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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2002

OR



|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|----- | ----------------------------------------------------------------------------------------

For the transition period from _________ to _________

Commission file number 33-13646

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Westcorp

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(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|CALIFORNIA                                                     |  | 51-0308535                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

23 Pasteur, Irvine, California 92618-3816

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(Address of principal executive offices)


(949) 727-1002

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(Registrants telephone number, including area code)


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

As of April 30, 2002, the registrant had 39,132,438 outstanding shares of
common stock, $1.00 par value. The shares of common stock represent the only
class of common stock of the registrant.

The total number of sequentially numbered pages is 32.

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TABLE OF CONTENTS



|                              |                                                                                               |                                                            |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION            
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME                         
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS                     
|                              |                                                                                               | NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS      
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                            
|PART II. OTHER INFORMATION   
|                              | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                              | ITEM 2. CHANGES IN SECURITIES                                                                
|                              | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                              | ITEM 5. OTHER INFORMATION                                                                    
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                   



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##### Table of Contents



WESTCORP AND SUBSIDIARIES

FORM 10-Q

March 31, 2002

TABLE OF CONTENTS



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|PART I.    |  | FINANCIAL INFORMATION                                                                 |  |                                                                                                                       |    |         
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|Item 1.    |  | Financial Statements                                                                  |  |                                                                                                                       |    |         
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|           |  |                                                                                       |  | Consolidated Statements of Financial Condition at
March 31, 2002 and December 31, 2001                                |    |          | 3 | 
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|           |  |                                                                                       |  | Consolidated Statements of Income for the
Three Months Ended March 31, 2002 and 2001                                  |    |          | 4 | 
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|           |  |                                                                                       |  | Consolidated Statements of Changes in Shareholders Equity for
the Periods Ended March 31, 2002 and December 31, 2001 |    |          | 5 | 
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|           |  |                                                                                       |  | Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2002 and 2001                              |    |          | 6 | 
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|           |  |                                                                                       |  | Notes to Unaudited Consolidated Financial Statements                                                                  |    |          | 7 | 
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|Item 2.    |  | Managements Discussion and Analysis
of Financial Condition and Results of Operations |  |                                                                                                                       | 12 |         
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|Item 3.    |  | Quantitative and Qualitative Disclosure about Market Risk                             |  |                                                                                                                       | 29 |         
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|PART II.   |  | OTHER INFORMATION                                                                     |  |                                                                                                                       |    |         
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|Item 1.    |  | Legal Proceedings                                                                     |  |                                                                                                                       | 31 |         
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|Item 2.    |  | Changes in Securities                                                                 |  |                                                                                                                       | 31 |         
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|Item 3.    |  | Defaults Upon Senior Securities                                                       |  |                                                                                                                       | 31 |         
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|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  |                                                                                                                       | 31 |         
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|Item 5.    |  | Other Information                                                                     |  |                                                                                                                       | 31 |         
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|Item 6.    |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                                       | 31 |         
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|SIGNATURES |  |                                                                                       |  |                                                                                                                       | 32 |         

