS 90+ DAYS PAST DUE INVENTORY
------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
At May 31, 1996.......................... 2.97% 0.60% 0.35% 3.92% 0.66%
At August 31, 1996....................... 3.08% 0.64% 0.48% 4.20% 0.95%
At November 30, 1996..................... 3.50% 0.68% 0.58% 4.76% 1.02%
</TABLE>

SERVICING PORTFOLIO HEDGING PROGRAM

The value of HomeSide's servicing portfolio is subject to volatility in the
event of unanticipated changes in prepayments. As interest rates increase,
prepayments by mortgagors decrease as fewer owners refinance, increasing
expected future cash flows from servicing revenue. Conversely, as interest rates
decrease, prepayments by mortgagors increase as homeowners seek to refinance
their mortgages, reducing expected future cash flows from servicing revenues on
those prepaid mortgages. Since the value of servicing rights is based on the net
present value of future cash flows, the value of the portfolio decreases in a
declining interest rate environment and increases in a rising rate environment.

68
<PAGE> 70

HomeSide's risk management policy is designed to minimize exposure to loss
in the value of the servicing portfolio caused by prepayments due to declines in
interest rates. The servicing portfolio is valued using market discount rates
and market consensus prepayment speeds, among other variables. The value is then
analyzed under various interest rate scenarios that help HomeSide estimate the
exposure to loss. This potential loss exposure determines the hedge profile,
which profile is monitored daily and may be adjusted to reflect significant
moves in key variables such as interest rate and yield curve changes and revised
prepayment speed assumptions. Results of the risk management program depend on a
variety of factors, including the hedge instruments typically used by HomeSide,
the relationship between mortgage rates and Treasury securities and certain
other factors. See "Risk Factors -- Impact of Changes in Interest Rates; Results
of Risk Management Activities" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- HomeSide -- Results of
Operations -- Risk Management Activities".

The FASB has been evaluating the accounting for derivative financial
instruments and hedging activities. The FASB has issued an exposure draft and
numerous comments have been received. It is unclear what changes will ultimately
be made to such exposure draft. Under current practice, derivative financial
instruments may be accounted for as hedges with changes in the value deferred as
a component of the asset or liability being hedged, provided the instruments are
designated as a hedge and reduce exposure to loss with a high correlation.
Management of HomeSide is unable to predict what effect, if any, changes in
accounting principles would have on HomeSide's financial statements or
HomeSide's use of hedge accounting.

SERVICING INTEGRATION

To facilitate administration and to effect the economies of scale targeted
by management, HomeSide's servicing operations are expected to be integrated
over the next year. HomeSide has one servicing site located in Jacksonville,
Florida, which at March 1, 1996 serviced approximately 522,000 loans with a
servicing staff of approximately 400. HHI had servicing operations located in
Jacksonville, Florida, San Antonio, Texas, and Honolulu, Hawaii. Approximately
11,000 loans are serviced at the Honolulu Mortgage subsidiary. HomeSide plans to
integrate the existing former HLI portfolio with the former HHI portfolio in
stages based on the capacity and capabilities of each of the respective
servicing sites. HomeSide has completed the transfer of its approximately
145,000 loans at HHI's Jacksonville facility to San Antonio for servicing.

In addition to the physical consolidation of servicing operations, HomeSide
intends to pursue the conversion of the entire servicing platform to HHI's
proprietary software. This proprietary servicing technology accommodates all
areas of loan servicing, including loan setup and maintenance, cashiering,
escrow administration, investor accounting, customer service and default
management. The platform is mainframe based, with on-line, real-time
architecture and is supported by an experienced staff of over 30 technology
providers.

HomeSide expects to achieve significant competitive advantages over time by
converting to the proprietary servicing software, which is expected to cost less
to operate than HomeSide's current outsourced system and is configured to
accommodate growth more efficiently than the current HomeSide system. Once the
conversion has been completed, this architecture is expected to support
HomeSide's portfolio growth to a size of up to approximately twice its size. The
system is also expected to permit continued development of workflow and other
client-server applications, contributing to increased productivity.

Several other measures are expected to be undertaken by HomeSide in order
to operate more efficiently. HomeSide has outsourced HHI's hazard insurance, tax
payments and default functions to specialized vendors, as was the historic
practice at HLI. The consolidation of the two servicing operations in
Jacksonville is expected to result in a reduction in headcount. In addition, the
plan to have dedicated centers for conventional and FHA/VA servicing in
Jacksonville and San Antonio, respectively, is expected to yield additional
economies through specialization.

EMPLOYEES

As of November 30, 1996, HomeSide had approximately 1,718 total employees,
substantially all of whom were full-time employees. HomeSide has no unionized
employees and considers its relationship with its

69
<PAGE> 71

employees generally to be satisfactory. Upon consummation of the HHI
Acquisition, HomeSide had approximately 2,300 total employees, substantially all
of whom were full-time employees.

PROPERTIES

HomeSide's corporate, administrative, and servicing headquarters are
located in Jacksonville, Florida, in facilities, which comprise approximately
145,000 square feet of owned space and approximately 135,000 square feet of
leased space. The servicing center lease expires on August 31, 1999 unless
HomeSide exercises its options to renew, which could extend the lease for an
additional six years. HomeSide also leases approximately 53,000 square feet of
warehouse space in Jacksonville, Florida for storing certain loan files, loan
servicing documents and other corporate records. In addition, HomeSide leases
20,000 square feet of space in Hawaii and owns an additional 190,000 square feet
of space in San Antonio, Texas. HomeSide believes that its present facilities
are adequate for its operations.

REGULATION

HomeSide's mortgage banking business is subject to the rules and
regulations of HUD, FHA, VA, Fannie Mae, FHLMC, GNMA and other regulatory
agencies with respect to originating, processing, underwriting, selling,
securitizing and servicing mortgage loans. In addition, there are other federal
and state statutes and regulations affecting such activities. These rules and
regulations, among other things, impose licensing obligations on HomeSide,
prohibit discrimination and establish underwriting guidelines which include
provisions for inspections and appraisals, require credit reports on prospective
borrowers and set maximum loan amounts. Moreover, lenders such as HomeSide are
required annually to submit audited financial statements to Fannie Mae, FHLMC,
GNMA and HUD and to comply with each regulatory entity's own financial
requirements. HomeSide's business is also subject to examination by Fannie Mae,
FHLMC and GNMA and state regulatory agencies at all times to assure compliance
with applicable regulations, policies and procedures.

Mortgage origination activities are subject to the provisions of various
Federal and state statutes including, among others, the Equal Credit Opportunity
Act, the Federal Truth-in-Lending Act and the Real Estate Settlement Procedures
Act, the Fair Housing Act, and the regulations promulgated thereunder, which,
among other provisions, prohibit discrimination, prohibit unfair and deceptive
trade practices and require the disclosure of certain basic information to
mortgagors concerning credit terms and settlement costs, limit fees and charges
paid by borrowers and lenders, and otherwise regulate terms and conditions of
credit and the procedures by which credit is offered and administered. Many of
the aforementioned regulatory requirements are designed to protect the interests
of consumers, while others protect the owners or insurers of mortgage loans.
Failure to comply with these requirements can lead to loss of approved status,
termination of servicing contracts without compensation to the servicers,
demands for indemnification or loan repurchases, class action lawsuits and
administrative enforcement actions.

Prior to the HLI Acquisition, HLI was a wholly-owned operating subsidiary
of a national bank, and subject to substantially all of the regulations and
restrictions applicable to a national bank. Prior to the HHI Acquisition, HHI
was a wholly-owned subsidiary of a bank holding company. During the period that
BKB or Barnett, or any of their subsidiaries, retains a material ownership
interest in HomeSide, HomeSide and its subsidiaries (i) will be under the
jurisdiction, supervision, and examining authority of the OCC, and (ii) may only
engage in activities that are part of, or incidental to, the business of
banking. The OCC has specifically ruled that mortgage banking is a proper
incident to the business of banking.

There are various other state and local laws and regulations affecting
HomeSide's operations. HomeSide is licensed in those states that require
licensing to originate, purchase and/or service mortgage loans. Conventional
mortgage operations may also be subject to state usury statutes. FHA and VA
loans are exempt from the effect of such statutes. See "Risk Factors --
Regulation, Possible Changes and Related Matters".

70
<PAGE> 72

LITIGATION

HomeSide is a defendant in a number of legal proceedings arising in the
normal course of business. HomeSide, in management's estimation, has recorded
adequate reserves in the financial statements for pending litigation.
Management, after reviewing all actions and proceedings pending against or
involving HomeSide, considers that the aggregate liability or loss, if any,
resulting from the final outcome of these proceedings will not have a material
effect on the financial position of HomeSide.

In recent years, the mortgage banking industry has been subject to class
action lawsuits which allege violations of federal and state laws and
regulations, including the propriety of collecting and paying various fees and
charges. Class action lawsuits may be filed in the future against the mortgage
banking industry.

71
<PAGE> 73

HLI -- HISTORICAL BUSINESS

HLI, at the time its loan servicing and production operations were acquired
by HomeSide, was one of the largest full-service mortgage banking companies in
the United States, emphasizing wholesale mortgage originations and low cost
mortgage servicing. As of and for the year ended December 31, 1995 and the three
months ended March 31, 1996, HLI originated approximately $8.9 billion and $4.2
billion of mortgage loans, respectively, including co-issue production, and
serviced a loan portfolio of $41.6 billion and $44.2 billion, respectively, at
the end of such periods. For 1995, HLI was ranked as the 9th largest originator
of residential mortgage loans (including co-issue volume) and as the 16th
largest servicer of residential mortgage loans, according to National Mortgage
News, and as the 5th largest wholesale originator of mortgage loans (including
co-issue volume) according to Wholesale Access. HLI is headquartered in
Jacksonville, Florida. The following discussion summarizes HLI's operations up
to the date it was acquired by the Company.

PRODUCTION

HLI participated in several origination channels, with a focus on wholesale
originations. In 1995, wholesale channels (correspondent, co-issue and broker)
represented approximately 90% of HLI's total production. No single source within
the correspondent or broker channels accounted for more than 2% of total
production in 1995. HLI's other origination channels included telemarketing,
affinity programs and retail branches. HLI also purchased servicing rights in
bulk from time to time. This multi-channel production base provided access to
and flexibility among production channels in a wide variety of market and
economic conditions. The table below details production by HLI's origination
channels:

RESIDENTIAL LOAN PRODUCTION BY CHANNEL

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------ THREE MONTHS ENDED
1991 1992 1993 1994 1995 MARCH 31, 1996
------ ------ ------- ------- ------ ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Wholesale:
Correspondent................ $2,096 $2,947 $ 4,955 $ 3,364 $3,778 $2,031
Co-issue(a).................. 1,200 2,955 2,860 4,285 3,901 1,597
Broker....................... 231 934 1,431 498 291 191
------ ------ ------- ------- ------ ------
Total wholesale........... 3,527 6,836 9,246 8,147 7,970 3,819
Retail......................... 910 1,824 2,125 788 915 368
------ ------ ------- ------- ------ ------
Total production.......... 4,437 8,660 11,371 8,935 8,885 4,187
Bulk acquisitions(a)........... 760 1,046 2,311 5,538 683 --
------ ------ ------- ------- ------ ------
Total production and
acquisitions............ $5,197 $9,706 $13,682 $14,473 $9,568 $4,187
====== ====== ======= ======= ====== ======
</TABLE>

- ---------------
(a) Represents the acquisition of servicing rights, not the underlying loans.
Amounts represent the UPB of mortgage debt to which the acquired servicing
rights relate.

HLI competed nationwide by offering a wide variety of mortgage products
designed to respond to consumer needs and tailored to address market
competition. HLI was primarily an originator of fixed rate 15-and 30-year
mortgage loans, which collectively represented 77% of total production in 1995
and 81% of the total production in the first three months of 1996.

HLI's national loan production operation resulted in geographically diverse
originations, enabling HLI to diversify its risk across many markets in the
United States. HomeSide originated loans in 48 states and the District of
Columbia and its largest markets by state in 1995 were California (18.4% of UPB
of production), Texas (9.4%), Florida (7.1%), Georgia (5.1%) and Massachusetts
(4.5%). HomeSide's largest markets by state in the three months ended March 31,
1996 were California (19.5% of UPB of production), Maryland (7.5%), Texas
(6.9%), Florida (6.4%), and Georgia (5.1%).

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<PAGE> 74

SECONDARY MARKETING

HLI customarily sold all loans that it originated while retaining the
servicing rights to such loans. HLI aggregated mortgage loans into pools and
sold these pools, as well as individual mortgage loans, to investors principally
at prices established under forward sales commitments. In 1995, approximately
83% of the mortgage loans originated by HLI were sold to GNMA (43%), Fannie Mae
(31%) or FHLMC (9%). The remaining approximately 17% were sold to private
investors. In the three months ended March 31, 1996, approximately 92% of the
mortgage loans originated by HLI were sold to GNMA (48%), Fannie Mae (35%) or
FHLMC (9%). The remaining approximately 8% were sold to private investors. For
each year since 1990, HLI has not experienced secondary marketing losses.

LOAN SERVICING

HLI derived its revenues predominantly from its servicing operations. Since
1991, HLI's servicing portfolio has grown as originations and bulk servicing
acquisitions have exceeded scheduled principal reductions, prepayments,
foreclosures and sales of servicing rights. Since 1994, HLI also maintained a
risk management program designed to protect, within certain parameters, the
economic value of its servicing portfolio, which is subject to prepayment risk
when interest rate declines provide mortgagors with refinancing opportunities.

CHANGES IN SERVICING PORTFOLIO

<TABLE>
<CAPTION>
THREE MONTHS
1991 1992 1993 1994 1995 ENDED MARCH 31, 1996
------- ------- ------- ------- ------- --------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
January 1st
balance............ $18,726 $20,601 $23,706 $27,999 $37,971 $41,555
Total additions.... 5,375 9,733 13,669 14,970 9,389 4,243
Scheduled
amortization....... 337 434 501 523 869 241
Prepayments.......... 1,303 4,345 8,123 3,372 2,740 1,274
Foreclosures......... 174 157 223 258 334 113
Servicing sales...... 1,686 1,692 529 845 1,862 12
------- ------- ------- ------- ------- -------
Total reductions... 3,500 6,628 9,376 4,998 5,805 1,640
------- ------- ------- ------- ------- -------
December 31st balance
or at end of
period............. $20,601 $23,706 $27,999 $37,971 $41,555 $44,158
======= ======= ======= ======= ======= =======
</TABLE>

Over the past five years, HLI's servicing portfolio grew steadily, from
$20.6 billion at December 31, 1991 to $41.6 billion at December 31, 1995, a 19%
compounded annual growth rate. HLI's weighted average servicing fee was 0.386%
at December 31, 1995.

SERVICING PORTFOLIO COMPOSITION

HLI originated and purchased servicing rights for mortgage loans
nationwide. The broad geographic distribution of HLI's servicing portfolio
reflected the national scope of HLI's originations and bulk servicing
acquisitions. The nine largest states accounted for 63.6% and 63.4% of
outstanding UPB of the total servicing portfolio of HLI at December 31, 1995,
and March 31, 1996, respectively, while the largest volume by state was
California with a 16.8% and 16.9% share of the total portfolio at December 31,
1995 and March 31, 1996, respectively.

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<PAGE> 75

The following tables set forth certain information regarding HLI's
servicing portfolio:

SERVICING PORTFOLIO COMPOSITION(A)

<TABLE>
<CAPTION>
AT DECEMBER 31, AT
----------------------------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
FHA/VA....................... $ 9,898 $10,751 $12,524 $15,695 $19,880 $20,680
Conventional................. 10,703 12,955 14,130 20,113 21,041 21,636
------- ------- ------- ------- ------- -------
Total serviced (UPB)....... $20,601 $23,706 $26,654 $35,808 $40,921 $42,316
======= ======= ======= ======= ======= =======
</TABLE>

- ---------------

(a) Servicing statistics are based on loans serviced by HLI and exclude loans
purchased not yet on servicing system.

SERVICING PORTFOLIO BY STATE(A)

<TABLE>
<CAPTION>
AT DECEMBER 31, 1995 AT MARCH 31, 1996
------------------------ ------------------------
STATE UPB % OF UPB UPB % OF UPB
--------------------------------------- ----------- -------- ----------- --------
(DOLLARS IN (DOLLARS IN
MILLIONS) MILLIONS)
<S> <C> <C> <C> <C>
California............................. $ 6,863 16.8% $ 7,168 16.9%
Massachusetts.......................... 3,784 9.2 3,759 8.9
Florida................................ 3,094 7.6 3,198 7.6
Maryland............................... 2,748 6.7 2,859 6.8
Texas.................................. 2,605 6.4 2,727 6.4
Virginia............................... 2,297 5.6 2,350 5.6
Georgia................................ 1,879 4.6 1,961 4.6
Connecticut............................ 1,430 3.5 1,449 3.4
Washington............................. 1,293 3.2 1,340 3.2
Other(b)............................... 14,928 36.4 15,505 36.6
------- ----- ------- -----
Total.................................. $40,921 100.0% $42,316 100.0%
======= ===== ======= =====
</TABLE>

- ---------------
(a) Servicing statistics are based on loans serviced by HLI and exclude loans
purchased not yet on servicing system.

(b) No other state represents more than 3.0% of HLI's servicing portfolio.

74
<PAGE> 76

SERVICING PORTFOLIO BY COUPON(A)

<TABLE>
<CAPTION>
AT DECEMBER 31, 1995 AT MARCH 31, 1996
--------------------------------------- ---------------------------------------
CUMULATIVE CUMULATIVE
INTEREST RATE UPB % OF UPB % OF UPB UPB % OF UPB % OF UPB
- ------------------------- ----------- -------- ---------- ----------- -------- ----------
(DOLLARS IN (DOLLARS IN
MILLIONS) MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Less than 6.0%........... $ 515 1.3% 1.3% $ 636 1.5% 1.5%
6.0% to 6.9%............. 4,636 11.3 12.6 4,633 11.0 12.5
7.0% to 7.9%............. 16,621 40.6 53.2 18,550 43.8 56.3
8.0% to 8.9%............. 11,752 28.7 81.9 11,648 27.5 83.8
9.0% to 9.9%............. 4,923 12.0 93.9 4,532 10.7 94.5
10.0% to 10.9%........... 2,024 5.0 98.9 1,893 4.5 99.0
Over 11.0%............... 450 1.1 100.0 424 1.0 100.0
------- ----- ------- -----
Total.......... $40,921 100.0% $42,316 100.0%
======= ===== ======= =====
</TABLE>

- ---------------
(a) Statistics based on loans serviced by HLI and exclude loans purchased not
yet on servicing system.

LOAN SERVICING CREDIT ISSUES

For HLI, servicing losses on investor-owned loans totaled $2.8 million,
$7.2 million, $10.0 million and $5.6 million for the years ended 1993, 1994 and
1995 and the period January 1 to March 15, 1996, respectively, primarily
representing losses on VA loans. HLI's historical delinquency and foreclosure
rate experience on VA loans has generally been consistent with that of the
industry.

Set forth below is a comparison of HLI's historical delinquency and
foreclosure experience to national industry statistics compiled by the Mortgage
Bankers Association:

SERVICING PORTFOLIO DELINQUENCIES
(PERCENT BY LOAN COUNT)

<TABLE>
<CAPTION>
AT TOTAL FORECLOSURE
DECEMBER 31, 30 DAYS 60 DAYS 90+ DAYS PAST DUE INVENTORY
- ------------ ------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
1993 HLI ........................... 2.91% 0.70% 1.00% 4.61% 1.41%
Industry Average (adjusted for
servicing portfolio mix)....... 3.77 0.88 1.10 5.75 1.27
1994 HLI............................ 3.13 0.70 0.97 4.80 1.19
Industry Average (adjusted for
servicing portfolio mix)....... 3.62 0.87 1.01 5.50 1.08
1995 HLI............................ 3.51 0.73 1.04 5.28 1.16
Industry Average (adjusted for
servicing portfolio mix)....... 3.89 0.84 0.95 5.68 1.11
</TABLE>

<TABLE>
<CAPTION>
AT
MARCH 31,
- ------------
<S> <C> <C> <C> <C> <C> <C>
1996 HLI............................ 2.65 0.56 0.59 3.80 1.00
</TABLE>

75
<PAGE> 77

HHI -- HISTORICAL BUSINESS

Prior to its acquisition by the Company, HHI operated as a full service
mortgage banking company, engaged in the origination, sale and servicing of
mortgage loans secured by residential properties. A significant portion of the
loans originated by HHI were underwritten to the standards and requirements of
secondary market investors and were sold as pools underlying mortgage-backed
securities guaranteed by Fannie Mae, FHLMC, GNMA and other institutional
investors. The balance was underwritten and retained by Barnett. In 1995 and the
three months ended March 31, 1996, HHI reported total production of $5.8 billion
and $1.6 billion, respectively and had a servicing portfolio of $33.4 billion at
December 31, 1995 and $33.0 billion at March 31, 1996. HHI was ranked as the
19th largest originator and as the 18th largest servicer of residential mortgage
loans for 1995, according to National Mortgage News. The following discussion
summarizes HHI's operations up to the date it was acquired by the Company.

Prior to 1994, HHI originated loans primarily on a retail basis through
bank branches in Florida and Georgia. In 1994, HHI grew its origination business
and servicing portfolio substantially, primarily through two acquisitions. HHI
acquired Loan America, a wholesale mortgage banking company with a $4.0 billion
servicing portfolio, in October 1994. Headquartered in Miami, Florida, Loan
America originated loans through brokers in twelve states. The acquisition of
Loan America represented HHI's first entry into the wholesale origination
business.

In February 1995, HHI acquired BancPLUS, a full service mortgage company
with a $13.9 billion servicing portfolio. Headquartered in San Antonio, Texas,
BancPLUS was primarily a retail originator with thirty-six branch offices in
seventeen states. HHI's acquisition of BancPLUS included the company's
proprietary mortgage banking software for retail origination, secondary
marketing and servicing. It also included BancPLUS' wholly-owned subsidiary
Honolulu Mortgage, a full-service mortgage banking company based in Honolulu,
Hawaii with a $1.7 billion servicing portfolio.

In connection with the HHI Acquisition, the Company acquired HHI's and its
subsidiaries' $33.0 billion servicing portfolio and servicing platform, its
proprietary mortgage servicing software, and Honolulu Mortgage, including its
production and servicing operations. Barnett retained its retail bank branch
network, the retail branch network acquired from BancPLUS, the broker network
acquired from Loan America and all of the related facilities. Barnett also
retained the facility which housed HHI's Jacksonville servicing unit. In
connection with the HHI Acquisition, BPFC was merged into BancPLUS, which in
turn was merged, together with LoanAmerica, into HLI. Also concurrently with the
HHI Acquisition, all of HHI's servicing portfolio was transferred to HLI, except
for certain portions of HHI's GNMA loans, which HHI retained. In the future, it
is expected that HHI will neither originate nor service any loans, except for
the GNMA loans retained by it on May 31, 1996. As part of the HHI Acquisition,
Barnett agreed to sell, subject to certain limitations, to HomeSide all of its
mortgage loan production on market terms pursuant to an exclusive, five-year
correspondent contract. See "Certain Relationships and Related Transactions."

PRODUCTION

Prior to the HHI Acquisition, HHI expanded its production capabilities
primarily through recent acquisitions. Originations grew from $1.9 billion in
1991 to $5.8 billion in 1995. In 1995 and the three months ended March 31, 1996,
wholesale originations represented approximately 52% and 49%, respectively, of
HHI's total production and retail represented the balance.

Subsequent to the HHI Acquisition, Barnett sells, subject to certain
limitations, to HomeSide all of its mortgage loan production on market terms
pursuant to an exclusive, five-year correspondent contract, with the exception
of the loans held by Barnett. However, Barnett sells HomeSide the servicing
rights related to these loans on a co-issue basis. Under the terms of its
correspondent agreement, loans originated through the Barnett network are
underwritten on a delegated basis. HomeSide performs the secondary marketing
functions of pricing and hedging related to the correspondent production.

76
<PAGE> 78

Like HLI, HHI built a multi-channel production network as part of its
strategy to become a national mortgage banking business through several
channels, including Barnett's retail bank branch franchise; a national wholesale
broker group obtained through the Loan America acquisition; a national retail
network obtained through the BancPLUS acquisition; traditional correspondent
business; and production from the Honolulu Mortgage subsidiary. This
multi-channel production base provided HHI with the flexibility to shift its
production focus to the most appropriate channel given specific market
conditions.

RESIDENTIAL LOAN PRODUCTION BY CHANNEL

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------ FIVE MONTHS ENDED
1991 1992 1993 1994 1995 MAY 31, 1996
------ ------ ------ ------ ------ ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Barnett banks branch retail.... $1,945 $3,507 $3,360 $2,559 $1,932 $ 537
BancPLUS retail (a)............ -- -- -- -- 606 192
Loan America broker (a)........ -- -- -- 401 1,386 378
Honolulu Mortgage (a).......... -- -- -- -- 244 83
Correspondent.................. -- -- -- 450 1,599 366
------ ------ ------ ------ ------ ------
Total production.......... $1,945 $3,507 $3,360 $3,410 $5,767 $1,556
====== ====== ====== ====== ====== ======
</TABLE>

- ---------------
(a) Since date of acquisitions by HHI.

HHI's loan production operation, historically limited to the Florida and
Georgia markets, became national in scope over the last two years. This
expansion was achieved primarily through HHI's acquisitions of Loan America and
BancPLUS. Historically, the mortgage origination leader in Florida with a market
share in excess of 11%, HHI originated loans in 45 states and the District of
Columbia. Its largest markets by state in 1995 were Florida (34% of UPB of
production), California (8%), Ohio (7%), New York (6%) and Hawaii (6%) and its
largest markets by state in the five months ended May 31, 1996 were Florida (33%
of UPB of production), California (8%), New York (7%), Hawaii (7%) and Ohio
(6%).

Secondary Marketing

Prior to the acquisitions of LoanAmerica and BancPLUS, HHI sold
approximately 20% of the loans originated by the Barnett banks into the
secondary market, predominately to Fannie Mae. The remaining 80% were retained
in Barnett's portfolio. Subsequent to its recent acquisitions, HHI began to
deliver some loans to FHLMC and issue GNMA securities. In 1995 and the first
three months of 1996, approximately 81% and 95%, respectively, of the mortgage
loans originated by HHI were eligible for inclusion in the programs of GNMA,
Fannie Mae, or FHLMC. Those loans not sold under these programs were sold to
approximately seven private investors, including several state housing finance
agency programs. The integration of HHI's production profile into HomeSide is
expected to provide greater balance in originations overall and is expected to
increase the weighting toward conventional product.

Loan Servicing

As with HLI, HHI's strategy had been to build its mortgage servicing
portfolio to benefit from economies of scale and productivity improvements. The
HHI portfolio increased from $10.0 billion at the end of 1991 to $33.4 billion
at the end of 1995, primarily as a result of the Loan America and BancPLUS
acquisitions.

77
<PAGE> 79

CHANGES IN SERVICING PORTFOLIO

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
January 1st balance........................... $ 9,243 $10,034 $11,524 $13,085 $18,411 $33,411
Total additions(a).......................... 2,039 3,744 5,237 7,469 20,312 1,526
Reductions.................................... 1,248 2,254 3,016 2,143 4,241 1,911
Servicing sales............................... 0 0 660 0 1,071 7
------- ------- ------- ------- ------- -------
Total reductions............................ 1,248 2,254 3,676 2,143 5,312 1,918
------- ------- ------- ------- ------- -------
December 31st balance or end of period
balance..................................... $10,034 $11,524 $13,085 $18,411 $33,411 $33,019
======= ======= ======= ======= ======= =======
</TABLE>

- ---------------
(a) Includes $13.9 billion of servicing from BancPLUS which includes $1.7
billion of servicing from Honolulu Mortgage in 1995 and $4.0 billion of
servicing from LoanAmerica acquisition in 1994.

SERVICING PORTFOLIO COMPOSITION

Historically, HHI was primarily a servicer of conventional loans,
consisting of Fannie Mae and FLHMC product. The acquisition of HHI's servicing
portfolio reduced the percentage of HomeSide's government loans in the combined
servicing portfolios. Based on the combined servicing portfolios of HLI and HHI,
the percentage of conventional loans and FHA/VA loans serviced was 65% and 35%,
respectively, at December 31, 1995 and 65% and 35%, respectively, at March 31,
1996.

SERVICING PORTFOLIO COMPOSITION

AT DECEMBER 31, AT
------------------------------- MARCH 31,
1993 1994 1995 1996
------- ------- ------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
FHA/VA........................................................ $ 1,032 $ 1,082 $ 6,023 $ 5,586
Conventional.................................................. 12,053 17,329 27,388 27,433
------- ------- ------- -------
Total serviced (UPB)...................................... $13,085 $18,411 $33,411 $33,019
======= ======= ======= =======
ARM........................................................... 48% 41% 28% 27%
Fixed......................................................... 52% 59% 72% 73%
Weighted average coupon....................................... 7.34% 7.44% 8.05% 8.04%
Weighted average servicing fee (% of UPB)..................... 0.259% 0.261% 0.277% 0.346%
Weighted average maturity (months)............................ 257 259 261 260
</TABLE>

78
<PAGE> 80

The following table sets forth information regarding the geographic
distribution of HHI's servicing portfolio at March 31, 1996. Because of
Barnett's market presence in Florida, that state comprised approximately 38.8%
share of HHI's total portfolio at such date:

SERVICING PORTFOLIO BY STATE

<TABLE>
<CAPTION>
% OF
STATE UPB UPB
----- --- ----
<S> <C> <C>
(DOLLARS IN MILLIONS)
Florida............................................... $12,803 38.8%
California............................................ 4,689 14.2
Texas................................................. 1,739 5.3
Massachusetts......................................... 236 0.7
Maryland.............................................. 536 1.6
Virginia.............................................. 491 1.5
Georgia............................................... 870 2.6
Hawaii................................................ 2,015 6.1
Illinois.............................................. 1,060 3.2
Washington............................................ 864 2.6
Other................................................. 7,716 23.4
------- -----
Total....................................... $33,019 100.0%
======= =====
</TABLE>

The following table sets forth the coupon stratification of HHI's servicing
portfolio at March 31, 1996:

SERVICING PORTFOLIO BY COUPON

<TABLE>
<CAPTION>
% OF CUMULATIVE
INTEREST RATE UPB UPB % OF UPB
------------- --- ---- ----------
<S> <C> <C> <C>
(DOLLARS IN MILLIONS)
Less than 6.0%........................... $ 195 0.6% 0.6%
6.0% to 6.9%............................. 4,075 12.3 12.9
7.0% to 7.9%............................. 12,236 37.1 50.0
8.0% to 8.9%............................. 10,904 33.0 83.0
9.0% to 9.9%............................. 3,390 10.3 93.3
10.0% to 10.9%........................... 1,615 4.9 98.2
Over 11.0%............................... 604 1.8 100.0
------- -----
Total.......................... $33,019 100.0%
======= =====
</TABLE>

79
<PAGE> 81

LOAN SERVICING CREDIT ISSUES

<TABLE>
The table below sets forth a comparison of HHI's historical delinquency and
foreclosure experience to national statistics compiled by the Mortgage Bankers
Association at December 31, 1995 and March 31, 1996:

SERVICING PORTFOLIO DELINQUENCIES
(PERCENT BY LOAN COUNT)

<CAPTION>
TOTAL FORECLOSURE
30 DAYS 60 DAYS 90+ DAYS PAST DUE INVENTORY
------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1995
--------------------
HHI..................................... 3.47% 0.66% 0.49% 4.62% 0.55%
Industry Average (adjusted for servicing
portfolio mix)........................ 3.17 0.65 0.63 4.45 0.80

AT MARCH 31, 1996
-----------------
HHI..................................... 2.95 0.59 0.39 3.93 0.66
</TABLE>

Under the terms of the HHI Acquisition, if HHI originated loans are
required to be repurchased out of a pool existing at May 31, 1996, Barnett is
obligated to purchase these loans from HomeSide for the following five-year
period. See "Certain Relationships and Related Transactions".

80
<PAGE> 82

THE ACQUISITIONS

THE HLI ACQUISITION

On March 15, 1996 the Company acquired from Bank of Boston all of the
outstanding stock of HLI. Certain assets and liabilities of HLI were retained by
Bank of Boston, including HLI's mortgage retail production operations in New
England.

The Company paid approximately $139.2 million in cash and issued [495,715]
shares of Common Stock, representing approximately 45% of the then outstanding
Common Stock (having a value of approximately $86.8 million), to Bank of Boston
in consideration of all the stock of HLI. Also in connection with the HLI
Acquisition, Bank of Boston paid approximately $1.0 million in cash for [5,714]
shares of HomeSide's Class C Non-Voting Common Stock ("Class C Common Stock"),
representing 100% of the outstanding Class C Common Stock. Additionally,
HomeSide agreed that if it acquired directly or indirectly all or any portion of
the capital stock or all or any substantial portion of the assets of another
person during the six-month period from the closing of the HLI Acquisition,
HomeSide would pay to Bank of Boston, on the effective date of such acquisition,
cash in an additional amount determined pursuant to a formula set forth in the
Stock Purchase Agreement between HomeSide and Bank of Boston dated December 11,
1995, as amended. Accordingly, upon the consummation of the HHI Acquisition,
HomeSide paid an additional $5.0 million in cash to Bank of Boston.

Simultaneously with the closing of the HLI Acquisition, THL purchased
[459,643] shares of Common Stock, representing approximately 41% of the then
outstanding Common Stock, for approximately $80.4 million in cash and MDP
purchased [153,214] shares of Common Stock, representing approximately 14% of
the then outstanding Common Stock, for approximately $26.8 million in cash.
HomeSide also reserved shares of its Common Stock for issuance to members of
management of HomeSide at a price of $[175.00] per share (the same price paid by
the Investors). Management of HomeSide has, since May 15, 1996, purchased a
total of [25,976] shares of Common Stock for an aggregate purchase price of
approximately $4.5 million. Simultaneously with the closing of the HLI
Acquisition, the Company also issued [5,714] shares of its Class B Non-Voting
Common Stock ("Class B Common Stock"), representing 100% of the outstanding
Class B Common Stock, to Smith Barney Inc. in consideration of services rendered
to HomeSide in connection with the HLI Acquisition pursuant to an agreement
dated March 14, 1996. Immediately following consummation of the HLI Acquisition,
Bank of Boston sold its shares of Class C Common Stock to an unaffiliated third
party pursuant to an agreement dated March 13, 1996.

Upon consummation of the HLI Acquisition, HLI terminated its former line of
credit with Bank of Boston and entered into a new credit agreement with certain
other lenders. In connection with the HHI Acquisition, HLI modified its credit
facility entered into on March 15, 1996 by entering into the Bank Credit
Agreement. See "Description of Bank Credit Agreement". Also in connection with
the HLI Acquisition, HomeSide entered into various contractual arrangements with
Bank of Boston and its affiliates regarding the provision of certain operational
services between the parties and the purchase by HomeSide from Bank of Boston of
certain mortgage production and servicing rights of Bank of Boston. See "Certain
Relationships and Related Transactions".

THE HHI ACQUISITION

On May 31, 1996, the Company acquired from Barnett all of the outstanding
stock of HHI. Certain assets and liabilities of HHI were retained by Barnett,
including those assets of HHI and its subsidiaries (other than Honolulu
Mortgage) associated with the loan origination or production activities of such
entities.

As consideration for all the stock of HHI, the Company paid Barnett
approximately $228.2 million in cash. In connection with the HHI Acquisition,
Siesta, an affiliate of Barnett, BKB, THL and MDP paid to the Company
approximately $118.0 million, $31.2 million, $8.1 million and $2.7 million,
respectively, in cash in exchange for shares of Common Stock. As a result,
immediately prior to this Offering Siesta owned approximately 33% of the
Company, and THL and MDP, collectively, and BKB each owned approximately 33% of
the Company.

81
<PAGE> 83

Upon consummation of the HHI Acquisition, HHI and its subsidiaries
terminated their former line of credit with Barnett. In connection with the HHI
Acquisition, HomeSide has entered into various contractual arrangements with
Barnett regarding the provision of certain operational services between the
parties and the purchase by HomeSide from Barnett of certain mortgage production
and servicing rights of Barnett. See "Certain Relationships and Related
Transactions".

Upon closing of the HHI Acquisition, HomeSide contributed all of the stock
of HLI to HHI, whereupon HLI became a wholly-owned subsidiary of HHI. All of
HHI's servicing portfolio was transferred to HLI, except for certain of HHI's
GNMA loans, which HHI retained. All of HHI's former subsidiaries, except
Honolulu Mortgage, were merged with and into HLI. All new business is expected
to be carried on by HLI or one of its subsidiaries. HomeSide may in the future
dissolve HHI if this would cause administrative convenience without adverse tax
or business consequences.

The following table sets forth the approximate sources and uses of cash and
equity related to (i) the HLI Acquisition and (ii) the HHI Acquisition as of the
respective dates of acquisition:

<TABLE>
<CAPTION>
HLI
ACQUISITION
HLI HHI AND
ACQUISITION ACQUISITION HHI
(MARCH 15, 1996) (MAY 31, 1996) ACQUISITION
---------------- -------------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
SOURCES:
Issuance of common stock.............................. $ 200.0 $160.0 $ 360.0
Notes offering........................................ 112.5 87.5 200.0
Borrowings under Bank Credit Agreement................ 1,479.1 408.3 1,887.4
Cash acquired......................................... 23.2 11.2 34.4
-------- ------ --------
Total Sources.................................... $1,814.8 $667.0 $2,481.8
======== ====== ========
USES:
Acquisition of HLI.................................... $ 225.9 $ -- $ 225.9
Acquisition of HHI.................................... -- 228.2 228.2
Net purchase of certain Bank of Boston assets(a)...... 292.1 -- 292.1
Net purchase of certain Barnett assets................ -- 44.7 44.7
Repayment of pre-acquisition facility................. 1,256.0 378.1 1,634.1
Payment of debt issuance and acquisition expenses..... 38.8 11.0 49.8
Contingent payment to Bank of Boston.................. -- 5.0 5.0
Pro forma cash balances............................... 2.0 -- 2.0
-------- ------ --------
Total Uses....................................... $1,814.8 $667.0 $2,481.8
======== ====== ========
</TABLE>

- ---------------
(a) Represents the net effect of purchasing loans held for sale previously
attributable to participations of an affiliate of Bank of Boston of $507.3
million and excluding net assets retained by Bank of Boston of $215.2
million.

82
<PAGE> 84

MANAGEMENT

The following table sets forth the name, age and position with the Company
and/or HLI of each person who is an executive officer or director of the Company
and HLI:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- --------------------------------------------------------
<S> <C> <C>
Joe K. Pickett.............. 51 Chairman of the Board and Chief Executive Officer (HLI
and the Company); Director (HLI and the Company)
Hugh R. Harris.............. 45 President and Chief Operating Officer (HLI and the
Company); Director (HLI and the Company)
Kevin D. Race............... 36 Vice President, Chief Financial Officer and Treasurer
(the Company); Executive Vice President and Chief
Financial Officer (HLI)
Robert J. Jacobs............ 44 Secretary and Vice President (the Company); Executive
Vice President, Secretary and General Counsel (HLI);
Director (HLI)
Betty L. Francis............ 50 Vice President (the Company); Chief Credit Officer and
Executive Vice President (HLI)
Mark. F. Johnson............ 42 Vice President (the Company); Executive Vice
President -- Secondary Marketing and Production (HLI)
William Glasgow, Jr......... 47 Vice President (the Company); Executive Vice President
(HLI)
Daniel T. Scheuble.......... 38 Vice President (the Company); Executive Vice
President -- Technology (HLI)
Thomas H. Fish.............. 64 Vice President and Assistant Secretary (the Company);
Executive Vice President and Assistant Secretary (HLI)
W. Blake Wilson............. 31 Senior Vice President, Director of Capital Markets (HLI)
Charles D. Gilmer........... 49 Senior Vice President and Treasurer (HLI)
Ann R. Mackey............... 39 Senior Vice President and Finance Director (HLI)
Thomas M. Hagerty........... 34 Director (the Company); Risk Management Committee (the
Company)
David V. Harkins............ 55 Director (the Company)*
Justin S. Huscher........... 43 Director (the Company); Risk Management Committee (the
Company)**
Peter J. Manning............ 57 Director (the Company)**
William J. Shea............. 48 Director (the Company)*
Kathleen M. McGillycuddy.... 47 Director (the Company); Risk Management Committee (the
Company)
Hinton F. Nobles, Jr. ...... 51 Director (the Company)
Douglas K. Freeman.......... 46 Director (the Company)*
Charles W. Newman........... 47 Director (the Company)**
</TABLE>

- ---------------

* Also serves as a member of the Compensation Committee.

** Also serves as a member of the Audit Committee.

The Board of Directors of the Company currently consists of eleven members,
two directors designated by the Fund, one director designated by MDP, three
directors designated by each of Siesta and BKB and two directors who are members
of management selected by at least five of the other directors in office. The
provisions of the shareholder agreements pursuant to which the current directors
were elected will terminate upon consummation of this Offering. Thereafter, the
directors will be elected each year by vote of the stockholders. Each of the
officers and directors shall serve until their successors are elected and
qualified or until their earlier resignation or removal. It is expected that
corporate officers will be appointed annually by the Board of Directors.

JOE K. PICKETT has served as Chairman of the Board and Chief Executive
Officer of HLI since April 1990 and as Chairman of the Board, Chief Executive
Officer and a Director of the Company since March 14, 1996.

83
<PAGE> 85

From October 1994 through October 1995, Mr. Pickett served concurrently as
President of the Mortgage Bankers Association of America. Mr. Pickett also
serves as a Director of Fannie Mae.

HUGH R. HARRIS has served as President and Chief Operating Officer of HLI
since January 1993 and as President, Chief Operating Officer and a Director of
the Company since March 14, 1996. From January 1988 to January 1993, Mr. Harris
served as Vice Chairman of HLI in charge of production and secondary marketing.
Mr. Harris currently serves as a Director of Republic Mortgage Insurance Company
(RMIC).

KEVIN D. RACE has served as Executive Vice President and Chief Financial
Officer of HLI and Vice President, Chief Financial Officer and Treasurer of the
Company since October 1996. From 1993 to 1996, Mr. Race served as Executive Vice
President, Chief Financial Officer and Treasurer of Fleet Mortgage Group. In
1996, Mr. Race was named President of Fleet Mortgage Group. In 1989, Mr. Race
served in the mortgage capital markets and non-conforming products areas of
Fleet Mortgage Group. From 1985 to 1989, Mr. Race served as Vice President and
National Product Manager for Mortgage Backed Securities for Citicorp. From 1982
to 1985, Mr. Race served in the secondary marketing area of North American
Mortgage Company.

ROBERT J. JACOBS has served as Executive Vice President and Secretary of
HLI since February 2, 1996. Mr. Jacobs has served as a Director of HLI since
March 14, 1996. Mr. Jacobs has also served as Secretary of the Company since
March 14, 1996 and as Vice President of the Company since April 10, 1996. From
1987 to 1996, Mr. Jacobs served as a Senior Vice President and Chief Legal
Officer of Chase Manhattan Mortgage Corporation, and served as General Counsel
for Citicorp Savings of Florida from 1984 to 1986. Mr. Jacobs currently serves
as President and Legislative Chairman of the Mortgage Bankers Association of
Florida.

BETTY L. FRANCIS has served as Chief Credit Officer and as Executive Vice
President of HLI since October 1996 and as Vice President of the Company since
April 10, 1996. Ms. Francis served from March 1994 to October 1996 as Chief
Financial Officer of HLI. Ms. Francis served from April 1993 to March 1994 as
the Senior Finance Officer of the Personal Banking Group, and from April 1990 to
April 1993 as the Comptroller of Bank of Boston and BKBC. Ms. Francis is a
Trustee of Commonwealth Energy Services, a gas and electric utility in
Massachusetts.

MARK F. JOHNSON has served as Executive Vice President of Secondary
Marketing and Production of HLI since April 1, 1992. From 1988 to 1992, Mr.
Johnson served as Senior Vice President and Director of Wholesale Lending for
HLI. Mr. Johnson also has served as Vice President of the Company since April
10, 1996.

WILLIAM GLASGOW, JR. has served as Executive Vice President of HLI since
July 1991. From October 1989 to July 1991, Mr. Glasgow served as Senior Vice
President with Citicorp Mortgage Inc. in St. Louis, Missouri. Mr. Glasgow has
also served as Vice President of the Company since April 10, 1996.

DANIEL T. SCHEUBLE has served as Executive Vice President for Technology,
Loan Processing and Consumer Direct Lending of HLI since 1993. From 1990 to
1992, Mr. Scheuble served as a Senior Technology and Operational Manager at Bank
of Boston. Mr. Scheuble has also served as Vice President of the Company since
April 10, 1996.

THOMAS H. FISH has served as Executive Vice President of HLI since 1988.
Mr. Fish has served as Assistant Secretary of HLI since March 14, 1996. Mr. Fish
served as Secretary and General Counsel of HLI from 1988 to March 14, 1996.

W. BLAKE WILSON has served as Senior Vice President and Director of Capital
Markets of HLI since June, 1996. Before joining HLI, Mr. Wilson served in
Capital Markets for Prudential Home Mortgage ("PHM") from 1992 through June,
1996. Prior to joining PHM, he worked in KPMG Peat Marwick's National Mortgage
and Structured Finance Group in Washington, D.C.

CHARLES D. GILMER has served as Senior Vice President and Treasurer of HLI
since October 1993. Mr. Gilmer previously served as the Director of Liability
Management for Citicorp from November 1989 to October 1993.

ANN R. MACKEY has served as Senior Vice President and Finance Director of
HLI since July 1993. From September 1992 to July 1993, Ms. Mackey served as a
manager in International Risk Management for Bank of Boston. Ms. Mackey
previously served as Senior Audit Manager at KPMG Peat Marwick from 1985 to
1992.

84
<PAGE> 86

THOMAS M. HAGERTY served as Treasurer of the Company from March 14, 1996 to
October 1996. Mr. Hagerty served as President of the Company from its
organization, December 11, 1995 through March 14, 1996. Mr. Hagerty has served
as a Director of HomeSide since December 11, 1995. Mr. Hagerty has been employed
by the Thomas H. Lee Company since 1988, and currently serves as a Managing
Director. Mr. Hagerty is also a Vice President and Trustee of THL Equity Trust
III, the General Partner of THL Equity Advisors III Limited Partnership, which
is the General Partner of Thomas H. Lee Equity Fund III, L.P. Mr. Hagerty also
serves as a Director of Select Beverages, Inc.

DAVID V. HARKINS has served as a Director of the Company since December 11,
1995. Mr. Harkins has been employed by the Thomas H. Lee Company since 1986 and
currently serves as a Senior Managing Director. Mr. Harkins has been Chairman
and Director of National Dentex Corporation, an operator of dental laboratories,
since 1983. Mr. Harkins also serves as Senior Vice President and Trustee of
Thomas H. Lee Advisors I, and T.H. Lee Mezzanine II, affiliates of ML-Lee
Acquisition Fund, L.P., and the ML-Lee Acquisition Funds, respectively,
President and Trustee of THL Equity Trust III, the General Partner of THL Equity
Advisors III Limited Partnership, which is the General Partner of Thomas H. Lee
Equity Fund III, L.P. and is a Director of Stanley Furniture Company, Inc.,
First Alert, Inc., and various private corporations.

JUSTIN S. HUSCHER has served as a Director of the Company since December
11, 1995. Mr. Huscher has been principally employed as a Vice President of
Madison Dearborn Partners, Inc. since January 1993. From April 1990 until
January 1993, Mr. Huscher served as Senior Investment Manager of First Chicago
Venture Capital. Mr. Huscher is a member of the operating committees of the
general partners of Huntway Partners, L.P. and Golden Oak Mining Company, L.P.,
respectively, and a member of the board of directors of Bay State Paper Holding
Company.

PETER J. MANNING has served as a Director of the Company since December 11,
1995. Mr. Manning has been employed by Bank of Boston and BKBC as Executive Vice
President, Mergers & Acquisitions since 1993. From 1990 to 1993, Mr. Manning
served as Executive Vice President, Chief Financial Officer and Treasurer of
BKBC and Chief Financial Officer of Bank of Boston.

WILLIAM J. SHEA has served as a Director of the Company since October 2,
1996. Mr. Shea has served as Vice Chairman, Chief Financial Officer and
Treasurer of BKBC since October 28, 1993. Mr. Shea served as Executive Vice
President, Chief Financial Officer and Treasurer of BKBC from December, 1992
through October 28, 1993. Prior to joining BKBC, Mr. Shea spent 19 years with
Coopers and Lybrand where he was Vice Chairman and Senior Partner.

KATHLEEN M. MCGILLYCUDDY has served as a Director of the Company since
March 14, 1996. Ms. McGillycuddy has been employed by Bank of Boston since 1992
and currently serves as Group Managing Director, Global Asset Liability
Management. Previously, Ms. McGillycuddy was employed by Fleet/Norstar Bank as
Executive Vice President, Corporate Liquidity and Funds Management from 1991 to
1992 and by Bank of New England as Executive Vice President, Corporate Liquidity
and Capital Markets Manager prior to 1991.

HINTON F. NOBLES JR. has served as a Director of Company since May 31,
1996. Mr. Nobles has been employed by Barnett since 1974 and currently serves as
Executive Vice President and a member of the Management Executive Committee. He
was elected Vice President in 1981, Senior Vice President for Special Services
in 1983 and Executive Vice President in 1985. Mr. Nobles was named to his
current position in 1989.

DOUGLAS K. FREEMAN has served as a Director of Company since May 31, 1996.
Mr. Freeman joined Barnett in 1991 and currently serves as Chief Consumer Credit
Executive and a member of Barnett's Management Operating Committee. From 1991 to
1995 Mr. Freeman served as Chief Corporate Banking Executive. Previously, Mr.
Freeman was employed by Wells Fargo Bank as Executive Vice President of Business
Banking and by Citizens & Southern Corporation as Senior Vice President of
Product and Sales Management. Mr. Freeman is past chairman of the Consumer
Bankers Association. He also chairs the Governor's Capital Partnership Board of
Florida and serves on the board of The Small Business Foundation of America,
Inc.

CHARLES W. NEWMAN has served as a Director of Company since May 31, 1996.
Mr. Newman has been employed by Barnett since 1983 and currently serves as Chief
Financial Officer and a member of the Management Executive Committee. From 1983
to 1991, Mr. Newman served as Vice President and Deputy Controller, Senior Vice
President and Controller, and Executive Vice President of Barnett. Mr. Newman
was elected to his current position in 1992.

85
<PAGE> 87

EXECUTIVE COMPENSATION

Following the HLI Acquisition, the annual salaries of HomeSide's Chief
Executive Officer and HomeSide's five other most highly compensated executive
officers whose total annual salary will exceed $100,000 are as follows: Joe K.
Pickett, $312,000; Hugh R. Harris, $300,000; Kevin D. Race, $225,000; Mark F.
Johnson, $200,000; William Glasgow, $200,000 and Charles D. Gilmer, $175,000.
Although none of HomeSide's executive officers are party to any employment or
non-competition agreements with HomeSide, and HomeSide is not, therefore,
contractually obligated to continue to pay such salaries, it is expected that
the annual salaries of the named executive officers will not be reduced during
the executive officers' term of employment with HomeSide.

Pursuant to severance agreements with HLI, certain executive officers,
including each of the named executive officers, will be entitled to severance
benefits if he is terminated, or constructively terminated through diminution in
job responsibilities or compensation following an acquisition. If such named
executive officer offers to remain in the employ of HomeSide for one year
following any such acquisition, and is either terminated during that first year
or has his job responsibilities or compensation diminished, he is entitled to a
severance benefit. The severance benefit will be a lump sum payment in cash
equal in the case of each of Messrs. Pickett and Harris to the sum of (i) twice
his annual salary in effect at the time of termination, (ii) his annual bonus
received for the preceding two years and (iii) a pro rata portion of the bonus
he would have received for the year in which termination occurs (paid at the
time the amount of such bonus would have been determined). The severance benefit
for the other named executive officers will be equal to the sum of (i) such
officer's annual salary in effect at the time of termination, (ii) his annual
bonus received for the preceding year, and (iii) a pro rata portion of the bonus
he would have received for the year in which termination occurs (paid at the
time the amount of such bonus would have been determined). The named executive
officers will also receive continued coverage under HomeSide's medical benefit
plans for one year following such termination, or two years following
termination in the case of Messrs. Pickett and Harris.

The named executive officers participate in the HomeSide 1996 Employee
Stock Option Plan under which [34,285] shares of Common Stock are reserved for
issuance. Options issued under the plan may be either non-qualified or incentive
stock options and the options will be exercisable at such prices as are set by
the HomeSide Board of Directors. Under the plan, options will vest in five equal
installments in arrears, or 20% per year. Non-qualified options to purchase
[26,298] shares have been granted (of which, options to purchase [382] shares
have since been cancelled) at an exercise price of $[175.00] per share,
including options to purchase the following number of shares granted to the
named executive officers: Joe K. Pickett, [4,762]; Hugh R. Harris, [4,762]; Mark
F. Johnson, [1,905]; William Glasgow, [1,905]; Charles D. Gilmer, [1,905]; and
Kevin D. Race, [1,905].

HomeSide has also adopted a 1996 Time Accelerated Restricted Stock Option
Plan under which [68,572] shares of Common Stock will initially be reserved for
issuance. Options granted under the plan will be non-qualified and will be
exercisable at such prices as are set by the Board of Directors. Options granted
under the plan will vest nine years from the date of grant, and may be exercised
at any time within six months thereafter. Vesting will accelerate upon
achievement of certain performance criteria. Non-qualified options to purchase
[52,596] shares have been granted (of which, options to purchase [764] shares
have since been cancelled) under this plan at an exercise price of $[175.00] per
share, including options to purchase the following number of shares granted to
the named executive officers: Joe K. Pickett, [9,524]; Hugh R. Harris, [9,524];
Mark F. Johnson, [3,810]; William Glasgow, [3,810]; Charles D. Gilmer, [3,810];
and Kevin D. Race, [3,810].

See "Certain Relationships and Related Transactions -- Management
Ownership" for information regarding shares of Common Stock sold to members of
management.

86
<PAGE> 88

HLI HISTORICAL EXECUTIVE COMPENSATION

<TABLE>
The following table sets forth all compensation awarded to, earned by or
paid to HomeSide's Chief Executive Officer and HomeSide's four most highly
compensated Executive Officers other than the Chief Executive Officer whose
total annual salary and bonus exceeded $100,000 for all services rendered in all
capacities to HLI and its subsidiaries for HLI's fiscal year ended December 31,
1995. None of HomeSide's named executive officers received any compensation from
HHI during 1995.

SUMMARY COMPENSATION TABLE

<CAPTION>
LONG-TERM
COMPENSATION PAYOUTS
AWARDS(b) ----------
----------------------- LONG-TERM
ANNUAL COMPENSATION RESTRICTED SECURITIES INCENTIVE
NAME AND PRINCIPAL -------------------- STOCK UNDERLYING PLAN ALL OTHER
HLI POSITION YEAR SALARY(a) BONUS(a) AWARDS OPTIONS PAYOUTS(c) COMPENSATION(d)
------------------ ---- --------- -------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joe K. Pickett................. 1995 $287,000 $200,000 $68,700 9,600 $215,156 $11,480
Chairman & CEO

Hugh R. Harris................. 1995 275,000 225,000 42,938 6,000 0 11,000
President

Charles D. Gilmer.............. 1995 170,769 155,000 0 0 0 0
Director, Risk Management

Mark F. Johnson................ 1995 190,577 125,000 28,625 4,000 0 7,623
Director, Wholesale/Securities
Marketing

William Glasgow, Jr............ 1995 189,230 125,000 28,625 4,000 0 7,569
Director Loan Administration
<FN>

- ---------------
(a) The salary and bonus amounts presented were earned in 1995. The payment of
certain of such amounts occurred in 1996. The amounts reflected in the table
do not include the following bonuses paid to the named executive officers in
1996 in connection with the closing of the HLI Acquisition: Mr. Pickett,
$50,000; Mr. Harris, $225,000; Mr. Gilmer, $175,000; Mr. Johnson, $200,000;
and Mr. Glasgow, $200,000.

(b) Involves Common Stock of BKBC. As of December 31, 1995, the named executive
officers held the following number of restricted shares of BKBC Common Stock
having the corresponding year-end market values:

AS OF DECEMBER 31, 1995

<CAPTION>
TOTAL NUMBER OF AGGREGATE
NAME RESTRICTED SHARES HELD MARKET VALUE
---- ---------------------- ------------
<S> <C> <C>
Joe K. Pickett............................................ 5,600 $259,000
Hugh R. Harris............................................ 4,135 191,244
Charles D. Gilmer......................................... 0 0
Mark F. Johnson........................................... 1,784 82,510
William Glasgow, Jr....................................... 1,700 78,625

</TABLE>

In connection with the HLI Acquisition, vesting on all of the restricted
stock owned by HLI employees, including the restricted stock listed above,
was accelerated and all prior forfeiture and transferability restrictions
thereon were removed.

(c) Represents the dollar value of vested shares of performance restricted stock
calculated by multiplying the closing price of BKBC Common Stock on each
vesting date by the number of shares that vested on that date.

(d) Includes matching employer contributions and credits under the Bank of
Boston thrift-incentive plan and the Bank of Boston deferred compensation
plan for the named executive officers.

87
<PAGE> 89

OPTION GRANTS IN 1995

The following table provides information on option grants with respect to
BKBC Common Stock in fiscal 1995 to the named executive officers. Pursuant to
applicable regulations of the Commission, the following table also sets forth
the hypothetical value which might have been realized with respect to such
options based on assumed rates of stock appreciation of 5% and 10% compounded
annually from date of grant to March 15, 1996, the end of the option terms:

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED
----------------------------------------------- ANNUAL RATES
NUMBER OF OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION
UNDERLYING OPTIONS FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM
GRANTED EMPLOYEES PRICE EXPIRATION ------------------
NAME (#)(A) IN 1995 ($/SH) DATE 5% 10%
- ------------------------------------- ---------- ----------- --------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Joe K. Pickett....................... 9,600 .90 $28.625 3/15/96 $15,631 $31,362
Hugh R. Harris....................... 6,000 .53 $28.625 3/15/96 $ 9,769 $19,601
Charles D. Gilmer.................... 0 0 0 -- --
Mark F. Johnson...................... 4,000 .40 $28.625 3/15/96 $ 6,513 $13,067
William Glasgow, Jr.................. 4,000 .40 $28.625 3/15/96 $ 6,513 $13,067
</TABLE>

- ---------------

(a) All options were exercised prior to March 15, 1996.

AGGREGATED OPTION EXERCISES IN 1995
AND DECEMBER 31, 1995 OPTION VALUES

The following table provides information on option exercises during 1995
with respect to BKBC Common Stock and on the values of the named executive
officers' unexercised options at December 31, 1995:

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT YEAR-END(#) OPTIONS AT YEAR-END
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ---------- --------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Joe K. Pickett.............. 0 $ 0 32,100 4,800 $687,575 $ 84,600
Hugh R. Harris.............. 0 0 10,200 3,000 202,275 52,875
Charles D. Gilmer........... 0 0 0 0 0 0
Mark F. Johnson............. 0 0 5,200 2,000 108,250 35,250
William Glasgow, Jr......... 4,000 32,750 0 2,000 0 35,250
</TABLE>

In connection with the HLI Acquisition, vesting of all stock options listed
in the preceding table was accelerated and all such options listed as being
unexercised at year end were exercised with values realized as follows: Mr.
Pickett, $753,725; Mr. Harris, $248,550; Mr. Johnson, $139,900; and Mr. Glasgow,
$26,000.

88
<PAGE> 90

RETIREMENT BENEFITS

The following table shows the years of service and the estimated annual
retirement benefits that are payable at age 65 from BKBC to each of the named
executive officers in the form of a single lifetime annuity with an assumed
future annual interest rate of 6.3% through 1996 and 5.5% thereafter on each
individual's cash balance account:

<TABLE>
<CAPTION>
ESTIMATED ANNUAL
PRIOR YEARS OF SERVICE RETIREMENT
NAME AS OF 12/31/95 BENEFIT
- --------------------------------------------------------------- ---------------------- -----------------
<S> <C> <C>
Joe K. Pickett................................................. 15 $73,883
Hugh R. Harris................................................. 12 50,676
Charles D. Gilmer.............................................. 2 2,386
Mark F. Johnson................................................ 13 48,616
William Glasgow, Jr............................................ 4 6,836
</TABLE>

The estimates shown above reflect Bank of Boston's cash balance formula as
of December 31, 1995 (under which credits are made annually to an individual's
account at a rate based on the individual's age and years of service), plus any
accrued benefits under the prior plan formula. These benefits are provided under
a combination of Bank of Boston's tax-qualified retirement plan and certain
supplemental plans.

89
<PAGE> 91

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table and the paragraphs that follow set forth information
with respect to the beneficial ownership of shares of the Company's voting
securities as of November 30, 1996 by (i) all shareholders of the Company who
own more than 5% of any class of such voting securities; (ii) each director who
is a stockholder; (iii) certain executive officers; and (iv) all directors and
executive officers as a group, as determined in accordance with Rule 13(d) under
the Exchange Act.

<TABLE>
<CAPTION>
PERCENTAGE OF VOTING
STOCK OUTSTANDING
NUMBER OF ------------------------
SHARES OF BEFORE THE AFTER THE
NAME OF BENEFICIAL OWNER COMMON STOCK OFFERING OFFERING
------------------------ ------------ ---------- ---------
<S> <C> <C> <C>
The First National Bank of Boston.......... [674,200] 32.91% %
100 Federal Street
Boston, MA

Siesta Holdings, Inc. ..................... [674,200] 32.91% %
3800 Howard Hughes Parkway
Suite 1560
Las Vegas, NV

THL........................................ [505,650] 24.68% %
75 State Street
Boston, MA

Madison Dearborn Capital Partners, L.P..... [168,550] 8.23% %
Three First National Plaza
Chicago, IL

Joe K. Pickett............................. [4,572] *
Hugh R. Harris............................. [4,286] *
Kevin D. Race.............................. [1,715] *
Charles D. Gilmer.......................... [2,000] *
William Glasgow............................ [2,572] *
Mark F. Johnson............................ [2,860] *
Thomas M. Hagerty.......................... [1,482] (a) *
David V. Harkins........................... [2,333] (b) *
All Directors and Executive Officers as a
Group (21 persons)....................... [25,238] (c) 1.23% %
</TABLE>

- ---------------
*Less than 1%.

(a) Does not include [504,168] shares owned by THL, as to which Mr. Hagerty
disclaims beneficial ownership.

(b) Does not include [503,317] shares owned by THL, as to which Mr. Harkins
disclaims beneficial ownership.

(c) Does not include the shares held by THL, MDP, Bank of Boston and Siesta,
with which certain directors are affiliated.

Each of the stockholders set forth above is party to a stockholder
agreement pursuant to which the parties have agreed to certain matters regarding
their ownership of shares of capital stock of the Company including, among other
things, election of directors, super majority voting requirements and preemptive
rights. This stockholder agreement, except for certain provisions relating to
transactions with affiliated parties, will terminate upon the consummation of
this Offering. See "Certain Relationships and Related Transactions -- Amended
and Restated Shareholder Agreement."

The Company has issued [25,976] shares of the Common Stock to members of
management of HomeSide. HomeSide has also granted options to purchase shares of
the Common Stock pursuant to employee stock option plans. See "Management --
Executive Compensation," "The Acquisitions" and "Certain Relationships and
Related Transactions."

90
<PAGE> 92

In addition to those shares of capital stock set forth in the preceding
table, [5,714] shares of Class B Common Stock (non-voting) of the Company are
beneficially owned by Smith Barney Inc. and [5,714] shares of Class C Common
Stock (non-voting) of the Company are beneficially owned by Robert Morrissey,
each constituting 100% of the respective class. Within 180 days of an initial
public offering of common stock of the Company, a holder of Class C Common Stock
may require the Company to purchase any portion of its shares of Class C Common
Stock at a price based upon the average bid prices of the Common Stock for the
preceding 20 days. In addition, upon consummation of a merger or sale of
substantially all the assets of the Company, a holder of Class C Common Stock
may require the Company to purchase any portion of its shares of Class C Common
Stock at an appraised fair market value price.

91
<PAGE> 93

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

AMENDED AND RESTATED SHAREHOLDER AGREEMENT

Each of the Principal Shareholders and certain other stockholders named
therein have entered into an Amended and Restated Shareholder Agreement with
HomeSide dated May 31, 1996 in connection with the HHI Acquisition (the
"Shareholder Agreement"). The Shareholder Agreement will terminate upon the
consummation of this Offering, except for provisions pursuant to which the
Company has agreed not to enter into transactions with certain affiliated
parties except on terms which the Company could have received in comparable
arms-length transactions.

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

Subject to certain limitations, pursuant to the Amended and Restated
Registration Rights Agreement among HomeSide and the Principal Shareholders
dated May 31, 1996, upon the request of (i) holders of shares of Common Stock
aggregating more than 50% of the number of shares of Common Stock then held by
THL, (ii) the Bank of Boston, (iii) MDP, or (iv) Siesta (provided that no
request may be made for registration of securities with an expected aggregate
offering price to the public of less than $20,000,000), HomeSide will use its
best efforts to effect the registration of the Common Stock requested by such
stockholder to be registered and the Common Stock of all other holders who have
requested registration in connection therewith; provided that (x) HomeSide is
not required to effect more than two registrations pursuant to any request made
by any of the foregoing parties, and (y) prior to an initial public offering of
equity securities of HomeSide pursuant to the Securities Act (so long as THL and
MDP hold in the aggregate a greater percentage of Common Stock then outstanding
than the Bank of Boston or Siesta), HomeSide need not effect such registration
unless the request is made by the holders of shares of Common Stock aggregating
more than 50% of the Common Stock held by THL. Under certain circumstances, if
HomeSide proposes to register shares of its Common Stock, it will, upon the
written request of any stockholder, register such requesting stockholder's
Common Stock, subject to pro rata reduction in the event all securities
requested to be included in the registration statement cannot, in the opinion of
the managing underwriter, be so included. None of the Principal Shareholders is
selling any shares in the Offering.

In addition, following any transfer of 50% or more of the capital stock
collectively owned by THL, MDP and their affiliates on the HLI Acquisition
closing, THL's rights to a demand registration prior to an initial public
offering will terminate but will inure to the benefit its transferees.

In connection with this Offering, the Company, holders of more than 5% of
the outstanding shares of Common Stock, holders of Class B and Class C Common
Stock and the directors and executive officers of the Company have agreed not to
sell any shares of such stock or any rights to acquire such stock for a period
of at least 180 days following the date of this Prospectus without the consent
of Merrill Lynch & Co. See "Underwriting," and "Shares Eligible for Future
Sale."

EXCLUSIVE MARKETING AGREEMENTS

HomeSide has entered into a Marketing Agreement dated March 15, 1996 (the
"BKBC Marketing Agreement") with BKBC pursuant to which HomeSide and BKBC may
market services to HomeSide customers who are also BKBC customers ("BKBC
Customers") and other customers of HomeSide. Under this agreement: (a) HomeSide
has the exclusive right, subject to certain limitations, to market to all
customers any mortgage loan refinancings, (b) HomeSide has the non-exclusive
right to market first mortgage loans (other than refinancings) to BKBC Customers
and the exclusive right to market such loans to other HomeSide customers, (c)
HomeSide has the exclusive right to market "other" mortgage loans to customers
who are not BKBC Customers, and BKBC has the exclusive right to market such
mortgage loans to BKBC Customers, (d) HomeSide has the non-exclusive right,
subject to certain limitations, to offer certain "Eligible Products" (mortgage
credit insurance, relocation services, title insurance, title search, appraisal
services, private mortgage insurance, escrow services, hazard insurance services
and certain other products) to BKBC Customers and the exclusive right to offer
Eligible Products to other customers, and (e) BKBC has the

92
<PAGE> 94

exclusive right to offer certain banking services to BKBC Customers and the
non-exclusive right to offer such services to other customers.

Under the BKBC Marketing Agreement, BKBC may not engage in a formal program
to solicit HomeSide's customers for refinancings.

The term of the BKBC Marketing Agreement is the later of: (a) eight years,
or (b) the third anniversary of the termination of the Operating Agreement
(which has a term of five years). See "-- Other BKBC Agreements -- Operating
Agreement" below.

HomeSide has also entered into a Marketing Agreement dated May 31, 1996
(the "Barnett Marketing Agreement") with Barnett which is substantially similar
to the BKBC Marketing Agreement, except that it governs rights with respect to
"Barnett Customers" as defined therein rather than with respect to BKBC
Customers.

TRANSITIONAL SERVICES AGREEMENTS

Bank of Boston and its affiliate banks (the "BKB Banks") and HomeSide have
entered into a series of Transitional Services Agreements dated March 15, 1996,
pursuant to which the BKB Banks agreed to make available to HomeSide, at the BKB
Banks' cost, certain corporate services, including travel and relocation,
general ledger support, audit, payroll, retirement plans, computer services,
disbursement accounting, purchasing, telecommunications/workstation support and
human resources. HomeSide also agreed to make available to the BKB Banks, at
HomeSide's cost, certain administrative services, including mortgage loan
origination support, mortgage loan quality control services, affordable housing
loan support and pledged loan support services.

Barnett and HomeSide have entered into a Transitional Services Agreement
dated May 31, 1996, pursuant to which Barnett agreed to make available to
HomeSide office space and certain corporate services, including finance
services, accounting services, purchasing services, benefits and compensation
administration, human resources and staffing services and technology services.
HomeSide reimburses Barnett for its cost of providing these items to HomeSide.

The terms of the services provided under the Transitional Services
Agreements vary. As a general matter, the services will be provided to the
receiving party until the receiving party no longer requires the services, but
in no event later than December 31, 1996. The term may be extended for 90 days
for most services, upon 60 days' prior written notice.

OTHER BKBC AGREEMENTS

Operating Agreement

The BKB Banks and HomeSide have entered into an Operating Agreement, dated
March 15, 1996 (the "BKBC Operating Agreement"), which sets forth the parties'
roles with respect to new loan originations and servicing rights. With certain
exceptions, the BKB Banks are required to sell all mortgage loan production to
HomeSide during the term of the BKBC Operating Agreement. In particular, among
other things, the BKBC Operating Agreement: (a) describes the mortgage loan
products to be purchased by HomeSide from BKB Banks, (b) ensures that the BKB
Banks receive the most favorable pricing and service released premiums offered
by HomeSide to correspondent lenders, (c) describes HomeSide's customer service
levels, (d) sets forth warehouse and pipeline management rights and obligations,
(e) describes the technology support which the parties provide to one another,
(f) describes the mortgage loan production and support functions to be provided
by the parties, (g) describes the reports and information provided periodically
by HomeSide to the BKB Banks, including, but not limited to, risk management,
internal performance and management reports, (h) sets forth the penalties to be
paid by the BKB Banks for failing to satisfy the buy price expiration dates, (i)
describes BKB Banks' mortgage loan repurchase obligations, and (j) restricts
HomeSide's ability to sell servicing rights relating to BKB Banks' portfolio
mortgage loans.

93
<PAGE> 95

The fees paid by the BKB Banks to HomeSide for loan servicing are "market"
fees consistent with the fees charged by HomeSide to other mortgagees.

The term of the BKBC Operating Agreement is five years. The termination of
the BKBC Operating Agreement will not affect HomeSide's right to service
mortgage loans serviced prior to the termination date.

Correspondent Loan Purchase and Sale Agreement

HomeSide and the BKB Banks have also entered into a Correspondent Loan
Purchase and Sale Agreement, dated March 15, 1996 (the "BKB Correspondent Loan
Purchase Agreement"), which describes the mortgage loans eligible for sale to
HomeSide by BKB, and related pricing and delivery requirements for such loans.
The BKB Banks receive the most favorable pricing offered by HomeSide to
correspondent lenders. Under certain conditions, the BKB Banks must indemnify
HomeSide or repurchase mortgage loans from HomeSide. The agreement provides
certain underwriting, appraisal, mortgage insurance and escrow requirements.

The term of the BKB Correspondent Loan Purchase Agreement is five years but
will automatically terminate upon the termination of the Operating Agreement.

PMSR Flow Agreement

HomeSide and the BKB Banks have entered into a PMSR Flow Agreement dated
March 15, 1996, which requires the BKB Banks, subject to certain exceptions, to
sell to HomeSide the servicing rights to the BKB Banks' portfolio mortgage
loans. The agreement also requires the BKB Banks to provide certain notices to
government agencies, flood service providers, insurance carriers and borrowers
upon the transfer of servicing rights to HomeSide. The agreement describes the
BKB Banks' obligation to prepare and record assignments of mortgage and pay tax,
service-related fees and flood service fees. Under certain conditions, the BKB
Banks must reimburse the servicing rights purchase price to HomeSide.

The term of the PMSR Flow Agreement is five years but will automatically
terminate upon the termination of the BKBC Operating Agreement.

Mortgage Loan Servicing Agreement

HomeSide and the BKB Banks have entered into a Mortgage Loan Servicing
Agreement dated March 15, 1996 (the "BKBC Servicing Agreement"), which requires
HomeSide, subject to certain exceptions, to service the BKB Banks' portfolio
mortgage loans. HomeSide is also required to use reasonable efforts to collect
mortgage loan payments, to remit principal and interest to the BKB Banks each
month and to perform general ledger reconciliations and other related tasks.
HomeSide is also required to perform certain default loan administration and
foreclosure activities. HomeSide provides additional services for the BKB Banks'
private banking clients.

The servicing fees paid by the BKB Banks to HomeSide are market-based fees
consistent with the fees charged by HomeSide to other mortgagees.

The term of the BKBC Servicing Agreement is five years. The BKB Banks will
not be obligated to deliver portfolio mortgage loan servicing rights to HomeSide
upon the termination of the BKBC Operating Agreement. However, the termination
of the BKBC Operating Agreement will not affect HomeSide's right to continue
servicing the BKB Banks' portfolio loans that are being serviced by HomeSide as
of such termination date.

OTHER BARNETT AGREEMENTS

Operating Agreement

Barnett and HomeSide have entered into an Operating Agreement, dated May
31, 1996 (the "Barnett Operating Agreement"), which sets forth the parties'
roles with respect to new loan originations and servicing rights. With certain
exceptions, Barnett and its affiliate banks (the "Barnett Banks") are required
to sell all

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<PAGE> 96

mortgage loan production to HomeSide during the term of the Barnett Operating
Agreement. In particular, among other things, the Barnett Operating Agreement:
(a) describes the mortgage loan products to be purchased by HomeSide from
Barnett Banks, (b) ensures that the Barnett Banks receive the most favorable
pricing and servicing released premiums offered by HomeSide to mortgage
correspondents, (c) describes HomeSide's customer service levels, (d) sets forth
warehousing and pipeline management rights and obligations, (e) describes the
technology support which the parties provide to one another, (f) describes the
mortgage loan production and support functions to be provided by the parties,
(g) describes the reports and information provided periodically by HomeSide to
the Barnett Banks, including, but not limited to, risk management, internal
performance and management reports, (h) sets forth penalties to be paid by the
Barnett Banks for failing to satisfy the buy price expiration dates, (i)
describes Barnett Banks' mortgage loan repurchase obligations, and (j) restricts
HomeSide's ability to sell servicing rights relating to the Barnett Banks'
portfolio mortgage loans. The fees paid by the Barnett Banks to HomeSide for
loan servicing are market-based fees consistent with the fees charged by
HomeSide to other mortgagees.

The term of the Barnett Operating Agreement is 5 years, subject to earlier
termination in certain specified instances. The termination of the Barnett
Operating Agreement will not affect HomeSide's rights to service mortgage loans
serviced prior to the termination date.

Correspondent Loan Purchase Agreement

HomeSide and Barnett Banks have entered into a Correspondent Loan Purchase
Agreement, dated May 16, 1996 (the "Barnett Correspondent Loan Purchase
Agreement"), which describes the mortgage loans which are eligible for sale to
HomeSide by the Barnett Banks and related pricing and delivery requirements for
such loans. The Barnett Banks receive the most favorable pricing offered by
HomeSide to other correspondents. Under certain conditions, the Barnett Banks
must repurchase mortgage loans for HomeSide. The Barnett Correspondent Loan
Purchase Agreement provides certain underwriting, appraisal, mortgage insurance
and escrow requirements.

The term of the Barnett Correspondent Loan Purchase Agreement is 5 years
but will automatically terminate upon the termination of the Operating
Agreement.

PMSR Flow Agreement

HomeSide and the Barnett Banks have entered into a PMSR Flow Agreement
dated May 31, 1996 ("PMSR Flow Agreement"), which requires the Barnett Banks,
subject to certain exceptions, to sell to HomeSide the servicing rights to the
Barnett Banks' portfolio mortgage loans. The agreement also requires the Barnett
Banks to provide certain notices to government agencies, flood service
providers, insurance carriers and borrowers upon the transfer of servicing
rights to HomeSide. The agreement describes the Barnett Banks' obligation to
prepare and record assignments of mortgage and pay tax, service-related fees and
flood service fees. Under certain conditions, the Barnett Banks must reimburse
the servicing rights purchase price to HomeSide.

The term of the PMSR Flow Agreement is 5 years but will automatically
terminate upon the termination of the Barnett Operating Agreement.

Mortgage Loan Servicing Agreement

HomeSide and the Barnett Banks have entered into a Mortgage Loan Servicing
Agreement dated as of May 31, 1996 (the "Barnett Servicing Agreement") which
requires HomeSide, subject to certain exceptions, to service the Barnett Banks'
portfolio mortgage loans. HomeSide is also required to use reasonable efforts to
collect mortgage loan payments, to remit principal and interest to the Barnett
Banks each month and to perform general ledger reconciliations and other related
tasks. HomeSide is also required to perform certain default loan administration
and foreclosure activities. HomeSide provides additional services for the
Barnett Banks' private banking clients.

The servicing fees paid by the Barnett Banks to HomeSide are market-based
fees consistent with those charged by HomeSide to other mortgagees.

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<PAGE> 97

The term of the Barnett Servicing Agreement is 5 years. The Barnett Banks
will not be obligated to deliver portfolio mortgage loan servicing rights to
HomeSide upon the termination of the Barnett Operating Agreement. However, the
termination of the Barnett Operating Agreement will not affect HomeSide's right
to continue servicing the Barnett Banks' portfolio loans that are being serviced
by HomeSide as of such termination date.

Each of the foregoing agreements described under "Certain Relationships and
Related Transactions" was entered into in connection with either the HLI
Acquisition or the HHI Acquisition. No additional consideration was paid or
received by HomeSide in connection with the execution and delivery thereof.

MANAGEMENT AGREEMENTS

HomeSide will pay the Thomas H. Lee Company, MDP, Bank of Boston and
Barnett pursuant to management agreements entered into in connection with the
HLI Acquisition and the HHI Acquisition, an annual management fee of $250,000,
$83,334, $333,333 and $333,333, respectively. Such management agreements have a
term of five years automatically extended for successive one year terms, except
either party may terminate the agreement by delivering notice thereof 90 days
prior to the end of any such term. The management agreements will terminate upon
consummation of this Offering.

MANAGEMENT OWNERSHIP

HomeSide has established option plans for employees of HomeSide pursuant to
which HomeSide has reserved [102,857] shares of Common Stock for grants to
employees of HomeSide.

In addition, certain members of management have purchased in the aggregate
[25,976] shares of Common Stock of HomeSide at a price of $[175.00] per share,
the same price paid by the Principal Shareholders. In the case of certain
purchasers, the shares have been acquired with the proceeds of loans from HLI.
Such loans are evidenced by recourse notes secured by a pledge of the shares
purchased, having a term of approximately 5 years and bearing interest at 8.25%
per annum. In the case of the executive officers of HomeSide, the executives
executed promissory notes for the purchase of their Common Stock in the
following amounts: Mr. Pickett ($400,000); Mr. Harris ($350,000); Mr. Jacobs
($50,000); Mr. Race ($150,000); Ms. Francis ($100,000); Mr. Johnson ($250,000);
Mr. Wilson ($50,000); Mr. Glasgow ($225,000); Ms. Mackey ($10,000). The
management purchasers are party to a Management Stockholders' Agreement that
contains various restrictions on transfer. Management holders also have
piggyback registration rights; however, such rights are not being exercised in
connection with the Offering. There is no right of repurchase by HomeSide upon
termination of employment. Upon death of a management shareholder, such
management shareholder's estate has a right to require HomeSide to acquire the
shares owned by such management shareholder and his or her permitted
transferees, subject to certain conditions and restrictions, for the lower of
$[175.00] per share and fair market value.

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of this Offering, the Company will have outstanding
shares of capital stock, of which shares, representing
approximately %, will be owned by the Principal Shareholders, and will have
reserved an additional shares of Common Stock for issuance pursuant
to employee stock option plans. Of the then outstanding shares, the 5,900,000
shares offered hereby will be freely tradeable by non-affiliates of the Company
without restriction or registration under the Securities Act. All of the
remaining shares of capital stock are "restricted securities" as
that term is defined in Rule 144 promulgated under the Act. None of such
securities will be eligible for sale under Rule 144 before March 14, 1998 ;
provided however that holders thereof have registration rights which entitle
them to require, under certain circumstances, that the Company register their
shares for sale to the public at an earlier date. The Company, the holders of
more than 5% of the outstanding shares of Common Stock, holders of Class B and
Class C Common Stock and the directors and executive officers of the Company
have agreed not to sell any such shares of stock or any rights to acquire such
stock for a period of at least 180 days following the date of this Prospectus
without the consent of Merill Lynch & Co. See "Underwriting." Following this
Offering, sales of substantial amounts of the Company's Common Stock in the
public market under Rule 144 or otherwise, or the potential for such sales,
could adversely affect the prevailing market prices for the Company's Common
Stock and impair the Company's ability to raise capital through the sale of
equity securities.

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<PAGE> 98

DESCRIPTION OF CAPITAL STOCK

The following description relating to the capital stock of the Company does
not purport to be complete. Reference is made to the Amended and Restated
Certificate of Incorporation and By-laws of the Company, which are filed as
exhibits to the Registration Statement of which this Prospectus forms a part,
for a detailed description of the provisions thereof which are summarized below.

Capital Stock

Upon completion of this Offering, the authorized capital stock of the
Company will consist of shares of Common Stock, shares of
Class B Common Stock, and shares of Class C Common Stock.

As of November 30, 1996, there were [2,048,576] shares of Common Stock
outstanding, all of which were held of record by 64 stockholders. As of November
30, 1996, there were [5,714] shares of Class B Common Stock outstanding, all of
which were held of record by one stockholder. As of November 30, 1996, there
were [5,714] shares of Class C Common Stock outstanding, all of which were held
of record by one stockholder.

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. All holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors of the Company
out of funds legally available therefor. Upon the liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to receive
ratably in the distribution of the assets of the Company available after the
payment of all debts and other liabilities. Holders of the Common Stock have no
preemptive, subscription, redemption or conversion rights.

The Class B Common Stock and Class C Common Stock have all the rights and
privileges of the Common Stock, except that (i) the holders of Class B Common
Stock and Class C Common Stock do not have voting rights unless otherwise
required by law; and (ii) the holder of the Class C Common Stock has the right
to require the Company to repurchase his stock upon the happening of certain
events. See "Security Ownership of Certain Beneficial Owners and Management."

The outstanding shares of Common Stock are, and the shares offered by the
Company in this Offering will be, when issued and paid for, fully paid and
nonassessable.

Transfer Agent and Registrar

The transfer agent and registrar for the Common Stock is
.