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##### Table of Contents






PART I. FINANCIAL INFORMATION







ITEM 1. FINANCIAL STATEMENTS

WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

|                                                                                                                                                                |                       |                                            |           |                        |            |              |           |           |            | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ------------------------------------------ | --------- | ---------------------- | ---------- | ------------ | --------- | --------- | ---------- | 
|                                                                                                                                                                |                       |                                            |           | March 31,              |            |              |           |          
|                                                                                                                                                                |                       |                                            |           | 2002                   |            | December 31,
|                                                                                                                                                                |                       |                                            |           | (Unaudited)            |            | 2001        
|                                                                                                                                                                |                       |                                            |           |                        |            |             
|                                                                                                                                                                |                       |                                            |           | (Dollars in thousands)
|ASSETS                                                                                                                                                          |                       |                                            |           |                        |            |              |           |          
|Cash and cash equivalents                                                                                                                                       |                       | $                                          | 354,606   |                        |            | $            | 104,327   |          
|Investment securities available for sale                                                                                                                        |                       |                                            | 10,682    |                        |            |              | 10,511    |          
|Mortgage-backed securities available for sale                                                                                                                   |                       |                                            | 2,182,105 |                        |            |              | 2,092,225 |          
|Loans receivable                                                                                                                                                |                       |                                            | 7,976,152 |                        |            |              | 7,533,150 |          
|Allowance for credit losses                                                                                                                                     |                       |                                            | (188,263  | )                      |            |              | (171,432  | )        
|                                                                                                                                                                |                       |                                            |           |                        |            |              |           |          
|                                                                                                                                                                | Loans receivable, net |                                            |           | 7,787,889              |            |              |           | 7,361,718 |           
|Amounts due from trusts                                                                                                                                         |                       |                                            | 127,851   |                        |            |              | 136,131   |          
|Retained interest in securitized assets                                                                                                                         |                       |                                            | 22,536    |                        |            |              | 37,392    |          
|Premises and equipment, net                                                                                                                                     |                       |                                            | 82,569    |                        |            |              | 79,258    |          
|Other assets                                                                                                                                                    |                       |                                            | 244,295   |                        |            |              | 250,835   |          
|                                                                                                                                                                |                       |                                            |           |                        |            |              |           |          
|                                                                                                                                                                |                       | TOTAL ASSETS                               |           | $                      | 10,812,533 |              |           | $         | 10,072,397 | 
|                                                                                                                                                                |                       |                                            |           |                        |            |              |           |          
|LIABILITIES                                                                                                                                                     |                       |                                            |           |                        |            |              |           |          
|Deposits                                                                                                                                                        |                       | $                                          | 2,252,441 |                        |            | $            | 2,329,326 |          
|Notes payable on automobile secured financing                                                                                                                   |                       |                                            | 7,211,910 |                        |            |              | 5,886,227 |          
|Securities sold under agreements to repurchase                                                                                                                  |                       |                                            | 136,365   |                        |            |              | 155,190   |          
|Federal Home Loan Bank advances                                                                                                                                 |                       |                                            | 2,881     |                        |            |              | 543,417   |          
|Amounts held on behalf of trustee                                                                                                                               |                       |                                            | 262,214   |                        |            |              | 280,496   |          
|Subordinated debentures                                                                                                                                         |                       |                                            | 147,850   |                        |            |              | 147,714   |          
|Short-term borrowings                                                                                                                                           |                       |                                            | 8,700     |                        |            |              | 25,068    |          
|Other liabilities                                                                                                                                               |                       |                                            | 83,075    |                        |            |              | 85,994    |          
|                                                                                                                                                                |                       |                                            |           |                        |            |              |           |          
|                                                                                                                                                                |                       | TOTAL LIABILITIES                          |           |                        | 10,105,436 |              |           |           | 9,453,432  | 
|Minority interest                                                                                                                                               |                       |                                            | 95,423    |                        |            |              | 78,261    |          
|SHAREHOLDERS EQUITY                                                                                                                                            |                       |                                            |           |                        |            |              |           |          
|Common stock, (par value $1.00 per share;
authorized 45,000,000 shares; issued and
outstanding 39,113,618 shares in March 2002 and
35,802,491 in December 2001) |                       |                                            | 39,113    |                        |            |              | 35,802    |          
|Paid-in capital                                                                                                                                                 |                       |                                            | 348,083   |                        |            |              | 301,955   |          
|Retained earnings                                                                                                                                               |                       |                                            | 276,768   |                        |            |              | 263,853   |          
|Accumulated other comprehensive loss, net of tax                                                                                                                |                       |                                            | (52,290   | )                      |            |              | (60,906   | )        
|                                                                                                                                                                |                       |                                            |           |                        |            |              |           |          
|                                                                                                                                                                |                       | TOTAL SHAREHOLDERS EQUITY                 |           |                        | 611,674    |              |           |           | 540,704    | 
|                                                                                                                                                                |                       |                                            |           |                        |            |              |           |          
|                                                                                                                                                                |                       | TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |           | $                      | 10,812,533 |              |           | $         | 10,072,397 | 
|                                                                                                                                                                |                       |                                            |           |                        |            |              |           |          

See accompanying notes to unaudited consolidated financial statements.