DESCRIPTION OF BANK CREDIT AGREEMENT

Each of HLI and Honolulu Mortgage is a party to the Bank Credit Agreement
that includes a warehouse credit facility (the "Warehouse Credit Facility") and
a servicing receivables credit facility ("Servicing Credit Facility")
(collectively, the "Facilities"). The Bank Credit Agreement provides for
availability of up to $2.5 billion which may be used to provide funds for HLI's
and Honolulu Mortgage's business of making, originating, acquiring and servicing
mortgage loans.

WAREHOUSE CREDIT FACILITY

The Warehouse Credit Facility provides for availability up to $2.5 billion
of borrowings, less amounts borrowed under the Servicing Credit Facility,
governed by a borrowing base which includes pools of loans that are subject to
binding sale commitments or hedge contracts and certain mortgage-backed
securities. The Warehouse Credit Facility terminates on May 31, 1999 (the
"Warehouse Termination Date").

SERVICING CREDIT FACILITY

The Servicing Credit Facility provides for availability of up to $950.0
million of borrowings governed by a borrowing base which includes (i) eligible
receivables arising from HLI's or Honolulu Mortgage's, as the case may be,
required monthly principal and interest payments for FHLMC, Fannie Mae and GNMA
mortgage-backed securities, (ii) eligible claims receivable related to
foreclosed loans serviced by BBMC, (iii) eligible receivables in respect of
payments of real estate taxes or receivables arising from insurance premiums in
respect of serviced loans, (iv) a portion of the value of the servicing
portfolio, (v) eligible receivables in respect of advances made by HLI or
Honolulu Mortgage, as the case may be, to repurchase certain loans

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<PAGE> 99

which are to be prepaid, and (vi) advances made by HLI or Honolulu Mortgage, as
the case may be, with respect to certain defaulted loans. The Servicing Credit
Facility terminates on the Warehouse Termination Date.

SECURITY

Borrowings under the Bank Credit Agreement are secured by (i) all mortgage
loans and mortgage-backed securities submitted for inclusion in the Warehouse
Credit Facility borrowing base and all take-out commitments and hedge contracts
related thereto, (ii) all servicing rights and hedge contracts and receivables
related thereto, and (iii) any other assets included in determining the
borrowing bases under the facilities. Borrowings under the facilities are
guaranteed by the Company. In addition, the Company has pledged to the Lenders
(as defined in the Bank Credit Agreement) all of the capital stock of HHI, HHI
has pledged all the capital stock of HLI and HLI has pledged all the capital
stock of its subsidiaries as security under the Bank Credit Agreement. Upon
certain events, including the achievement of unsecured long-term senior
non-credit-enhanced debt ("Rated Debt") ratings of at least A- by Standard &
Poor's Rating Services ("S&P") and at least A3 by Moody's Investor Services,
Inc. ("Moody's"), the Facilities become unsecured (except for the stock
pledges). The Facilities will again be required to be secured upon the
occurrence of certain other events.

OPTIONAL AND MANDATORY PREPAYMENTS

The entire unpaid principal balance under the Warehouse Credit Facility and
the Servicing Credit Facility will be due and payable on the Warehouse
Termination Date. HLI or Honolulu Mortgage, as the case may be, may prepay
(without premium) all or any part of the loans under the Bank Credit Agreement
or reduce the commitment (without penalty) under the Warehouse Credit Facility
at any time or from time to time in certain minimum increments following
specified notice periods. In addition, mandatory prepayments will be required
(i) in the amounts by which borrowings outstanding exceed the related borrowing
base at any time, (ii) with certain proceeds from debt issuances and (iii) with
proceeds of certain termination and similar fees under servicing agreements.
Amounts repaid under the Facilities may, absent any uncured or unwaived default
under the Bank Credit Agreement, be reborrowed during the term of the Warehouse
Credit Facility.

INTEREST RATES AND FEES

Loans under the Bank Credit Agreement bear interest at rates per annum,
based on, at HLI's option, (A) the highest of (i) Chase Manhattan Bank's prime
rate, (ii) the secondary market rate for certificates of deposit plus 1%, and
(iii) the federal funds rate in effect from time to time plus 0.5%, or (B) a
eurodollar rate, in each case based upon the rating of the Rated Debt as
announced by S&P, Fitch Investors Service, Inc. ("Fitch") and Moody's as
applicable, and in accordance with the following:

<TABLE>
<CAPTION>
APPLICABLE MARGIN APPLICABLE MARGIN APPLICABLE MARGIN
FOR WAREHOUSE FOR SERVICING FOR SERVICING
RATING LEVEL LOANS ADVANCE LOANS PORTFOLIO LOANS
------------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
A- or higher....................... 0.350% 0.350% 0.600%
BBB+............................... 0.400% 0.400% 0.675%
BBB or BBB-........................ 0.450% 0.450% 0.750%
BB+ or BB.......................... 0.625% 0.625% 1.000%
BB- or lower....................... 0.625% 0.625% 1.500%
</TABLE>

For purposes of determining the applicable interest rate under the Bank
Credit Agreement, the applicable rating is deemed to be two increments higher
than the rating announced by both S&P and Fitch (or if different ratings are
announced, the lower of the two), such that if the Rated Debt was BB+, the rate
for purposes of the Bank Credit Agreement would be BBB. In the event that
Moody's issues a comparable debt rating and such rating (after adjusting to
increase by two increments) differs from the rating level in effect pursuant to
the above grid by (i) two increments or more, the applicable pricing level will
be deemed to be one pricing level below (i.e. having a larger margin) the higher
of such rating levels or (ii) one increment, the applicable pricing level shall
be deemed to be the higher (i.e. having a smaller margin) of such rating levels.
The margins set forth in the middle column above apply only to portions of the
Servicing Credit Facility borrowing base constituting advance receivables, while
the margins in last column above apply to all other portions of the Servicing
Credit Facility borrowing base.

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<PAGE> 100

The annual commitment fee on the Facilities ranges from 0.125% to 0.375% of
the commitments thereunder depending upon the rating of the Rated Debt.

RESTRICTIVE COVENANTS

The Bank Credit Agreement contains certain covenants that impose
limitations and requirements on HLI and the Company and their subsidiaries,
including limitations with respect to payments, dividends or distributions from
HLI to the Company.

Other covenants in the Bank Credit Agreement impose limitations on HLI and
its subsidiaries with respect to, among other things: (i) the incurrence of
certain additional indebtedness; (ii) the incurrence of liens; (iii) the making
of certain investments other than certain permitted investments; (iv)
fundamental changes in HLI's business activities or the sale or disposition of a
substantial part of HLI's business or the acquisition of substantially all of
the assets or stock of any other person other than the dissolution of inactive
subsidiaries of HLI or intercompany mergers, sales or consolidation; (v) capital
expenditures in excess of $10.0 million in any fiscal year; (vi) transactions
with affiliates; (vii) entering into new lines of business; (viii) making
optional prepayments or redeeming or purchasing any indebtedness evidenced by
the Notes or modifying any such indebtedness; or (ix) amending the material
terms of HomeSide's Stockholder Agreement. These covenants are subject to
various other customary exceptions under the Bank Credit Agreement.

HLI is also required to maintain compliance with certain financial
covenants, including:

(a) Maintaining a Minimum Consolidated Tangible Net Worth (as defined
in the Bank Credit Agreement) equal to the sum of (i) an amount equal to
80% of Adjusted Consolidated Tangible Net Worth (as defined in the Credit
Agreement) as of March 15, 1996 plus (ii) an amount equal to 50% of the
excess of (A) the aggregate amount of net proceeds received during the
period from March 15, 1996 through such date by the Company from the
issuance of capital stock other than to Principal Shareholders over (B) the
amount thereof applied to prepay or redeem the Notes plus (iii) an amount
equal to 80% of the sum of Consolidated Net Income (as defined in the
Credit Agreement) for each fiscal quarter for which Consolidated Net Income
is positive during the period from the March 15, 1996 through the last day
of the most recently ended fiscal quarter of HLI less (iv) the amount of
Restricted Payments (as defined in the Bank Credit Agreement) actually made
by HLI and permitted under the Bank Credit Agreement during the period
March 15, 1996 through such date (to the extent such Restricted Payments
were not deducted in determining such Adjusted Consolidated Tangible Net
Worth).

(b) Not permitting the ratio of Consolidated Total Liabilities (as
defined in the Bank Credit Agreement) to Adjusted Consolidated Tangible Net
Worth to exceed (i) 7.5:1.0 at any time during the period from March 15,
1996 through and including March 31, 1997 or (ii) 7.0:1.0 at any time
thereafter.

(c) Not permitting the ratio of Consolidated Servicing-Related Debt
(as defined in the Bank Credit Agreement) to Adjusted Consolidated Tangible
Net worth to exceed (i) 2.0:1.0 at any time during the period from March
15, 1996 through and including September 30, 1997, (ii) 1.75:1.0 at any
time during the period from and including October 1, 1997 through and
including September 30, 1998 or (iii) 1.5:1.0 thereafter.

(d) Not permitting (i) for any period beginning on March 15, 1996 and
ending on the earlier to occur of the last day of the fiscal year of HLI
first ending after March 15, 1996 or the last day of the fiscal quarter of
HLI ending on March 31, 1997, or (ii) for any period of four consecutive
fiscal quarters of HLI ending thereafter, the ratio of (A) the sum of (1)
Consolidated Cash Flow (as defined in the Bank Credit Agreement) for such
period plus (2) Consolidated Interest and Dividend Expense (as defined in
the Bank Credit Agreement) for such period to (B) Consolidated Interest and
Dividend Expense for such period to be less than 2.75:1.0.

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<PAGE> 101

EVENTS OF DEFAULT

The Bank Credit Agreement contains certain standard payment, covenant, and
bankruptcy-related events of default, as well as other events of default,
including, among other things, (i) the failure of HLI to pay any amount of
principal under the Bank Credit Agreement when due or any interest or fees under
the Bank Credit Agreement within five days after such amounts are due; (ii) the
failure of any party to a loan document (each, a "Loan Party") to comply with
any covenant, agreement, condition, provision, or term of any Loan Document (as
defined in the Bank Credit Agreement), provided that, in certain cases, such
Loan Party has a 30-day grace period in which to remedy such failure; (iii) the
default by the Company, HLI or any of its subsidiaries in payment of
indebtedness aggregating $15.0 million or more, or the default by the Company,
HLI or any of its subsidiaries in the observance of any agreement or condition
relating to indebtedness aggregating $15.0 million or more which permits or
causes the holder thereof to cause such indebtedness to become due prior to its
stated maturity; (iv) entry of unpaid judgments against HLI or any subsidiary of
HLI of $10.0 million or more other than judgments that have been stayed pending
appeal within 60 days of entry; (v) the occurrence of certain events under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that
would have a material adverse effect on HLI and its subsidiaries; (vi) except
upon a Positive Security Event, the failure of any Security Document (as defined
in the Bank Credit Agreement) to remain in full force and effect or any lien
granted pursuant thereto to remain legal, valid and enforceable; (vii) the
failure of any Guarantee (as defined in the Bank Credit Agreement) to remain in
full force and effect, (viii) certain bankruptcy and insolvency events; (ix) any
execution or attachment whereby a substantial part of HLI's property is taken or
attempted to be taken and that is not vacated or stayed within 60 days; and (x)
certain changes of control relating to the Company and HLI, including where (a)
the Company ceases to own 100% of the capital stock of HLI and/or the ownership
of the Company by the Principal Shareholders on March 15, 1996 falls below
certain percentages or (b) a certain number of directors of the Company as of
March 15, 1996 fail to continue as directors of the Company.

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<PAGE> 102

DESCRIPTION OF THE NOTES

The Company has outstanding $200,000,000 in aggregate principal amount of
11 1/4% Series B Senior Secured Second Priority Notes due 2003 issued pursuant
to the terms of an indenture dated as of May 14, 1996 (the "Indenture") between
the Company, as issuer, and The Bank of New York, as trustee (the "Trustee").
The following summary of the material provisions of the Indenture does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the provisions of the Indenture. The Notes will mature on May 15,
2003 and bear interest at the rate of 11 1/4% per annum. The Notes are secured
by a second priority pledge, subject to a first priority pledge in favor of the
lenders under the Bank Credit Agreement, of all of the capital stock of each of
the Company's current and future subsidiaries held directly by the Company,
including all of the capital stock of HLI held by HHI. The Notes are not secured
by any lien on, or other security interest in, any other properties or assets of
the Company or its subsidiaries. The Notes are senior obligations of the Company
and the Indebtedness evidenced by the Notes will rank pari passu in right of
payment with all other existing and future senior indebtedness of the Company.

The Notes are redeemable at the option of the Company, as a whole or from
time to time in part, at any time on or after May 15, 2001, on not less than 30
nor more than 60 days' prior notice at the redemption prices (expressed as
percentages of principal amount) set forth below, together with accrued
interest, if any, to the redemption date, if redeemed during the 12-month period
beginning on May 15 of the years indicated below (subject to the right of
holders of record on relevant record dates to receive interest due on an
interest payment date):

<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
-------------------------------------------------- ----------
<S> <C>
2001.............................................. 105.625%
2002.............................................. 102.813%
</TABLE>

In addition, at any time or from time to time prior to May 15, 1999, the
Company may redeem up to 35% of the aggregate principal amount of the Notes
within 60 days of one or more equity offerings with the net proceeds of such
offering at a redemption price equal to 111.25% of the principal amount thereof,
together with accrued interest, if any, to the date of redemption (subject to
the right of holders of record on relevant record dates to receive interest due
on an interest payment date); provided that immediately after giving effect to
any such redemption at least $75 million of the original aggregate principal
amount of the Notes remains outstanding.

The Indenture contains covenants which, among other things, limit the right
of the Company or its subsidiaries to incur indebtedness, permit liens to exist
on its properties, pay dividends on or make distributions to holders of the
Company's capital stock, purchase or redeem any shares of the Company's capital
stock, sell or issue additional shares of the capital stock of its subsidiaries,
consolidate or merge with any other persons or sell all or substantially all of
its assets.

The Indenture provides that if a change of control (which term is
specifically defined in the Indenture) shall occur at any time, then each holder
of Notes shall have the right to require that the Company purchase such holder's
Notes, in whole or in part in integral multiples of $1,000, at a purchase price
in cash in an amount equal to 101% of the principal amount thereof, plus accrued
interest, if any, to the date of purchase. Among the events which constitute a
change of control under the Indenture is the acquisition by a person or group of
more than 40% of the outstanding voting stock of the Company. The Indenture
contains certain standard payment, covenant and bankruptcy-related events of
default, including, among other things, (i) the failure of the Company to pay
any interest payment within thirty days after such amounts are due; (ii) the
failure of any person party to the Indenture or any guaranty or pledge executed
in connection therewith to perform any covenant, warranty or other agreement
contained in the Indenture, such guaranty or pledge; (iii) the failure of the
Company to pay any of its indebtedness aggregating $15 million or more when such
amounts become due (after giving effect to applicable grace periods, cures and
waivers); (iv) any pledge or guarantee given to secure the Notes ceases to be in
full force and effect; or (v) the occurrence of certain events of bankruptcy,
insolvency or reorganization with respect to the Company or any of its
subsidiaries deemed significant.

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<PAGE> 103

UNDERWRITING

Subject to terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Company has agreed to sell to each of the
underwriters named below (the "Underwriters"), and each of the Underwriters, for
whom Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch & Co.")
and Smith Barney Inc. are acting as representatives (the "Representatives"), has
severally agreed to purchase from the Company the number of shares of Common
Stock set forth opposite its name below.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................................
Smith Barney Inc...................................................
---------
Total.................................................
=========
</TABLE>

In the Purchase Agreement, the Underwriters named therein have agreed,
subject to terms and conditions set forth therein, to purchase all of the shares
of Common Stock being sold pursuant to the Purchase Agreement if any such shares
of Common Stock are purchased. Under certain circumstances, the commitments of
non-defaulting Underwriters may be increased as set forth in the Purchase
Agreement.

The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock offered hereby to the public initially at
the public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per
share of Common Stock, and that the Underwriters may allow, and such dealers may
reallow, a discount not in excess of $ per share of Common Stock on
sales to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.

The Company has granted to the Underwriters an option exercisable for 30
days after the date hereof to purchase up to an aggregate of 885,000 additional
shares of Common Stock to cover over-allotments, if any, at the initial public
offering price, less the underwriting discount. To the extent that the
Underwriters exercise such option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase approximately the same
percentage thereof which the number of shares of Common Stock to be purchased by
it shown in the foregoing table is of the number of shares of Common stock
initially purchased by the Underwriters.

The Company, each of the Company's directors and executive officers and
owners of more than 5% of the Common Stock (or Class B Common Stock or Class C
Common Stock) have agreed not to offer, sell, agree to offer or sell, grant any
option to purchase or otherwise dispose of, any shares of Common Stock (or any
shares of Class B Common Stock or Class C Common Stock) or any securities
convertible into or exercisable or exchangeable for shares of Common Stock (or
shares of Class B Common Stock or Class C Common Stock), directly or indirectly,
for a period of 180 days after the date of this Prospectus without the prior
written consent of Merrill Lynch & Co. acting on behalf of the Underwriters,
subject to certain limited exceptions included in the Purchase Agreement.

The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price of the Common Stock will be determined
by negotiations between the Company and the Representatives. Among the factors
considered in such negotiations, in addition to prevailing market conditions,
are current market valuations of publicly-traded companies that the Company and
the Underwriters believe to be reasonably comparable to the Company, an
assessment of the Company's results of operations in recent periods, estimates
of the business potential and earnings prospects of the Company, the current
state of the Company's development and the current state of the Company's
industry and the economy as a whole. The initial public offering price set forth
on the cover page of this Prospectus should not, however, be considered an
indication of the actual value of the Common Stock. Such price will be subject
to change as a result of market conditions and other factors. There can be no
assurance that an active trading market will develop for the

102
<PAGE> 104

Common Stock or that the Common Stock will trade in the public market subsequent
to the Offering at or above the initial public offering price.

The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof.

Smith Barney Inc. currently owns beneficially [5,714] shares of Class B
Common Stock (non-voting) of the Company, representing approximately 0.277% of
the total outstanding capital stock of the Company prior to the Offering and
% of the total outstanding capital stock of the Company after the
Offering. None of such shares are being sold in the Offering.

Certain of the Underwriters have provided various investment banking and
advisory services to the Company and certain of its subsidiaries and affiliates.

LEGAL MATTERS

Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company by Hutchins, Wheeler & Dittmar, A Professional
Corporation, Boston, Massachusetts and for the Underwriters by Brown & Wood LLP,
New York, New York.

EXPERTS

The balance sheet of HomeSide, Inc. as of March 14, 1996, included in this
Prospectus and elsewhere in the registration statement, has been audited by
Arthur Andersen LLP, independent certified public accountants, as indicated in
their report with respect thereto, and is included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.

The consolidated balance sheets of BancBoston Mortgage Corporation, as of
December 31, 1995 and 1994 and the related consolidated statements of operations
and retained earnings and cash flows for each of the three years in the period
ended December 31, 1995, included in this Prospectus and elsewhere in the
registration statement, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as indicated in their report with respect thereto, and
is included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.

The consolidated balance sheets of Barnett Mortgage Company and
subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of operations, stockholder's equity, and cash flows for each of the
three years in the period ended December 31, 1995, included in this registration
statement, have been audited by Arthur Andersen LLP, independent certified
public accountants, as indicated in their report with respect thereto, and is
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.

The consolidated statements of financial condition of BancPLUS Financial
Corporation and subsidiary as of December 31, 1994 and 1993 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended, included in this Prospectus and elsewhere in the
registration statement, have been audited by KPMG Peat Marwick LLP, independent
auditors, as set forth in their report included herein. In that report, that
firm states that with respect to a certain subsidiary, Honolulu Mortgage
Company, Inc., its opinion is based on the report of other independent auditors,
namely Ernst & Young LLP. The financial statements referred to above have been
included herein in reliance upon the authority of those firms as experts in
accounting and auditing in giving said reports.

103
<PAGE> 105

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
HOMESIDE, INC.
Unaudited Consolidated Balance Sheet at November 30, 1996.................................. F-2
Unaudited Consolidated Statement of Income and Retained Earnings for the Three Months Ended
November 30, 1996 and the Period March 16, 1996 through November 30, 1996................ F-3
Unaudited Consolidated Statement of Cash Flows for the Period March 16, 1996 through
November 30, 1996........................................................................ F-4
Notes to Unaudited Consolidated Financial Statements....................................... F-5
HOMESIDE, INC.
Unaudited Pro Forma Consolidated Financial Information..................................... F-16
Unaudited Pro Forma Consolidated Income Statement for the Period March 16, 1996 to November
30, 1996................................................................................. F-17
Unaudited Pro Forma Consolidated Income Statement for the Year Ended December 31, 1995..... F-19
HOMESIDE, INC.
Report of Independent Certified Public Accountants......................................... F-23
Balance Sheet at March 14, 1996............................................................ F-24
Notes to Balance Sheet..................................................................... F-25
BANCBOSTON MORTGAGE CORPORATION (ACQUIRED BY HOMESIDE, INC. ON MARCH 15, 1996 AND NOW KNOWN
AS HOMESIDE LENDING, INC.)
Consolidated Balance Sheets at December 31, 1995 and March 15, 1996........................ F-27
Consolidated Statements of Income and Retained Earnings (Deficit) for the Quarter Ended
March 31, 1995 and the Period January 1, 1996 through March 15, 1996..................... F-28
Consolidated Statements of Cash Flows for the Quarter Ended March 31, 1995 and the Period
January 1, 1996 through March 15, 1996................................................... F-29
Notes to Consolidated Financial Statements................................................. F-30
BARNETT MORTGAGE COMPANY (ACQUIRED BY HOMESIDE, INC. ON MAY 31, 1996 AND NOW KNOWN AS
HOMESIDE HOLDINGS, INC.)
Consolidated Statements of Operations for the Period April 1, 1996 to May 30, 1996, the
Period January 1, 1996 to May 30, 1996 and the Three and Six Months Ended June 30,
1995..................................................................................... F-32
Consolidated Statements of Cash Flows for the Period January 1, 1996 to May 30, 1996 and
the Six Months Ended June 30, 1995....................................................... F-33
Notes to Consolidated Financial Statements................................................. F-34
BANCBOSTON MORTGAGE CORPORATION (ACQUIRED BY HOMESIDE, INC. ON MARCH 15, 1996 AND NOW KNOWN
AS HOMESIDE LENDING, INC.)
Report of Independent Accountants.......................................................... F-35
Consolidated Balance Sheets at December 31, 1994 and 1995.................................. F-36
Consolidated Statements of Operations and Retained Earnings for the Years Ended December
31, 1993, 1994 and 1995.................................................................. F-37
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995..................................................................................... F-38
Notes to Consolidated Financial Statements................................................. F-40
BARNETT MORTGAGE COMPANY (ACQUIRED BY HOMESIDE, INC. ON MAY 31, 1996 AND NOW KNOWN AS
HOMESIDE HOLDINGS, INC.)
Report of Independent Certified Public Accountants......................................... F-55
Consolidated Balance Sheets at December 31, 1994 and 1995.................................. F-56
Consolidated Statements of Operations for the Years Ended December 31, 1993, 1994 and
1995..................................................................................... F-57
Consolidated Statements of Stockholder's Equity for the Years Ended December 31, 1993, 1994
and 1995................................................................................. F-58
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995..................................................................................... F-59
Notes to Consolidated Financial Statements................................................. F-60
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY (ACQUIRED BY BARNETT MORTGAGE COMPANY ON
FEBRUARY 28, 1995)
Independent Auditors' Report............................................................... F-72
Consolidated Statements of Financial Condition at December 31, 1993 and 1994............... F-73
Consolidated Statements of Operations for the Years Ended December 31, 1993 and 1994....... F-74
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1993 and
1994..................................................................................... F-75
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993 and 1994....... F-76
Notes to Consolidated Financial Statements................................................. F-77
</TABLE>

F-1
<PAGE> 106

HOMESIDE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
NOVEMBER 30, 1996
--------------------
<S> <C>
ASSETS
Cash and cash equivalents............................................. $ 1,183
Mortgage loans held for sale, net..................................... 1,101,229
Mortgage servicing rights receivable, net............................. 1,339,819
Accounts receivable................................................... 173,145
Premises and equipment, net........................................... 29,221
Other assets.......................................................... 214,114
----------
Total Assets.......................................................... $2,858,711
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable to banks................................................ $2,010,813
Accounts payable and accrued liabilities.............................. 141,555
Deferred income taxes payable......................................... 97,139
Long term debt........................................................ 221,278
----------
Total Liabilities..................................................... 2,470,785
----------
Common stock:
Common stock, $.01 par value, [2,500,000] shares authorized and
[2,048,576] shares issued and outstanding....................... 20
Class B non-voting common stock, $.01 par value, [5,714] shares
authorized, and [5,714] shares issued and outstanding........... --
Class C non-voting common stock, $1.00 par value, [5,714] shares
authorized, and [5,714] shares issued and outstanding........... 6
Additional paid in capital............................................ 360,474
Retained earnings..................................................... 29,276
----------
389,776
Less: Notes received in payment for capital stock..................... (1,850)
----------
Total Stockholders' Equity............................................ 387,926
----------
Total Liabilities and Stockholders' Equity............................ $2,858,711
==========
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-2
<PAGE> 107

HOMESIDE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE THREE FOR THE PERIOD FROM
MONTHS ENDED MARCH 16, 1996 TO
NOVEMBER 30, 1996 NOVEMBER 30, 1996
----------------- -------------------
<S> <C> <C>
REVENUES:
Mortgage servicing fees.............................. $ 91,636 $ 216,470
Amortization of mortgage servicing rights............ (48,831) (105,737)
-------- ---------
Net servicing revenue........................... 42,805 110,733
Interest income...................................... 25,241 60,230
Interest expense..................................... (22,321) (61,203)
-------- ---------
Net interest expense............................ 2,920 (973)
Net mortgage origination revenue..................... 16,521 43,604
Other income......................................... 79 541
-------- ---------
Total revenue........................................ 62,325 153,905

EXPENSES:
Salaries and employee benefits....................... 20,650 53,307
Occupancy and equipment.............................. 3,337 8,267
Servicing losses on investor-owned loans............. 4,957 12,953
Other expenses....................................... 11,711 29,579
-------- ---------
Total expenses.................................. 40,655 104,106
Income before income taxes........................... 21,670 49,799
Income tax expense................................... 9,015 20,523
-------- ---------
Net income........................................... 12,655 29,276
Retained earnings at beginning of period............. 16,621 --
-------- ---------
Retained earnings at end of period................... $ 29,276 $ 29,276
======== =========
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-3
<PAGE> 108

HOMESIDE, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MARCH 16, 1996
TO
NOVEMBER 30, 1996
--------------------
<S> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net income............................................................. $ 29,276
Amortization........................................................... 108,818
Depreciation........................................................... 3,178
Servicing losses on investor-owned loans............................... 12,953
Deferred income tax expense............................................ 20,523
Capitalized excess servicing rights.................................... (16,373)
Mortgage loans originated and purchased for sale....................... (9,081,815)
Proceeds and principal repayments of mortgage loans held for sale...... 8,853,510
Change in accounts receivable.......................................... (78,235)
Change in other assets and accounts payable and accrued liabilities.... (33,624)
-----------
Net cash used in operating activities.................................. (181,789)
-----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of premises and equipment..................................... (3,354)
Acquisition of mortgage servicing rights............................... (344,288)
Net purchases of risk management contracts............................. (88,438)
Acquisition of BBMC, net of cash acquired.............................. (133,392)
Acquisition of BMC, net of cash acquired............................... (106,244)
-----------
Net cash used in investing activities.................................. (675,716)
-----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Net borrowings from banks.............................................. 526,480
Issuance of bridge financing........................................... 90,000
Repayment of bridge financing.......................................... (90,000)
Issuance of notes...................................................... 200,000
Payment of debt issue costs............................................ (20,290)
Repayment of long term debt............................................ (417)
Proceeds from issuance of common stock................................. 152,915
-----------
Net cash provided by financing activities.............................. 858,688
-----------
Net increase in cash................................................... 1,183
Cash and cash equivalents at beginning of period....................... --
-----------
Cash and cash equivalents at end of period............................. $ 1,183
===========
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-4
<PAGE> 109

HOMESIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of HomeSide,
Inc. ("HomeSide" or the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
in accordance with Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management of the Company,
all material adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
period from March 16, 1996 (date operations began) to November 30, 1996 and the
three months ended November 30, 1996 are not necessarily indicative of the
results that may be expected for the fiscal year ended February 28, 1997.

The accompanying interim financial statements of HomeSide have been
prepared for the period March 16, 1996 to November 30, 1996 to coincide with the
commencement of operations of HomeSide as discussed in "ORGANIZATION" below and
the end of the Company's third fiscal quarter based on a February 28 year end.
The financial statements for the third quarter of fiscal 1997 include the period
September 1, 1996 to November 30, 1996. The financial statements presented
include the results of operations of the Company's wholly-owned operating
subsidiary, HomeSide Lending, Inc., and beginning June 1, 1996, the results of
operations of the servicing activities of Barnett Mortgage Company ("BMC")
acquired on May 31, 1996.

References to the first quarter of fiscal 1997 relate to the period March
16, 1996 to May 31, 1996. References to the second quarter of fiscal 1997 relate
to the three months ended August 31, 1996. References to the third quarter of
fiscal 1997 relate to the three months ended November 30, 1996. Year to date
operating results include the period March 16, 1996 to November 30, 1996.

2. ORGANIZATION

On December 11, 1995, HomeSide was formed by an investor group, consisting
of Thomas H. Lee Company and Madison Dearborn Partners (collectively, the
"Investors"), and signed a definitive stock purchase agreement with The First
National Bank of Boston ("Bank of Boston") for the purpose of acquiring certain
assets and liabilities of the mortgage banking business ("BBMC") owned by Bank
of Boston. The transaction closed on March 15, 1996 and HomeSide began
operations on March 16, 1996 through its operating subsidiary, HomeSide Lending,
Inc.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Risk Management of Mortgage Loan Originations

HomeSide has a risk management program in place to offset the risk that a
change in interest rates will result in a decrease in the value of HomeSide's
mortgage loan inventory and commitments to originate loans. To manage its
interest rate risk exposure, HomeSide enters into forward sales agreements and
purchases option contracts. These agreements and contracts are not considered
trading instruments and are primarily

F-5
<PAGE> 110

HOMESIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

entered into for purposes of managing interest rate risk relative to commitments
to originate mortgage loans against market value declines resulting from
fluctuations in interest rates.

The cost of option contracts to manage HomeSide's fixed and variable rate
loan origination commitments are capitalized and amortized as an adjustment of
gain or loss on the sale of the loan over the life of the underlying option
contract. Unamortized premiums are included in other assets in the accompanying
consolidated balance sheet. HomeSide is not exposed to loss beyond its initial
outlay to acquire the option contract.

Risk Management of Mortgage Servicing Rights

Mortgage servicing rights are a significant asset of HomeSide and possess
economic value as they permit the owner to receive a portion of the interest
coupon from the mortgagor for performing specified servicing activities. Because
the underlying mortgage loan note permits the borrower to prepay the loan, the
value of the related servicing rights tends to diminish in periods of declining
interest rates and increase in value in periods of rising rates. This tendency
of the mortgage servicing rights portfolio to change in value with changes in
interest rates subjects HomeSide to substantial interest rate risk, which
directly affects the volatility of reported earnings as capitalized mortgage
servicing rights are carried at the lower of amortized cost or fair value. It is
the policy of HomeSide to mitigate this risk through its risk management
program.

Qualifying risk management instruments with a demonstrated ability to
mitigate this risk are used in this program. The risk management instruments
used by HomeSide have characteristics such that they tend to increase in value
as interest rates decline. Conversely, these risk management instruments tend to
decline in value as interest rates rise. Accordingly, changes in value of these
contracts will tend to move inversely with changes in value of HomeSide's
mortgage servicing rights.

To date, option contracts on U.S. Treasury bond futures have been purchased
to manage interest rate risk on HomeSide's mortgage servicing rights. These
option contracts are designated as hedges on the purchase date and such
designation must be at a level at least as specific as the level at which
mortgage servicing rights are evaluated for impairment. The option contracts are
marked-to-market with changes in market value deferred and recognized as an
adjustment to the cost of the related mortgage servicing right asset being
hedged. As a result, any changes in market value that are deferred are amortized
and evaluated for impairment in the same manner as the related mortgage
servicing rights. Correlation between changes in value of the option and changes
in the value of HomeSide's mortgage servicing rights is assessed on a quarterly
basis to ensure that high correlation is maintained over the term of the hedging
program.

At November 30, 1996, the carrying value of the risk management contracts
included in other assets was $162,351,000, the market value of the contracts.
Further, net gains on risk management contracts of $60,181,000 were deferred as
a component of mortgage servicing rights as of November 30, 1996. During the
third fiscal quarter, $133,348,000 of gains were deferred as a component of
mortgage servicing rights, which offset the deferred losses recorded as of the
end of the second fiscal quarter. Of the gains deferred during the third fiscal
quarter, $107,256,000 were realized. At any point in time, HomeSide's maximum
loss exposure on its option contracts is limited to the amount paid for such
contracts.

Mortgage loans

Mortgage loans held for sale are carried at the lower of aggregate cost or
fair value. Fair value is based on the contract prices at which the mortgage
loans will be sold or, if the loans are not committed for sale, the current
market price.

Loans are placed on non-accrual status when any portion of the principal or
interest is ninety days past due or earlier when concern exists as to the
ultimate collectibility of principal or interest. When loans are placed on
nonaccrual status, the related interest receivable is reversed against interest
income of the current

F-6
<PAGE> 111

HOMESIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

period. Interest payments received on nonaccrual loans are applied as a
reduction of the principal balance when concern exists as to the ultimate
collection of principal; otherwise, such payments are recognized as interest
income. Loans are removed from nonaccrual status when principal and interest
become current and they are estimated to be fully collectible.

Mortgage servicing rights

Mortgage servicing rights are initially recorded at fair value as of their
date of acquisition or origination. Purchased mortgage servicing rights ("PMSR")
represent the value of rights to service mortgage loans originated by others.
Originated mortgage servicing rights ("OMSR") represent the value of mortgage
servicing rights associated with mortgage loans originated by HomeSide. OMSR are
capitalized in accordance with Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage Servicing Rights" ("SFAS 122"). Mortgage servicing
rights are amortized as a reduction of servicing fee income over the estimated
servicing period in proportion to the estimated future net cash flows from the
loans serviced.

SFAS 122 also requires that capitalized mortgage servicing rights be
evaluated for impairment based on the fair value of these rights. For purposes
of determining impairment, HomeSide's mortgage servicing rights are stratified
based on interest rate and type of loan (conventional/government). Impairment,
if any, is recognized through a valuation allowance for each impaired stratum
and included in the amortization of mortgage servicing rights.

Mortgage servicing rights also includes excess mortgage servicing
receivables ("EMSR"), which represent the present value of servicing fee income
in excess of a normal servicing fee. When loans are sold, the estimated excess
servicing is recognized as income and amortized over the estimated servicing
period in proportion to the estimated future aggregate net cash flows from the
loans serviced. Remaining asset balances are evaluated for impairment based on
current estimates of future discounted cash flows. Such write-downs are included
in amortization of mortgage servicing rights.

The following table presents a breakdown of the components of mortgage
servicing rights at November 30, 1996:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Mortgage servicing rights and excess servicing
receivables........................................... $1,505,737
Deferred gains on risk management contracts, net........ (60,181)
----------
1,445,556
Less: Accumulated amortization.......................... (105,737)
----------
$1,339,819
==========
</TABLE>

Accounts receivable

Accounts receivable includes advances, consisting primarily of payments for
property taxes and insurance premiums, as well as principal and interest
remitted to investors before they are collected from mortgagors, made in
connection with loan servicing activities. Accounts receivable also includes
loans purchased from mortgage-backed securities serviced by HomeSide for others
and mortgage claims filed primarily with the FHA and the VA.

Premises and equipment

Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized over the lesser
of the estimated life of the improvement or the term of the lease.

F-7
<PAGE> 112

HOMESIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred Charges

Included in other assets are deferred charges of $17,209,000, representing
costs incurred to obtain a $2.5 billion line of credit from an independent
syndicate of banks and costs incurred in the issuance of $200,000,000 of
long-term debt. The deferred charges are being amortized to interest expense
over the terms of the related line of credit (3 years) and long-term debt (7
years).

Mortgage servicing fees

Mortgage servicing fees represent fees earned for servicing mortgage loans
owned by investors. The fees are generally calculated on the outstanding
principal balances of the loans serviced and are recognized as income on an
accrual basis.

Servicing losses on investor-owned loans

HomeSide records losses attributable to servicing FHA and VA loans for
investors. These amounts include actual losses for final disposition of loans,
accrued interest for which payment has been denied, and estimates for potential
losses based on HomeSide's experience as a servicer of government loans.

A reserve for estimated servicing losses on investor-owned loans is
available for potential losses related to the mortgage servicing portfolio and
is included in the balance of accounts payable and accrued liabilities.

Interest expense

Interest expense is reduced by credits received on borrowings with
depository institutions for custodial balances placed with such institutions.

Net mortgage origination revenue

Net mortgage origination revenue includes gains and losses from sales of
mortgage loans.

Income taxes

HomeSide accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under the
Statement, current tax liabilities or assets are recognized through charges or
credits to the current tax provision for the estimated taxes payable or
refundable for the current year.

Deferred tax liabilities are recognized for temporary differences that will
result in amounts taxable in the future and deferred tax assets are recognized
for temporary differences and tax benefit carryforwards that will result in
amounts deductible or creditable in the future. Net deferred tax liabilities or
assets are recognized through charges or credits to the deferred tax provision.
A deferred tax valuation reserve is established if it is more likely than not
that all or a portion of the deferred tax assets will not be realized. Changes
in the deferred tax valuation reserve are recognized through charges or credits
to the deferred tax provision.

The effect of enacted changes in tax law, including changes in tax rates,
on deferred tax assets and liabilities is recognized in income in the period
that includes the enactment date.

F-8
<PAGE> 113

HOMESIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. ACQUISITIONS

Acquisition of BancBoston Mortgage Corporation

On March 15, 1996, HomeSide acquired from Bank of Boston all of the
outstanding stock of BBMC, which was subsequently renamed HomeSide Lending, Inc.
Certain assets and liabilities of BBMC were retained by Bank of Boston,
including BBMC's mortgage retail production operations in New England.

HomeSide paid $139,500,000 in cash and issued $86,750,000 of common stock,
$.01 par value per share, of HomeSide ("Common Stock") to Bank of Boston in
consideration for certain assets, net of assumed liabilities and the stock of
BBMC. The Common Stock issued to Bank of Boston was assigned a value of
$[175.00] per share, the same per share amount paid by the Investors. On May 31,
1996, HomeSide paid an additional $5,000,000 to Bank of Boston in connection
with the closing of the BMC acquisition. The transaction was accounted for under
the purchase method of accounting and, accordingly, the results of operations of
HomeSide Lending, Inc. are included from the date of purchase. The assets and
liabilities of BBMC were recorded by HomeSide at their fair values at March 15,
1996, which totaled $1,525,314,000 and $1,221,808,000, respectively. The total
purchase price paid for BBMC, including transaction costs and interest, was
$247,403,000. The excess of fair value of net assets acquired over cost was
$56,103,000 and was allocated entirely to mortgage servicing rights. The excess
is being amortized over the estimated servicing period in proportion to the
estimated future net cash flows from the loans serviced, in the same manner as
mortgage servicing rights.

Acquisition of Barnett Mortgage Company

On May 31, 1996, HomeSide acquired from Barnett certain assets, net of
assumed liabilities, and the outstanding common stock of BMC, which was
subsequently renamed HomeSide Holdings, Inc. (the "BMC Acquisition"). HomeSide
Holdings, Inc. then became the parent company of HomeSide Lending, Inc. and
transferred all of the assets and liabilities of HomeSide Holdings, Inc., with
the exception of certain portions of HomeSide Holdings, Inc.'s GNMA servicing
rights, to HomeSide Lending, Inc. Certain assets and liabilities of BMC were
retained by Barnett, including those assets of BMC and its subsidiaries (other
than Honolulu Mortgage Company, Inc.) associated with the loan origination or
production activities of such entities.

HomeSide paid $228,234,000 in cash to Barnett in consideration for certain
assets, net of assumed liabilities, and the stock of BMC. In connection with the
BMC Acquisition, an affiliate of Barnett purchased [674,200] shares of Common
Stock for an aggregate purchase price of $117,985,000, or $[175.00] per share,
the same per share amount paid by the Investors and Bank of Boston. The
transaction was accounted for under the purchase method of accounting and,
accordingly, the results of operations of HomeSide include BMC from the date of
acquisition. The assets and liabilities of BMC were recorded by HomeSide at
their fair values at May 31, 1996, which totaled $764,825,000 and $516,129,000,
respectively. The total purchase price paid for BMC, including transaction costs
and interest, was $235,432,000. The excess of fair value of net assets acquired
over cost was $13,264,000 and was allocated entirely to mortgage servicing
rights. The excess is being amortized over the estimated servicing period in
proportion to the estimated future net cash flows from the loans serviced, in
the same manner as mortgage servicing rights.

The assets acquired and liabilities assumed in each of the transactions
noted above have been recorded at their estimated fair value as of the date of
the acquisition. Changes in those estimates may affect the amounts recorded and
the resulting allocation of purchase price.

Unaudited pro forma statements of operations for the year ended December
31, 1995 and the period from March 16, 1996 to November 30, 1996, assuming BBMC
and BMC had been acquired as of January 1, 1995, and assuming BMC had been
acquired as of March 15, 1996 are as follows (in millions):

F-9
<PAGE> 114

HOMESIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PERIOD
YEAR ENDED MARCH 16, 1996 TO
DECEMBER 31, 1995 NOVEMBER 30, 1996
----------------- -----------------
<S> <C> <C>
Net servicing revenue..................................... $ 237.4 $ 121.5
Net warehouse interest (expense) revenue.................. (5.5) 0.7
Net mortgage origination revenue.......................... 0.7 44.6
Other income.............................................. 0.7 0.6
------- -------
Total revenues.......................................... 233.3 167.4
Expenses.................................................. (144.1) (117.2)
------- -------
Income before income taxes................................ 89.2 50.2
Income tax expense........................................ (36.5) (20.7)
------- -------
Net income.............................................. $ 52.7 $ 29.5
======= =======
</TABLE>

The purchase accounting adjustments in the above pro forma statements of
operations are based on the actual purchase price and the amount of assets
actually acquired. In addition, gains on sales of mortgage servicing rights are
not included in net servicing revenue in these pro forma results. No adjustments
have been made for restructuring costs that might have been incurred during the
periods presented or for cost efficiencies that might have been realized.
Accordingly, these pro forma results are not indicative of future results.

5. NOTES PAYABLE TO BANKS

HomeSide borrows funds on a demand basis from a syndicate of banks under a
$2.5 billion line of credit collateralized by substantially all of HomeSide
Lending, Inc.'s assets. The line of credit is used to provide funds for HomeSide
Lending, Inc.'s business of making, originating, acquiring and servicing
mortgage loans. The line of credit includes both a warehouse credit facility and
servicing-secured credit facility, of which the servicing secured facility is
capped at $950 million. The line of credit terminates on May 31, 1999. The line
of credit agreement contains covenants that impose limitations and restrictions
on HomeSide, including the maintenance of certain net worth and ratio
requirements. The amount of the unused line of credit was $449,261,000 as of
November 30, 1996.

Drawings under the line of credit bear interest at rates per annum, based
on, at HomeSide's option (A) the highest of (i) the lead bank's prime rate, (ii)
the secondary market rate of certificates of deposit plus 100 basis points, and
(iii) the federal funds rate in effect from time to time plus 0.5%, or (B) a
eurodollar rate. As of November 30, 1996, the weighted average interest rate on
the amounts borrowed was 5.98%.

6. LONG TERM DEBT

On May 14, 1996, HomeSide issued $200,000,000 of 11.25% notes ("Notes")
maturing on May 15, 2003 and paying interest semiannually in arrears on May 15
and November 15 of each year, commencing on November 15, 1996. The Notes are
redeemable at the option of HomeSide, in whole or in part, at any time on or
after May 15, 2001, at certain pre-set redemption prices. The indenture contains
covenants that impose limitations and restrictions on HomeSide, including the
maintenance of certain net worth and ratio requirements. In accordance with
certain of these restrictions, effective August 15, 1996, the interest rate on
the Notes was increased to 11.75% until the exchange notes discussed below were
issued.

The Notes were initially issued as part of a private placement offering.
HomeSide has filed a Form S-4 with the SEC to register notes, with terms
identical to the Notes, under the Securities Act of 1933 (such registered notes
also referred to herein as the "Notes"). The registration statement was declared
effective during October 1996. The exchange is expected to be completed on or
about December 11, 1996.

As discussed elsewhere in this registration statement, HomeSide is in the
process of registering common stock for issuance to the public. A portion of the
proceeds from such issuance, which is expected to be completed during the fourth
quarter of fiscal 1997, is to be used to repay $70,000,000 in principal of the
Notes prior to maturity. The indenture governing the terms of the Notes requires
that such repayment be made at a

F-10
<PAGE> 115

HOMESIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11.25% premium. Therefore, HomeSide expects to record a loss from the early
extinguishment of debt during the fourth quarter of fiscal 1997. In addition,
the portion of deferred charges associated with the debt to be repaid will be
written-off and included in the determination of loss on early extinguishment of
debt. The total loss is estimated to be approximately $10,500,000, $6,500,000
net of tax, and will be recorded as an extraordinary item.

HomeSide also has a mortgage note payable on its headquarters building that
is due in 2017 and bears interest at 9.50%. HomeSide's main office building is
pledged as collateral. Principal payments due on the mortgage note payable are
as follows:

<TABLE>
<CAPTION>
FISCAL YEAR (IN THOUSANDS)
-----------
<S> <C>
1997........................................................ $ 56
1998........................................................ 234
1999........................................................ 258
2000........................................................ 283
2001........................................................ 312
Thereafter.................................................. 12,481
-------
$13,624
=======
</TABLE>

7. STOCKHOLDERS' EQUITY

On March 15, 1996, in connection with the BBMC acquisition discussed in
Note 4, the Investors contributed cash of $107,250,000 for [612,857] shares of
Common Stock. Also on March 15, 1996, HomeSide issued [495,715] shares of Common
Stock and cash to Bank of Boston in exchange for BBMC. The Common Stock issued
to Bank of Boston was assigned a value of $86,750,000.

Simultaneously with the closing of the BBMC acquisition, HomeSide also
issued [5,714] shares of its Class B Non-Voting Common Stock ("Class B shares")
to Smith Barney, Inc. in consideration of services rendered to HomeSide in
connection with the BBMC acquisition. Bank of Boston also paid $1,000,000 in
cash for [5,714] shares of HomeSide's Class C Non-Voting Common Stock ("Class C
shares"). Bank of Boston then sold the Class C shares to an unaffiliated third
party.

On May 31, 1996, in connection with the BMC Acquisition discussed in Note
4, Bank of Boston, the Investors and certain directors and executive managers of
HomeSide contributed a total of approximately $46,015,000 in cash for [262,945]
shares of Common Stock. In August 1996 and November 1996, another [1,144] shares
and [1,715] shares, respectively, were purchased by certain executives for
approximately $200,000 and $300,000, respectively. Approximately, $1,850,000 of
the amount contributed by certain directors and management was financed by
HomeSide Lending, Inc. and, accordingly, is reported as a reduction of
stockholders' equity of HomeSide. Also on May 31, 1996, HomeSide issued
[674,200] shares of Common Stock and cash to Barnett in exchange for BMC. The
Common Stock issued to Barnett was assigned a value of $117,985,000.

The following is a breakdown of HomeSide's Common Stock ownership as of
November 30, 1996, including the effect of the BMC Acquisition:

<TABLE>
<CAPTION>
CASH SHARES
CONTRIBUTED ISSUED
------------ ----------
<S> <C> <C>
Bank of Boston.......................................... $117,985,000 [674,200]
Barnett................................................. 117,985,000 [674,200]
Investors............................................... 117,985,000 [674,200]
Directors and management................................ 4,545,000 [25,976]
------------ ----------
$358,500,000 [2,048,576]
============ ==========
</TABLE>

F-11
<PAGE> 116

HOMESIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

HomeSide is in the process of registering 5,900,000 shares of Common Stock
(excluding the over-allotment option) for issuance to the public. The total
proceeds expected to be received from the issuance, net of underwriting fees,
and estimated expenses is $92,282,000 and will be used to repay a portion of
long-term debt, and reduce amounts outstanding under the bank credit agreement.
The issuance is expected to occur during the fourth quarter of fiscal 1997.

8. STOCK OPTIONS

HomeSide has established the HomeSide 1996 Employee Stock Option Plan under
which [34,285] shares of Common Stock are reserved for issuance. Options issued
under the plan may be either non-qualified or incentive stock options and the
options will be exercisable at such prices as are set by HomeSide's board of
directors. Under the plan, options will vest in five equal installments in
arrears. During the period March 16, 1996 to November 30, 1996, options to
purchase [26,298] shares were granted at an exercise price of $[175.00] per
share. To date, there have been no exercises of options and options to purchase
[382] shares were cancelled under this plan.

HomeSide has also adopted a 1996 Time Accelerated Restricted Stock Option
Plan under which [68,572] shares of Common Stock are reserved for issuance.
Options granted under this plan will be non-qualified and will be exercisable at
such prices as are set by the board of directors. Options granted under the plan
will vest nine years from the date of grant. Vesting will accelerate upon the
achievement of certain performance criteria. During the period March 16, 1996 to
November 30, 1996, options to purchase [52,596] shares were granted at an
exercise price of $[175.00] per share. To date, there have been no exercises of
options and options to purchase [764] shares were cancelled under this plan.

There was no compensation expense associated with the above option grants
since the exercise price was equal to the estimated fair value of the Common
Stock at the date of grant.

9. SUPPLEMENTAL CASH FLOW INFORMATION

During the period March 16, 1996 to November 30, 1996, HomeSide extended
loans totaling $1,850,000 to certain members of management in connection with
their purchase of shares of Common Stock.

In connection with the acquisitions of BBMC and BMC, HomeSide recorded
non-cash assets and assumed liabilities, including fair value adjustments, of
approximately $2,251,676,000 and $1,737,937,000, respectively. As part of the
purchase price of BBMC and BMC, HomeSide issued [495,714] shares of Common Stock
with a value of $86,750,000 and [674,200] shares of Common Stock with a value of
$117,985,000 to Bank of Boston and Barnett, respectively. In addition, HomeSide
issued [5,714] shares of Class B shares in exchange for certain services
performed in connection with the acquisition of BBMC. The Class B shares were
valued at $[175.00] per share, or $1,000,000.

HomeSide paid $57,680,000 and $1,000 of interest and income taxes,
respectively, during the period ended November 30, 1996.

10. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No 107, Disclosures about Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments
whether or not recognized in the balance sheet, for which it is practicable to
estimate fair value.

Financial instruments include such items as mortgage loans held for sale,
mortgage loans held for investment, interest rate contracts, notes payable, and
other instruments.

Fair value estimates are made as of a specific point in time based on the
characteristics of the financial instruments and the relevant market
information. Where available, quoted market prices are used. In other cases,
fair values are based on estimates using other valuation techniques, such as
discounting estimated future cash flows using a rate commensurate with the risks
involved or other acceptable methods. These techniques involve uncertainties and
are significantly affected by the assumptions used and the judgments made
regarding risk characteristics of various financial instruments, prepayments,
discount rates, estimates of future cash flows, future suspected loss
experience, and other factors. Changes in assumptions could significantly affect

F-12
<PAGE> 117

HOMESIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

these estimates. Derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized in
an immediate sale of the instrument. Also because of differences in
methodologies and assumptions used to estimate fair value, the Company's fair
values should not be compared to those of other companies.

Under the Statement, fair value estimates are based on existing financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company. For certain assets and
liabilities, the information required under the Statement is supplemented with
additional information relevant to an understanding of the fair value.

The methods and assumptions used to estimate the fair values of each class
of financial instruments are as follows:

Cash and cash equivalents

The carrying amount reported in the balance sheet approximates fair value.

Mortgage loans held for sale

Fair values are based on the estimated value at which the loans could be
sold in the secondary market. These loans are priced to be sold with servicing
rights retained, as is the Company's normal business practice.

Accounts receivable

Carrying amounts are considered to approximate fair value. All amounts that
are assumed to be uncollectible within a reasonable time are written off.

Risk management contracts

Fair values are estimated based on actual market quotes or option models.

Notes payable to banks

The carrying amount of the notes payable to banks reported in the balance
sheet approximates its fair value.

Long-term debt

Fair value of long-term debt is estimated by discounting estimated future
cash flows using a rate commensurate with the risks involved.

Commitments to originate mortgage loans

Fair value is estimated using quoted market prices for securities backed by
similar loans adjusted for differences in loan characteristics.

Forward contracts to sell mortgages

Forward contracts to sell mortgages, which represent legally binding
agreements to sell loans to permanent investors at a specified price or yield,
are valued using market prices for securities backed by similar loans and are
reflected in the fair values of the mortgages held for sale, to the extent that
these commitments relate to mortgage loans already originated, or of the related
commitments to extend credit.

F-13
<PAGE> 118

HOMESIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Options on mortgage-backed securities

The fair values of options are estimated based on actual market quotes. In
some instances, quoted prices for the underlying loans or option models are
used.

Fair Value

The fair values of the Company's financial instruments as of November 30,
1996 are as follows:

<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................. $ 1,183 $ 1,183
Mortgage loans held for sale.......................................... 1,101,229 1,101,229
Accounts receivable................................................... 173,145 173,145
Risk management contracts............................................. 162,351 162,351
Other assets.......................................................... 51,763 51,763
LIABILITIES
Notes payable to banks................................................ 2,010,813 2,010,813
Long-term debt........................................................ 221,278 221,278
OFF-BALANCE SHEET(1)
Commitments to originate mortgage loans............................... -- 20,836
Mandatory forward contracts to sell mortgages......................... -- (19,954)
Options on mortgage-backed securities................................. -- (391)
</TABLE>

- ---------------

(1) Parenthesis denote a liability

Fair value estimates are made as of a specific point in time, based on
relevant market data and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale the Company's entire holding of a particular financial instrument.
Because no active market exists for some portion of the Company's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, current interest rates
and prepayment trends, risk characteristics of various financial instruments,
and other factors.

These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be determined with
precision. Changes in any of these assumptions used in calculating fair value
would also significantly affect the estimates. Further, the fair value estimates
were calculated as of November 30, 1996. Changes in market interest rates and
prepayment assumptions could significantly change the fair value.

11. RISK MANAGEMENT OF FINANCIAL INSTRUMENTS

As discussed in Note 3, HomeSide purchases options contracts on U.S.
Treasury bond futures to manage the interest rate risk related to the value of
HomeSide's mortgage servicing rights. A summary of HomeSide's investments in
purchased option instruments as of November 30, 1996 is as follows:

<TABLE>
<S> <C>
Notional amount of U.S. Treasury bond future options............. $ 35.1 billion
Fair value of outstanding options................................ $162.4 million
</TABLE>

Cash requirements for HomeSide's option contracts are limited to the
initial premium paid. The amount of contracts purchased depends on certain
factors, such as interest rates and growth in the mortgage servicing portfolio.
HomeSide is subject to market risk to the extent that interest rates fluctuate;
however, the purpose of the option contracts is to hedge the value of its
mortgage servicing rights portfolio, which tends to react inversely with changes
in the value of HomeSide's option contracts. HomeSide's credit risk on its
option

F-14
<PAGE> 119

HOMESIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

contracts is limited since the option contracts are traded on a national
exchange, which guarantees performance by the counterparty.

12. CONTINGENCIES

HomeSide, along with its subsidiaries, is a defendant in a number of legal
proceedings arising in the normal course of business. HomeSide, in management's
estimation, has recorded adequate reserves in the financial statements for
pending litigation. Management, after reviewing all actions and proceedings
pending against or involving HomeSide, considers that the aggregate liabilities
or loss, if any, resulting from the final outcome of these proceedings will not
have a material effect on the financial position, operations or liquidity of
HomeSide.

For five years following the consummation of the BMC Acquisition, which
occurred on May 31, 1996, Barnett is obligated to repurchase or reimburse
HomeSide for any credit losses related to $101.0 million of loans serviced with
recourse, which is less than 1.0% of HomeSide's total mortgage servicing
portfolio.

13. SUBSEQUENT EVENTS

In December 1996 the Company filed a Registration Statement in connection
with a public offering of its Common Stock. Immediately prior to the effective
date of the Prospectus forming a part of such Registration Statement (i) the
Certificate of Incorporation of the Company will be amended to change the title
of the Company's Class A Common Stock to Common Stock and to increase the number
of shares of capital stock which the Company is authorized to issue to
shares of capital stock of which shares
will be Common Stock (voting), par value $.01 per share, shares will be
Class B Common Stock (non voting), par value $.01 per share and shares
will be Class C Common Stock (non-voting), par value $1.00 per share; and (ii)
the Company will effect a for split of its capital stock in the form of a
% stock dividend.

F-15
<PAGE> 120

UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION

The unaudited pro forma consolidated financial information set forth below
which is based upon management's assumptions and includes adjustments as
described in the notes which follow, should be read in conjunction with the
historical financial statements and notes thereto included elsewhere in this
Prospectus. The Unaudited Pro Forma Consolidated Income Statement set forth
below gives effect to the HLI Acquisition and the HHI Acquisition as though such
transactions occurred on January 1, 1995. Results of operations for the period
March 16, 1996 to November 30, 1996 include the period March 16, 1996 to
November 30, 1996 for HomeSide and the period April 1, 1996 to May 30, 1996 for
HHI. Results of operations for the year ended December 31, 1995 include the
results of HLI and HHI for the twelve months ended December 31, 1995. Results of
operations for the period ended November 30, 1996 reflect the consummation of
this Offering and the application of the proceeds thereof as described under
"Use of Proceeds" as if such transactions had occurred on March 16, 1996. The
unaudited pro forma consolidated financial information does not purport to
represent the results that actually would have occurred if the acquisition of
HLI or the acquisition of HHI had in fact occurred as of the dates and is not
intended to project HomeSide's financial position or results of operations that
may be achieved for any future period.

F-16
<PAGE> 121

UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD MARCH 16, 1996 TO NOVEMBER 30, 1996(A)
(IN MILLIONS)

<TABLE>
<CAPTION>
COMMON PRO FORMA
HOMESIDE HHI HHI ACQUISITION STOCK HOMESIDE, HHI
HISTORICAL(A) HISTORICAL(A) ADJUSTMENTS(B) OFFERING(C) AND THE OFFERING
------------- ------------- --------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Revenues:
Mortgage servicing fees..... $ 216.4 $20.6 $ -- $ -- $ 237.0
Amortization of mortgage
servicing rights......... (105.7) (8.3) (1.5)(d) -- (115.5)
------- ----- ------ ---- -------
Net servicing
revenue........... 110.7 12.3 (1.5) -- 121.5
Interest income............. 60.2 4.9 1.7(e) -- 66.8
Interest expense............ (61.2) (3.5) (1.4)(e) 6.6(l) (59.5)
------- ----- ------ ---- -------
Net interest
revenue........... (1.0) 1.4 0.3 6.6 7.3
Net mortgage origination
revenue.................. 43.6 5.0 (4.0)(f) -- 44.6
Other income................ 0.6 0.7 (0.7)(g) -- 0.6
------- ----- ------ ---- -------
Total revenue....... 153.9 19.4 (5.9) 6.6 174.0
Expenses:
Salaries and employee
benefits................. 53.4 10.4 (5.5)(h) -- 58.3
Occupancy and equipment..... 8.2 1.6 (1.2)(i) -- 8.6
Servicing losses on
investor-owned loans..... 13.0 -- -- -- 13.0
Other expenses.............. 29.6 12.2 (4.5)(j) -- 37.3
------- ----- ------ ---- -------
Total expenses...... 104.2 24.2 (11.2) -- 117.2
Income before income taxes.... 49.7 (4.8) 5.3 6.6 56.8
Income tax expense............ 20.5 (0.9) 1.1(k) 2.8(m) 23.5
------- ----- ------ ---- -------
Net income.................... $ 29.2 $(3.9) $ 4.2 $3.8 $ 33.3
======= ===== ====== ==== =======
Net income per share..........
</TABLE>

- ---------------
(a) Reflects HomeSide's and HHI's historical consolidated financial statements
for the period March 16, 1996 to November 30, 1996 for HomeSide and for the
period April 1, 1996 to May 30, 1996 for HHI. Pro forma adjustments to the
historical financial statements have been completed in a manner consistent
with the calendar periods of the related financial statements of HomeSide
and HHI, respectively.

(b) Reflects pro forma adjustments related to the HHI Acquisition including
proceeds from the offering of $200.0 million of Notes as if such offering
occurred on March 16, 1996. The adjustments reflect the application of
purchase accounting to the HHI Acquisition and, as a result, the assets and
liabilities have been adjusted to reflect the allocation of the purchase
price.

(c) Reflects the consummation of the sale of the Common Stock offered hereby
and the application of the proceeds thereof as described under "Use of
Proceeds" as if such transactions had occurred at March 16, 1996.

(d) Amortization was increased by $1.5 million to reflect the allocation of the
HHI purchase price to mortgage servicing rights.

(e) In 1996, HHI sold loans held for sale as participations to an affiliate of
Barnett. The funding source was replaced with the Bank Credit Agreement.
Consequently, interest income was increased by $1.7 million to adjust for
interest income passed to the participations.

Interest expense was reduced to reflect the Bank Credit Agreement. Also
reflects the reversal of interest expense of $1.4 million on $90.0 million
of bridge financing outstanding March 16, 1996 to May 15, 1996

F-17
<PAGE> 122

and records incremental interest expense of $3.6 million on the $200
million of notes as if the issuance occurred on March 16, 1996 instead of
May 15, 1996. A portion of the proceeds from the Notes were used to pay-off
the bridge financing.

<TABLE>
<S> <C>
Bank Credit Agreement................................................ $ 0.8
Reversal on interest on $90 million bridge financing................. 1.4
Interest expense on $200 million of notes............................ (3.6)
-----
Net increase in interest expense........................... $(1.4)
=====
</TABLE>

Pro Forma interest expense is comprised of the following components:

<TABLE>
<S> <C>
Warehouse interest expense.......................................... $(34.1)
Interest credit on escrow deposits.................................. 30.1
Other interest expense
Servicing secured interest expense................................ (20.5)
Other interest expense............................................ (19.3)
------
Total other interest expense........................................ (39.8)
------
Total interest expense.................................... $(43.8)
======
</TABLE>

(f) Origination revenue of $4.0 million generated by the loan production units
retained by Barnett was eliminated.

(g) Barnett retained mortgage loans held for investment. The interest earned on
these loans of $0.7 million has been eliminated.

(h) Salaries and employee benefits of $5.5 million for mortgage loan production
units retained by Barnett were eliminated. The personnel associated with
these positions were retained by Barnett.

(i) Occupancy and equipment expenses of $1.2 million for loan production units
retained by Barnett have been eliminated. The assets and operations
associated with these functions were retained by Barnett.

(j) Expenses have been reduced for mortgage loan production units retained by
Barnett. Other expenses have been adjusted to reflect amortization of debt
issuance costs.

<TABLE>
<S> <C>
Decrease in other expenses for loan production units retained by
Barnett............................................................ $(3.8)
Elimination of goodwill amortization................................. (1.0)
Amortization of debt issuance costs.................................. 0.3
-----
Net decrease in other expenses............................. $(4.5)
=====
</TABLE>

(k) Adjusts income tax expense for HomeSide's expected effective income tax
rate.

(l) Reduces interest expenses to reflect the repayment of $70.0 million
principal amount of Notes with a portion of the proceeds from the issuance
of Common Stock. The interest rate on the Notes was 11.25% for the period
March 16, 1996 to August 14, 1996. On August 15, 1996 the interest rate was
increased to 11.750% until the exchange offer is complete. The remaining
proceeds were assumed to have reduced the amount outstanding under the Bank
Credit Agreement. The issuance of Common Stock and repayment of borrowings
is assumed to have occurred as of March 16, 1996. The following table
details the adjustments made to interest expense:

<TABLE>
<S> <C>
Interest on $70.0 million principal amount of the 11.25% Notes from
March 16, 1996 to November 30, 1996................................. $5.7
Interest on $14.4 million of borrowings under the Bank Credit
Agreement from March 16, 1996 to November 30, 1996 at an average
rate of 6.16%....................................................... 0.6
Reduction of deferred finance fee amortization associated with the
$70.0 million principal amount of the 11.25% Notes repaid........... 0.3
----
$6.6
====
</TABLE>

(m) Adjusts for the tax effect of the reduction of interest expense and
deferred finance fee amortization.

- ---------------

Note: Numbers may not total or agree to financial statements due to rounding.

F-18
<PAGE> 123

UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HOMESIDE HOMESIDE FOR
HLI HLI FOR THE HLI HHI HLI THE HLI AND HHI
HISTORICAL(A) ACQUISITION(B) ACQUISITION HISTORICAL(A) ACQUISITION(C) ACQUISITIONS
------------- -------------- --------------- ------------- -------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Mortgage servicing fees....... $ 173.0 $ 173.0 $ 108.6 $ 19.9(m) $ 301.5
Gain on risk management
contracts................... 108.7 -- 108.7 -- --(n) 108.7
Amortization of mortgage
servicing rights............ (108.0) $ (7.7)(d) (115.7) (48.3) (8.8)(o) (172.8)
------------- ------- --------------- ------------- ------- --------
Net servicing revenue......... 173.7 (7.7) 166.0 60.3 11.1 237.4
Interest income............... 24.3 5.4(e) 29.7 27.3 9.9(p) 66.9
Interest expense.............. (27.1) (11.0)(f) (38.1) (20.4) (13.9)(q) (72.4)
------------- ------- --------------- ------------- ------- --------
Net interest revenue.......... (2.8) (5.6) (8.4) 6.9 (4.0) (5.5)
Net mortgage origination
revenue..................... 3.4 (2.9)(g) 0.5 3.2 (3.0)(r) 0.7
Gain on sales of servicing
rights...................... 10.2 (10.2)(h) -- 9.1 (9.1)(s) --
Other income.................. 0.5 -- 0.5 2.5 (2.3)(t) 0.7
------------- ------- --------------- ------------- ------- --------
Total revenue................. 185.0 (26.4) 158.6 82.0 (7.3) 233.3
Expenses:
Salaries and employee
benefits.................... 45.4 (5.8)(i) 39.6 53.1 (21.5)(u) 71.2
Occupancy and equipment....... 10.0 (6.4)(j) 3.6 6.0 (4.2)(v) 5.4
Servicing losses on
investor-owned loans........ 10.0 -- 10.0 -- -- 10.0
Real estate acquired.......... 1.1 -- 1.1 -- -- 1.1
Other expenses................ 21.8 3.3(k) 25.1 52.9 (21.6)(w) 56.4
------------- ------- --------------- ------------- ------- --------
Total expenses................ 88.3 (8.9) 79.4 112.0 (47.3) 144.1
Income before income tax
expense..................... 96.7 (17.5) 79.2 (30.0) 40.0 89.2
Income tax expense............ 37.9 (7.8)(l) 30.1 (9.6) 16.0(x) 36.5
------------- ------- --------------- ------------- ------- --------
Net income.................... $ 58.8 $ (9.7) $ 49.1 $ (20.4) $ 24.0 $ 52.7(y)
============ ============== ============== ============ ============== ===================
</TABLE>

- ---------------
(a) Reflects HLI's and HHI's historical consolidated income statements for the
year ended December 31, 1995 subject to certain reclassifications to
conform with the pro forma income statement presentation. For HHI,
amortization of goodwill and affiliate profit sharing amounts have been
reclassified to conform with this pro forma presentation.

(b) Reflects pro forma adjustments related to HomeSide's initial capitalization
and the HLI Acquisition, including related financing and proceeds from
$112.5 million of the Notes. The remaining proceeds were held in escrow
pending completion of the HHI Acquisition. The adjustments reflect the
application of purchase accounting to the HLI Acquisition and, as a result,
the assets and liabilities have been adjusted to reflect the allocation of
the purchase price.

(c) Reflects pro forma adjustments related to the HHI Acquisition, including
related financing and proceeds from the incremental $87.5 million of the
Notes. The adjustments reflect the application of purchase accounting to
the HHI Acquisition and, as a result, the assets and liabilities have been
adjusted to reflect the allocation of the purchase price.

(d) Amortization of mortgage servicing rights was increased by $7.7 million to
reflect the allocation of the HLI purchase price to servicing rights.

(e) In 1995, HLI sold loans held for sale as participations to an affiliate of
Bank of Boston. This funding source was replaced with the Bank Credit
Agreement. Consequently, interest income has been increased by $13.3
million to adjust for interest income passed to the participations. Bank of
Boston retained

F-19
<PAGE> 124

mortgage loans held for investment. The interest earned on these loans of $7.9
million has been eliminated.

(f) Reflects the Bank Credit Agreement, issuance of $112.5 million principal
amount of the Notes, and initial HomeSide capital structure. The Bank
Credit Agreement also replaced the funding of loans held for sale as
participations to an affiliate of Bank of Boston. Consequently, interest
expense has been increased by $10.3 million.

The income earned on the escrow deposit accounts associated with the loan
servicing portfolio reduces interest expense. Before the HLI Acquisition,
these deposits were held at Bank of Boston and earned a higher benefit than
would have been earned had they been held by an independent party.
Reduction of $2.6 million is based on the benefit that would have been
received from an independent party.

<TABLE>
<S> <C>
New Bank Credit Agreement and capital structure.............. $ 14.6
Issuance of $112.5 million principal amount of the Notes..... (12.7)
Participations to affiliate of Bank of Boston................ (10.3)
Reduced benefit from escrow deposits......................... (2.6)
------
$(11.0)
======
</TABLE>

Pro Forma interest expense is comprised of the following components:

<TABLE>
<S> <C>
Warehouse interest expense................................... $(24.8)
Interest credit on escrow deposits........................... 32.1
Other interest expense
Servicing secured interest expense......................... (31.3)
Other interest expense..................................... (14.1)
------
Total other interest expense................................. (45.4)
------
Total interest expense............................. $(38.1)
======
</TABLE>

(g) Mortgage origination revenue of $2.9 million generated by the branches
retained by Bank of Boston was eliminated.

(h) Mortgage servicing rights were adjusted to fair value as part of the
purchase accounting adjustments. Therefore no gain on sales would have been
recognized since the proceeds received on the sales would have been equal
to the cost basis of the mortgage servicing rights.

(i) The salaries and employee benefits incurred at the retail branches and the
loan processing center retained by Bank of Boston of $5.8 million have been
eliminated. The personnel associated with these positions were retained by
Bank of Boston.

(j) Occupancy expenses for the retail branches and the loan processing center
retained by Bank of Boston of $6.4 million have been eliminated. The assets
and operations associated with these functions were retained by Bank of
Boston.

(k) Reflects amortization of debt issuance and Offering costs of $3.6 million
and elimination of goodwill amortization of $0.3 million.

(l) Adjusts income tax expense for the HLI Acquisition and Offering Adjustments
and HomeSide's expected effective rate.

(m) BancPLUS was acquired by HHI on February 28, 1995. Income for the period
January 1, 1995 through February 28, 1995 was added to reflect the period
BancPLUS was not owned by HHI. Also, servicing fee income was increased to
reflect the new agreement on servicing fee rates paid on Barnett's mortgage
loan portfolio.

<TABLE>
<S> <C>
Period BancPLUS not owned by HHI................................ $ 9.9
Servicing fee income............................................ 10.0
-----
Net increase in mortgage servicing revenues................ $19.9
=====
</TABLE>

F-20
<PAGE> 125

(n) At HHI, risk management contracts were not in place throughout 1995 and no
gains were recognized in income to offset the decline in the value of the
mortgage servicing rights and accelerated amortization due to changes in
interest rates. No adjustments have been included to reflect the results of
a risk management program had one been in place at HHI. After the HHI
Acquisition, HomeSide extended its risk management practices to the
combined servicing portfolio.

(o) Amortization of mortgage servicing rights was increased to reflect the
period from January 1, 1995 through February 28, 1995 during which BancPLUS
was not owned by HHI. Amortization was also increased to reflect the
allocation of the HHI purchase price to mortgage servicing rights.

<TABLE>
<S> <C>
Amortization for BancPLUS during period not owned by HHI........ $(2.9)
Increased amortization.......................................... (5.9)
-----
Net increase in amortization of mortgage servicing
rights................................................... $(8.8)
=====
</TABLE>

(p) In 1995, HHI sold loans held for sale as participations to an affiliate of
Barnett. This funding source will be replaced with the Bank Credit
Agreement. Consequently, interest income was increased to adjust for
interest income passed to the participations. Income for the period January
1, 1995 through February 28, 1995 was added to reflect the period BancPLUS
was not owned by BMC. Barnett is retaining mortgage loans held for
investment. The interest earned on these loans has been eliminated.

<TABLE>
<S> <C>
Interest income on participations................................... $ 9.6
Period BancPLUS not owned by HHI.................................... 1.4
Elimination of interest income on mortgage loans held for
investment........................................................ (1.1)
-----
Net increase in warehouse interest income...................... $ 9.9
=====
</TABLE>

(q) Reflects the Bank Credit Agreement, issuance of $87.5 million of the Notes
and the initial HomeSide capital structure.

Interest expense for the period January 1, 1995 through February 28, 1995
was added to reflect the period BancPLUS was not owned by BMC.

The income earned on the escrow deposit accounts associated with the loan
servicing portfolio reduces interest expense. Before the HHI Acquisition,
these deposits were held at Barnett and earned a higher benefit than would
have been earned had they been held by an independent party. Reduction of
$0.6 million is based on the benefit that would have been received from an
independent party.

<TABLE>
<S> <C>
New Bank Credit Agreement and capital structure................ $ (1.6)
Issuance of $87.5 million principal amount of the Notes........ (9.8)
Period BancPLUS not owned by HHI............................... (1.9)
Reduced benefit from escrow deposits........................... (0.6)
------
$(13.9)
======
</TABLE>

Pro Forma interest expense is comprised of the following components:

<TABLE>
<S> <C>
Warehouse interest expense........................................ $(40.9)
Interest credit on escrow deposits................................ 31.2
Other interest expense
Servicing secured interest expense........................... (14.8)
Other interest expense....................................... (9.8)
------
Total other interest expense (24.6)
------
Total interest expense.................................. $(34.3)
======
</TABLE>

(r) Origination revenue of $3.0 million generated by the loan production units
retained by Barnett was eliminated.

F-21
<PAGE> 126

(s) Mortgage servicing rights were adjusted to fair value as part of the
purchase accounting adjustments. Because the proceeds received on the sales
would have been equal to the adjusted carrying value of the mortgage
servicing rights, no gain on sales would have been recognized.

(t) Other income of $2.3 million generated by the branches retained by Barnett
was eliminated.

(u) Salaries and employee benefits for the period January 1, 1995 through
February 28, 1995 were added to reflect the period BancPLUS was not owned
by HHI. Salaries and employee benefits for mortgage loan production units
retained by Barnett were eliminated.

<TABLE>
<S> <C>
Period BancPLUS not owned by HHI............................... $ 5.6
Decrease in salaries and employee benefits for loan production
units retained by Barnett..................................... (27.1)
------
Net decrease in salaries and employee benefits................. $(21.5)
======
</TABLE>

(v) Occupancy and equipment expenses of $4.2 million for loan production units
retained by Barnett have been eliminated.

(w) Expenses have been reduced for mortgage loan production units retained by
Barnett. Other expenses for the period January 1, 1995 through February 28,
1995 were added to reflect the period BancPLUS was not owned by HHI. Other
expenses have been adjusted to reflect amortization of debt issuance costs
and amortization of goodwill.

<TABLE>
<S> <C>
Decrease in other expenses for loan production units retained
by Barnett.................................................... $(25.8)
Period BancPLUS not owned by HHI -- other expenses............. 3.9
Amortization of debt issuance costs............................ 2.0
Adjustment to amortization of goodwill......................... (1.7)
------
Net decrease in other expenses............................ $(21.6)
======
</TABLE>

(x) Adjusts income tax expense for the HHI Acquisition and Offering Adjustments
and HomeSide's expected effective rate.

(y) The pro forma financial statements for the year ended December 31, 1995
have been prepared under the accounting policies used by HLI and HHI during
that period. Effective January 1, 1996, HLI and HHI prospectively adopted
SFAS 122, "Accounting for Mortgage Servicing Rights." This statement, among
other provisions, requires that the value of mortgage servicing rights
associated with mortgage loans originated by an entity be capitalized as
assets. The value of originated mortgage servicing rights (OMSR) is
determined by allocating the total costs of the mortgage loans between the
loans and the mortgage servicing rights based on their relative fair
values. Also, the new statement requires that capitalized mortgage
servicing rights be evaluated for impairment based on the fair value of
these rights. For purposes of determining impairment, mortgage servicing
rights that are capitalized after the adoption of this statement are
stratified based on one or more of the predominant risk characteristics of
the underlying loans. Impairment is recognized through a valuation
allowance for each impaired stratum.

Had this statement been adopted January 1, 1995, net mortgage origination
revenue would have increased by $10.6 million and $2.8 million for pro
forma HLI and pro forma HHI, respectively, for the effect on income of
recording OMSR. If these provisions of SFAS 122 were applied to the pro
forma financial statements for the year ended December 31, 1995, additional
amortization of mortgage servicing rights of $45.0 million and $10.0
million would have been recorded for pro forma HLI and pro forma HHI,
respectively, due to the interest rate environment during 1995. As a result
of the above adjustments, pro forma HomeSide for the HLI Acquisition and
the Offering net income would have been $27.8 million and pro forma
HomeSide for the HLI and HHI Acquisitions and the Offering net income would
have been $28.1 million for the year ended December 31, 1995.
- ---------------
Note: Numbers may not total or agree to financial statements due to rounding.

F-22
<PAGE> 127

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholders and
the Board of Directors of
HomeSide, Inc.:

We have audited the accompanying balance sheet of HOMESIDE, INC. (a Delaware
corporation) as of March 14, 1996. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of HomeSide, Inc. as of March 14,
1996, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Jacksonville, Florida
April 10, 1996, except for Note 3,
as to which the date is December 12, 1996

F-23
<PAGE> 128

HOMESIDE, INC.

BALANCE SHEET

MARCH 14, 1996
(NOTE 1)

<TABLE>
<S> <C>
ASSETS
Total assets................................................................. $ 0
=============
STOCKHOLDERS' EQUITY
COMMON STOCK:
Common Stock, $.01 par value, 1,500,000 shares authorized and 1,131,429
shares subscribed...................................................... $ 11,314
Class B non-voting common stock, $.01 par value, 5,714 shares authorized
and subscribed......................................................... 57
Class C non-voting common stock, $1.00 par value, 5,714 shares
authorized and subscribed.............................................. 5,714
-------------
17,085
ADDITIONAL PAID-IN CAPITAL................................................... 199,982,915
SUBSCRIPTION RECEIVABLE...................................................... (200,000,000)
-------------
Total stockholders' equity.............................................. $ 0
=============
</TABLE>

The accompanying notes are an integral part of this balance sheet.

F-24
<PAGE> 129

HOMESIDE, INC.

NOTES TO BALANCE SHEET

MARCH 14, 1996

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

On December 11, 1995, HomeSide, Inc. ("HomeSide") was formed for the
purpose of acquiring BancBoston Mortgage Corporation ("BBMC"), the mortgage
banking subsidiary of The First National Bank of Boston ("BKB" or "Bank of
Boston"), which is a wholly-owned subsidiary of Bank of Boston Corporation
("BKBC"). In December 1995, Bank of Boston signed an agreement with HomeAmerica
Capital Inc. (currently known as HomeSide, Inc.) to sell BBMC. HomeSide expects
to adopt a fiscal year ended February 28 and accordingly will report quarterly
results for the quarters ended May 31, August 31, November 30 and February 28.

HomeSide will initially be capitalized by the issuance of 1,131,429 shares
of Common Stock, 5,714 shares of Class B non-voting common stock, and 5,714
shares of Class C non-voting common stock. Each of these shares will be
purchased for approximately $175.00 per share.

On March 15, 1996, HomeSide completed the acquisition of all of the
outstanding stock of BBMC, which was subsequently renamed HomeSide Lending, Inc.
Certain assets and liabilities of BBMC were retained by Bank of Boston,
including BBMC's mortgage retail production operations in New England.

HomeSide paid $139,150,000 in cash and issued $86,750,000 in Common Stock
to Bank of Boston in consideration for certain assets, net of assumed
liabilities, and the stock of BBMC. On May 31, 1996, HomeSide paid an additional
$5.0 million to Bank of Boston in connection with the closing of the acquisition
of Barnett Mortgage Company ("BMC"). The transaction was accounted for under the
purchase method of accounting. The assets and liabilities of BBMC were recorded
by HomeSide at their fair market values at March 15, 1996, which totaled $1.5
billion and $1.2 billion, respectively. The total purchase price paid for BBMC,
including transaction costs and interest, was $247.2 million.

On March 4, 1996, HomeSide entered into an agreement to acquire BMC, the
mortgage banking subsidiary of Barnett Banks, Inc. ("Barnett").

HomeSide's business consists primarily of:

- Mortgage production: the origination and purchase of residential single
family mortgage loans through all major channels including correspondents
(including BKB and after the BMC acquisition, Barnett), mortgage brokers,
co-issue partners, telemarketing, affinity programs and retail branches;

- Secondary marketing: the sale of residential single family mortgage loans
as pools underlying mortgage-backed securities guaranteed by governmental
or quasi-governmental agencies or as whole loans to investors; and

- Servicing: the administration, collection, and remittance of monthly
mortgage principal and interest payments, the collection and payment of
property taxes and insurance premiums and the management of certain loan
default activities.

The "Risk Factors" section in the accompanying Prospectus should be read in
connection with these financial statements.

2. CONTINGENCIES

BBMC is a defendant in a number of legal proceedings arising in the normal
course of business. BBMC, in management's estimation, had recorded adequate
reserves in its financial statements for pending litigation. Management, after
reviewing all actions and proceedings pending against or involving BBMC,
considers that the aggregate liabilities or loss, if any, resulting form the
final outcome of these proceedings will not have a material effect on the
financial position or results of operations of BBMC.

F-25
<PAGE> 130

3. SUBSEQUENT EVENTS

On May 15, 1996, HomeSide issued $200 million principal amount of 11.25%
senior secured second priority notes ("Notes"). The Notes mature May 15, 2003
and pay interest semiannually in arrears on May 15 and November 15 of each year,
commencing November 15, 1996. The Notes are redeemable at the option of
HomeSide, in whole or in part, at any time on or after May 15, 2001, at certain
pre-set redemption prices. Upon issuance, $90.0 million of the proceeds were
used to repay bridge financing incurred in the acquisition of BBMC, $87.5
million was placed into escrow pending completion of the BMC acquisition, $6.5
million was used to pay underwriting expenses and the remaining $16.0 million
was retained by HomeSide. The $87.5 million was released from escrow, and
forwarded to HomeSide, on May 31, 1996 upon completion of the BMC acquisition as
discussed below.

On May 31, 1996, HomeSide completed the acquisition of all of the
outstanding common stock of BMC, which was subsequently renamed HomeSide
Holdings, Inc. ("HHI"). HHI then became the parent company of HLI and it
transferred all of the assets and liabilities of HHI, with the exception of
HHI's GNMA servicing rights, to HLI. Certain assets and liabilities of BMC were
retained by Barnett, including those assets of BMC and its subsidiaries (other
than Honolulu Mortgage Company ("Honolulu Mortgage")) associated with the loan
origination or production activities of such entities.