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##### Table of Contents






WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

|                                                                                 |                            |                                               |         |                                     |            |      |        |         |            | 
|-------------------------------------------------------------------------------- | -------------------------- | --------------------------------------------- | ------- | ----------------------------------- | ---------- | ---- | ------ | ------- | ---------- | 
|                                                                                 |                            |                                               |         | Three Months Ended                 
|                                                                                 |                            |                                               |         | March 31,                          
|                                                                                 |                            |                                               |         |                                    
|                                                                                 |                            |                                               |         | 2002                                |            | 2001
|                                                                                 |                            |                                               |         |                                     |            |     
|                                                                                 |                            |                                               |         | (Dollars in thousands,             
|                                                                                 |                            |                                               |         | except share and per share amounts)
|Interest income:                                                                 |                            |                                               |         |                                     |            |      |        |        
|                                                                                 |                            | Loans, including fees                         |         | $                                   | 232,912    |      |        | $       | 172,642    | 
|                                                                                 |                            | Other                                         |         |                                     | 29,284     |      |        |         | 40,025     | 
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|                                                                                 | TOTAL INTEREST INCOME      |                                               |         | 262,196                             |            |      |        | 212,667 |           
|Interest expense:                                                                |                            |                                               |         |                                     |            |      |        |        
|                                                                                 |                            | Deposits                                      |         |                                     | 21,010     |      |        |         | 33,506     | 
|                                                                                 |                            | Notes payable on automobile secured financing |         |                                     | 92,018     |      |        |         | 73,009     | 
|                                                                                 |                            | Other long-term borrowings                    |         |                                     | 3,692      |      |        |         | 4,631      | 
|                                                                                 |                            | Short-term borrowings                         |         |                                     | 3,350      |      |        |         | 8,281      | 
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|                                                                                 | TOTAL INTEREST EXPENSE     |                                               |         | 120,070                             |            |      |        | 119,427 |           
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|NET INTEREST INCOME                                                              |                            |                                               | 142,126 |                                     |            |      | 93,240 |        
|Provision for credit losses                                                      |                            |                                               | 65,698  |                                     |            |      | 26,982 |        
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|NET INTEREST INCOME AFTER                                                        |                            |                                               |         |                                     |            |      |        |        
|                                                                                 |                            | PROVISION FOR CREDIT LOSSES                   |         |                                     | 76,428     |      |        |         | 66,258     | 
|Noninterest income:                                                              |                            |                                               |         |                                     |            |      |        |        
|                                                                                 |                            | Automobile lending                            |         |                                     | 11,674     |      |        |         | 26,934     | 
|                                                                                 |                            | Other                                         |         |                                     | 5,485      |      |        |         | 3,534      | 
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|                                                                                 | TOTAL NONINTEREST INCOME   |                                               |         | 17,159                              |            |      |        | 30,468  |           
|Noninterest expenses:                                                            |                            |                                               |         |                                     |            |      |        |        
|                                                                                 |                            | Salaries and associate benefits               |         |                                     | 34,871     |      |        |         | 35,677     | 
|                                                                                 |                            | Credit and collections                        |         |                                     | 8,077      |      |        |         | 6,418      | 
|                                                                                 |                            | Data processing                               |         |                                     | 4,580      |      |        |         | 4,490      | 
|                                                                                 |                            | Other                                         |         |                                     | 13,331     |      |        |         | 14,740     | 
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|                                                                                 | TOTAL NONINTEREST EXPENSES |                                               |         | 60,859                              |            |      |        | 61,325  |           
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|INCOME BEFORE INCOME TAX                                                         |                            |                                               | 32,728  |                                     |            |      | 35,401 |        
|Income tax                                                                       |                            |                                               | 12,964  |                                     |            |      | 14,333 |        
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|INCOME BEFORE MINORITY INTEREST                                                  |                            |                                               | 19,764  |                                     |            |      | 21,068 |        
|Minority interest in earnings of subsidiaries                                    |                            |                                               | 2,911   |                                     |            |      | 3,360  |        
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|INCOME BEFORE EXTRAORDINARY ITEM                                                 |                            |                                               | 16,853  |                                     |            |      | 17,708 |        
|Extraordinary gain from early extinguishment of debt
(net of income taxes of $6) |                            |                                               |         |                                     |            |      | 8      |        
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|NET INCOME                                                                       |                            | $                                             | 16,853  |                                     |            | $    | 17,716 |        
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|Net income per common share  basic:                                             |                            |                                               |         |                                     |            |      |        |        
|                                                                                 |                            | Income before extraordinary item              |         | $                                   | 0.46       |      |        | $       | 0.55       | 
|                                                                                 |                            | Extraordinary item                            |         |                                     | 0.00       |      |        |         | 0.00       | 
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|                                                                                 |                            | Net income                                    |         | $                                   | 0.46       |      |        | $       | 0.55       | 
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|Net income per common share  diluted:                                           |                            |                                               |         |                                     |            |      |        |        
|                                                                                 |                            | Income before extraordinary item              |         | $                                   | 0.46       |      |        | $       | 0.55       | 
|                                                                                 |                            | Extraordinary item                            |         |                                     | 0.00       |      |        |         | 0.00       | 
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|                                                                                 |                            | Net income                                    |         | $                                   | 0.46       |      |        | $       | 0.55       | 
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|Weighted average number of common shares outstanding:                            |                            |                                               |         |                                     |            |      |        |        
|                                                                                 |                            | Basic                                         |         |                                     | 36,791,744 |      |        |         | 31,949,647 | 
|                                                                                 |                            |                                               |         |                                     |            |      |        |        
|                                                                                 |                            | Diluted                                       |         |                                     | 36,980,861 |      |        |         | 32,120,274 | 
|                                                                                 |                            |                                               |         |                                     |            |      |        |        