HomeSide paid approximately $228.2 million in cash to Barnett in
consideration for certain assets, net of assumed liabilities, and the stock of
BMC. The transaction was accounted for under the purchase method of accounting.
The assets and liabilities of BMC were recorded by HomeSide at their fair market
values at May 31, 1996, which totaled $777.6 million and $520.7 million,
respectively. The total purchase price paid for BMC, including transaction
costs, was approximately $235.3 million. In addition to the cash Barnett
received, Siesta Holdings, Inc. ("Siesta"), an affiliate of Barnett, purchased
an ownership interest in HomeSide. As of May 31, 1996, (i) Bank of Boston, (ii)
Thomas H. Lee Equity Fund III, L.P. and certain affiliates of Thomas H. Lee
Company and Madison Dearborn Capital Partners, L.P., collectively, and (iii)
Siesta each owned one-third of HomeSide.

In connection with the BMC acquisition, HLI and its wholly owned
subsidiary, Honolulu Mortgage entered into a $2.5 billion senior secured
revolving credit facility maturing on May 31, 1999 with third party financial
institutions that replaced a line of credit entered into by HLI on March 15,
1996 in connection with the BBMC acquisition, which replaced BBMC's former line
of credit with Bank of Boston, and BMC's former line of credit with Barnett.
HLI's and Honolulu Mortgage's new facility provides for availability up to $2.5
billion, with the servicing commitment portion capped at $950 million. The new
credit facility provides financing for HLI's and Honolulu Mortgage's ongoing
operations, including the origination and servicing of residential mortgage
loans, other working capital and general corporate purposes. The facility is
secured primarily by all of HLI's and Honolulu Mortgage's assets.

In December 1996, the Company filed a Registration Statement in connection
with a public offering of its Common Stock. Immediately prior to the effective
date of the Prospectus forming a part of such Registration Statement the
Certificate of Incorporation of the Company will be amended to change the title
of the Company's Class A Common Stock to Common Stock and to increase the number
of shares of capital stock which the Company is authorized to issue.

F-26
<PAGE> 131

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

CONSOLIDATED BALANCE SHEETS

ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1995 MARCH 15, 1996
----------------- --------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)

<CAPTION>
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents..................................... $ 830 $ 23,216
Mortgage loans:
Held for sale............................................ 388,436 641,465
Held for investment...................................... 33,183 65,068
Accounts receivable........................................... 82,473 45,183
Accounts receivable from Bank of Boston and affiliates........ 343 --
Pool loan purchases........................................... 65,272 56,261
Mortgage claims receivable, net............................... 45,422 17,563
Mortgage servicing rights receivable, net..................... 533,891 522,469
Excess mortgage servicing rights receivable, net.............. 17,447 20,393
Accrued and deferred income taxes............................. 40,724 77,257
Real estate acquired.......................................... 2,627 2,797
Premises and equipment, net................................... 25,386 25,071
Other assets.................................................. 18,269 16,159
---------- ----------
Total assets.................................................. $ 1,254,303 $1,512,902
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Note payable to Bank of Boston................................ $ 966,000 $1,256,000
Accounts payable and accrued liabilities...................... 51,683 130,382
Accrued income taxes payable.................................. 36,213 --
Long term debt................................................ 13,816 13,790
---------- ----------
Total liabilities............................................. 1,067,712 1,400,172
---------- ----------
Common stock, $1 par value per share; 10,000 shares
authorized;
100 shares issued and outstanding........................... -- --
Additional paid in capital.................................... 156,666 156,666
Retained earnings (accumulated deficit)....................... 29,925 (43,936)
---------- ----------
Total stockholder's equity.................................... 186,591 112,730
---------- ----------
Total liabilities and stockholder's equity.................... $ 1,254,303 $1,512,902
========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-27
<PAGE> 132

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (DEFICIT)

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE QUARTER JANUARY 1, 1996
ENDED THROUGH
MARCH 31, 1995 MARCH 15, 1996
--------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
(UNAUDITED)
Revenues:
Mortgage servicing fees..................................... $ 43,657 $ 38,977
Gain (loss) on hedge contracts.............................. 3,612 (128,795)
Amortization of mortgage servicing rights................... (23,103) (7,245)
-------- ---------
Net servicing revenue.................................. 24,166 (97,063)
Interest income............................................. 4,122 8,423
Interest expense............................................ (6,079) (10,089)
-------- ---------
Net interest revenue................................... (1,957) (1,666)
Net mortgage origination revenue............................ (1,083) 7,638
Gain on sale of servicing rights............................ 4,285 --
Other income................................................ 13 253
-------- ---------
Total revenue.......................................... 25,424 (90,838)
Expenses:
Salaries and employee benefits.............................. 11,696 10,287
Occupancy and equipment..................................... 2,358 2,041
Servicing losses on investor-owned loans.................... 733 5,560
Real estate acquired........................................ 218 291
Other expenses.............................................. 4,713 7,377
-------- ---------
19,718 25,556
Income (loss) before income taxes........................... 5,706 (116,394)
Income tax expense (benefit)................................ 2,277 (42,533)
-------- ---------
Net income (loss)........................................... 3,429 (73,861)
Retained (deficit) earnings at beginning of period.......... (28,901) 29,925
-------- ---------
Accumulated deficit at end of period........................ $ (25,472) $ (43,936)
======== =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-28
<PAGE> 133

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
QUARTER JANUARY 1, 1996
ENDED THROUGH
MARCH 31, 1995 MARCH 15, 1996
-------------- ---------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)

<CAPTION>
(UNAUDITED)
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss).......................................... $ 3,429 $ (73,861)
Amortization............................................... 23,185 7,327
Depreciation............................................... 769 719
Servicing losses on investor-owned loans................... 733 5,560
Write down of real estate owned............................ 109 1,067
Gain (loss) on risk management contracts................... (3,612) 128,795
Loss on sale of mortgage servicing rights.................. (4,285) --
Capitalized excess mortgage servicing receivable........... 355 (3,967)
Mortgage loans originated and purchased for sale........... (426,918) (2,027,741)
Proceeds and principal repayments of mortgage loans held
for sale................................................. 627,155 1,774,712
Change in accounts receivable.............................. 394 37,633
Change in accrued and deferred income taxes................ (3,371) (72,746)
Change in pool loan purchases.............................. (2,269) 9,011
Change in mortgage claims receivable....................... 477 25,863
Change in other assets and accounts payable and accrued
liabilities.............................................. (18,578) 75,167
-----------
Net cash provided by (used in) operating activities............. 197,573 (112,461)
-----------
Cash flows used in investing activities:
Net origination of loans held for investment............... (71,908) (31,885)
Purchase of premises and equipment......................... (668) (404)
Purchase and origination of mortgage servicing rights...... (6,934) (60,171)
Proceeds from (purchase of) risk management contracts...... 3,262 (63,426)
Proceeds from sale of mortgage servicing rights............ 4,285 --
Proceeds from sale of real estate owned.................... 559 759
-----------
Net cash used in investing activities........................... (71,404) (155,127)
-----------
Cash flows (used in) provided by financing activities:
Net (repayments to) borrowings from Bank of Boston......... (130,522) 290,000
Repayment of long term debt................................ (46) (26)
-----------
Net cash (used in) provided by financing activities........ (130,568) 289,974
-----------
Net (decrease) increase in cash................................. (4,399) 22,386
Cash at beginning of period................................ 5,653 830
-----------
Cash at end of period........................................... $ 1,254 $ 23,216
===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest................................................... $ 9,165 $ 9,211
===========
Income taxes............................................... $ 5,648 $ 30,213
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-29
<PAGE> 134

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of BancBoston
Mortgage Corporation (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
in accordance with Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements and should be read in conjunction with the
audited consolidated financial statements of the Company for the year ended
December 31, 1995. In the opinion of management of the Company, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the period January 1,
1996 to March 15, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996.

The accompanying interim financial statements of the Company have been
prepared for the period January 1, 1996 to March 15, 1996, the date the Company
was sold, as discussed in "ORGANIZATION" below. Results of operations for
periods subsequent to March 15, 1996 will be included in future financial
statements of HomeSide, Inc. Results of operations for the three months ended
March 31, 1995 have been presented for comparative purposes.

2. ORGANIZATION

Prior to March 15, 1996, the Company was a wholly-owned subsidiary of the
First National Bank of Boston (Bank of Boston), which is a wholly-owned
subsidiary of Bank of Boston Corporation. Upon the close of business on March
15, 1996, Bank of Boston Corporation sold the Company to certain affiliates of
Thomas H. Lee Company and Madison Dearborn Capital Partner, L.P. (Investors),
creating an independent mortgage company, which was named HomeSide, Inc. Under
terms of the transaction, Bank of Boston received cash and an equity interest in
the new company. The investors retained a majority interest in the new company.

On May 31, 1996, Barnett Banks, Inc. (Barnett) sold Barnett Mortgage
Company (now HomeSide Holdings, Inc.), which owned certain of Barnett's mortgage
banking operations, primarily its servicing portfolio and proprietary mortgage
banking software systems, to HomeSide, Inc. Barnett received cash and an
affiliate of Barnett acquired an ownership interest in HomeSide, Inc. for cash.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company's accounting policies are discussed in Note 2 of the audited
consolidated financial statements of the Company for the year ended December 31,
1995. The accounting policies of the Company for the periods presented in the
accompanying interim financial statements conform to the policies presented in
the audited consolidated financial statements for the year ended December 31,
1995, except for the adoption of Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage Servicing Rights" (SFAS 122).

On January 1, 1996, the Company adopted SFAS 122 which, among other
provisions, requires that the value of mortgage servicing rights associated with
mortgage loans originated by an entity be capitalized as assets. The value of
the Company's originated mortgage servicing rights (OMSR) is determined by
allocating the total costs of the mortgage loans between the loans and the
mortgage servicing rights based on their relative fair values. Previously, OMSR
were included with the cost of the related loans and considered in determining
the gain or loss on sale when the loans were sold. Through March 15, 1996, the
Company capitalized $2,067,000 of OMSR, which had the effect of increasing net
mortgage origination revenue by $2,067,000 for the period January 1, 1996 to
March 15, 1996 since a portion of the basis of loans originated for sale was
allocated to OMSR.

F-30
<PAGE> 135

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SFAS 122 also requires that capitalized mortgage servicing rights be
evaluated for impairment based on the fair value of these rights. For purposes
of determining impairment, the Company's mortgage servicing rights are
stratified based on interest rate and type of loan (conventional/government).
Impairment, if any, is recognized through a valuation allowance for each
impaired stratum. The Company did not record any impairment charges related to
its mortgage servicing right portfolio for the period January 1, 1996 to March
15, 1996. Since SFAS 122 prohibits retroactive application, historical
accounting results have not been restated and, accordingly, the accounting
results for the quarter ended March 31, 1995 are not directly comparable with
the period January 1, 1996 to March 15, 1996.

4. RISK MANAGEMENT ACTIVITIES

As discussed in the Company's audited financial statements for the year
ended December 31, 1995, the Company has a risk management policy designed to
protect the economic value of its mortgage servicing portfolio from declines in
value due to increases in estimated prepayment speeds, which are primarily
influenced by declines in interest rates. During the first quarter of 1996,
long-term interest rates increased, reversing the declining trend which
prevailed during 1995. As a result, from January 1, 1996 to March 15, 1996, the
Company recognized a loss on risk management contracts of $128,795,000, which
included a reversal of $86,500,000 in unrealized gains recognized during 1995.

F-31
<PAGE> 136

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD APRIL 1, 1996 TO MAY 30, 1996,
THE PERIOD JANUARY 1, 1996 TO MAY 30, 1996 AND
THE THREE AND SIX MONTHS ENDED JUNE 30, 1995

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FOR THE THREE APRIL 1, 1996 FOR THE SIX JANUARY 1,
MONTHS ENDED TO MAY 30, MONTHS ENDED 1996 TO MAY
JUNE 30, 1995 1996 JUNE 30, 1995 30, 1996
------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Mortgage Origination Revenue:
Mortgage origination fees....... $ 3,469,496 $ 1,646,405 $ 6,004,619 $ 7,288,487
Gain on sales of loans, net..... 994,681 (3,382,960) 1,513,615 482,097
------------- -------------- -------------- --------------
Total mortgage origination
revenue.................. 4,464,177 (1,736,555) 7,518,234 7,770,584
------------- -------------- -------------- --------------
Interest Income (Expense):
Interest income................. 4,420,002 5,637,821 7,002,527 14,216,288
Interest expense, substantially
all to affiliates............. (6,766,123 ) (3,479,782) (9,684,960) (9,574,047)
------------- -------------- -------------- --------------
Net interest income
(expense)................ (2,346,121 ) 2,158,039 (2,682,433) 4,642,241
------------- -------------- -------------- --------------
Mortgage Servicing Revenue:
Mortgage servicing income....... 22,438,636 15,706,692 35,723,498 38,833,222
Mortgage servicing income from
affiliates.................... 6,407,273 5,464,308 12,502,709 13,626,195
Amortization of capitalized
mortgage servicing rights..... (12,123,793 ) (8,455,734) (20,474,792) (25,467,112)
------------- -------------- -------------- --------------
Net mortgage servicing revenue... 16,722,116 12,715,266 27,751,415 26,992,305
------------- -------------- -------------- --------------
Other Income......................... 6,203,385 1,678,385 7,054,383 1,739,967
------------- -------------- -------------- --------------
Total revenues.................. 25,043,557 14,815,135 39,641,599 41,145,097
------------- -------------- -------------- --------------
Expenses:
Salaries and benefits........... 14,300,768 10,401,903 23,433,243 25,172,581
General and administrative...... 12,119,341 6,816,094 20,402,735 20,748,278
Occupancy and equipment......... 2,424,081 1,568,623 3,941,229 3,719,982
Amortization of goodwill........ 1,673,052 928,449 2,225,827 2,323,547
------------- -------------- -------------- --------------
Total expenses............. 30,517,242 19,715,069 50,003,034 51,964,388
------------- -------------- -------------- --------------
Loss Before Income Taxes............. (5,473,685 ) (4,899,934) (10,361,435) (10,819,291)
Income Tax Benefit................... (2,117,689 ) (914,901) (2,876,941) (2,476,272)
------------- -------------- -------------- --------------
Net Loss............................. $ (3,355,996 ) $ (3,985,033) $ (7,484,494) $ (8,343,019)
============= ============ ============== ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-32
<PAGE> 137

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1996 TO MAY 30, 1996 AND
THE SIX MONTHS ENDED JUNE 30, 1996

<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED JANUARY 1, 1996
JUNE 30, 1995 TO MAY 30, 1996
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $ (7,484,494) $ (8,343,019)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Amortization of purchased mortgage servicing rights... 19,334,513 24,141,074
Amortization of excess servicing fees................. 1,140,279 1,326,038
Amortization of goodwill.............................. 2,225,827 2,323,547
Depreciation and amortization of property and
equipment........................................... 1,379,438 1,389,879
Capitalization of excess servicing fees............... (131,847) (6,436,908)
Gain on sale of mortgage servicing rights............. (4,849,738) --
Proceeds from sale of mortgage servicing rights....... 8,393,052 --
Origination of loans held for sale.................... (1,068,052,000) (1,204,553,000)
Sales of mortgage loans held for sale................. 992,831,897 1,422,203,868
Changes in assets and liabilities:
Accounts receivable, net......................... 1,770,362 32,354,311
Other assets..................................... 787,082 (22,768,003)
Accounts payable and accrued liabilities......... (4,477,798) (17,277,852)
Other, net....................................... 106,024 --
--------------- ---------------
Total adjustments........................... (49,542,909) 232,702,954
--------------- ---------------
Net cash (used in) provided by operating
activities................................ (57,027,403) 224,359,935
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchased and originated mortgage servicing rights....... (3,149,621) (17,869,158)
Net increase in loans held for investment................ (8,709,611) (14,137,015)
Net increase in real estate owned........................ (484,074) (837,758)
Purchase of property and equipment, net of retirements... (437,833) (647,946)
Net assets acquired by Barnett........................... -- 10,784,220
Business acquisitions, net of cash acquired.............. (158,747,064) --
--------------- ---------------
Net cash used in investing activities............ (171,528,203) (22,707,657)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in notes payable................. 70,819,419 (233,671,822)
Capital contributions.................................... 167,331,263 28,233,505
--------------- ---------------
Net cash provided by (used in) financing
activities................................................. 238,150,682 (205,438,317)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH............................ 9,595,076 (3,786,039)
CASH AT BEGINNING OF PERIOD................................ 3,900,572 14,987,783
============== ==============
CASH AT END OF PERIOD...................................... $ 13,495,648 $ 11,201,744
============== ==============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-33
<PAGE> 138

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 30, 1996 AND JUNE 30, 1995

1. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Barnett
Mortgage Company ("BMC") and its wholly owned subsidiaries, BancPLUS Financial
Corporation ("BancPLUS") and Loan America Financial Corporation ("LAFC"). Wholly
owned subsidiaries of BancPLUS include BancPLUS Mortgage Corp. and Honolulu
Mortgage Company, Inc. ("HMC"). As discussed in Note 2, BancPLUS and LAFC were
acquired in 1995 and 1994, respectively. These acquisitions were accounted for
as purchases; therefore, BancPLUS and LAFC are included in the consolidated
financial statements from their respective dates of acquisition. BMC is a wholly
owned subsidiary of Barnett Banks, Inc. (the "Parent"). All significant
intercompany accounts and transactions have been eliminated in consolidation.

2. ORGANIZATION

On February 28, 1995, BMC completed the acquisition of BancPLUS for
approximately $167 million in cash. BancPLUS and its wholly owned subsidiaries
are full service mortgage bankers based in San Antonio, Texas and Honolulu,
Hawaii, who had total assets of $244 million and a servicing portfolio of $13.9
billion at the date of acquisition. The purchase price in excess of net assets
acquired was $113 million.

On October 1, 1994, BMC completed the acquisition of LAFC for $60 million.
LAFC was a Miami based wholesale mortgage banking company which had assets of
$180 million and a servicing portfolio of approximately $4 billion at the date
of acquisition. The purchase price in excess of net assets acquired was $29
million.

On May 31, 1996, the parent sold BMC to HomeSide, Inc. Barnett received
cash and an affiliate of Barnett received an ownership interest in HomeSide,
Inc. for cash. As of May 31, 1996, BMC ceased to exist as a separate company and
operations for periods subsequent to that date will be included in the results
of operations of HomeSide, Inc. Accordingly, a May 31, 1996, balance sheet is
not presented for BMC and statement of operations data does not include periods
subsequent to May 30, 1996.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BMC's accounting policies are discussed in Note 1 of the audited
consolidated financial statements for the year ended December 31, 1995. The
accounting policies of BMC for the periods presented in the accompanying interim
financial statements conform to the policies presented in the audited
consolidated financial statements for the year ended December 31, 1995, except
for the adoption of Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights" ("SFAS 122").

On January 1, 1996, BMC adopted SFAS 122 which, among other provisions,
requires that the value of mortgage servicing rights associated with mortgage
loans originated by an entity be capitalized as assets. The adoption of SFAS 122
resulted in capitalized originated mortgage servicing rights ("OMSR") of
$5,892,000 and $13,353,000 for the periods April 1, 1996 to May 30, 1996 and
January 1, 1996 to May 30, 1996, respectively.

SFAS 122 requires that capitalized mortgage servicing rights be evaluated
for impairment based on the fair value of these rights. For purposes of
determining impairment, BMC's mortgage servicing rights are stratified based on
interest rate, fixed rate versus adjustable rate, and type of loan (conventional
versus government). Impairment, if any, is recognized through a valuation
allowance for each stratum. BMC did not recognize any impairment charges related
to its mortgage servicing rights portfolio for the periods April 1, 1996 to May
30, 1996 and January 1, 1996 to May 30, 1996.

Since SFAS 122 prohibits retroactive application, historical accounting
results have not been restated and, accordingly, the accounting results for the
periods April 1, 1996 to May 30, 1996 and January 1, 1996 to May 30, 1996 are
not directly comparable with the three and six months ended June 30, 1995.

F-34
<PAGE> 139

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors
BancBoston Mortgage Corporation

We have audited the accompanying consolidated balance sheets of BancBoston
Mortgage Corporation as of December 31, 1994 and 1995, and the related
consolidated statements of operations and retained earnings and cash flows for
each of the three years in the period then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of BancBoston
Mortgage Corporation as of December 31, 1994 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period then ended, in conformity with generally accepted accounting
principles.

As discussed in Notes 2 and 10, BancBoston Mortgage Corporation adopted
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, and changed its method of accounting for purchased mortgage servicing
rights, effective January 1, 1993. BancBoston Mortgage Corporation also changed
its method of accounting for mortgage servicing fee income, effective January 1,
1994.

COOPERS & LYBRAND L.L.P.

Jacksonville, Florida

January 18, 1996, except
for the second paragraph
of Note 1 and the fifth
paragraph of Note 2, as to
which the date is March 4, 1996

F-35
<PAGE> 140

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1994 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash................................................................ $ 5,653 $ 830
Mortgage loans
Held for sale..................................................... 271,215 388,436
Held for investment............................................... 28,589 33,183
Purchased mortgage servicing rights, net............................ 415,815 533,891
Excess mortgage servicing receivable, net........................... 15,333 17,447
Accounts receivable................................................. 66,390 82,473
Accounts receivable from Bank of Boston and affiliates.............. 373 343
Pool loan purchases................................................. 77,477 65,272
Mortgage claims receivable, net..................................... 48,835 45,422
Deferred tax asset.................................................. 31,012 40,724
Real estate acquired................................................ 924 2,627
Premises and equipment, net......................................... 25,279 25,386
Other assets........................................................ 19,992 18,269
---------- ----------
Total Assets.............................................. $1,006,887 $1,254,303
========== ==========
LIABILITIES & STOCKHOLDER'S EQUITY
Note payable to Bank of Boston...................................... $ 779,021 $ 966,000
Accounts payable and accrued liabilities............................ 81,269 51,683
Accrued income taxes................................................ 4,825 36,213
Long-term debt...................................................... 14,007 13,816
---------- ----------
Total Liabilities......................................... 879,122 1,067,712
---------- ----------
Commitments and Contingencies (Notes 1, 9, 11, 13 and 15)
Stockholder's Equity:
Common stock, $1 par value per share: 10,000 shares authorized;
100 shares issued and outstanding
Additional paid-in capital........................................ 156,666 156,666
Retained earnings (Accumulated deficit)........................... (28,901) 29,925
---------- ----------
Total Stockholder's Equity..................................... 127,765 186,591
---------- ----------
Total Liabilities & Stockholder's Equity.................. $1,006,887 $1,254,303
========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-36
<PAGE> 141

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1993 1994 1995
--------- -------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Revenues:
Mortgage servicing fees................................ $ 111,822 $140,491 $ 173,038
Gain (loss) on risk management contracts............... 6,688 (6,702) 108,702
Amortization of mortgage servicing rights.............. (112,492) (66,801) (108,013)
-------- --------- ---------
Net servicing revenue............................... 6,018 66,988 173,727
-------- --------- ---------
Interest income........................................ 50,156 31,585 24,324
Interest expense....................................... (44,199) (33,952) (27,128)
-------- --------- ---------
Net interest revenue................................ 5,957 (2,367) (2,804)
-------- --------- ---------
Net mortgage origination revenue....................... 6,173 4,983 3,417
Gain on sales of servicing rights...................... 651 10,862 10,230
Other income........................................... 50 147 511
-------- --------- ---------
Total Revenue.................................. 18,849 80,613 185,081
-------- --------- ---------
Expenses:
Salaries and employee benefits......................... 33,096 40,370 45,381
Occupancy and equipment................................ 7,966 9,012 10,009
Servicing losses on investor-owned loans............... 2,770 7,177 9,981
Real estate acquired................................... 1,600 253 1,054
Other expenses......................................... 22,058 19,326 21,896
-------- --------- ---------
Total Expenses................................. 67,490 76,138 88,321
-------- --------- ---------
Income (loss) before income taxes and cumulative
effects of changes in accounting principles............ (48,641) 4,475 96,760
Income tax expense (benefit) before cumulative
effects of changes in accounting principles:
Current................................................ (1,425) 4,773 47,646
Deferred............................................... (15,859) (2,248) (9,712)
-------- --------- ---------
Total Income Tax Expense (Benefit)............. (17,284) 2,525 37,934
-------- --------- ---------
Income (loss) before cumulative effects of changes
in accounting principles............................... (31,357) 1,950 58,826
Cumulative effect on prior years of:
Change in purchased mortgage servicing rights (PMSR)
valuation method, net of tax........................... (59,921) -- --
Change in accounting for income taxes.................... 6,093 -- --
Change in accounting for mortgage servicing fee income,
net of tax............................................. -- 3,455 --
-------- --------- ---------
Net Income (Loss)................................... (85,185) 5,405 58,826
Retained Earnings (Accumulated Deficit), January 1....... 50,879 (34,306) (28,901)
-------- --------- ---------
Retained Earnings (Accumulated Deficit), December 31..... $ (34,306) $(28,901) $ 29,925
======== ========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-37
<PAGE> 142

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows (used in) provided by operating
activities:
Net income (loss)................................. $ (85,185) $ 5,405 $ 58,826
Adjustments to reconcile net income (loss) to cash
(used in) provided by operations:
Cumulative effects of change in:
PMSR valuation, net of tax................... 59,921 -- --
Accounting for income taxes.................. (6,093) -- --
Accounting for mortgage servicing fees, net
of tax.................................... -- (3,455) --
Amortization................................... 117,177 67,207 108,404
Depreciation................................... 2,243 2,621 3,133
Servicing losses on investor-owned loans....... 2,770 7,177 9,981
Deferred tax benefit........................... (15,859) (2,248) (9,712)
Gain on sale of mortgage servicing rights...... (651) (10,862) (10,230)
(Gain) loss on risk management contracts....... (6,688) 6,702 (108,702)
Write down of real estate acquired............. 1,113 1,066 1,699
Capitalized excess mortgage servicing
receivable................................... (13,557) (3,653) (7,513)
Mortgage loans originated and purchased for
sale......................................... (8,525,347) (4,673,100) (4,816,964)
Proceeds and principal repayments of mortgage
loans held for sale.......................... 8,395,528 5,005,969 4,694,909
Change in accounts receivable.................. (13,827) (7,482) (16,053)
Change in pool loan purchases.................. (1,345) 9,002 12,205
Change in mortgage claims receivable........... (13,681) 4,574 (5,383)
Change in accrued income taxes................. (3,584) (1,231) 31,388
Change in other assets and accounts payable and
accrued liabilities.......................... (3,154) (13,051) (11,899)
----------- ----------- -----------
Net cash (used in) provided by operating
activities................................... (110,219) 394,641 (65,911)
----------- ----------- -----------
Cash flows used in investing activities:
Principal payments on mortgage loans
held for investment............................ 7,038 11,216 12,966
Purchase of premises and equipment................ (4,170) (5,355) (3,141)
Acquisition of Bell Mortgage...................... -- -- (891)
Purchase of mortgage servicing rights............. (124,693) (164,047) (193,013)
Proceeds from risk management contracts, net...... 6,688 (9,641) 27,120
Proceeds from real estate acquired................ 5,010 2,773 2,610
Proceeds from sales of mortgage servicing
rights......................................... 651 10,862 28,649
----------- ----------- -----------
Net cash used in investing activities.......... (109,476) (154,192) (125,700)
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-38
<PAGE> 143

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows provided by (used in) financing
activities:
Borrowings from Bank of Boston.................... 7,674,500 3,988,224 3,669,085
Repayments to Bank of Boston...................... (7,455,481) (4,228,214) (3,482,106)
Repayment of long-term debt....................... (159) (173) (191)
----------- ----------- -----------
Net cash provided by (used in) financing
activities................................... 218,860 (240,163) 186,788
----------- ----------- -----------
Net (decrease) increase in cash..................... (835) 286 (4,823)
Cash at January 1................................. 6,202 5,367 5,653
----------- ----------- -----------
Cash at December 31............................... $ 5,367 $ 5,653 $ 830
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest....................................... $ 44,809 $ 32,819 $ 27,498
=========== =========== ===========
Income taxes................................... $ 2,158 $ 7,864 $ 16,258
=========== =========== ===========
Supplemental schedule of non-cash investing
activities:
BBMC purchased bulk mortgage servicing rights
during the years 1993, 1994 and 1995. In
conjunction with purchases, liabilities were
assumed as follows:
Accounts payable.................................. $ 14,586 $ 60,188 $ 23,022
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-39
<PAGE> 144

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

BancBoston Mortgage Corporation (BBMC) is a wholly-owned subsidiary of The
First National Bank of Boston (Bank of Boston), which is a wholly-owned
subsidiary of Bank of Boston Corporation. In December 1995, Bank of Boston
Corporation signed an agreement with Thomas H. Lee Company and Madison Dearborn
Partners (Investors) to sell BBMC, creating an independent mortgage company.
Under the terms of the agreement, Bank of Boston will receive cash and an equity
interest in the new company. The Investors will acquire a majority interest in
the new company. The transaction is expected to close in the first half of 1996.

On March 4, 1996, Barnett Banks, Inc. (Barnett) entered into an agreement
to sell certain of its mortgage banking operations, primarily its servicing
portfolio and proprietary mortgage banking software systems to the new company.
Barnett will receive cash and an ownership interest in the new company. The
transaction is expected to close in the second quarter of 1996.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The consolidated financial statements include BBMC and its wholly-owned
subsidiaries. All material intercompany transactions have been eliminated.
Certain reclassifications have been made to the 1993 and 1994 financial
statements to conform to the 1995 presentation.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Interest rate products

BBMC enters into financial agreements and purchases financial instruments
as part of its interest rate risk management strategy. These agreements are not
considered trading instruments and are primarily entered into for purposes of
managing the prepayment risk associated with mortgage servicing rights and
interest rate risk relative to commitments to originate mortgage loans against
market value declines resulting from fluctuations in interest rates. These
instruments and agreements are designated as a part of BBMC's risk management
strategy and are linked to the related assets being managed.

BBMC acquires financial instruments, including derivative contracts (risk
management contracts), to partially protect the value of mortgage servicing
rights from the effects of prepayment activity caused by interest rate declines.
These financial instruments increase or decrease in value in an inverse
relationship to changes in market interest rates. Accordingly, as interest rates
decline, these financial instruments will increase in value, and as interest
rates increase, these financial instruments will decline in value. The value of
these financial instruments will fluctuate daily with interest rate changes, and
these fluctuations may be significant. However, the decline in the value of
these financial instruments is limited to the value recorded in the balance
sheet. These financial instruments primarily include options on U.S. treasury
futures, forward contracts, and interest rate floors.

As of March 4, 1996, due to rising interest rates, the risk management
contracts had declined in value by the carrying amount recorded on the balance
sheet at December 31, 1995 (see Note 14).

The cost of option contracts to manage BBMC's fixed and variable rate loan
origination commitments are capitalized and amortized as an adjustment of gain
or loss over the life of the underlying option contract.

F-40
<PAGE> 145

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Unamortized premiums are included in other assets on the balance sheet. At
December 31, 1995, BBMC had call options to purchase mortgage-backed securities
with a total face amount of $315.0 million. The unamortized premiums associated
with these options was $1.1. million at December 31, 1995. There were no put
options outstanding as of the balance sheet date.

Short-term option contracts that are used to manage interest rate risk on
BBMC's mortgage servicing rights are marked-to-market with gains or losses
recognized in current income. The current market value of these option contracts
are included in the balance of capitalized mortgage servicing rights. At
December 31, 1995, the current market value of these option contracts included
in mortgage servicing rights was $84.9 million. Unrealized gains (losses) at
December 31, 1995 and 1994 included in the consolidated statements of operations
were $86.5 million and ($2.9) million for 1995 and 1994, respectively. All gains
and losses recognized in 1993 were realized.

Mortgage loans

Mortgage loans held for investment are stated at the lower of cost or fair
value at the time the permanent investment decisions are made. Discounts, if
any, are amortized over the anticipated life of the investment.

Loans are placed on nonaccrual status when any portion of the principal or
interest is ninety days past due or earlier when concern exists as to the
ultimate collectibility of principal or interest. When loans are placed on
nonaccrual status, the related interest receivable is reversed against interest
income of the current period. Interest payments received on nonaccrual loans are
applied as a reduction of the principal balance when concern exists as to the
ultimate collection of principal; otherwise, such payments are recognized as
interest income. Loans are removed from nonaccrual status when principal and
interest become current and they are estimated to be fully collectible.

Purchased and originated mortgage servicing rights

Purchased mortgage servicing rights (PMSR) represent the cost of purchasing
the right to service mortgage loans originated by others. PMSR are amortized as
a reduction of servicing fee income over the estimated servicing period in
proportion to the estimated future net cash flows from the loans serviced.
Remaining PMSR asset balances are evaluated for impairment by determining their
estimated recoverable amount through applying the discount rate in effect at the
time the servicing was purchased to the estimated future aggregate net cash
flows from the underlying mortgages. The carrying value is written down for any
impairment; such write-downs are included in the amortization of mortgage
servicing rights. Prior to 1993, this valuation was performed on an undiscounted
basis.

In May 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 122, Accounting for
Mortgage Servicing Rights. This Statement, among other provisions, requires that
the value of mortgage servicing rights associated with mortgage loans originated
by an entity be capitalized as assets. The value of originated mortgage
servicing rights (OMSR) is determined by allocating the total costs of the
mortgage loans between the loans and the mortgage servicing rights based on
their relative fair values. Presently, OMSR are included with the cost of the
related loans and considered in determining the gain or loss on sale when the
loans are sold. Also, the new Statement requires that capitalized mortgage
servicing rights be evaluated for impairment based on the fair value of these
rights. For the purposes of determining impairment, mortgage servicing rights
that are capitalized after the adoption of this Statement

F-41
<PAGE> 146

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

are stratified based on one or more of the predominate risk characteristics of
the underlying loans. Impairment is recognized through a valuation allowance for
each impaired stratum.

The Statement applies prospectively to fiscal years beginning after
December 15, 1995. BBMC plans to adopt the Statement beginning January 1, 1996.
The actual effect of implementing this new Statement on BBMC's financial
position and results of operations will depend on factors including the amount
and mix of originated and purchased production, the level of interest rates, and
market estimates of future prepayment rates.

Accordingly, BBMC cannot determine at this time the ultimate impact on its
future earnings of applying the new methodologies of recording all mortgage
servicing rights as assets, of calculating impairment, and of applying the other
provisions of the Statement.

Excess mortgage servicing receivable

Excess mortgage servicing receivable (EMSR) represents the present value of
servicing fee income in excess of a normal servicing fee. When loans are sold,
the estimated excess servicing is recognized as income and amortized over the
estimated servicing period in proportion to the estimated future aggregate net
cash flows from the loans serviced. Remaining asset balances are evaluated for
impairment based on current estimates of future discounted cash flows. Such
write-downs are included in amortization of mortgage servicing rights.

Accounts receivable

Accounts receivable includes advances made in connection with loan
servicing activities. These advances consist primarily of payments for property
taxes and insurance premiums, as well as, principal and interest remitted to
investors before they are collected from mortgagors.

Pool loan purchases

Pool loan purchases are carried at cost and consist of FHA-insured,
VA-guaranteed, and conventional loans purchased from mortgage-backed securities
serviced by BBMC for others. At the purchase date, these loans were delinquent
or in the process of foreclosure or repayment. Losses associated with pool loan
purchases are largely reimbursed by the insurer.

Mortgage claims receivable

Mortgage claims receivable includes claims filed primarily with the FHA and
the VA. These receivables are carried at cost, less an allowance for estimated
amounts that are not collectible from the mortgage insuring agencies.

Real estate acquired

Real estate acquired includes properties on which BBMC has foreclosed and
taken title. It is initially reported at the lower of the carrying value of the
loan or the fair value of the real estate obtained, less estimated selling
costs. The excess, if any, of the loan balance over the fair value of the
property at the time of transfer to real estate acquired is charged to the
reserve for estimated servicing losses on investor-owned loans. Subsequent
declines in the value of the property and costs related to holding the property
are charged against income.

F-42
<PAGE> 147

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Premises and equipment

Other assets

Other assets consist primarily of a prepaid pension asset of $10.1 million,
allocated from the Bank of Boston, and the excess of cost over fair value of net
assets acquired. The excess of cost over fair value of net assets acquired is
amortized using a straight-line basis over periods varying from seven to
twenty-five years.

Mortgage servicing fees

Servicing losses on investor-owned loans

BBMC records losses attributable to servicing FHA and VA loans for
investors. These amounts include actual losses for final disposition of loans,
accrued interest for which payment has been denied, and estimates for potential
losses based on BBMC's experience as a servicer of government loans.

Net mortgage origination revenue

Net mortgage origination revenue includes gains and losses from sales of
mortgage loans, deferred origination fees and expenses, and the present value of
gains from the EMSR.

Income taxes

BBMC files its federal tax return through inclusion in Bank of Boston
Corporation's consolidated return. Accordingly, Bank of Boston's federal tax
provision is allocated to all member subsidiaries as if each member were a
separate taxpayer. However, the timing of utilization of certain of BBMC's tax
attributes may differ from a stand-alone tax-paying basis.

BBMC accounts for income taxes in accordance with SFAS No. 109, Accounting
for Income Taxes, which was prospectively adopted effective January 1, 1993.
Note 10 includes additional information with respect to the adoption of this
Statement. Under the Statement, current tax liabilities or assets are recognized
through charges or credits to the current tax provision for the estimated taxes
payable or refundable for the current year.

F-43
<PAGE> 148

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The effect of enacted changes in tax law, including changes in tax rates,
on deferred tax assets and liabilities is recognized in income in the period
that includes the enactment date.

Accounting changes

Effective January 1, 1993, BBMC elected to change its method of valuing its
mortgage servicing rights from an undiscounted basis to a discounted basis to
conform its financial reporting to the regulatory accounting rules adopted by
the bank regulators in 1993.

The cumulative effect to January 1, 1993 of adopting this change in
accounting principle was an increase in net loss of approximately $59.9 million,
which is net of $30.9 million of income tax benefit. Effective January 1, 1994,
BBMC changed its method of accounting for mortgage servicing fees from the cash
basis to the accrual basis. The cumulative effect to January 1, 1994 of this
accounting change was an increase in net income of approximately $3.5 million,
which is net of income taxes of $1.9 million.

BBMC's income (loss) before income taxes and cumulative effects of changes
in accounting principles and net income (loss) for 1993 and 1994, as if the
changes for the valuing of mortgage servicing rights and the change in
accounting for mortgage servicing fees had been retroactively applied, would
have been as follows:

<TABLE>
<CAPTION>
1993 1994
-------- ------
(IN THOUSANDS)
<S> <C> <C>
Income (loss) before income taxes and cumulative effects of
changes in accounting principles............................... $(48,013) $4,475
-------- ------
Net income (loss)................................................ $(24,850) $1,950
======== ======
</TABLE>

3. PURCHASED MORTGAGE SERVICING RIGHTS AND EXCESS MORTGAGE SERVICING RECEIVABLE

PMSR consist of the following:

<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
PMSR....................................................... $ 732,775 $ 954,931
Accumulated amortization................................... (316,960) (421,040)
--------- ---------
Balance at December 31..................................... $ 415,815 $ 533,891
========= =========
</TABLE>

EMSR consists of the following:

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
(IN THOUSANDS)
EMSR......................................................... $ 60,419 $ 66,465
Accumulated amortization..................................... (45,086) (49,018)
-------- --------
Balance at December 31....................................... $ 15,333 $ 17,447
======== ========
</TABLE>

F-44
<PAGE> 149

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. RESERVE FOR ESTIMATED SERVICING LOSSES ON INVESTOR-OWNED LOANS

An analysis of the reserve for estimated servicing losses on investor-owned
loans is as follows:

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
Balance at January 1.................................. $(5,000) $(4,700) $(6,650)
Servicing losses on investor-owned loans.............. (2,770) (7,177) (9,981)
Charge-offs........................................... 3,462 5,304 7,473
Recoveries............................................ (392) (77) (242)
------- ------- -------
Balance at December 31................................ $(4,700) $(6,650) $(9,400)
======= ======= =======
</TABLE>

5. MORTGAGE SERVICING PORTFOLIO

BBMC's residential mortgage servicing portfolio totaled $37.9 billion and
$41.5 billion at December 31, 1994 and 1995, respectively, and included
mortgage-backed securities of $24.0 billion and $28.5 billion in 1994 and 1995,
respectively. In addition, BBMC's commercial loan servicing portfolio totaled
$1.0 billion and $0.9 billion in 1994 and 1995, respectively. Related fiduciary
funds are segregated in trust accounts, principally deposited with Bank of
Boston, and are not included in the accompanying consolidated financial
statements.

BBMC has in force an errors and omissions policy in the amount of $20
million. Fidelity coverage up to a limit of $75 million, subject to a $1 million
deductible, is provided under a Bank of Boston master program.

6. PREMISES AND EQUIPMENT

Premises and equipment consist of the following:

<TABLE>
<CAPTION>
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land......................................................... $ 4,086 $ 4,086
Building..................................................... 14,251 14,477
Furniture and equipment...................................... 24,300 26,870
Leasehold improvements....................................... 752 824
-------- --------
43,389 46,257
Accumulated depreciation and amortization.................... (18,110) (20,871)
-------- --------
Balance at December 31....................................... $ 25,279 $ 25,386
======== ========
</TABLE>

7. NOTE PAYABLE TO BANK OF BOSTON

BBMC borrows funds on a demand basis from Bank of Boston under a $1.25
billion line of credit, collateralized by substantially all of BBMC's assets. At
December 31, 1994 and 1995, the interest rate was 8.5% and 6.8%, respectively,
less the benefit received from balances held at Bank of Boston. Interest
expense, net of this benefit, was $25.0 million, $24.6 million, and $20.5
million in 1993, 1994, and 1995, respectively.

F-45
<PAGE> 150

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. LONG-TERM DEBT

Long-term debt consists of a 30-year mortgage note, payable monthly with
interest at 9 1/2%, maturing in 2017. BBMC's main office building is pledged as
collateral. Principal payments due on long-term debt are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996........................................... $ 210
1997........................................... 231
1998........................................... 233
1999........................................... 279
2000........................................... 307
Thereafter..................................... 12,556
--------------
Total Due............................ $ 13,816
===========
</TABLE>

9. EMPLOYEE BENEFITS

BBMC participates with Bank of Boston and its affiliates in a
non-contributory defined benefit pension plan (Plan) covering substantially all
full-time employees. Bank of Boston funds the Plan in compliance with the
requirements of the Employee Retirement Income Security Act.

The Plan is an account balance defined benefit plan in which each employee
has an account to which amounts are allocated based on level of pay and years of
service and which grows at a specific rate of interest. Benefits accrued prior
to 1989 are based on years of service, highest average compensation, and social
security benefits. Expense (income) associated with this Plan was ($0.9)
million, ($1.1) million and $0.5 million in 1993, 1994 and 1995, respectively.

BBMC also maintains non-qualified deferred compensation and retirement
plans for certain officers. All benefits provided under these plans are unfunded
and any payments to plan participants are made by BBMC. As of December 31, 1994
and 1995, approximately $0.8 million and $0.7 million, respectively, were
included in accrued expenses and other liabilities for these plans. For the
years ended December 31, 1993, 1994, and 1995, expense related to these plans
was $0.1 million, $0.2 million and $0.2 million, respectively.

BBMC also participates with Bank of Boston and its affiliates in a thrift
incentive plan. Under this plan, employer contributions are generally based on
the amount of eligible employee contributions. The amounts charged to operating
expense under this plan were $0.5 million, $0.8 million, and $0.2 million in
1993, 1994, and 1995, respectively.

BBMC participates with Bank of Boston and its affiliates by providing
certain health and life insurance benefits for retired employees. Eligible
employees currently receive credits up to $10 thousand based on years of
service, which are used to purchase post-retirement health care coverage. Life
insurance coverage is dependent on years of service at retirement. Amounts
charged to employee benefits expense for these benefits were $0.6 million in
1993, $0.6 million in 1994, and $0.5 million in 1995.

F-46
<PAGE> 151

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of post-retirement benefits expense for the three years
ended December 31 were as follows:

<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost (benefits earned during the period).............. $ 44 $ 63 $ 53
Interest cost on projected benefit obligation................. 280 282 264
Amortization:
Unrecognized net asset...................................... 250 250 250
Unamortized gain............................................ (20) (11) (53)
---- ---- ----
Net post-retirement benefit cost.............................. $554 $584 $514
==== ==== ====
</TABLE>

BBMC's unfunded accumulated post-retirement benefit obligation for the two
years ended December 31 was as follows:

<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated post-retirement benefit obligation for retirees...... $ 3,711 $ 3,515
Unrecognized net gain............................................ 1,385 1,541
Unrecognized net obligation...................................... (4,500) (4,250)
------- -------
Post-retirement benefit liability................................ $ 596 $ 806
======= =======
</TABLE>

Assumptions used in actuarial computations were:

<TABLE>
<CAPTION>
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Rate of increase in future
compensation
levels.............................. 4.50% 4.50% 4.50%
Weighted average discount rate........ 7.50% 8.25% 7.25%
Medical inflation rate................ 12% declining 11% declining 8% declining
to 5% in 2001 to 5% in 2001 to 5% in 1999
</TABLE>

An increase of 1% in the assumed health care cost trend rate would result
in an increase of 4.8%, 5.9%, and 5.8% in the accumulated post-retirement
benefit obligation and 4.1%, 4.9%, and 4.9% in annual post-retirement benefit
expense in 1993, 1994, and 1995, respectively.

10. INCOME TAXES

The components of the net deferred tax asset at December 31 are as follows:

<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
(IN THOUSANDS)
PMSR............................................................. $27,223 $34,008
EMSR............................................................. 9,303 8,957
Reserve for estimated servicing losses on investor-owned loans... 2,529 3,657
Other............................................................ (2,385) (1,301)
Valuation reserve................................................ (5,658) (4,597)
------- -------
Net deferred tax assets, net of reserve.......................... $31,012 $40,724
======= =======
</TABLE>

The deferred tax assets, net of the valuation reserve, can be realized from
the reversal of existing deferred tax liabilities and by carryback to previous
years with taxable income. The valuation reserve has been primarily established
against state deferred tax assets where carryback is not permitted.

F-47
<PAGE> 152

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the provision for (benefit from) income taxes for the
years ending December 31 are as follows:

<TABLE>
<CAPTION>
1993 1994 1995
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current tax provision (benefit)...................... $ (1,425) $ 4,773 $47,646
Deferred tax
Benefit on income.................................. (15,859) (2,587) (8,651)
Change in valuation reserve........................ -- 339 (1,061)
-------- ------- -------
Net deferred tax benefit............................. (15,859) (2,248) (9,712)
Income tax provision (benefit) before cumulative
effect of changes in accounting principles......... (17,284) 2,525 37,934
Change in accounting for:
PMSR............................................... (30,868) -- --
Income taxes....................................... (6,093) -- --
Mortgage servicing fee............................. -- 1,860 --
-------- ------- -------
Total income tax provision (benefit)................. $(54,245) $ 4,385 $37,394
======== ======= =======
</TABLE>

Effective January 1, 1993, BBMC adopted prospectively SFAS No. 109, which
principally affects accounting for deferred taxes. The cumulative effect to
January 1, 1993 of adopting this new Standard was a decrease in net loss of $6.1
million.

The following table reconciles the expected federal tax provision (benefit)
on income (loss) before cumulative effect of changes in accounting principles,
based on the federal statutory tax rate of 35% in 1993, 1994, and 1995, to the
actual tax provision (benefit) before cumulative effect of changes in accounting
principles:

<TABLE>
<CAPTION>
1993 1994 1995
-------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Expected tax provision (benefit) applicable to income (loss)
before cumulative effect of changes in accounting
principles.................................................. $(17,024) $1,567 $33,866
Effect of:
State income taxes, net of federal tax benefits............. -- 381 3,774
Federal tax rate change to 35% on deferred tax assets....... (408) -- --
Other....................................................... 148 577 294
-------- ------ -------
Actual tax provision (benefit) before cumulative effect of
changes in accounting principles............................ $(17,284) $2,525 $37,934
======== ====== =======
</TABLE>

F-48
<PAGE> 153

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. LEASE COMMITMENTS

BBMC leases office facilities and equipment under noncancelable leases that
include renewal options and escalation clauses which extend into 1999. Rental
expense for leases of office facilities and equipment was $3.6 million in both
1993 and 1994 and $3.9 million in 1995. BBMC's minimum future lease commitments
are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996................................................... $1,996
1997................................................... 622
1998................................................... 280
1999................................................... 52
Thereafter............................................. --
-------
Total........................................ $2,950
===========
</TABLE>

12. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

BBMC purchases financial instruments and enters into financial agreements
with off-balance sheet risk in the normal course of business through the
origination and selling of mortgage loans and the management of the risk of
fluctuations in interest rates. These instruments involve, to varying degrees,
elements of credit and interest rate risk. Credit risk is the possibility that a
loss may occur if a counterparty to a transaction fails to perform according to
the terms of the contract. Interest rate risk is the possibility that a change
in interest rates will cause the value of a financial instrument to decrease or
become more costly to settle. Financial instruments primarily used by BBMC
include commitments to extend credit, mandatory and optional forward
commitments, commitments to purchase mortgage servicing rights, and other
instruments to minimize the interest rate risk of capitalized servicing assets,
primarily options on treasury bond futures.

Options and forward contracts

BBMC purchases options and forward contracts to protect the value of
mortgage servicing assets from exposure to increases in prepayment activity and
to reduce the impact of interest rate fluctuations on its lending commitments.
The notional amount of the options and forward contracts is the amount upon
which interest and other payments under the contract are based and is generally
not exchanged. Therefore, the notional amounts should not be taken as the
measure of credit risk or a reflection of future cash requirements. The risk
associated with options and forwards is the exposure to current and expected
market movements in the interest rates and the ability of the counterparties to
meet the terms of the contracts. The cash requirements associated with these
options and forward contracts, aside from the initial purchase price, are
minimal. These contracts generally require future performance on the part of the
counterparty upon exercise of the option or execution of the forward contract by
BBMC.

BBMC is exposed to credit loss in the event of nonperformance by the
counterparties to the various instruments. BBMC controls credit and market risk
associated with interest rate products by establishing and monitoring limits as
to the types and degree of risks that may be undertaken. BBMC's exposure to
credit risk in the event of default by the counterparties for the options is
$123.3 million which was due at December 31, 1995.

BBMC's exposure to credit risk in the event of default by the counterparty
for mandatory forward commitments to sell mortgage loans is the difference
between the contract price and the current market price, offset by any available
margins retained by BBMC or an independent clearing agent. The amount of credit
risk as of December 31, 1995, if all counterparties failed completely and if the
margins, if any, retained by BBMC

F-49
<PAGE> 154

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

or an independent clearing were to become unavailable, was approximately $24.1
million for mandatory forward commitments of mortgage-backed securities.

The following is a summary of BBMC's notional amounts and fair values of
interest rate products as of December 31, 1994 and 1995.

<TABLE>
<CAPTION>
1994 1995
---------------------- ------------------------
ESTIMATED ESTIMATED
NOTIONAL FAIR NOTIONAL FAIR
AMOUNT VALUE(1) AMOUNT VALUE(1)
-------- --------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Purchased commitments to sell mortgage loans:
Mandatory forward contracts.................... $286,430 $ 4,413 $1,169,559 $ (9,798)
Options on mortgage-backed securities.......... 87,000 172 315,000 --
Risk management contracts:
Purchased...................................... 371,000 2,157 3,107,500 118,753
Sold........................................... -- -- 295,000 (33,833)
</TABLE>

- ---------------
(1) Fair value represents the amount at which a given instrument could be
exchanged in an arms length transaction with a third party as of the balance
sheet date.

(2) See Note 14 for additional disclosures on fair value of financial
instruments.

Commitments to originate mortgage loans

BBMC regularly enters into commitments to originate mortgage loans at a
future date subject to compliance with stated conditions. Commitments to
originate mortgage loans have off-balance sheet risk to the extent BBMC does not
have matching commitments to sell loans, which exposes BBMC to lower of cost or
market valuation adjustments in a rising interest rate environment.
Additionally, the extension of a commitment, which is subject to BBMC's credit
review and approval policies, gives rise to credit exposure when certain
borrowing conditions are met and the loan is made. Until such time, it
represents only potential exposure. The obligation to lend may be voided if the
customer's financial condition deteriorates or if the customer fails to meet
certain conditions. Commitments to originate mortgage loans do not necessarily
reflect future cash requirements since some of the commitments are expected to
expire without being drawn upon. Commitments to originate mortgage loans totaled
$194.5 million at December 31, 1994 and $885.6 million at December 31, 1995.

Mortgage loans sold with recourse

BBMC sells mortgage loans with recourse to various investors and retains
the servicing rights on these loans. The total outstanding balance of loans sold
with recourse does not necessarily represent future cash outflows. The total
outstanding principal balance of loans sold with recourse was $9.0 million at
December 31, 1994 and $6.8 million at December 31, 1995.

Servicing commitments to investors

BBMC is required to submit to certain investors, primarily GNMA, guaranteed
principal and interest payments from the underlying mortgage loans regardless of
actual collections.

Purchase mortgage servicing rights commitments

BBMC routinely enters into commitments to purchase mortgage servicing
rights associated with mortgages originated by third parties, subject to
compliance with stated conditions. These commitments to

F-50
<PAGE> 155

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

purchase mortgage servicing rights, expiring during 1996, correspond to mortgage
loans having an aggregate loan principal balance of approximately $2.7 billion
at December 31, 1995.

Geographical concentration of credit risk

BBMC is engaged in business nationwide and has no material concentration of
credit risk in any geographic region.

13. OTHER RELATED PARTY TRANSACTIONS

BBMC services mortgage loans for Bank of Boston and its affiliates. The
balances of those portfolios totaled $3.3 billion and $2.0 billion at December
31, 1994 and 1995, respectively. Related servicing fees are included in mortgage
servicing fees and were $5.4 million, $8.4 million and $7.6 million in 1993,
1994, and 1995, respectively.

BBMC reimburses Bank of Boston and its affiliates for certain occupancy and
supplies costs. Total costs reimbursed were $.0.7 million in 1993, 1994, and
1995.

BBMC services real estate acquired by the Bank of Boston and its
affiliates. Related expenses are reimbursed and were $0.3 million in 1993, $2.1
million in 1994, and $1.7 million in 1995.

An affiliate of Bank of Boston purchases a 99.25% participation in
mortgages in the process of being sold to permanent investors. The principal
balances sold under this agreement aggregated approximately $3.6 billion and
$6.5 billion in 1994 and 1995, respectively.

BBMC purchased mortgage servicing rights from Bank of Boston during 1995
and capitalized $4.8 million in mortgage servicing rights associated with this
transaction.

BBMC sold mortgage loans to Bank of Boston and its affiliates in its normal
course of business. These sales totaled $1.3 billion, $0.4 billion, and $0.5
billion in 1993, 1994, and 1995, respectively. Included in mortgage loans held
for sale at December 31 are loans which will be sold to Bank of Boston and its
affiliates totaling $94.5 million and $18.1 million for 1994 and 1995,
respectively.

Miscellaneous administrative services are provided by related companies.
These services did not have a material impact on the consolidated financial
statements.

14. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosures about Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments
whether or not recognized in the balance sheet, for which it is practicable to
estimate fair value.

Financial instruments include such items as mortgage loans held for sale,
mortgage loans held for investment, interest rate contracts, notes payable, and
other instruments.

Fair value estimates are made as of a specific point in time based on the
characteristics of the financial instruments and the relevant market
information. Where available, quoted market prices are used. In other cases,
fair values are based on estimates using other valuation techniques, such as
discounting estimated future cash flows using a rate commensurate with the risks
involved or other acceptable methods. These techniques involve uncertainties and
are significantly affected by the assumptions used and the judgments made
regarding risk characteristics of various financial instruments, prepayments,
discount rates, estimates of future cash flows, future expected loss experience,
and other factors. Changes in assumptions could significantly affect these
estimates. Derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in an immediate
sale of the instrument. Also, because of differences

F-51
<PAGE> 156

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in methodologies and assumptions used to estimate fair value, BBMC's fair values
should not be compared to those of other companies.

Under the Statement, fair value estimates are based on existing financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of BBMC. For certain assets and
liabilities, the information required under the Statement is supplemented with
additional information relevant to an understanding of the fair value.

The methods and assumptions used to estimate the fair values of each class
of financial instruments are as follows:

Cash

The carrying amount reported in the balance sheet approximates fair value.

Mortgages held for sale

Fair values are based on the estimated value at which the loans could be
sold in the secondary market. These loans are priced to be sold with servicing
rights retained, as is BBMC's normal business practice.

Mortgages held for investment

Fair value is estimated using market quotes for securities backed by
similar loans or by discounting contractual cash flows, adjusted for credit risk
and prepayment estimates. These loans are priced with servicing rights retained.
Discount rates are obtained from secondary market sources.

Accounts receivable, pool loan purchases, and mortgage claims receivable, net

Carrying amounts are considered to approximate fair value. All amounts that
are assumed to be uncollectible within a reasonable time are written off.

Excess mortgage servicing receivable

Fair value is based on the present value of expected future net cash flows
and the current estimated servicing life.

Risk management contracts

Fair values are estimated based on actual market quotes or option models.

Note payable to Bank of Boston

The carrying amount of the note payable to Bank of Boston reported in the
balance sheet approximates its fair value.

Long-term debt

Fair value of long-term debt is estimated by discounting estimated future
cash flows using a rate commensurate with the risks involved.

Commitments to originate mortgage loans

Fair value is estimated using quoted market prices for securities backed by
similar loans adjusted for differences in loan characteristics.

F-52
<PAGE> 157

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Forward contracts to sell mortgages

Options on mortgage-backed securities

The fair values of options are estimated based on actual market quotes. In
some instances, quoted prices for the underlying loans or option models are
used.

The estimated fair values of BBMC's financial instruments are as follows:

<TABLE>
<CAPTION>
1994 1995
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash.................................... $ 5,653 $ 5,653 $ 830 $ 830
Mortgages held for sale................. 271,215 272,535 388,436 395,984
Mortgages held for investment........... 28,589 26,988 33,183 35,003
Accounts receivable..................... 66,763 66,763 82,816 82,816
Pool loan purchases..................... 77,477 77,477 65,272 65,272
Mortgage claims receivable.............. 48,835 48,835 45,422 45,422
Excess mortgage servicing receivable.... 15,333 20,700 17,447 19,117
Risk management contracts, classified
as PMSR, and other assets(2).......... 3,727 2,157 84,520 84,920
LIABILITIES
Note payable to Bank of Boston.......... 779,021 779,021 966,000 966,000
Long-term debt.......................... 14,007 13,853 13,816 16,211
OFF-BALANCE SHEET(1)
Commitments to originate mortgage
loans................................. (1,455) 1,094
Mandatory forward contracts to sell
mortgages(2).......................... 4,413 (9,798)
Options on mortgage-backed
securities(2)......................... 172 --
Risk management contracts............... (6,998) --
</TABLE>

- ---------------

(1) Parentheses denote a liability
(2) See Note 12 for additional disclosures on notional amounts

Fair value estimates are made as of a specific point in time, based on
relevant market data and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale BBMC's entire holding of a particular financial instrument. Because no
active market exists for some portion of BBMC's financial instruments, fair
value estimates are based on judgments regarding future expected loss
experience, current economic conditions, current interest rates and repayment
trends, risk characteristics of various financial instruments, and other
factors.

F-53
<PAGE> 158

BANCBOSTON MORTGAGE CORPORATION
(Acquired by HomeSide, Inc. on March 15, 1996 and now known as HomeSide Lending,
Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1994 and 1995. Changes in market interest rates and prepayment
assumption could significantly change the fair value.

15. CONTINGENCIES

BBMC is a defendant in a number of legal proceedings arising in the normal
course of business. BBMC, in management's estimation, has recorded adequate
reserves in the financial statements for pending litigation. Management, after
reviewing all actions and proceedings pending against or involving BBMC,
considers that the aggregate liability or loss, if any, resulting from the final
outcome of these proceedings will not have a material effect on the financial
position or results of operations of BBMC.

During 1994, BBMC settled a class action lawsuit pertaining to escrow
practices. BBMC agreed to change its escrow calculations to the aggregate method
and, as a result, refunded approximately $45.0 million in excess escrow balance
to mortgagors. In addition, BBMC paid interest on these excess funds in the
amount of approximately $1.3 million. The change in escrow calculations did not
have a material impact on the consolidated financial statements.

16. ACQUISITION OF BELL MORTGAGE

On June 1, 1995, BBMC purchased the assets and liabilities of Bell Mortgage
Company (Bell Mortgage), a privately-held mortgage origination company located
in Minneapolis, Minnesota, for $0.9 million in cash. The acquisition of Bell
Mortgage was accounted for as a purchase. Accordingly, the purchase price was
allocated to net assets acquired based upon their estimated fair market value.
As of a result of the acquisition, goodwill of $0.4 million was recorded and is
being amortized over a 7-year period using the straight-line method.

Also, under the terms of the agreement, the shareholders of Bell Mortgage
will receive additional contingent cash payments based on Bell Mortgage reaching
specific performance goals over the next 3 years. These additional cash payments
will be recorded as additions to goodwill and will be amortized over the
remainder of the original 7-year period using the straight-line method.

Results of operations after the acquisition date are included in the 1995
consolidated financial statements. Proforma financial results would not have
been materially different as a result of this acquisition.

F-54
<PAGE> 159

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholder of
Barnett Mortgage Company:

We have audited the accompanying consolidated balance sheets of BARNETT
MORTGAGE COMPANY (a Florida corporation and a wholly owned subsidiary of Barnett
Banks, Inc.) and subsidiaries as of December 31, 1994 and 1995 and the related
consolidated statements of operations, stockholder's equity, and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Barnett Mortgage Company and
subsidiaries as of December 31, 1994 and 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Jacksonville, Florida
March 8, 1996

F-55
<PAGE> 160

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
CASH............................................................ $ 3,900,572 $ 14,987,783
MORTGAGE LOANS:
Held for sale, net............................................ 183,913,568 465,879,840
Held for investment, net...................................... 14,699,097 19,225,181
CAPITALIZED MORTGAGE SERVICING RIGHTS:
Purchased mortgage servicing rights, net...................... 85,574,002 240,059,235
Excess mortgage servicing rights, net......................... 6,887,431 10,729,518
ACCOUNTS RECEIVABLE, Net:
Mortgage claims receivable.................................... 14,667,507 40,810,317
Amounts due from affiliates................................... 170,894 3,296,638
Other receivables............................................. 3,704,721 20,784,599
PROPERTY AND EQUIPMENT, net..................................... 18,565,631 25,263,834
REAL ESTATE OWNED, net.......................................... 731,091 600,061
GOODWILL, net................................................... 25,690,047 138,674,988
OTHER ASSETS.................................................... 967,476 14,318,185
------------ ------------
$359,472,037 $994,630,179
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Notes payable................................................. $248,214,485 $653,055,514
Drafts payable................................................ 9,208,104 11,573,446
Accounts payable and accrued liabilities...................... 9,791,502 63,789,362
Deferred tax liability........................................ 7,355,676 34,383,877
------------ ------------
Total liabilities..................................... 274,569,767 762,802,199
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, $100 par value; 10,000 shares authorized,
issued, and outstanding.................................... 1,000,000 1,000,000
Additional paid-in capital.................................... 81,141,958 248,453,974
Retained earnings (accumulated deficit)....................... 2,760,312 (17,625,994)
------------ ------------
Total stockholder's equity............................ 84,902,270 231,827,980
------------ ------------
$359,472,037 $994,630,179
=========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-56
<PAGE> 161

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
MORTGAGE ORIGINATION REVENUE:
Mortgage origination fees...................... $ 357,900 $ 3,276,304 $ 17,103,976
Gain (loss) on sales of loans, net............. 5,687,882 691,969 (13,920,382)
------------ ------------ ------------
Total mortgage origination revenue..... 6,045,782 3,968,273 3,183,594
------------ ------------ ------------
INTEREST INCOME (EXPENSE):
Interest income................................ 855,053 3,459,860 27,264,470
Interest expense, substantially all to
affiliates.................................. (1,415,372) (4,911,433) (20,427,661)
------------ ------------ ------------
Net interest income (expense).......... (560,319) (1,451,573) 6,836,809
------------ ------------ ------------
MORTGAGE SERVICING REVENUE:
Mortgage servicing income...................... 20,559,829 27,130,545 83,502,311
Mortgage servicing income from affiliates...... 18,325,974 20,016,790 25,057,174
Amortization of capitalized mortgage servicing
rights...................................... (11,547,048) (17,783,184) (48,282,193)
Gain on sales of servicing..................... 0 0 9,096,134
------------ ------------ ------------
Net mortgage servicing revenue......... 27,338,755 29,364,151 69,373,426
------------ ------------ ------------
OTHER INCOME..................................... 6,296,519 4,491,999 2,592,125
------------ ------------ ------------
Total revenues......................... 39,120,737 36,372,850 81,985,954
------------ ------------ ------------
EXPENSES:
Salaries and benefits.......................... 13,913,978 17,473,917 53,070,150
General and administrative..................... 12,432,134 14,923,734 41,849,355
Affiliate profit sharing....................... 10,773,786 3,533,551 6,242,191
Occupancy and equipment........................ 1,809,949 2,702,169 5,959,537
Amortization of goodwill....................... 0 259,275 4,839,536
------------ ------------ ------------
Total expenses......................... 38,929,847 38,892,646 111,960,769
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES................ 190,890 (2,519,796) (29,974,815)
INCOME TAX PROVISION (BENEFIT)................... 87,040 (461,411) (9,588,509)
------------ ------------ ------------
NET INCOME (LOSS)................................ $ 103,850 $ (2,058,385) $(20,386,306)
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-57
<PAGE> 162

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS
COMMON PAID-IN (ACCUMULATED
STOCK CAPITAL DEFICIT) TOTAL
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1992.......... $1,000,000 $ 16,910,146 $ 4,714,847 $ 22,624,993
Capital contributions............. 0 3,527,674 0 3,527,674
Net income........................ 0 0 103,850 103,850
---------- ------------ ------------ ------------
BALANCE, December 31, 1993.......... 1,000,000 20,437,820 4,818,697 26,256,517
Capital contributions............. 0 60,704,138 0 60,704,138
Net loss.......................... 0 0 (2,058,385) (2,058,385)
---------- ------------ ------------ ------------
BALANCE, December 31, 1994.......... 1,000,000 81,141,958 2,760,312 84,902,270
Capital contributions............. 0 167,312,016 0 167,312,016
Net loss.......................... 0 0 (20,386,306) (20,386,306)
---------- ------------ ------------ ------------
BALANCE, December 31, 1995.......... $1,000,000 $248,453,974 $(17,625,994) $231,827,980
========== ============ ============ ============
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-58
<PAGE> 163

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(NOTE 7)

<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................. $ 103,850 $ (2,058,385) $ (20,386,306)
--------------
-
------------- ------------
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Amortization of purchased mortgage servicing
rights.................................... 9,321,064 15,288,479 45,816,361
Amortization of excess servicing fees....... 2,225,984 2,494,705 2,465,832
Amortization of goodwill.................... 0 259,275 4,839,536
Depreciation and amortization of property
and equipment............................. 1,430,339 1,776,267 3,191,009
Capitalization of excess servicing fees..... (3,657,824) (1,258,180) (7,081,112)
Origination of loans held for sale.......... 0 (508,150,116) (3,318,208,729)
Sales of mortgage loans held for sale....... 0 456,864,511 3,106,918,971
Proceeds from sales of mortgage servicing
rights.................................... 0 0 10,437,502
Gain on sales of servicing rights........... 0 0 (9,096,134)
Deferred income tax provision (benefit)..... (309,391) 91,933 (1,250,725)
Changes in assets and liabilities:
Accounts receivable, net.................. (3,931,488) 2,067,746 (8,164,924)
Other assets.............................. (292,732) 1,254,075 (11,285,808)
Accounts payable and accrued
liabilities............................ (11,438,834) (7,700,318) 9,488,879
Other, net................................ 209,676 45,104 6,807,216
--------------
-
------------- ------------
Total adjustments...................... (6,443,206) (36,966,519) (165,122,126)
--------------
-
------------- ------------
Net cash used in operating
activities........................... (6,339,356) (39,024,904) (185,508,432)
--------------
-
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchased mortgage servicing rights............ (31,569,835) (22,487,973) (21,563,279)
Net increase in loans held for investment...... (457,402) (1,593,575) (3,152,365)
Net increase (decrease) in real estate owned... (421) (166,405) 1,751,036
Purchases of property and equipment, net of
retirements................................. (4,232,868) (220,543) (556,054)
Business acquisitions, net of cash acquired.... 0 (58,824,244) (158,747,064)
--------------
-
------------- ------------
Net cash used in investing
activities........................... (36,260,526) (83,292,740) (182,267,726)
--------------
-
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in notes payable.................. 43,004,351 64,990,122 211,666,829
Capital contributions.......................... 0 59,765,851 167,196,540
--------------
-
------------- ------------
Net cash provided by financing
activities........................... 43,004,351 124,755,973 378,863,369
--------------
-
------------- ------------
NET INCREASE IN CASH............................. 404,469 2,438,329 11,087,211
CASH AT BEGINNING OF YEAR........................ 1,057,774 1,462,243 3,900,572
--------------
-
------------- ------------
CASH AT END OF YEAR.............................. $ 1,462,243 $ 3,900,572 $ 14,987,783
=============== ============= ============
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-59
<PAGE> 164

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995

1. SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS

Barnett Mortgage Company and its wholly owned subsidiaries (the "Company")
originate, purchase, and service residential mortgage loans. The Company
operates nationally with offices in 25 states.

The accounting and reporting policies of the Company conform to generally
accepted accounting principles and prevailing practices within the mortgage
banking industry.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Barnett
Mortgage Company ("BMC") and its wholly owned subsidiaries, BancPLUS Financial
Corporation ("BancPLUS") and Loan America Financial Corporation ("LAC").
Wholly-owned subsidiaries of BancPLUS include BancPLUS Mortgage Corp. and
Honolulu Mortgage Company ("HMC"). As discussed in Note 2, BancPLUS and LAC were
acquired in 1994 and 1995, respectively. These acquisitions were accounted for
as purchases; therefore, BancPLUS and LAC are included in the consolidated
financial statements from their respective dates of acquisition. BMC is a wholly
owned subsidiary of Barnett Banks, Inc. (the "Parent"). All significant
intercompany accounts and transactions have been eliminated in consolidation.

Certain previously reported amounts have been reclassified to conform to
current presentation.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosed amount of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

Mortgage Loans

Mortgage loans held for sale are carried at the lower of aggregate cost or
market. Cost is defined as the unpaid principal balance of the mortgage loans,
adjusted for discounts and premiums, including deferred costs and fees.
Differences between the net carrying amount of mortgage loans held for sale and
the amount received from the sale, net of the recognition of any commitment fees
paid, are recognized as gains or losses from the sale of mortgage loans. At
December 31, 1994 and 1995, mortgage loans held for sale were carried at cost,
which was less than their market values. Mortgage loans held for sale originated
by the Parent's banking subsidiaries (the "Affiliate Banks") are not included in
the Company's mortgage loans held for sale. These loans are funded and owned by
the Affiliate Banks. The Company will purchase such loans from the Affiliate
Banks and sell them to the secondary market simultaneously. Gains and losses
from the sales of loans are recorded in the accompanying statements of
operations. At December 31, 1995, the Affiliate Banks owned approximately
$135,323,000 in mortgage loans held for sale.

Mortgage loans held for investment are stated at the lower of cost or fair
market value at the time the permanent investment decisions are made and
primarily consist of (i) mortgage loans originated on behalf of employees of the
Parent and the Affiliate Banks who are relocating, (ii) seasoned loans obtained
in acquisitions by the Affiliate Banks which management has chosen to retain
rather than sell, and (iii) loans in the final stages of foreclosure which were
repurchased by the Company.

F-60
<PAGE> 165

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Interest income on mortgage loans is recorded on the accrual basis. Loans
are placed on nonaccrual status and accrued interest is reversed when the
collectibility of interest and principal is uncertain, generally after the loans
become 120 days past due.

Capitalized Mortgage Servicing Rights

Capitalized mortgage servicing rights include purchased mortgage servicing
rights ("PMSRs") and excess servicing fees. The Company capitalizes the cost of
purchased mortgage servicing rights ("bulk"), servicing rights acquired through
the purchase of mortgage loans originated by others ("flow") and servicing
rights acquired in connection with acquisitions ("acquired") (Note 2). These
amounts are capitalized and amortized in proportion to and over the life of the
net servicing income, primarily using a discounted cash flow method for flow and
acquired purchases and to a maximum of seven years using the
sum-of-the-years-digits method for bulk purchases. PMSRs, net, represent PMSRs
of $116,326,941 and $308,722,024 at December 31, 1994 and 1995, respectively,
net of accumulated amortization of $30,752,939 and $68,662,789, respectively.

Excess servicing fees are stated net of accumulated amortization and
represent the present value of servicing yields in excess of industry standards.
These amounts are capitalized and amortized over the estimated life of the
underlying loans, primarily to a maximum of eight years using the
sum-of-the-years-digits method, to provide for the recognition of a normal
servicing fee in each year. Excess servicing fees, net, represent excess
servicing fees at December 31, 1994 and 1995 of $14,876,068 and $20,640,470,
respectively, net of accumulated amortization of $7,988,637 and $9,910,952,
respectively.

The Company evaluates the effect of prepayments on the net realizable value
of purchased mortgage servicing rights and excess servicing fees on a
disaggregated undiscounted basis. If needed, the Company records additional
amortization or write-downs based on this evaluation.

Accounts Receivable

Mortgage claims receivable includes loan servicing advances made in
connection with loan servicing activities and claims receivable. Loan servicing
advances consist primarily of payments for property taxes and insurance
premiums, as well as principal and interest remitted to investors before they
are collected from mortgagors. Claims receivable includes claims filed on
foreclosed mortgages, primarily with the FHA and the VA.

Reserves for estimated losses on loan servicing advances are based on
management's continuing evaluation of potential losses. The allowance for losses
included in accounts receivable was $320,654 and $1,542,989 at December 31, 1994
and 1995, respectively.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation.
Depreciation is provided on a straight-line basis using estimated useful lives
of 12 to 50 years for buildings and improvements and 3 to 20 years for furniture
and equipment. Leasehold improvements are amortized over their estimated useful
lives or the terms of the related leases, whichever is shorter.

Real Estate Owned

Real estate owned represents real estate acquired by foreclosure and is
carried at the lower of cost or appraised value minus estimated costs to sell.
Any additional declines are charged to other expense and are recorded in a
valuation reserve on an asset-by-asset basis. Net costs of maintaining and
operating foreclosed properties are charged to expense as incurred.

F-61
<PAGE> 166

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred Commitment Fees

Deferred commitment fees, which are included in other assets, primarily
consist of fees paid to permanent investors to ensure the ultimate sale of loans
and put option fees paid for the option of selling mortgage-backed securities.
Fees paid to permanent investors are recognized as an adjustment to the sales
price when loans are sold. Any gain or loss resulting from either the exercise
or expiration of put option fees is included in gain (loss) on sales of loans.

Goodwill

Net assets acquired in purchase transactions (Note 2) are recorded at fair
value at the date of acquisition. Goodwill, representing the excess of the
purchase price over the fair value of the net assets purchased, is being
amortized on a straight-line basis over 25 years. The Company reviews its
goodwill periodically for events or changes in circumstances that may indicate
that the carrying amounts of the assets are not recoverable on an undiscounted
cash flow basis.

Reserve for Losses

A reserve for losses is maintained for estimated foreclosure losses. The
required level of reserves is determined on an undiscounted basis by analysis of
such factors such as the prevailing stages of delinquencies, anticipated
reinstatement rates from the various stages of delinquency, and loss experience
on similar loans serviced. This reserve represents that portion of the estimated
foreclosure losses for which the Company does not have an outstanding receivable
as of the date of the financial statements, but for which an expected loss is
estimated based on loan delinquencies and other characteristics of the loans
serviced. This reserve is included in accounts payable and accrued liabilities
in the accompanying financial statements.

Mortgage Origination Fees

Mortgage origination fees consist primarily of (i) fees received from
borrowers on loans originated for sale, (ii) fees received from certain
correspondents, and (iii) fees received from an affiliate (Note 5). Mortgage
origination fees are deferred and recognized as income when the related loans
are sold.

Mortgage Servicing Revenue

Mortgage servicing fees consist primarily of servicing fees and late
charges received for servicing loans owned by investors and affiliates.
Servicing fees are calculated on the basis of the outstanding principal balance
of loans serviced and are recorded as income when received. Loan servicing costs
are charged to expense as incurred.

Late charges are recognized when assessed and are recorded in mortgage
claims receivable net of an allowance for estimated waived or otherwise
uncollectible amounts. Accrued late fees, net of allowance, totaled $1,998,380
and $1,554,393 at December 31, 1994 and 1995, respectively. In addition, amounts
greater than 120 days past due are written off.

Statement of Financial Accounting Standards No. 122

In May 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 122, "Accounting for
Mortgage Servicing Rights". This statement, among other provisions, requires
that the value of mortgage servicing rights associated with mortgage loans
originated by an entity be capitalized as assets. The value of originated
mortgage servicing rights ("OMSRs") is determined by allocating the total cost
of the mortgage loans between the loans and the mortgage servicing rights based
on their relative fair values. Presently, OMSRs are included with the cost of
the related loans and

F-62
<PAGE> 167

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

considered in determining the gain or loss on sale when the loans are sold.
Also, the statement requires that capitalized mortgage servicing rights be
evaluated for impairment based on the fair value of these rights. For the
purposes of determining impairment, mortgage servicing rights that are
capitalized after the adoption of this statement are stratified based on one or
more of the predominate risk characteristics of the underlying loans. Impairment
is recognized through a valuation allowance for each impaired stratum.

The statement applies prospectively to fiscal years beginning after
December 15, 1995. The Company plans to adopt the statement beginning January 1,
1996. The actual effect of implementing this statement on the Company's
financial position and results of operations will depend on factors determined
at the end of a reporting period, including the amount and mix of originated and
purchased production, the level of interest rates, and market estimates of
future prepayment rates. Accordingly, the Company cannot determine at this time
the ultimate impact on its future earnings of applying the new methodologies of
recording all mortgage servicing rights as assets, of calculating impairment,
and of applying the other provisions of the statement; however, the adoption of
the statement will accelerate the timing of income recognition from origination
activities.

Consolidated Statements of Cash Flows

The Company defines cash as cash in banks.

2. ACQUISITIONS

On February 28, 1995, the Company completed the acquisition of BancPLUS for
approximately $167 million in cash. BancPLUS and its wholly owned subsidiaries,
BancPLUS Mortgage Corp. and HMC, are full-service mortgage bankers based in San
Antonio, Texas, and Honolulu, Hawaii, who had total assets of $244 million and a
servicing portfolio of $13.9 billion at the date of acquisition. The purchase
price in excess of net assets acquired was $113 million.

On October 1, 1994, the Company completed the acquisition of LAC for $60
million. LAC was a Miami-based wholesale mortgage banking company which had
assets of $180 million and a servicing portfolio of approximately $4 billion at
the date of acquisition. The purchase price in excess of net assets acquired, as
adjusted for changes in estimates in 1995, was $29 million.

These acquisitions are included in the consolidated financial statements
from their respective dates of acquisition. Unaudited pro forma statements of
operations for 1994 and 1995, assuming BancPLUS and LAC had been acquired as of
January 1, 1994, are as follows (in thousands):

<TABLE>
<CAPTION>
1994 1995
--------- --------
<S> <C> <C>
Mortgage origination revenue.................................. $ 26,149 $ 4,631
Interest income (expense), net................................ (148) 6,137
Mortgage servicing revenue.................................... 87,437 74,646
Other income.................................................. 5,830 2,744
--------- --------
Total revenues...................................... 119,268 88,158
Expenses...................................................... (136,439) (115,997)
--------- --------
Loss before income taxes and affiliate profit sharing......... (17,171) (27,839)
Affiliate profit sharing...................................... (3,534) (6,242)
Income tax benefit............................................ 4,741 10,780
--------- --------
Net loss............................................ $ (15,964) $(23,301)
========= ========
</TABLE>

F-63
<PAGE> 168

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The above pro forma statements of operations assume that the Parent contributed
capital equal to the purchase price as of January 1, 1994. The purchase
accounting adjustments are reflected based on the actual purchase price and the
amount of assets actually acquired. In addition, gains on sales of mortgage
servicing rights are included in mortgage servicing revenue in these pro forma
results. No adjustments have been made for restructuring costs that might have
been incurred during the periods presented or for cost efficiencies that might
have been realized. Accordingly, these pro forma results are not indicative of
future results.

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1994 and 1995 consisted of the
following:

<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Building and improvements......................... $ 14,720,814 $ 23,494,585
Furniture and equipment........................... 11,584,787 12,881,277
------------ ------------
26,305,601 36,375,862
Less accumulated depreciation..................... 7,739,970 11,112,028
------------ ------------
$ 18,565,631 $ 25,263,834
========== ==========
</TABLE>

4. INCOME TAXES

The Company's results of operations are included in the Parent's
consolidated income tax return. The Company's income tax provision and related
asset or liability are computed based on income tax rates as if the Company
filed a separate income tax return. Pursuant to a tax-sharing agreement with the
Parent, the Company is reimbursed for the tax effect of current operating losses
utilized in the consolidated return.

The components of the provision (benefit) for income taxes for the years
ended December 31, 1993, 1994, and 1995 are as follows:

<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- -----------
<S> <C> <C> <C>
Current:
Federal.............................. $ 377,258 $(514,431) $(7,504,840)
State................................ 19,173 (38,913) (832,944)
--------- --------- -----------
396,431 (553,344) (8,337,784)
--------- --------- -----------
Deferred:
Federal.............................. (296,983) 87,016 (1,080,141)
State................................ (12,408) 4,917 (170,584)
--------- --------- -----------
(309,391) 91,933 (1,250,725)
--------- --------- -----------
Provision (benefit) for income taxes... $ 87,040 $(461,411) $(9,588,509)
========= ========= ==========
</TABLE>

F-64
<PAGE> 169

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The differences between federal income tax computed at the statutory rate
of 35 percent and the actual tax provision are shown below:

<TABLE>
<CAPTION>
1993 1994 1995
-------- ----------- ------------
<S> <C> <C> <C>
Income (loss) before taxes................... $190,890 $(2,519,796) $(29,974,815)
======== =========== ============
Tax provision (benefit) at the statutory
rate....................................... $ 66,812 $ (881,929) $(10,491,185)
Increase (decrease) in taxes:
State income tax, net of federal benefit... 4,590 (22,098) (539,470)
Goodwill................................... 0 90,746 1,693,838
Other...................................... 15,638 351,870 (251,692)
-------- ----------- ------------
Total income tax provision
(benefit)........................ $ 87,040 $ (461,411) $ (9,588,509)
======== =========== ============
Effective tax rate........................... 46% (18)% (32)%
======== =========== ============
</TABLE>

Deferred income taxes reflect the impact of temporary differences between
the financial statement carrying amounts and the tax bases of assets and
liabilities due to differences in the timing of recognition of revenues and
expenses and differences related to acquisitions. The tax effects of temporary
differences which create deferred tax assets and liabilities at December 31,
1994 and 1995 are detailed below:

<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Reserves................................................ $ 0 $ 5,109,268
Net operating loss carryforwards........................ 4,044,430 3,146,010
Late charges............................................ 629,351 954,969
Property and equipment.................................. 651,825 321,215
Other................................................... 930,060 1,571,175
----------- ----------
Gross deferred tax assets....................... 6,255,666 11,102,637
Valuation allowance............................. 0 (3,146,010)
----------- ----------
Deferred tax asset.............................. 6,255,666 7,956,627
----------- ----------
Deferred tax liabilities:
Capitalized servicing rights............................ 13,310,651 41,520,994
Other................................................... 300,691 819,510
----------- ----------
Deferred tax liability.......................... 13,611,342 42,340,504
----------- ----------
Net deferred tax liability................................ $ 7,355,676 $34,383,877
=========== ==========
</TABLE>

The Company's $34,383,877 net deferred tax liability includes a valuation
allowance of $3,146,010, representing LAC's preaffiliation federal and state net
operating loss carryforwards for which realization is uncertain.