See accompanying notes to unaudited consolidated financial statements.

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WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Unaudited)

|                             |                                                                                                               |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               |         |   |   |         |         |  
|---------------------------- | ------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------- | --------- | ----- | - | ------- | ----- | -------- | - | ---------- | ------ | -------------- | - | ------- | ------- | - | - | ------------- | ------- | - | - | ------- | ------- | -
|                             |                                                                                                               |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   | Accumulated   |         |   |   |        
|                             |                                                                                                               |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   | Other         |         |   |   |        
|                             |                                                                                                               |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   | Comprehensive |         |   |   |        
|                             |                                                                                                               |  |                                              |           |       |   | Common  |       | Paid-in  |   | Retained   |        | Income (Loss), |   |         |         |  
|                             |                                                                                                               |  | Shares                                       |           | Stock |   | Capital |       | Earnings |   | Net of Tax |        | Total         
|                             |                                                                                                               |  |                                              |           |       |   |         |       |          |   |            |        |               
|                             |                                                                                                               |  | (Dollars in thousands, except share amounts)
|Balance at January 1, 2001   |                                                                                                               |  | 31,931,826                                   |           |       | $ | 31,932  |       |          | $ | 246,889    |        |                | $ | 223,163 |         |   | $ | (14,816       | )       |   | $ | 487,168 |        
|                             | Net income                                                                                                    |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         | 55,690  |   |   |               |         |   |   |         | 55,690  |  
|                             | Unrealized gains on securities
available for sale and retained
interest in securitized assets,
net of tax (1) |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               | 12,309  |   |   |         | 12,309  |  
|                             | Reclassification adjustment for
losses on securities available for
sale included in net income (2)            |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               | 1,050   |   |   |         | 1,050   |  
|                             | Unrealized hedge losses on cash
flow hedges, net of tax (3)                                                   |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               | (75,048 | ) |   |         | (75,048 | )
|                             | Reclassification adjustment for
losses on cash flow hedges
included in income (4)                             |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               | 15,599  |   |   |         | 15,599  |  
|                             |                                                                                                               |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               |         |   |   |         |        
|                             | Comprehensive income                                                                                          |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               |         |   |   |         | 9,600   |  
|                             | Issuance of subsidiary common stock                                                                           |  |                                              |           |       |   |         |       |          |   |            | (3,205 | )              |   |         |         |   |   |               |         |   |   |         | (3,205  | )
|                             | Issuance of common stock                                                                                      |  |                                              | 3,870,665 |       |   |         | 3,870 |          |   |            | 58,271 |                |   |         |         |   |   |               |         |   |   |         | 62,141  |  
|                             | Cash dividends                                                                                                |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         | (15,000 | ) |   |               |         |   |   |         | (15,000 | )
|                             |                                                                                                               |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               |         |   |   |         |        
|Balance at December 31, 2001 |                                                                                                               |  | 35,802,491                                   |           |       |   | 35,802  |       |          |   | 301,955    |        |                |   | 263,853 |         |   |   | (60,906       | )       |   |   | 540,704 |        
|                             | Net income                                                                                                    |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         | 16,853  |   |   |               |         |   |   |         | 16,853  |  
|                             | Unrealized loss on securities
available for sale and retained
interest in securitized assets,
net of tax (1)  |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               | (2,263  | ) |   |         | (2,263  | )
|                             | Unrealized hedge losses on cash
flow hedges, net of tax (3)                                                   |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               | (3,559  | ) |   |         | (3,559  | )
|                             | Reclassification
adjustment for losses on cash flow hedges included in income (4)                             |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               | 14,438  |   |   |         | 14,438  |  
|                             |                                                                                                               |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               |         |   |   |         |        
|                             | Comprehensive income                                                                                          |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               |         |   |   |         | 25,469  |  
|                             | Issuance of subsidiary common stock                                                                           |  |                                              |           |       |   |         |       |          |   |            | (2,250 | )              |   |         |         |   |   |               |         |   |   |         | (2,250  | )
|                             | Issuance of common stock                                                                                      |  |                                              | 3,311,127 |       |   |         | 3,311 |          |   |            | 48,378 |                |   |         |         |   |   |               |         |   |   |         | 51,689  |  
|                             | Cash dividends                                                                                                |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         | (3,938  | ) |   |               |         |   |   |         | (3,938  | )
|                             |                                                                                                               |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               |         |   |   |         |        
|Balance at March 31, 2002    |                                                                                                               |  | 39,113,618                                   |           |       | $ | 39,113  |       |          | $ | 348,083    |        |                | $ | 276,768 |         |   | $ | (52,290       | )       |   | $ | 611,674 |        
|                             |                                                                                                               |  |                                              |           |       |   |         |       |          |   |            |        |                |   |         |         |   |   |               |         |   |   |         |        