5. RELATED-PARTY TRANSACTIONS

The Company services loans (Note 8) for the Affiliate Banks. Total loan
servicing income relating to loans owned by the Affiliate Banks was
approximately $18,326,000, $20,017,000, and $25,057,000 in 1993, 1994, and 1995,
respectively.

Through March 1995, the Company received earnings credits from the Parent
or its subsidiaries in exchange for maintaining fiduciary deposit accounts.
Revenue recognized as a result of this arrangement was

F-65
<PAGE> 170

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$2,456,000, $2,365,000, and $523,000 in 1993, 1994, and 1995, respectively, and
has been included in other income. Subsequent to March 1995, the Company
received earnings credits in the form of reduced interest expense.

Notes payable at December 31, 1995, includes advances from lines of credit
with the Parent and the Affiliate Banks which bear interest at a rate of LIBOR
plus 1%, reduced in proportion to compensating balances maintained with
Affiliate Banks.

Amounts payable to the Parent and Affiliate Banks which are included in
accounts payable and accrued liabilities at December 31, 1994 and 1995 were
$2,170,000 and $7,680,000, respectively.

The Company performs certain centralized processing functions for certain
Affiliate Banks. Included in other income was approximately $2,559,000,
$2,171,000, and $1,972,000 in fees for these services for the years ended
December 31, 1993, 1994, and 1995, respectively.

The Company recorded certain expenses related to transactions with the
Parent and the Affiliate Banks as follows:

<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Management fees............................. $ 465,729 $ 721,141 $ 2,914,794
Affiliate revenue sharing................... 10,773,786 3,533,551 6,242,191
Rent expense................................ 1,267,130 1,292,498 1,316,448
Interest expense............................ 1,415,372 3,281,503 17,588,548
Information processing support.............. 328,556 1,953,244 3,505,484
Internal audit fees......................... 91,933 358,800 421,392
------------ ------------ ------------
$ 14,342,506 $ 11,140,737 $ 31,988,857
========== ========== ==========
</TABLE>

The Company pays its Parent a management fee for traditional corporate
support functions, such as accounting operations, financial reporting and
analysis, human resources, marketing, and strategic planning. Affiliate revenue
sharing is a distribution to the Affiliate Banks and is based on each
affiliate's annual loan production.

The Parent funds certain additions to building and improvements through
capital contributions. The Parent made noncash capital contributions of
$3,527,674, $938,287, and $115,476 to the Company for the net cost of building
facilities in 1993, 1994, and 1995, respectively. In addition, the Parent has
made additional capital contributions to fund acquisitions. During 1994 and
1995, the Parent contributed $59,800,000 and $167,100,000, respectively to the
Company to fund the acquisitions of LAC and BancPLUS, respectively.

LAC and BancPLUS Mortgage Corp. sell a certain amount of their loan
production to an Affiliate Bank. Total loans sold to the Affiliate Bank, at
cost, during 1994 and 1995 were $204 million and $324 million, respectively.
Additionally, BMC charges the Affiliate Bank a fee, which totaled $509,000 and
$809,000 during 1994 and 1995, respectively, for arranging these transactions
and providing certain support services.

F-66
<PAGE> 171

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. NOTES PAYABLE

At December 31, 1994, LAC had available mortgage warehouse credit
facilities which permitted the Company to borrow a maximum amount of $275
million, collateralized by the mortgage loans held for sale by LAC. The
following table summarizes information regarding these facilities as of December
31, 1994:

<TABLE>
<S> <C>
Balance at end of year....................................... $ 174,015,589
Weighted average interest rate at end of year................ 7.23%
Maximum amount outstanding................................... $ 174,015,589
Average amount outstanding................................... 150,825,062
Contractual interest rate at end of year..................... 1.25% to 8.5%
Weighted average interest rate during the year............... 5.58%
</TABLE>

These facilities expired on May 27, 1995. The Company replaced these
facilities with a borrowing arrangement from the Parent and the Affiliate Banks
(Note 5). Also, during 1995, the Company entered into a credit facility for $200
million, of which $0 was outstanding at December 31, 1995.

7. SUPPLEMENTAL CASH FLOW INFORMATION

The Company transferred $890,203, $235,000, and $1,669,000 from mortgage
loans to real estate acquired by foreclosure in 1993, 1994, and 1995,
respectively. These transactions have been excluded from the accompanying
consolidated statements of cash flows.

For the years ended December 31, 1993, 1994, and 1995, income taxes of
$255,605, $396,431 and $2,852,641, respectively, were paid to the Parent.
Interest paid during the same years was $1,259,372, $4,578,611 and $18,529,118,
respectively.

8. LOAN SERVICING

The Company was servicing 243,116 and 445,665 loans at December 31, 1994
and 1995, respectively. The remaining principal balances on serviced loans
totaled approximately $18.4 billion and $33.4 billion at December 31, 1994 and
1995, respectively. At December 31, 1995, the geographic distribution of loans
serviced was 38% in Florida, 14% in California, and 48% in other states. Loans
serviced for others are not included in the accompanying consolidated balance
sheets. The accompanying balance sheets also do not include funds held in
fiduciary deposit accounts, as these funds are not assets of the Company. These
amounts averaged $262,000,000 and $407,000,000 during 1994 and 1995,
respectively.

In connection with its loan servicing activities, the Company makes certain
payments of property taxes and insurance premiums in advance of collecting them
from specific mortgagors and makes certain payments of attorneys' fees and other
costs related to loans in foreclosure. Also, in connection with servicing
mortgage-backed securities guaranteed by Government National Mortgage
Association ("GNMA") or Federal National Mortgage Association ("FNMA"), the
Company advances certain principal and interest payments to security holders
prior to their collection from specific mortgagors. These advances are presented
as receivables in the accompanying consolidated balance sheets.

Conforming conventional loans serviced by the Company are securitized
through FNMA or Federal Home Loan Mortgage Corporation ("FHLMC") programs on a
nonrecourse basis, whereby foreclosure losses are generally the responsibility
of FNMA and FHLMC and not the Company. Similarly, the government loans serviced
by the Company are securitized through GNMA programs, whereby the Company is
insured against loss by the FHA or partially guaranteed against loss by the VA.

F-67
<PAGE> 172

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company is exposed to potential losses on loans partially guaranteed by
the VA in the event the VA elects to pay its guarantee amount instead of
repurchasing the loans. The Company incurred losses of $809,000, in 1995, but
did not incur any significant losses in 1993 or 1994 related to these loans. The
Company has also fulfilled certain pool commitments with loans that were sold
with recourse. Total principal outstanding of loans sold with recourse was
$64,415,000 and $144,490,000 at December 31, 1994 and 1995, respectively.
Management believes that its reserves for losses are adequate for any
contingencies that may arise from these loans.

9. COMMITMENTS AND CONTINGENCIES

The Company's fidelity bond requirements are satisfied through a policy
with underwriters at Lloyd's of London ("Lloyd's"). Maximum coverage is
$75,000,000 per occurrence, with a self-insurance program covering losses under
the deductible of $5,000,000 for the Parent as a whole. The Company is only
liable for losses up to its $250,000 deductible. At December 31, 1995, the
Company had errors and omissions insurance coverage through a policy with
Lloyd's in the amount of $35,000,000. Premiums on both policies have been paid
through August 1996.

The Company leases office space and equipment under various operating
leases expiring through 1998. Substantially all lease agreements for office
space contain renewal options and provide for increases in rental payments based
on the lessor's operating costs or the consumer price index.

The following is a schedule of future minimum rental payments, exclusive of
any contingent operating charges under certain leasing arrangements that have
initial or remaining noncancelable lease terms in excess of one year at December
31, 1995:

<TABLE>
<S> <C>
Year ending December 31:
1996................................................... $2,274,796
1997................................................... 1,200,805
1998................................................... 681,885
1999................................................... 395,047
----------
Total.......................................... $4,552,533
==========
</TABLE>

The Company is a party to certain pending legal proceedings arising from
matters incidental to its business. In the opinion of management and counsel,
the aggregate unreserved liability or loss, if any, of legal proceedings will
not have a significant effect on the consolidated financial condition, results
of operations or liquidity of the Company.

F-68
<PAGE> 173

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial
instruments as of December 31, 1995 is made in accordance with the requirements
of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments." The
estimated fair value amounts have been determined by the Company using available
market information and appropriate valuation methodologies. However,
considerable judgment is necessary to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts:

<TABLE>
<CAPTION>
1994
-------------------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
------------ ------------
<S> <C> <C>
Assets:
Cash................................................ $ 3,900,572 $ 3,900,572
Accounts receivable, net............................ 18,543,122 18,543,122
Mortgage loans held for sale, net................... 183,913,568 185,101,884
Mortgage loans held for investment, net............. 14,699,097 14,365,427
Liabilities:
Notes payable....................................... 248,214,485 248,214,485
Accounts payable and accrued liabilities............ 9,791,502 9,791,502
Off-balance sheet financial instruments:
Commitments to extend credit and sell loans......... 0 605,854
</TABLE>

<TABLE>
<CAPTION>
1995
-------------------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
------------ ------------
<S> <C> <C>
Assets:
Cash................................................ $ 14,987,783 $ 14,987,783
Accounts receivable, net............................ 64,891,554 64,891,554
Mortgage loans held for sale, net................... 465,879,840 471,241,851
Mortgage loans held for investment, net............. 19,225,181 19,225,181
Liabilities:
Notes payable....................................... 653,055,514 653,055,514
Accounts payable and accrued liabilities............ 63,789,362 63,789,362
Off-balance sheet financial instruments:
Commitments to extend credit and sell loans......... 0 (4,084,450)
</TABLE>

The fair value estimates as of December 31, 1994 and 1995 are based on
pertinent information available to management as of the respective dates.
Although management is not aware of any factors that would significantly affect
the estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since those dates, and
therefore, current estimates of fair value may differ significantly from the
amounts presented herein.

The following describes the methods and assumptions used by the Company in
estimating fair value amounts:

Cash, Accounts Receivable, Notes Payable, and Accounts Payable and Accrued
Liabilities

The carrying amount approximates fair value.

F-69
<PAGE> 174

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Mortgage Loans Held for Sale

Fair value is estimated using the quoted market prices for securities
backed by similar types of loans and dealer commitments to purchase loans on a
servicing retained basis.

Mortgage Loans Held for Investment

Fair value is estimated using quoted market prices for sales of whole loans
with similar characteristics, such as repricing dates, product type, and size.
In 1995, management's estimates of fair value of these loans does not materially
differ from cost.

Off-Balance Sheet Financial Instruments

Fair value represents the gain or loss on the Company's unclosed
commitments to originate or purchase loans and the Company's commitments to sell
loans. Both types of commitments take into consideration the remaining terms of
the agreements and the present creditworthiness of the counterparties.

11. DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK

During December, 1995, the Company purchased options to buy $500 million of
U.S. Treasury securities in order to reduce its exposure to the impact of
falling interest rates on the value of its capitalized mortgage servicing
assets. The cost of the options of $6,600,000, net of accumulated amortization
of $41,000, is included in other assets. These options were terminated in
January 1996 and the realized gain was reflected as a reduction of PMSRs.

The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business through the production and sale of mortgage
loans and the management of interest rate risk. These instruments include
short-term commitments (interest rate and points) to extend credit,
mortgage-backed securities mandatory forward commitments, put options to sell
mortgage-backed securities, and loans sold with recourse. These instruments
involve, to varying degrees, elements of credit and interest rate risk.

The Company's exposure to credit loss in the event of nonperformance by the
other party for commitments to extend credit, mortgage-backed securities
mandatory forward commitments, put options to sell mortgage-backed securities,
and loans sold with recourse is represented by the contractual or notional
amounts of these instruments. As these off-balance sheet financial instruments
have essentially the same credit risk involved in extending loans, the Company
generally uses the same credit and collateral policies in making these
commitments and conditional obligations as it does for on-balance sheet
instruments.

At December 31, 1994 and 1995, financial instruments having potential
credit risk in excess of those reported in the consolidated balance sheets are
as follows:

<TABLE>
<CAPTION>
CONTRACTUAL OR NOTIONAL AMOUNTS 1994 1995
---------------------------------------------------------- ------------ ------------
<S> <C> <C>
Commitments to extend credit.............................. $133,000,000 $418,000,000
Commitments to sell mortgage loans and mortgage-backed
securities.............................................. 288,000,000 863,000,000
Loans sold with recourse.................................. 64,415,000 144,490,000
</TABLE>

F-70
<PAGE> 175

BARNETT MORTGAGE COMPANY
(Acquired by HomeSide, Inc. on May 31, 1996 and now known as HomeSide Holdings,
Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. CONCENTRATION OF CREDIT RISK

The Company has identified certain credit risk concentrations in relation
to its on- and off-balance sheet financial instruments. A credit risk
concentration results when the Company has a significant credit exposure to an
individual or a group engaged in similar activities or is affected similarly by
economic conditions.

A significant portion of the Company's financial instruments is transacted
with other financial institutions, various government agencies, and individual
investors. The Company does not have a credit risk concentration with any one
financial institution, agency, or individual. However, of the loans held by the
Company and sold with recourse, a majority are secured by residential real
estate in Florida.

13. RETIREMENT PLAN

The Company participates in the Parent's retirement, management and
incentive compensation, and health and welfare plans. The Company's share of
pension and 401(k) plans' costs and expenses allocated annually by the Parent
are as follows:

<TABLE>
<CAPTION>
PENSION 401(K)
PLANS PLAN
-------- --------
<S> <C> <C>
Year ended December 31:
1993......................................................... $ 96,192 $240,367
1994......................................................... 143,148 245,739
1995......................................................... 268,938 837,956
</TABLE>

The Company remits amounts expensed to the Parent for retirement plans and
for health and welfare plans. Amounts for the management and incentive
compensation plans are remitted directly to employees or to plans maintained on
their behalf.

Information from the Parent's retirement plans' administrator is not
available to permit the Company to determine its share of the vested and
nonvested retirement plan benefit obligations and plan assets. The weighted
average discount rate and rate of increase in future compensation levels used in
determining the actual present value of the projected benefit obligations were
8.90% and 4.50%, respectively, in 1994 and 7.30% and 4.00% in 1995. The expected
long-term rate of return on assets was 9.00% and 9.50% in 1994 and 1995,
respectively.

The Parent has estimated the accumulated postretirement benefit obligation
on a consolidated basis only and allocates costs to each subsidiary. No specific
estimate has been made for each subsidiary.

14. SUBSEQUENT EVENT

On March 4, 1996, the Parent entered into a transaction in which the stock
of Barnett Mortgage Company would be acquired by a newly formed entity in
exchange for one-third ownership of the new entity and cash. Under the terms of
the transaction, the Parent would retain its mortgage production units, continue
to originate mortgages and retain certain other assets.

F-71
<PAGE> 176

INDEPENDENT AUDITORS' REPORT

Board of Directors
BancPLUS Financial Corporation:

We have audited the accompanying consolidated statements of financial
condition of BancPLUS Financial Corporation and subsidiary as of December 31,
1993 and 1994, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of Honolulu Mortgage Company, Inc., a wholly-owned subsidiary of
BancPLUS Mortgage Corp., which statements reflect total assets constituting 16%
and 20% and total revenues constituting 17% and 14% of the related 1993 and 1994
consolidated totals, respectively. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Honolulu Mortgage Company, Inc., is based
solely on the report of the other auditors.

In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of BancPLUS Financial Corporation and
subsidiary as of December 31, 1993 and 1994, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.

As discussed in note 2(j) to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."

KPMG PEAT MARWICK LLP

San Antonio, Texas
March 17, 1995

F-72
<PAGE> 177

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1993 AND 1994
(IN THOUSANDS OF DOLLARS, EXCEPT FOR SHARE DATA)

<TABLE>
<CAPTION>
1993 1994
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents.............................................. $ 4,096 $ 7,901
Mortgage loans held for sale, at lower of cost or market (note 6)...... 417,695 120,871
Accounts receivable and accrued interest, net of allowance for
uncollectible amounts of $3,031 in 1993 and $2,621 in 1994........... 33,941 29,836
Mortgage loan administration contracts, net of accumulated amortization
of $91,079 in 1993 and $116,167 in 1994 (note 3)..................... 118,265 117,716
Real estate acquired through foreclosure............................... 599 1,694
Properties and equipment, net (note 4)................................. 10,595 10,435
Prepaid expenses and other assets...................................... 8,100 5,640
-------- --------
Total assets................................................. $593,291 $294,093
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable (note 5)............................................... 508,342 237,586
Accounts payable and accrued expenses................................ 54,073 23,490
Reserves for losses.................................................. 13,300 11,400
-------- --------
Total liabilities............................................ 575,715 272,476
-------- --------
Commitments and contingencies (notes 3, 5, 6, 8, 10 and 11)
Stockholders' equity (note 5):
Common stock, par value $.01 per share -- 200,000 shares authorized;
100,000 shares issued and outstanding............................. 1 1
Preferred stock, par value $.01 per share ($10,000 liquidation
preference) -- 100,000,000 shares authorized; 1,284,783 and
1,460,125 shares issued and outstanding in 1993 and 1994,
respectively...................................................... 13 15
Additional paid-in capital........................................... 20,174 20,173
Retained earnings (accumulated deficit).............................. (2,612) 1,428
-------- --------
Total stockholders' equity................................... 17,576 21,617
-------- --------
Total liabilities and stockholders' equity................... $593,291 $294,093
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-73
<PAGE> 178

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993 AND 1994
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
1993 1994
-------- -------
<S> <C> <C>
INCOME
Loan administration..................................................... $ 69,471 $62,253
Loan origination........................................................ 42,053 16,184
Gain on sale of mortgage loan administration contracts.................. 11,334 24,348
Interest income, net of interest expense of $23,732 in 1993 and $15,959
in 1994.............................................................. (1,004) (2,019)
Other................................................................... 1,199 1,190
------- --------
Total income.................................................... 123,053 101,956
------- --------
EXPENSES
Personnel............................................................... 48,977 42,798
Occupancy and equipment................................................. 5,803 6,924
Provision for foreclosure costs......................................... 4,528 3,050
Amortization of mortgage loan administration contracts.................. 58,808 25,175
Other general and administrative........................................ 17,198 15,797
------- --------
Total expenses.................................................. 135,314 93,744
------- --------
Income (loss) before income taxes, extraordinary item, and
cumulative effect of a change in accounting principle............. (12,261) 8,212
Income taxes (note 9)..................................................... (4,228) 3,107
------- --------
Income (loss) before extraordinary item and cumulative effect of
a change in accounting principle.................................. (8,033) 5,105
Extraordinary loss resulting from extinguishment of debt, net of income
tax benefit of $548 (note 5)............................................ -- (1,064)
Cumulative effect on prior years of a change in accounting for income
taxes................................................................... (264) --
------- --------
Net income (loss)............................................... $ (8,297) $ 4,041
======= ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-74
<PAGE> 179

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993 AND 1994
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS TOTAL
COMMON PREFERRED PAID-IN (ACCUMULATED STOCKHOLDERS'
STOCK STOCK CAPITAL DEFICIT) EQUITY
------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992....... $1 $12 $ 20,175 $ 5,685 $ 25,873
Net loss......................... -- -- -- (8,297) (8,297)
Preferred stock
dividends-in-kind............. -- 1 (1) -- --
--
--- ------- ------ -------
Balance at December 31, 1993....... 1 13 20,174 (2,612) 17,576
Net income....................... -- -- -- 4,041 4,041
Preferred stock
dividends-in-kind............. -- 2 (1) (1) --
--
--- ------- ------ -------
Balance at December 31, 1994....... $1 $15 $ 20,173 $ 1,428 $ 21,617
== === ======= ====== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-75
<PAGE> 180

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993 AND 1994
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
1993 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)............................................. $ (8,297) $ 4,041
----------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation............................................... 1,559 1,958
Amortization............................................... 58,832 25,199
Provision for foreclosure costs............................ 4,528 3,050
Capitalized excess servicing fees.......................... (1,161) (330)
Non-cash interest expense.................................. 1,168 1,497
Gain on sales of servicing................................. (11,334) (24,348)
Proceeds from sales of servicing........................... 8,924 32,065
Extraordinary loss resulting from extinguishment of debt... -- 1,064
Cumulative effect of a change in accounting principle...... 264 --
Deferred tax benefit....................................... (4,583) (270)
Changes in operating assets and liabilities:
Increase in accounts receivable and other assets......... (9,040) (4,713)
Loans originated or acquired for sale.................... (3,240,339) (1,703,896)
Proceeds from sales of loans............................. 3,127,539 1,991,424
Net increase (decrease) in warehouse debt................ 110,735 (269,085)
Increase (decrease) in accounts payable and accrued
expenses.............................................. 9,823 (9,647)
----------- -----------
Total adjustments to net income (loss)................ 56,915 43,968
----------- -----------
Net cash provided by operating activities............. 48,618 48,009
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of mortgage loan administration contracts........... (33,455) (38,198)
Real estate acquired through foreclosure...................... (1,421) (1,648)
Proceeds from sales of foreclosed real estate................. 816 1,259
Purchases of properties and equipment......................... (4,117) (1,796)
----------- -----------
Net cash used in investing activities................. (38,177) (40,383)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable................................... 725,150 400,936
Principal payments on notes payable........................... (739,084) (402,630)
Loan fees paid................................................ -- (2,127)
----------- -----------
Net cash used in financing activities................. (13,934) (3,821)
----------- -----------
Net increase (decrease) in cash and cash
equivalents......................................... (3,493) 3,805
CASH AND CASH EQUIVALENTS
Beginning of year............................................. 7,589 4,096
----------- -----------
End of year................................................... $ 4,096 $ 7,901
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-76
<PAGE> 181

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1994

(1) REPORTING ENTITY

BancPLUS Financial Corporation (the Company) was incorporated in 1991 for
the purpose of acquiring all of the capital stock of BancPLUS Mortgage Corp.
(BancPLUS Mortgage), and its only substantive operations to date have involved
such activities. The purchase of the stock of BancPLUS Mortgage was effective as
of September 1, 1991.

The accompanying consolidated financial statements include the operations
of the Company and BancPLUS Mortgage. All significant intercompany balances and
transactions have been eliminated in consolidation.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Mortgage Loans Held for Sale

Mortgage loans held for sale are stated at the lower of cost or market
value as determined in the aggregate. The cost basis of mortgage loans includes
loan principal outstanding, adjusted for discounts or premiums. Loan fees and
direct costs associated with the origination of mortgage loans, which are
deferred and recognized when the loans are sold, are reflected as deferred
revenue in the financial statements. Commitment fees paid to permanent investors
are recognized as expense when the related loans are sold or when it becomes
evident that the commitment will not be used. The market value of mortgage loans
covered by investor commitments is based on commitment prices. The market value
of uncommitted mortgage loans is determined by current investor yield
requirements. Differences between the carrying amounts of mortgage loans and
sales proceeds are recognized at the time of sale.

When mortgage loans are sold with servicing rights retained and the actual
servicing fees to be received differ from normal servicing fees for similar
loans, an additional gain or loss is recognized. This gain or loss represents
the present value of the difference between the actual and the normal servicing
fees over the remaining lives of the loans, adjusted for anticipated
prepayments. The excess servicing fees receivable resulting from the recognition
of these gains are included in mortgage loan administration contracts.

(b) Allowance for Uncollectible Receivables

An allowance is maintained for estimated uncollectible advances made
primarily in connection with BancPLUS Mortgage's responsibilities as servicer
for loans in Government National Mortgage Association (GNMA) pools. The
allowance represents that portion of the advances made as of the date of the
financial statements that are not expected to be reimbursed. The allowance is
increased by provisions charged to earnings and reduced by receivable
charge-offs, net of recoveries.

Mortgage loan administration contracts are recorded at cost, which does not
exceed the present value of future net servicing income, net of amortization.
Mortgage loan administration contracts are amortized in the

F-77
<PAGE> 182

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

current period on an accelerated method that approximates the proportion that
current net servicing income bears to anticipated total net servicing income
from the related loans. In connection with the periodic evaluation of the
amortization of mortgage loan administration contracts, the Company compares the
recorded investment in mortgage loan administration contracts to the value of
the expected future net servicing income determined on a disaggregated,
undiscounted basis. Differences representing an excess of recorded investment
over expected future net servicing income are charged to earnings through an
additional current period charge to amortization.

Included in mortgage loan administration contracts at December 31, 1994 was
$2,428,000 of excess servicing fees receivable. This amount represents the
present value of future servicing fees in excess of the normal fee. These
receivables are amortized in the current period on an accelerated method that
approximates the proportion that the current servicing fees bear to anticipated
total servicing fees to be received from the related loans. The receivable
balance is revalued periodically using current prepayment estimates and original
discount rates and, if so indicated, is written down to the present value of the
estimated remaining future excess service fee revenue through an additional
charge to amortization. If the receivable balance is less than the present value
of the estimated remaining future excess service fee revenue due to favorable
prepayment experience, amortization is adjusted prospectively.

(d) Reserve for Losses

A reserve for losses is maintained for estimated foreclosure losses
associated primarily with BancPLUS Mortgage's responsibilities as servicer for
loans in GNMA pools. The required level of reserves is determined on an
undiscounted basis by analysis of such factors as the prevailing level of loan
delinquencies, anticipated reinstatement rates from the various stages of
delinquency, and loss experience on similar loans serviced. This reserve
represents that portion of the estimated foreclosure losses for which BancPLUS
Mortgage does not have an outstanding receivable as of the date of the financial
statements, but for which an expected loss is estimable based on loan
delinquencies and other characteristics of the loans serviced. The reserve is
increased by provisions charged to earnings and by purchase price adjustments on
certain acquisitions of mortgage loan administration contracts. The reserve is
reduced by charge-offs, net of recoveries.

(e) Real Estate Acquired Through Foreclosure

Real estate properties acquired through foreclosure are recorded at the
lower of cost or fair value on their acquisition dates and at the lower of such
initial amount or current fair value thereafter.

(f) Properties and Equipment

Properties and equipment are stated at cost less accumulated depreciation
and are depreciated using the straight-line method over their estimated useful
lives.

Maintenance, repairs, and minor renewals are charged to expense.
Betterments and major renewals are capitalized. Upon retirement or disposition,
both the asset cost and the related accumulated depreciation are written off and
gains or losses are included in operations.

(g) Loan Administration

Loan administration fees represent a participation in interest collections
on loans serviced for investors, normally based on a stipulated percentage of
the outstanding monthly principal balance of the loans. Loan administration fees
are recognized as income when received. Loan administration costs are charged to
expense as incurred.

F-78
<PAGE> 183

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(h) Loan Origination

Fees and direct loan costs associated with the origination of single-family
residential loans held for sale are recognized when the related loans are sold.
Direct loan costs have not been reclassified against loan origination income.

(i) Cash Equivalents

Cash equivalents include all highly liquid investments with a maturity of
three months or less at the date of acquisition.

(j) Federal Income Taxes

BancPLUS Financial Corporation files a consolidated federal income tax
return which includes the operations of BancPLUS Mortgage.

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" and has reported the
cumulative effect of this change in accounting for income taxes in the
consolidated statement of operations for the year ended December 31, 1993.
Statement 109 required a change from the deferred method of accounting for
income taxes required under APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability method specified in
Statement 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recoverable or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the period that includes the enactment date.

(3) SERVICING INFORMATION

BancPLUS Mortgage acts as a correspondent for investors in securing and
servicing loans. BancPLUS Mortgage was servicing approximately 197,000 loans
with an aggregate unpaid principal balance of approximately $14,013,000,000 at
December 31, 1994. Amounts capitalized in connection with acquiring the right to
service mortgage loans were approximately $35,970,000 and $25,980,000 for the
years ended December 31, 1993 and 1994, respectively.

As of December 31, 1994, 24% of the servicing portfolio balance was secured
by properties in California, 13% in Texas, and 13% in Hawaii. There were no
other state concentrations in excess of 10% and there were loans in all 50
states. The portfolio included approximately 26% Federal Housing Administration
(FHA) loans in Government National Mortgage Association (GNMA) pools and 11%
Department of Veterans Affairs (VA) loans in GNMA pools. Federal National
Mortgage Association (FNMA) loans comprised approximately 37% of the portfolio
and Federal Home Loan Mortgage Corporation (FHLMC) loans comprised approximately
19% of the portfolio. The remaining 7% of the portfolio was spread among various
other investors.

BancPLUS Mortgage is generally required to advance, from corporate funds,
escrow and foreclosure costs for loans which it services. A portion of these
advances is not recoverable for the loans in GNMA pools. Upon foreclosure, an
FHA or VA property is typically conveyed to the Department of Housing and Urban
Development (HUD) or VA. However, VA has the authority to deny conveyance of the
foreclosed property and to reimburse BancPLUS Mortgage based on a percentage of
the loan's outstanding principal balance. BancPLUS Mortgage assumes
responsibility for the disposition of properties on which VA has denied
conveyance.

F-79
<PAGE> 184

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Included in the servicing portfolio at December 31, 1994 were approximately
$79,656,000 of loans serviced for FNMA or private investors and $1,166,000 of
uninsured conventional loans for which there is recourse to BancPLUS Mortgage in
the event of foreclosure.

Anticipated losses associated with these activities are provided for in the
consolidated financial statements. Actual losses have been within management's
expectations.

Custodial funds for the payment of insurance and taxes and unremitted
principal and interest are segregated in separate bank accounts excluded from
BancPLUS Mortgage's assets and liabilities. Such custodial funds approximated
$212,754,000 at December 31, 1994.

The Company carries blanket fidelity bond coverage in the aggregate amount
of $15,700,000 and errors and omissions coverage in the aggregate amount of
$16,000,000 at December 31, 1994.

(4) PROPERTIES AND EQUIPMENT

The following is a detail of properties and equipment at December 31, 1993
and 1994 (in thousands):

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
IN YEARS 1993 1994
----------- ------- -------
<S> <C> <C> <C>
Building and improvements............................ 5 - 30 $ 6,660 $ 7,186
Data processing equipment............................ 3 - 7 3,439 4,109
Furniture, fixtures, and equipment................... 5 - 7 3,573 4,042
------- -------
13,672 15,337
Less accumulated depreciation........................ (3,077) (4,902)
------- -------
Properties and equipment, net.............. $10,595 $10,435
======= =======
</TABLE>

(5) NOTES PAYABLE

Notes payable consisted of the following at December 31, 1993 and 1994 (in
thousands):

<TABLE>
<CAPTION>
1993 1994
-------- --------
<S> <C> <C>
Committed operating lines of credit:
Mortgage loans credit facility............................... $258,645 $ 88,239
Receivables credit facility.................................. 12,183 3,800
Working capital credit facility.............................. 2,600 --
Pool advance credit facility................................. -- 198
-------- --------
Total committed operating lines of credit................. 273,428 92,237
Uncommitted operating lines of credit:
Mortgage loans and mortgage backed securities credit
facility.................................................. 123,444 24,764
Term debt.................................................... 62,500 76,368
Subordinated notes........................................... 40,857 40,880
Mortgage on corporate headquarters........................... 3,613 3,337
Notes payable to related party............................... 4,500 --
-------- --------
Total notes payable.................................. $508,342 $237,586
======== ========
</TABLE>

The committed operating lines permitted BancPLUS Mortgage to borrow an
aggregate maximum amount of $282,000,000 at December 31, 1994. These agreements
expire during 1995. The uncommitted operating lines permitted BancPLUS Mortgage
to borrow an additional aggregate maximum amount of

F-80
<PAGE> 185

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$275,000,000 at December 31, 1994. These agreements also expire during 1995.
Borrowings under these agreements bear interest at rates ranging from the
federal funds rate plus 1% to a range of prime minus .75% to prime plus 1.25%,
reduced in proportion to compensating balances maintained at the banks.
Commitment fees paid relating to committed operating lines of credit outstanding
at December 31, 1994 totaled $901,000 and ranged from .31% to .57%. These
amounts are amortized over the term of the commitments and are included as a
component of interest expense. Non-usage fees for the committed operating lines
range from .125% to .25%.

These operating lines of credit are secured by mortgage loans and mortgage
backed securities and all rights relating to or to be reimbursed for principal
and interest advances and foreclosure advances. All of these operating lines of
credit are cross-collateralized and cross-defaulted.

The agreements provide for various financial covenants, the most
restrictive of which place limitations on debt, other investments, transactions
with affiliates, and the payment of dividends. The agreements also require the
maintenance of certain financial ratios, including minimums for net worth,
portfolio size, and funds from operations. As of December 31, 1994, BancPLUS
Mortgage was in compliance with all requirements of the creditor banks.

BancPLUS Mortgage had notes payable outstanding to a group of banks which
provided $76,368,000 of acquisition term financing at December 31, 1994. The
notes mature in 2000 and bear interest at prime plus 1.25%, reduced in
proportion to the amount of compensating balances maintained at the banks.
Quarterly installments of principal in the amount of $3,632,000 plus interest
are due through the year 1999. A final principal payment of $3,728,000 plus
interest is due February 7, 2000. The notes are secured by the servicing
portfolios of both BancPLUS Mortgage and Honolulu Mortgage Company, Inc., a
wholly-owned subsidiary of BancPLUS Mortgage (subject to the restrictions
required by GNMA, FNMA, and FHLMC), and all of the issued and outstanding shares
of capital stock of certain BancPLUS Mortgage subsidiaries. These notes contain
financial covenants similar to those contained in the operating lines of credit
agreements. BancPLUS Mortgage met all of the requirements of the creditor banks
at December 31, 1994.

As of December 31, 1993 and 1994, BancPLUS Financial Corporation had
$41,000,000 of 11.5% subordinated notes outstanding. The notes become due
February 26, 2001 with annual redemptions of one-third of the original principal
to begin February 26, 1999. In connection with the issuance of those notes, the
note holders also acquired warrants to purchase 9,170 Stock Units (see note 10).

BancPLUS Mortgage has executed as co-maker with its subsidiary, Fiesta
Investments, Inc., a mortgage in the face amount of $4,150,000 to provide
financing for the purchase and improvement of its corporate headquarters. As of
December 31, 1994, $3,337,000 was outstanding on the note, which bears interest
at prime plus 1% (prime plus 2% beginning in 1995). The note requires monthly
principal installments of approximately $23,000 and matures on December 31,
1996.

Substantially all of the BancPLUS Mortgage debt is guaranteed by BancPLUS
Financial Corporation.

Aggregate cash payments for interest were $22,779,000 and $14,733,000
during the years ended December 31, 1993 and 1994, respectively.

During the first quarter of 1994, BancPLUS Mortgage refinanced all of its
operating lines of credit and term debt through a group of banks. As a result of
this refinancing, the Company recognized an extraordinary loss of $1,064,000
resulting from the write-off of certain unamortized commitment fees relating to
the refinanced debt.

F-81
<PAGE> 186

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(6) COMMITMENTS AND CONTINGENCIES

BancPLUS Mortgage had commitments at set prices and rates, which generally
were less than a year in duration, to make and purchase loans of approximately
$61,259,000 and to sell loans of approximately $107,344,000 at December 31,
1994. BancPLUS Mortgage also had commitments to make and purchase loans of
approximately $55,200,000 at December 31, 1994 for which prices and rates had
not been set. Market risk exists on the commitments to make and purchase loans
for which prices and rates are set as a result of potential future fluctuations
in mortgage interest rates. To mitigate this risk, BancPLUS Mortgage has entered
into sales agreements which, viewed independent of the related commitments to
make or purchase loans, are subject to offsetting market risk should there be
fluctuations in mortgage interest rates. All loans in the warehouse are covered
by these forward sales agreements. BancPLUS Mortgage conducts forward sales on a
percentage of the loans in process and, to a lesser extent, may use options to
hedge all or a portion of any remaining loans in process. Gains or losses on
options are deferred and recognized at the time the related mortgage loans are
sold or upon expiration of the option term. At December 31, 1994, such options
had a carrying value of $197,000 and a fair value of $134,000.

All loans are collateralized by the underlying real estate. The gross
amount of the commitments to make and purchase loans represents BancPLUS
Mortgage's maximum exposure to credit risk. To mitigate credit risk, BancPLUS
Mortgage securitizes and sells conventional loans on a non-recourse basis, and
securitizes and sells government loans through programs under which VA partially
guarantees or FHA insures BancPLUS Mortgage against credit risk.

BancPLUS Mortgage has been named as a defendant in various lawsuits arising
in the normal course of business. Management intends to vigorously defend the
lawsuits and is of the opinion that their resolution will not have a material
adverse effect on the accompanying financial statements.

BancPLUS Mortgage has obligations under various operating leases. Lease
expense was $3,670,000 and $4,628,000 for the years ended December 31, 1993 and
1994, respectively. Additionally, BancPLUS Mortgage leases a portion of its
corporate headquarters facility to outside tenants. The future minimum rent
payments and receipts as of December 31, 1994 relating to these leasing
activities were as follows (in thousands):

<TABLE>
<CAPTION>
LEASE LEASE
PAYMENTS INCOME
-------- ------
<S> <C> <C>
1995...................................................... $2,272 $601
1996...................................................... 1,713 449
1997...................................................... 978 247
1998...................................................... 532 95
1999 and thereafter....................................... 399 13
</TABLE>

(7) FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments", requires that the Company disclose
estimated fair values for its financial instruments. Fair value estimates along
with the methods and assumptions used in developing such estimates are set forth
below for the Company's financial instruments.

Cash, Receivables and Payables -- The carrying amount approximates fair
value because these instruments are of short duration and do not present
significant credit concerns.

Mortgage Loans Held for Sale -- The fair value of mortgage loans held for
sale and covered by investor commitments is based on commitment prices. The fair
value of uncommitted mortgage loans is determined using current investor yield
requirements.

F-82
<PAGE> 187

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Excess Servicing Fees Receivable -- The fair value of excess servicing fees
receivable is determined by discounting the expected future cash flows using
current prepayment estimates.

Notes Payable -- The carrying amount approximates fair value due to the
variable interest rates associated with this debt. The fair value of the
subordinated notes is determined in accordance with the redemption requirements
of the notes.

The estimated fair values of the Company's financial instruments are
summarized as follows (in thousands):

<TABLE>
<CAPTION>
AT DECEMBER 31, 1994
-----------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
<S> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents.................................... $ 7,901 $ 7,901
Mortgage loans held for sale................................. 120,871 120,895
Receivables, net of allowance................................ 29,836 29,836
Excess servicing fees receivable............................. 2,428 4,230
-------- ----------
Total financial assets............................... $161,036 $ 162,862
======== ========
FINANCIAL LIABILITIES:
Notes payable................................................ 237,586 237,706
Payables..................................................... 23,490 23,490
-------- ----------
Total financial liabilities.......................... $261,076 $ 261,196
======== ========
UNRECOGNIZED FINANCIAL INSTRUMENTS:
Fixed commitments to make and purchase loans................. 61,259 61,294
Floating commitments to make and purchase loans.............. 51,359 51,359
-------- ----------
Total commitments to make and purchase loans......... $112,618 $ 112,653
======== ========
Commitments to sell loans, into which specific loans have not
been allocated............................................ $ 14,830 $ 14,877
======== ========
</TABLE>

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Because no ready market exists for a portion of the
Company's financial instruments, fair value estimates are based on judgments
regarding future expected losses, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. Other significant assets that are not considered
financial instruments include mortgage loan administration contracts, net of
excess servicing fees receivable and properties and equipment. In addition, the
tax ramifications related to the realization of unrealized gains and losses can
have a significant effect on fair value estimates and have not been considered
in the estimates.

F-83
<PAGE> 188

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(8) EMPLOYEE BENEFIT PLANS

BancPLUS Mortgage sponsors a savings and investment plan in which employees
may contribute a portion of their compensation. BancPLUS Mortgage matches a
portion of employee contributions, subject to the plan's defined vesting
schedule.

Honolulu Mortgage Company, Inc. sponsors a retirement plan which covers
substantially all of its employees. This retirement plan includes an employee
savings option with partial matching by Honolulu Mortgage Company, Inc. Annual
contributions are discretionary as defined in the plan agreement and such
contributions are funded on a current basis.

Total expense relating to these plans was $468,000 and $680,000 for the
years ended December 31, 1993 and 1994, respectively.

(9) INCOME TAXES

The components of income taxes for the years ended December 31, 1993 and
1994 were as follows (in thousands):

<TABLE>
<CAPTION>
1993 1994
------- ------
<S> <C> <C>
Current expense........................................... $ 355 $3,377
Deferred benefit.......................................... (4,583) (270)
------ -------
Total................................................ $(4,228) $3,107
====== =======
</TABLE>

The expected income taxes for the years ended December 31, 1993 and 1994
differ from the recorded amounts as follows (in thousands):

<TABLE>
<CAPTION>
1993 1994
-------- ------
<S> <C> <C>
Income (loss) before income taxes, extraordinary item, and
cumulative effect of a change in accounting principle........ $(12,261) $8,212
======== ======
Income tax at 34% statutory rate............................... (4,169) 2,792
Increase (decrease) in tax resulting from:
State and local income taxes................................. 28 248
Other, net................................................... (87) 67
-------- ------
Income tax expense (benefit)......................... $ (4,228) $3,107
======== ======
</TABLE>

F-84
<PAGE> 189

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1993 and 1994 are presented below (in thousands):

<TABLE>
<CAPTION>
1993 1994
------ ------
<S> <C> <C>
Deferred tax assets:
Accruals not currently deductible for income tax purposes...... $ 673 $1,005
Valuation allowances........................................... 5,475 4,771
Excess of tax over book basis for organization costs........... 896 700
Properties and equipment, principally due to differences in
depreciation................................................ 130 88
Deferred installment sale income............................... -- 304
Other.......................................................... 103 150
------ ------
Total deferred tax assets.............................. 7,277 7,018
------ ------
Deferred tax liabilities:
Excess of book over tax basis for mortgage loan administration
contracts................................................... 5,972 5,136
Accounts receivable, principally due to allowance for
uncollectible accounts...................................... 412 533
Other.......................................................... -- 186
------ ------
Total deferred tax liabilities......................... 6,384 5,855
------ ------
Net deferred tax asset................................. $ 893 $1,163
====== ======
</TABLE>

Management believes that realization of the deferred tax assets is more
likely than not based on the expectation that such benefits will be utilized in
future consolidated tax returns.