---

|(1) |  | The pre-tax amount in unrealized gains and losses on securities available
for sale and retained interest in securitized assets was $3.8 million for
the three months ended March 31, 2002 compared with $20.9 million for the
period ended December 31, 2001.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | There was no pre-tax amount of unrealized gains or losses on securities
available for sale reclassified into earnings for the three months ended
March 31, 2002 compared with an unrealized loss of $1.8 million for the
year ended December 31, 2001.       
|   
|   
|   
|   
|(3) |  | The pre-tax amount of unrealized losses on cash flow hedges was $6.0
million for the three months ended March 31, 2002 compared with $127
million for the year ended December 31, 2001.                                                                      
|   
|   
|   
|   
|(4) |  | The pre-tax amount of unrealized losses on cash flow hedges reclassified
into earnings was $24.5 million for the three months ended March 31, 2002
compared with $26.4 million for the year ended December 31, 2001.                                         

See accompanying notes to unaudited consolidated financial statements.

5



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##### Table of Contents






WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                                  |                                                         |   |                        |            |      |   |          |            |  
|--------------------------------------------------------------------------------- | ------------------------------------------------------- | - | ---------------------- | ---------- | ---- | - | -------- | ---------- | -
|                                                                                  |                                                         |   | Three Months Ended    
|                                                                                  |                                                         |   | March 31,             
|                                                                                  |                                                         |   |                       
|                                                                                  |                                                         |   | 2002                   |            | 2001
|                                                                                  |                                                         |   |                        |            |     
|                                                                                  |                                                         |   | (Dollars in thousands)
|OPERATING ACTIVITIES                                                              |                                                         |   |                        |            |      |   |          |           
|Net income                                                                        |                                                         | $ | 16,853                 |            |      | $ | 17,716   |           
|Adjustments to reconcile net income to net cash provided by
Operating activities: |                                                         |   |                        |            |      |   |          |           
|                                                                                  | Provision for credit losses                             |   |                        | 65,698     |      |   |          | 26,982     |  
|                                                                                  | Depreciation and amortization                           |   |                        | 40,555     |      |   |          | 19,593     |  
|                                                                                  | Amortization of retained interest in securitized assets |   |                        | 14,378     |      |   |          | 14,366     |  
|Loans held for sale:                                                              |                                                         |   |                        |            |      |   |          |           
|                                                                                  | Proceeds from sale of mortgage loans                    |   |                        | 455        |      |   |          | 620        |  
|(Increase) decrease in other assets                                               |                                                         |   | (1,150                 | )          |      |   | 2,821    |           
|(Decrease) increase in other liabilities                                          |                                                         |   | (2,920                 | )          |      |   | 2,010    |           
|Other, net                                                                        |                                                         |   | 2,597                  |            |      |   | 2,666    |           
|                                                                                  |                                                         |   |                        |            |      |   |          |           
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                         |                                                         |   | 136,466                |            |      |   | 86,774   |           
|INVESTING ACTIVITIES                                                              |                                                         |   |                        |            |      |   |          |           
|Loans receivable:                                                                 |                                                         |   |                        |            |      |   |          |           
|                                                                                  | Origination of loans                                    |   |                        | (1,336,596 | )    |   |          | (1,248,308 | )
|                                                                                  | Participation paid to dealers                           |   |                        | (29,603    | )    |   |          | (29,295    | )
|                                                                                  | Loan payments and payoffs                               |   |                        | 852,444    |      |   |          | 452,335    |  
|Investment securities available for sale:                                         |                                                         |   |                        |            |      |   |          |           