At December 31, 1993, the net deferred tax asset of $893,000 was comprised
of $1,377,000 of deferred income tax benefit (included in prepaid expenses and
other assets) and $484,000 of deferred state income taxes payable (included in
accounts payable and accrued expenses). Prepaid expenses and other assets also
included $983,000 of current income taxes recoverable at December 31, 1993. At
December 31, 1994, the net deferred tax asset of $1,163,000 was comprised of
$1,473,000 of deferred income tax benefit (included in prepaid expenses and
other assets) and $310,000 of deferred state income taxes payable (included in
accounts payable and accrued expenses). Accounts payable and accrued expenses
also included $1,411,000 of current income taxes payable at December 31, 1994.

Aggregate cash payments for income taxes were $1,907,000 and $1,470,000
during the years ended December 31, 1993 and 1994, respectively.

(10) STOCKHOLDERS' EQUITY AND RELATED PARTY TRANSACTIONS

Under a Management Shareholders Agreement between the Company and its
shareholders, certain restrictions exist with respect to the transfer of shares
between shareholders which provide that the Company has a right of first refusal
on any transfer of shares to third parties. The terms of this Management
Shareholders Agreement include provisions whereby the Company may be required to
acquire the outstanding shares of specified "management shareholders" at "fair
value" in the event of termination of employment of such individuals in certain
cases. The agreement provides that any requirement of the Company to purchase
shares of terminated management shareholders expires on the day the common stock
of the Company is listed or admitted to trading on a national securities
exchange or quoted by NASDAQ.

The Company's preferred stock outstanding has a stated $1.30 per share
annual dividend which is payable quarterly and is cumulative. The Company
declared preferred stock dividends-in-kind, recorded at par value, of 159,300
and 181,041 shares during 1993 and 1994, respectively of which 41,755 and 47,454
were issued

F-85
<PAGE> 190

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
(Acquired by Barnett Mortgage Company on February 28, 1995)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

January 1, 1994 and 1995, respectively. The preferred shares have a liquidation
preference of $10 per share (exclusive of accrued dividends) and are redeemable
at the Company's option on or after October 31, 1996 for $10 per share.

In connection with the issuance of the 11.5% subordinated notes, the note
holders acquired warrants to purchase 9,170 Stock Units at a price of $202.71
per Unit. The warrants expire February 26, 2001. Each Stock Unit entitles the
holder to acquire 1 share of common stock and 10.271 shares of preferred stock
as of the warrant issuance date, adjusted proportionately for subsequent
issuances of stock. The value of the warrants of $186,000 was allocated to
additional paid in capital at the date of issuance.

Effective October 18, 1991, the Company granted options to the Chairman and
Chief Executive Officer of BancPLUS Mortgage to purchase up to 5,263 shares of
common stock at $95 per share and 52,632 shares of preferred stock at $9.50 per
share. The options are exercisable immediately and expire in ten years. Any
exercise must be made to acquire a proportionate number of common and preferred
shares. As of December 31, 1994, none of the options had been exercised.

From time to time, the Company's mortgage banking subsidiaries may make
mortgage loans to its officers and employees in the normal course of business.
The terms of such mortgage loans will be substantially similar to those provided
to the public, but may, in certain circumstances, be more favorable to such
officers or employees. It is the Company's policy to waive the origination fee
on officer and employee residential mortgage loans. Such mortgage loans are sold
to investors in the secondary market in the ordinary course of business.

Substantially all of the Company's net assets are attributable to BancPLUS
Mortgage's net assets, which are restricted. (See Note 5).

(11) BANCPLUS GROUP PERFORMANCE SHARE PLAN

Effective April 28, 1993, the Company adopted the BancPLUS Group
Performance Share Plan, pursuant to which designated employees of BancPLUS
Mortgage may be awarded "Performance Shares" entitling them to cash bonus
payments in the event of (1) distributions to common shareholders (after
outstanding preferred stock has been effectively redeemed and specified
distributions have been made to existing common shareholders), (2) termination
of employment in certain cases or (3) a change of control of the Company. These
Performance Shares vest ratably over a five-year period subsequent to the date
of grant unless the Company determines a different vesting schedule at the time
of grant. As of December 31, 1994, none of the events which trigger a cash bonus
have occurred.

A maximum of 3,627 Performance Shares are currently authorized under the
BancPLUS Group Performance Share Plan. As of December 31, 1994, a total of 3,500
Performance Shares have been issued under the Plan.

(12) SUBSEQUENT EVENTS

On February 28, 1995, all of the outstanding stock of BancPLUS Financial
Corporation was acquired by Barnett Mortgage Company. Barnett Mortgage Company
is a wholly-owned subsidiary of Barnett Banks, Inc., a registered bank holding
company headquartered in Jacksonville, Florida. The acquisition will be
accounted for as a purchase.

On February 28, 1995, the Company also repaid all its subordinated notes
outstanding and redeemed all of its outstanding preferred stock, stock warrants,
stock options, and Performance Shares. Additionally, BancPLUS Mortgage repaid
the mortgage on its corporate headquarters.

F-86
<PAGE> 191
===============================================================================
NO DEALER, SALESPERSON, OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE COMMON STOCK BY ANYONE IN ANY JURISDICTION WHERE, OR TO ANY PERSON
TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH
IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

------------------------

<TABLE>
TABLE OF CONTENTS

<CAPTION>
PAGE
----
<S> <C>
Additional Information................ 2
Prospectus Summary.................... 3
Risk Factors.......................... 11
Use of Proceeds....................... 17
Dividend Policy....................... 17
Capitalization........................ 17
Dilution.............................. 18
The Company........................... 19
Selected Consolidated Financial
Information......................... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations -- HomeSide........... 26
Management's Discussion and Analysis
of Financial Condition and Results
of Operations -- HLI................ 34
Management's Discussion and Analysis
of Financial Condition and Results
of Operations -- HHI................ 47
Industry Overview..................... 58
Business.............................. 61
HomeSide............................ 61
HLI -- Historical Business.......... 72
HHI -- Historical Business.......... 76
The Acquisitions...................... 81
Management............................ 83
Security Ownership of Certain
Beneficial Owners and Management.... 90
Certain Relationships and Related
Transactions........................ 92
Shares Eligible for Future Sale....... 96
Description of Capital Stock.......... 97
Description of Bank Credit
Agreement........................... 97
Description of the Notes.............. 101
Underwriting.......................... 102
Legal Matters......................... 103
Experts............................... 103
Index to Financial Statements......... F-1
</TABLE>
===============================================================================
===============================================================================

5,900,000 SHARES

[LOGO]

COMMON STOCK

---------------------------

PROSPECTUS

---------------------------

MERRILL LYNCH & CO.
SMITH BARNEY INC.

, 1997
================================================================================

<PAGE> 192

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

<TABLE>
The expenses in connection with the issuance and distribution of the
securities being registered hereby, other than underwriting discounts and
commissions, to be paid by the Company, are estimated as follows:

<S> <C>
Registration fee under Securities Act............................ $37,010
NASD filing fee.................................................. 12,713
NYSE listing fees................................................ *
Legal fees....................................................... *
Accounting fees.................................................. *
Printing and engraving........................................... *
Transfer agent fees.............................................. *
Miscellaneous.................................................... *
-------
Total....................................................... $ *
=======
<FN>
- ---------------
* To be provided by Amendment.
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the General Corporation Law of the State of Delaware
provides as follows:

(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.

(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect to any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.

II-1
<PAGE> 193

(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.

(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the board of directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) if
there are no such directors, or, if such directors so direct, by
independent legal counsel in a written opinion, or (3) by the shareholders.

(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.

(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of shareholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.

(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.

(h) For purposes of this section, references to the corporation shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.

(i) For purposes of this section, references to other enterprises
shall include employee benefit plans; references to fines shall include any
excise taxes assessed on a person with respect to any employee benefit
plan; and references to serving at the request of the corporation shall
include any service as a director, officer, employee, or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner not opposed to the best interests of the
corporation as referred to in this section.

(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has

II-2
<PAGE> 194

ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.

Article 10 of the By-laws of the Company provides as follows:

ARTICLE 10

INDEMNIFICATION

Section 10.1 Third Party Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.

Section 10.2 Derivative Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.

Section 10.3 Expenses. To the extent that a Director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 10.1 and 10.2,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.

Section 10.4 Authorization. Any indemnification under Sections 10.1 and
10.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Sections 10.1 and 10.2.
Such determination shall be made (a) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.

Section 10.5 Advance Payment of Expenses. Expenses incurred by an officer
or Director in defending a civil or criminal action, suit or proceeding may be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding as authorized by the Board of Directors in the specific case upon
receipt of an

II-3
<PAGE> 195

undertaking by or on behalf of such officer or Director to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this Article 10. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board of Directors deems appropriate.

Section 10.6 Non-Exclusiveness. The indemnification provided by this
Article 10 shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

Section 10.7 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article 10.

Section 10.8 Constituent Corporations. The Corporation shall have power to
indemnify any person who is or was a director, officer, employee or agent of a
constituent corporation absorbed in a consolidation or merger with this
Corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, in the same manner as hereinabove
provided for any person who is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.

Section 10.9 Additional Indemnification. In addition to the foregoing
provisions of this Article 10, the Corporation shall have the power, to the full
extent provided by law, to indemnify any person for any act or omission of such
person against all loss, cost, damage and expense (including attorney's fees) if
such person is determined (in the manner prescribed in Section 10.4 hereof) to
have acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the Corporation.

Article X of the Certificate of Incorporation of the Issuer provides in
relevant part as follows:

No director shall be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
notwithstanding any provision of law imposing such liability; provided, however,
that, to the extent provided by applicable law, this provision shall not
eliminate the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of Delaware, or
(iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with respect
to any acts or omissions of such director occurring prior to such amendment or
repeal.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

During the past three years the Company has issued the following
securities, none of which have been registered under the Securities Act of 1933,
as amended (the "Act"):

(a) On March 15, 1996, the Company issued and sold to THL Equity Holdings,
Inc. an aggregate of [459,643] shares of Common Stock for an aggregate price of
$80,437,525.

(b) On March 15, 1996, the Company issued and sold to Madison Dearborn
Capital Partners L.P. an aggregate of [153,214] shares of Common Stock for an
aggregate price of $26,812,450.

(c) On March 15, 1996, the Company issued and sold to The First National
Bank of Boston an aggregate of [501,429] shares of Common Stock in consideration
for its sale of all of the outstanding capital

II-4
<PAGE> 196

stock of BancBoston Mortgage Corporation to the Company, [5,714] of which shares
were subsequently redeemed by the Company on May 15, 1996.

(d) On March 15, 1996, the Company issued and sold to Smith Barney Inc. an
aggregate of [5,714] shares of Class B Common Stock in exchange for services
provided in connection with the acquisition of BancBoston Mortgage Corporation
by the Company.

(e) On March 15, 1996, the Company issued and sold to The First National
Bank of Boston an aggregate of [5,714] shares of Class C Common Stock for an
aggregate price of $999,950.

(f) On March 15, 1996, the Company issued a $90,000,000 Short Term
Promissory Note to Merrill Lynch Capital Corporation.

(g) On May 14, 1996, the Company issued and sold $200,000,000 of 11 1/4%
Senior Secured Second Priority Notes due 2003 to a limited group of
institutional investors.

(h) On May 15, 1996, the Company issued and sold to certain senior level
management employees of the Company and its subsidiaries an aggregate of
[22,645] shares of Common Stock for an aggregate price of $3,962,875.

(i) On May 31, 1996, the Company issued and sold to Thomas H. Lee Equity
Fund III, L.P., Thomas H. Lee Foreign Fund III, L.P. and affiliates of Thomas H.
Lee Company an aggregate of [46,007] shares of Common Stock for an aggregate
price of $8,051,225.

(j) On May 31, 1996, the Company issued and sold to Madison Dearborn
Capital Partners L.P. an aggregate of [15,336] shares of Common Stock for an
aggregate price of $80,437,525.

(k) On May 31, 1996, the Company issued and sold to The First National Bank
of Boston an aggregate of [178,485] shares of Common Stock for an aggregate
price of $31,234,875.

(l) On May 31, 1996, the Company issued and sold to Siesta Holdings, Inc.
an aggregate of [674,200] shares of Common Stock in consideration for Barnett
Banks, Inc.'s sale of all of the outstanding capital stock Barnett Mortgage
Company.

(m) On May 31, 1996, the Company issued and sold to certain senior level
management employees of the Company and its subsidiaries an aggregate of [472]
shares of Common Stock for an aggregate price of $82,600.

(n) On August 21, 1996, the Company issued and sold to certain senior level
management employees of the Company and its employees an aggregate of [1,144]
shares of Common Stock for an aggregate price of $200,200.

(o) On November 14, 1996, the Company issued and sold to a certain senior
level management employee of the Company and its subsidiaries an aggregate of
[1,715] shares of Common Stock for an aggregate price of $300,125.

(p) On May 31, 1996, the Company issued options to purchase an aggregate of
[47,642] shares of Common Stock under the Company's Time Accelerated Restricted
Stock Option Plan exercisable at $175.00 per share.

(q) On May 31, 1996, the Company issued options to purchase an aggregate of
[23,821] shares of Common Stock under the Company's Non-Qualified Stock Option
Plan exercisable at $175.00 per share.

(r) On June 3, 1996, the Company issued options to purchase an aggregate of
[762] shares of Common Stock under the Company's Time Accelerated Restricted
Stock Option Plan exercisable at $175.00 per share.

(s) On June 3, 1996, the Company issued options to purchase an aggregate of
[381] shares of Common Stock under the Company's Non-Qualified Stock Option Plan
exercisable at $175.00 per share.

(t) On June 17, 1996, the Company issued options to purchase an aggregate
of [382] shares of Common Stock under the Company's Time Accelerated Restricted
Stock Option Plan exercisable at $175.00 per share.

II-5
<PAGE> 197

(u) On June 17, 1996, the Company issued options to purchase an aggregate
of [191] shares of Common Stock under the Company's Non-Qualified Stock Option
Plan exercisable at $175.00 per share.

(v) On October 8, 1996, the Company issued options to purchase an aggregate
of [3,810] shares of Common Stock under the Company's Time Accelerated
Restricted Stock Option Plan exercisable at $175.00 per share.

(w) On October 8, 1996, the Company issued options to purchase an aggregate
of [1,905] shares of Common Stock under the Company's Non-Qualified Stock Option
Plan exercisable at $175.00 per share.

No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Act set forth in Section 4(2) thereof relative to sales by an issuer not
involving any public offering or the rules and regulations thereunder.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
(a) Exhibits. Unless otherwise indicated, all Exhibits are incorporated by
reference to the Company's Registration Statement on Form S-4, No. 333-06737.

<S> <C>
1.1* Form of Purchase Agreement.

3.1 Certificate of Incorporation of HomeSide, Inc.

3.2 By-Laws of HomeSide, Inc.

3.3* Amended and Restated Certificate of Incorporation of HomeSide, Inc.

4.1* Form of Common Stock Certificate.

5.1* Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation regarding
legality of the securities being registered.

10.1 Stock Purchase Agreement dated December 11, 1995 between HomeAmerica Capital,
Inc. (currently known as HomeSide, Inc.) and The First National Bank of Boston
(the "BBMC Purchase Agreement").

10.2 Amendment No. 1, dated as of March 15, 1996, to the BBMC Purchase Agreement.

10.3 Marketing Agreement dated as of March 15, 1996 between HomeSide, Inc. and The
First National Bank of Boston.

10.4 Repurchase of Mortgage Loan Servicing Rights Letter Agreement between The
First National Bank of Boston and BancBoston Mortgage Corporation (currently
known as HomeSide Lending, Inc.)

10.5 Operating Agreement effective as of March 15, 1996 between The First National
Bank of Boston and BancBoston Mortgage Corporation (currently known as
HomeSide Lending, Inc.)

10.6 Brokered Loan Purchase and Sale Agreement dated as of March 15, 1996 between
BancBoston Mortgage Corporation (currently known as HomeSide Lending, Inc.)
and each of The First National Bank of Boston, Bank of Boston Connecticut,
Rhode Island Hospital Trust National Bank and Bank of Boston Florida, N.A.

10.7 Master Take-Out Commitment dated as of March 15, 1996 between BancBoston
Mortgage Corporation (currently known as HomeSide Lending, Inc.) and each of
The First National Bank of Boston, Bank of Boston Connecticut, Rhode Island
Hospital Trust National Bank and Bank of Boston Florida, N.A.

10.8 Neighborhood Assistance Corporation of America Mortgage Loan Take-Out
Commitment dated as of March 15, 1996 between BancBoston Mortgage Corporation
(currently known as HomeSide Lending, Inc.) and The First National Bank of
Boston.

10.9+ PMSR Flow Agreement dated as of March 15, 1996 between BancBoston Mortgage
Corporation (currently known as HomeSide Lending, Inc.) and each of The First
National Bank of Boston, Bank of Boston Connecticut, Rhode Island Hospital
Trust National Bank and Bank of Boston Florida, N.A.
</TABLE>

II-6
<PAGE> 198

<TABLE>
<S> <C>
10.10+ Mortgage Loan Servicing Agreement dated as of March 15, 1996 between
BancBoston Mortgage Corporation (currently known as HomeSide Lending, Inc.)
and each of The First National Bank of Boston, Bank of Boston Connecticut,
Rhode Island Hospital Trust National Bank and Bank of Boston Florida, N.A.
10.11 Stock Purchase Agreement dated as of March 4, 1996 between GrantAmerica, Inc.
(currently known as HomeSide, Inc.) and Barnett Banks, Inc. (the "BMC Purchase
Agreement").
10.12 Amendment No. 1, dated as of May 31, 1996, to the BMC Purchase Agreement.
10.13 Tax Indemnity Letter Agreement dated as of March 4, 1996 between Barnett
Mortgage Company (currently known as HomeSide Holdings, Inc.) and Barnett
Banks, Inc.
10.14 Amended and Restated Shareholder Agreement dated as of May 31, 1996 among
HomeSide, Inc. and the shareholders thereof.
10.15 Amended and Restated Registration Rights Agreement dated as of May 31, 1996
between HomeSide, Inc. and certain shareholders thereof.
10.16 Marketing Agreement dated as of May 31, 1996 between HomeSide, Inc. and
Barnett
Banks, Inc.
10.17 Transitional Services Agreement dated as of May 31, 1996 between Barnett
Banks, Inc., Barnett Mortgage Company (currently known as HomeSide Holdings,
Inc.) and HomeSide, Inc.
10.18 Operating Agreement dated as of May 31, 1996 between HomeSide Lending, Inc.
and Barnett Banks, Inc.
10.19+ Mortgage Loan Servicing Agreement dated as of April, 1996 between HomeSide
Lending, Inc. and Barnett Banks, Inc.
10.20+ PMSR Flow Agreement dated as of May 31, 1996 between HomeSide Lending, Inc.
and Barnett Banks, Inc.
10.21 Correspondent Agreement dated May 16, 1996 between HomeSide Lending, Inc. and
Barnett Banks, Inc.
10.22 Delegated Underwriting Agreement dated as of May 15, 1996 between HomeSide
Lending, Inc. and HomeSide Holdings, Inc.
10.23 Credit Agreement dated as of May 31, 1996 among HomeSide Lending, Inc.,
Honolulu Mortgage Company, Inc., the Lenders parties thereto, the Balance
Lenders thereto, NationsBank of Texas, N.A., as Syndication Agent, Bankers
Trust Company, as Documentation Agent, The First National Bank of Boston, as
Collateral Agent, and Chemical Bank, as Administrative Agent (the "Credit
Agreement").
10.24 Holdings Pledge Agreement dated as of May 31, 1996 between HomeSide, Inc. and
Chemical Bank, as Administrative Agent for the Lenders parties to the Credit
Agreement.
10.25 HomeSide Pledge Agreement dated as of May 31, 1996 between HomeSide Lending,
Inc. and Chemical Bank, as Administrative Agent for the Lenders parties to the
Credit Agreement.
10.26 BMC Pledge Agreement dated as of May 31, 1996 between HomeSide Holdings, Inc.
and Chemical Bank, as Administrative Agent for the Lenders parties to the
Credit Agreement.
10.27 Registration Rights Agreement dated as of May 14, 1996 among HomeSide, Inc.
and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Smith Barney Inc. and Friedman, Billings, Ramsey & Co., Inc.
10.28 Holdings Guaranty dated as of May 31, 1996 by HomeSide, Inc. in favor of
Chemical Bank, as Administrative Agent for the Lenders parties to the Credit
Agreement.
10.29 HomeSide Guaranty dated as of May 31, 1996 by HomeSide Lending, Inc. in favor
of Chemical Bank, as Administrative Agent for the Lenders parties to the
Credit Agreement.
10.30 Subsidiaries Guaranty dated as of May 31, 1996 by each of SWD Properties,
Inc., Stockton Plaza, Inc., HomeSide Mortgage Securities, Inc. and Honolulu
Mortgage Company, Inc. in favor of Chemical Bank, as Administrative Agent for
the Lenders parties to the Credit Agreement.
</TABLE>

II-7
<PAGE> 199

<TABLE>
<S> <C>
10.31 BMC Guaranty dated as of May 31, 1996 by HomeSide Holdings, Inc. in favor of
Chemical Bank, as Administrative Agent for the Lenders parties to the Credit
Agreement.

10.32 Security and Collateral Agency Agreement dated as of May 31, 1996 between
HomeSide Lending, Inc. and Chemical Bank, as Administrative Agent for the
Lenders parties to the Credit Agreement.

10.33 Security and Collateral Agency Agreement dated as of May 31, 1996 between
Honolulu Mortgage Company, Inc. and Chemical Bank, as Administrative Agent for
the Lenders parties to the Credit Agreement.

10.34 Security and Collateral Agency Agreement dated as of May 31, 1996 between
HomeSide Holdings, Inc. and Chemical Bank, as Administrative Agent for the
Lenders parties to the Credit Agreement.

10.35 Intercreditor Agreement dated as of May 31, 1996 between HomeSide, Inc.,
HomeSide Holdings, The Bank of New York, as Trustee, and Chemical Bank, as
Administrative Agent under the Credit Agreement.

10.36 HomeSide, Inc. Time Accelerated Restricted Stock Option Plan.

10.37 HomeSide, Inc. Non-Qualified Stock Option Plan.

10.38 Class B Non-Voting Common Stock Issuance Agreement dated as of March 14, 1996
between HomeSide, Inc. and Smith Barney Inc.

10.39 Transitional Services Agreement dated as of March 15, 1996 between The First
National Bank of Boston and BancBoston Mortgage Corporation (currently known
as HomeSide Lending, Inc.)

10.40 Transitional Services Agreement dated as of March 15, 1996 between The First
National Bank of Boston and BancBoston Mortgage Corporation (currently known
as HomeSide Lending, Inc.)

10.41 Management Agreement dated as of March 15, 1996 between BancBoston Mortgage
Corporation (currently known as HomeSide Lending, Inc.) and The First National
Bank of Boston.

10.42 Management Agreement dated as of March 15, 1996 between BancBoston Mortgage
Corporation (currently known as HomeSide Lending, Inc.) and Thomas H. Lee
Company.

10.43 Management Agreement dated as of March 15, 1996 between BancBoston Mortgage
Corporation (currently known as HomeSide Lending, Inc.) and Madison Dearborn
Partners, Inc.

10.44 Management Stockholder Agreement dated as of May 15, 1996 between HomeSide,
Inc., The First National Bank of Boston, Thomas H. Lee Equity Fund III, L.P.
and certain affiliates thereof, Madison Dearborn Capital Partners, L.P. and
certain employees of HomeSide, Inc. and its subsidiaries.

10.45 Management Agreement dated as of May 31, 1996 between HomeSide Lending, Inc.
and Barnett Banks, Inc.

10.46 Form of HomeSide Severance Agreement

21.1 List of subsidiaries of HomeSide, Inc.

23.1.1** Consent of Arthur Andersen LLP

23.1.2** Consent of Arthur Andersen LLP

23.2** Consent of Coopers & Lybrand L.L.P.

23.3** Consent of KPMG Peat Marwick LLP

23.4 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included
in Exhibit 5.1)

24.1 Powers of Attorney (contained on the signature page to this Registration
Statement).

27.1** Financial Data Schedule

<FN>
- ---------------
+ Portions of this Exhibit have been omitted pursuant to an order of the
Securities and Exchange Commission granting confidential treatment.
</TABLE>

II-8
<PAGE> 200

* This Exhibit will be filed with a subsequent amendment to this Registration
Statement.

** This Exhibit is filed with this Registration Statement.

(b) Financial Statement Schedules.

Schedule II -- Valuation and Qualifying Accounts and Reserves For the three
years ended December 31, 1995 For Barnett Mortgage Company (at page S-1).

Schedule II -- Valuation and Qualifying Accounts and Reserves For the year
ended December 31, 1994 For BancPLUS Financial Corporation and Subsidiary (at
page S-2).

Schedules other than those listed above have been omitted since the
information is not applicable, not required or is included in the financial
statements or notes thereto.

ITEM 17. UNDERTAKINGS.

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 14 above or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

(b) The undersigned registrant hereby undertakes (1) that for purposes of
determining any liability under the Act, the information omitted from the form
of prospectus filed as part of a registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective; and (2) that
for the purpose of determining any liability under the Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

II-9
<PAGE> 201

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF JACKSONVILLE, STATE OF
FLORIDA, ON THE 12TH DAY OF DECEMBER, 1996.

HOMESIDE, INC.

By: /s/ JOE K. PICKETT
------------------------------------
Joe K. Pickett
Chairman and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Joe K. Pickett and Hugh R. Harris and each of
them, with the power to act without the other, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her or in his or her name, place and stead, in any and all capacities
to sign any and all amendments or post-effective amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.

<TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOE K. PICKETT Chairman of the Board, Chief December 12, 1996
- -------------------------------------------- Executive Officer and Director
Joe K. Pickett (Principal Executive Officer)

/s/ HUGH R. HARRIS President, Chief Operating Officer December 12, 1996
- -------------------------------------------- and Director
Hugh R. Harris

/s/ KEVIN D. RACE Vice President, Chief Financial December 12, 1996
- -------------------------------------------- Officer and Treasurer (Principal
Kevin D. Race Financial and Accounting Officer)

/s/ THOMAS M. HAGERTY Director December 12, 1996
- --------------------------------------------
Thomas M. Hagerty

/s/ DAVID V. HARKINS Director December 12, 1996
- --------------------------------------------
David V. Harkins

/s/ JUSTIN S. HUSCHER Director December 12, 1996
- --------------------------------------------
Justin S. Huscher

/s/ PETER J. MANNING Director December 12, 1996
- --------------------------------------------
Peter J. Manning
</TABLE>

II-10
<PAGE> 202

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ WILLIAM J. SHEA Director December 12, 1996
- --------------------------------------------
William J. Shea

/s/ KATHLEEN M. MCGILLYCUDDY Director December 12, 1996
- --------------------------------------------
Kathleen M. McGillycuddy

/s/ HINTON NOBLES Director December 12, 1996
- --------------------------------------------
Hinton Nobles

/s/ DOUGLAS FREEMAN Director December 12, 1996
- --------------------------------------------
Douglas Freeman

/s/ CHARLES NEWMAN Director December 12, 1996
- --------------------------------------------
Charles Newman
</TABLE>

II-11
<PAGE> 203

BARNETT MORTGAGE COMPANY

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS
-----------------------------------
BALANCE AT ACQUIRED CHARGED TO CHARGES TO BALANCE AT
BEGINNING FROM COSTS AND OTHER END
DESCRIPTION OF PERIOD BANCPLUS EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- ----------------------------------- ---------- --------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Reserve for losses $ -- $11,300 $ $ -- $ -- $ 11,300
YEAR ENDED DECEMBER 31, 1994
Reserve for losses -- -- -- -- --
YEAR ENDED DECEMBER 31, 1993
Reserve for losses $ -- $ -- $ -- $ -- $ --
</TABLE>

S-1
<PAGE> 204

BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE TWO YEARS ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS
----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- ------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Reserve for losses $ 13,300 $-- $-- $ (1,900)(a) $ 11,400
Year ended December 31, 1993
Reserve for losses 14,700 -- -- (1,400)(a) 13,300
</TABLE>

- ---------------

(a) Represents losses incurred on dispositions of foreclosure claims and VA
buydowns.

S-2
<PAGE> 205

EXHIBIT INDEX

Unless otherwise indicated, all Exhibits are incorporated by reference to
the Company's Registration Statement on Form S-4, No. 333-06737.

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
1.1* Form of Purchase Agreement...........................................

3.1 Certificate of Incorporation of HomeSide, Inc........................

3.2 By-Laws of HomeSide, Inc.............................................

3.3* Amended and Restated Certificate of Incorporation of HomeSide,
Inc..................................................................

4.1* Form of Common Stock Certificate.....................................

5.1* Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation
regarding legality of the securities being registered................

10.1 Stock Purchase Agreement dated December 11, 1995 between HomeAmerica
Capital, Inc. (currently known as HomeSide, Inc.) and The First
National Bank of Boston (the "BBMC Purchase Agreement")..............

10.2 Amendment No. 1, dated as of March 15, 1996, to the BBMC Purchase
Agreement............................................................

10.3 Marketing Agreement dated as of March 15, 1996 between HomeSide, Inc.
and The First National Bank of Boston................................

10.4 Repurchase of Mortgage Loan Servicing Rights Letter Agreement between
The First National Bank of Boston and BancBoston Mortgage Corporation
(currently known as HomeSide Lending, Inc.)..........................

10.5 Operating Agreement effective as of March 15, 1996 between The First
National Bank of Boston and BancBoston Mortgage Corporation
(currently known as HomeSide Lending, Inc.)..........................

10.6 Brokered Loan Purchase and Sale Agreement dated as of March 15, 1996
between BancBoston Mortgage Corporation (currently known as HomeSide
Lending, Inc.) and each of The First National Bank of Boston, Bank of
Boston Connecticut, Rhode Island Hospital Trust National Bank and
Bank of Boston Florida, N.A..........................................

10.7 Master Take-Out Commitment dated as of March 15, 1996 between
BancBoston Mortgage Corporation (currently known as HomeSide Lending,
Inc.) and each of The First National Bank of Boston, Bank of Boston
Connecticut, Rhode Island Hospital Trust National Bank and Bank of
Boston Florida, N.A..................................................

10.8 Neighborhood Assistance Corporation of America Mortgage Loan Take-Out
Commitment dated as of March 15, 1996 between BancBoston Mortgage
Corporation (currently known as HomeSide Lending, Inc.) and The First
National Bank of Boston..............................................

10.9+ PMSR Flow Agreement dated as of March 15, 1996 between BancBoston
Mortgage Corporation (currently known as HomeSide Lending, Inc.) and
each of The First National Bank of Boston, Bank of Boston
Connecticut, Rhode Island Hospital Trust National Bank and Bank of
Boston Florida, N.A..................................................

10.10+ Mortgage Loan Servicing Agreement dated as of March 15, 1996 between
BancBoston Mortgage Corporation (currently known as HomeSide Lending,
Inc.) and each of The First National Bank of Boston, Bank of Boston
Connecticut, Rhode Island Hospital Trust National Bank and Bank of
Boston Florida, N.A..................................................

10.11 Stock Purchase Agreement dated as of March 4, 1996 between
GrantAmerica, Inc. (currently known as HomeSide, Inc.) and Barnett
Banks, Inc. (the "BMC Purchase Agreement")...........................

10.12 Amendment No. 1, dated as of May 31, 1996, to the BMC Purchase
Agreement............................................................

10.13 Tax Indemnity Letter Agreement dated as of March 4, 1996 between
Barnett Mortgage Company (currently known as HomeSide Holdings, Inc.)
and Barnett Banks, Inc...............................................
</TABLE>
<PAGE> 206

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
10.14 Amended and Restated Shareholder Agreement dated as of May 31, 1996
among HomeSide, Inc. and the shareholders thereof....................

10.15 Amended and Restated Registration Rights Agreement dated as of May
31, 1996 between HomeSide, Inc. and certain shareholders thereof.....

10.16 Marketing Agreement dated as of May 31, 1996 between HomeSide, Inc.
and Barnett Banks, Inc...............................................

10.17 Transitional Services Agreement dated as of May 31, 1996 between
Barnett Banks, Inc., Barnett Mortgage Company (currently known as
HomeSide Holdings, Inc.) and HomeSide, Inc...........................

10.18 Operating Agreement dated as of May 31, 1996 between HomeSide
Lending, Inc. and Barnett Banks, Inc.................................

10.19+ Mortgage Loan Servicing Agreement dated as of April , 1996 between
HomeSide Lending, Inc. and Barnett Banks, Inc........................

10.20+ PMSR Flow Agreement dated as of May 31, 1996 between HomeSide
Lending, Inc. and Barnett Banks, Inc.................................

10.21 Correspondent Agreement dated May 16, 1996 between HomeSide Lending,
Inc. and Barnett Banks, Inc..........................................

10.22 Delegated Underwriting Agreement dated as of May 15, 1996 between
HomeSide Lending, Inc. and HomeSide Holdings, Inc....................

10.23 Credit Agreement dated as of May 31, 1996 among HomeSide Lending,
Inc., Honolulu Mortgage Company, Inc., the Lenders parties thereto,
the Balance Lenders thereto, NationsBank of Texas, N.A., as
Syndication Agent, Bankers Trust Company, as Documentation Agent, The
First National Bank of Boston, as Collateral Agent, and Chemical
Bank, as Administrative Agent (the "Credit Agreement")...............

10.24 Holdings Pledge Agreement dated as of May 31, 1996 between HomeSide,
Inc. and Chemical Bank, as Administrative Agent for the Lenders
parties to the Credit Agreement......................................

10.25 HomeSide Pledge Agreement dated as of May 31, 1996 between HomeSide
Lending, Inc. and Chemical Bank, as Administrative Agent for the
Lenders parties to the Credit Agreement..............................

10.26 BMC Pledge Agreement dated as of May 31, 1996 between HomeSide
Holdings, Inc. and Chemical Bank, as Administrative Agent for the
Lenders parties to the Credit Agreement..............................

10.27 Registration Rights Agreement dated as of May 14, 1996 among
HomeSide, Inc. and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Smith Barney Inc. and Friedman, Billings,
Ramsey & Co., Inc....................................................

10.28 Holdings Guaranty dated as of May 31, 1996 by HomeSide, Inc. in favor
of Chemical Bank, as Administrative Agent for the Lenders parties to
the Credit Agreement.................................................

10.29 HomeSide Guaranty dated as of May 31, 1996 by HomeSide Lending, Inc.
in favor of Chemical Bank, as Administrative Agent for the Lenders
parties to the Credit Agreement......................................

10.30 Subsidiaries Guaranty dated as of May 31, 1996 by each of SWD
Properties, Inc., Stockton Plaza, Inc., HomeSide Mortgage Securities,
Inc. and Honolulu Mortgage Company, Inc. in favor of Chemical Bank,
as Administrative Agent for the Lenders parties to the Credit
Agreement............................................................

10.31 BMC Guaranty dated as of May 31, 1996 by HomeSide Holdings, Inc. in
favor of Chemical Bank, as Administrative Agent for the Lenders
parties to the Credit Agreement......................................

10.32 Security and Collateral Agency Agreement dated as of May 31, 1996
between HomeSide Lending, Inc. and Chemical Bank, as Administrative
Agent for the Lenders parties to the Credit Agreement................

10.33 Security and Collateral Agency Agreement dated as of May 31, 1996
between Honolulu Mortgage Company, Inc. and Chemical Bank, as
Administrative Agent for the Lenders parties to the Credit
Agreement............................................................
</TABLE>
<PAGE> 207

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
10.34 Security and Collateral Agency Agreement dated as of May 31, 1996
between HomeSide Holdings, Inc. and Chemical Bank, as Administrative
Agent for the Lenders parties to the Credit Agreement................

10.35 Intercreditor Agreement dated as of May 31, 1996 between HomeSide,
Inc., HomeSide Holdings, The Bank of New York, as Trustee, and
Chemical Bank, as Administrative Agent under the Credit Agreement....

10.36 HomeSide, Inc. Time Accelerated Restricted Stock Option Plan.........

10.37 HomeSide, Inc. Non-Qualified Stock Option Plan.......................

10.38 Class B Non-Voting Common Stock Issuance Agreement dated as of March
14, 1996 between HomeSide, Inc. and Smith Barney Inc.................

10.39 Transitional Services Agreement dated as of March 15, 1996 between
The First National Bank of Boston and BancBoston Mortgage Corporation
(currently known as HomeSide Lending, Inc.)..........................

10.40 Transitional Services Agreement dated as of March 15, 1996 between
The First National Bank of Boston and BancBoston Mortgage Corporation
(currently known as HomeSide Lending, Inc.)..........................

10.41 Management Agreement dated as of March 15, 1996 between BancBoston
Mortgage Corporation (currently known as HomeSide Lending, Inc.) and
The First National Bank of Boston....................................

10.42 Management Agreement dated as of March 15, 1996 between BancBoston
Mortgage Corporation (currently known as HomeSide Lending, Inc.) and
Thomas H. Lee Company................................................

10.43 Management Agreement dated as of March 15, 1996 between BancBoston
Mortgage Corporation (currently known as HomeSide Lending, Inc.) and
Madison Dearborn Partners, Inc.......................................

10.44 Management Stockholder Agreement dated as of May 15, 1996 between
HomeSide, Inc., The First National Bank of Boston, Thomas H. Lee
Equity Fund III, L.P. and certain affiliates thereof, Madison
Dearborn Capital Partners, L.P. and certain employees of HomeSide,
Inc. and its subsidiaries............................................

10.45 Management Agreement dated as of May 31, 1996 between HomeSide
Lending, Inc. and Barnett Banks, Inc.................................

10.46 Form of HomeSide Severance Agreement.................................

21.1 List of subsidiaries of HomeSide, Inc................................

23.1.1** Consent of Arthur Andersen LLP.......................................

23.1.2** Consent of Arthur Andersen LLP.......................................

23.2** Consent of Coopers & Lybrand L.L.P...................................

23.3** Consent of KPMG Peat Marwick LLP.....................................

23.4 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation
(included in Exhibit 5.1)............................................

24.1 Powers of Attorney (contained on the signature page to this
Registration Statement)..............................................

27.1** Financial Data Schedule..............................................
</TABLE>

- ---------------

+ Portions of this Exhibit have been omitted pursuant to an order by the
Securities and Exchange Commission granting confidential treatment.

* This Exhibit will be filed with a subsequent amendment to this Registration
Statement.

** This Exhibit is filed with this Registration Statement.

<PAGE> 1

EXHIBIT 23.1.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

As independent certified public accountants we hereby consent to the use of
our report, dated April 10, 1996, except for Note 3, as to which the date is
December 12, 1996, on our audit of the balance sheet of HomeSide, Inc. (and to
all references to our firm) included in or made a part of this registration
statement.

ARTHUR ANDERSEN LLP

Jacksonville, Florida
December 12, 1996

<PAGE> 1

EXHIBIT 23.1.2

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

As independent certified public accountants, we hereby consent to the use
of our report, dated March 8, 1996, on our audits of the consolidated financial
statements of Barnett Mortgage Company and subsidiaries (and to all references
to our firm) included in or made a part of this registration statement.

ARTHUR ANDERSEN LLP

Jacksonville, Florida
December 12, 1996

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-1
(File No. ) of our report, which includes an explanatory paragraph on
the adoption of Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes, and the changing of methods for accounting for purchased
mortgage servicing rights and accounting for mortgage servicing fee income,
dated January 18, 1996, except for the second paragraph of Note 1 and the fifth
paragraph of Note 2, as to which the date is March 4, 1996, on our audits of the
consolidated financial statements of BancBoston Mortgage Corporation. We also
consent to the reference to our firm under the caption "Experts."

COOPERS & LYBRAND, L.L.P.

Jacksonville, Florida
December 12, 1996

<PAGE> 1

EXHIBIT 23.3

The Board of Directors
HomeSide, Inc.:

The audits of the consolidated financial statements of BancPLUS Financial
Corporation and subsidiary referred to in our report dated March 17, 1995,
included the related financial statement schedule as of December 31, 1993 and
1994, included in the registration statement. This financial statement schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement schedule based on our audits. In
our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statement taken as a whole, presents fairly in
all material respects the information set forth therein.

We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the prospectus. Our report refers to
a change to the asset and liability method of accounting for income taxes.

KPMG Peat Marwick LLP

San Antonio, Texas
December 12, 1996

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HOMESIDE, INC. AS OF AND FOR THE PERIOD
ENDED NOVEMBER 30, 1996 APPEARING ON FORM S-1 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM S-1.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-16-1996
<PERIOD-END> NOV-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,183
<SECURITIES> 0
<RECEIVABLES> 173,145
<ALLOWANCES> 21,650
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 32,399
<DEPRECIATION> 3,178
<TOTAL-ASSETS> 2,858,711
<CURRENT-LIABILITIES> 0
<BONDS> 221,278
<COMMON> 0
0
0
<OTHER-SE> 387,926
<TOTAL-LIABILITY-AND-EQUITY> 2,858,711
<SALES> 0
<TOTAL-REVENUES> 215,108
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 104,106
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,203
<INCOME-PRETAX> 49,799
<INCOME-TAX> 20,523
<INCOME-CONTINUING> 29,276
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,276
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>