|                                                                                  | Purchases                                               |   |                        | (802       | )    |   |          | (232       | )
|                                                                                  | Proceeds from sale                                      |   |                        | 485        |      |   |          |            |  
|                                                                                  | Proceeds from maturities                                |   |                        | 135        |      |   |          |            |  
|Mortgage-backed securities:                                                       |                                                         |   |                        |            |      |   |          |           
|                                                                                  | Purchases                                               |   |                        | (354,620   | )    |   |          | (209,238   | )
|                                                                                  | Payments received                                       |   |                        | 251,818    |      |   |          | 134,333    |  
|Decrease in amounts due from trusts                                               |                                                         |   | 8,280                  |            |      |   | 66,865   |           
|Purchase of premises and equipment                                                |                                                         |   | (10,871                | )          |      |   | (4,547   | )         
|Proceeds from sale of premises and equipment                                      |                                                         |   | 5,806                  |            |      |   |          |           
|                                                                                  |                                                         |   |                        |            |      |   |          |           
|NET CASH USED IN INVESTING ACTIVITIES                                             |                                                         |   | (613,524               | )          |      |   | (838,087 | )         
|FINANCING ACTIVITIES                                                              |                                                         |   |                        |            |      |   |          |           
|Decrease in deposits                                                              |                                                         |   | (63,426                | )          |      |   | (231,277 | )         
|Decrease in securities sold under agreements to repurchase                        |                                                         |   | (18,321                | )          |      |   | (6,028   | )         
|Proceeds from notes payable on automobile secured financing                       |                                                         |   | 2,570,822              |            |      |   | 998,037  |           
|Payments on notes payable on automobile secured financing                         |                                                         |   | (1,236,111             | )          |      |   | (269,903 | )         
|Decrease in short-term borrowings                                                 |                                                         |   | (16,368                | )          |      |   | (1,109   | )         
|Decrease in amounts held on behalf of trustee                                     |                                                         |   | (18,282                | )          |      |   | (27,535  | )         
|(Decrease) increase in FHLB advances                                              |                                                         |   | (540,535               | )          |      |   | 222,261  |           
|Decrease in subordinated debentures                                               |                                                         |   | (32                    | )          |      |   | (800     | )         
|Proceeds from issuance of common stock                                            |                                                         |   | 51,688                 |            |      |   | 422      |           
|Proceeds from issuance of subsidiary common stock                                 |                                                         |   | 10,300                 |            |      |   | 1,558    |           
|Cash dividends                                                                    |                                                         |   | (3,938                 | )          |      |   | (3,193   | )         
|Payments on cash flow hedges                                                      |                                                         |   | (8,460                 | )          |      |   | (9,459   | )         
|                                                                                  |                                                         |   |                        |            |      |   |          |           
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                         |                                                         |   | 727,337                |            |      |   | 672,974  |           
|                                                                                  |                                                         |   |                        |            |      |   |          |           
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                  |                                                         |   | 250,279                |            |      |   | (78,339  | )         
|Cash and cash equivalents at beginning of period                                  |                                                         |   | 104,327                |            |      |   | 128,762  |           
|                                                                                  |                                                         |   |                        |            |      |   |          |           
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        |                                                         | $ | 354,606                |            |      | $ | 50,423   |           
|                                                                                  |                                                         |   |                        |            |      |   |          |           

See accompanying notes to unaudited consolidated financial statements.

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WESTCORP AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1  Basis of Presentation

The accompanying unaudited consolidated financial statements include our
accounts and the accounts of our wholly owned subsidiary, Western Financial
Bank, also known as the Bank, and its majority owned subsidiary, WFS Financial
Inc, also known as WFS. All significant intercompany accounts and transactions
have been eliminated in consolidation. Certain prior year amounts have been
reclassified to conform with the current years presentation.

The unaudited consolidated financial statements included herein have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of 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, all adjustments (including normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2002 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2002. These unaudited consolidated financial statements should
be read in conjunction with the audited consolidated financial statements and
footnotes thereto for the year ended December 31, 2001 included in the
Westcorp Form 10-K.

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
141, Accounting for Business Combinations, also known as SFAS No. 141, and
Statement of Financial Accounting Standards No. 142, Accounting for Goodwill
and Intangible Assets, also known as SFAS No. 142. Under SFAS No. 141 and SFAS
No. 142, companies may no longer use the pooling-of-interest accounting method
for business combinations or account for mergers on their financial statements
under the traditional purchase method, which required companies to amortize
goodwill assets over a specific time period. Instead purchased goodwill will
remain on the balance sheet as an asset subject to impairment reviews. We
adopted SFAS No. 141 and SFAS No. 142 on January 1, 2002, and they did not
have a material effect on our earnings or financial position.

In July 2001, the FASB issued Statement of Financial Accounting Standards No.
143, Accounting for Asset Retirement Obligations, also known as SFAS No. 143,
in which retirement obligations would be recorded as a liability using the
present value of the estimated cash flows and a corresponding amount would be
capitalized as part of the assets carrying amount. The capitalized asset
retirement cost would be amortized to expense over the assets useful life
using a systematic and rational allocation method. The estimate of the asset
retirement obligation will change and have to be revised over time. SFAS No.
143 is effective for fiscal years beginning after June 15, 2002. If
applicable, an accounting change to adopt the standard would be made as of the
beginning of the companys fiscal year. We do not expect SFAS No. 143 to have
a material effect on our earnings or financial position.

In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, also
known as SFAS No. 144, to supercede Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, also known as SFAS No. 121. The basic
recognition and measurement model for assets held for use and held for sale
under SFAS No. 121 has been retained, however SFAS No. 144 removes goodwill
from the scope as goodwill is now subject to the provisions of SFAS No. 141
and SFAS No. 142. SFAS No. 144 provides guidance on differentiating between
assets held and used, held for sale, and held for disposal other than by sale.
Assets held for sale/disposal must be stated at the lower of the assets
carrying amounts or fair values and depreciation would no longer be
recognized. Assets to be disposed of by sale would be classified as held for
sale when management, having the authority to approve the action, commits to a
plan to

7



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##### Table of Contents



sell the assets meeting several strict criteria. The three-step approach for
recognizing and measuring impairment of assets to be held and used under SFAS
No. 121 remains applicable. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001 and for interim periods within those fiscal
years. We adopted SFAS 144 on January 1, 2002, and it did not have a material
effect on our earnings or financial position.

Note 2  Mortgage-Backed Securities Available for Sale

Mortgage-backed securities available for sale consisted of the following:

|                                 |  |                        |           |            |  |            |        |       |  |   |        |  |  |   |           | 
|-------------------------------- |  | ---------------------- | --------- | ---------- |  | ---------- | ------ | ----- |  | - | ------ |  |  | - | --------- | 
|                                 |  | March 31, 2002        
|                                 |  |                       
|                                 |  |                        |           |            |  | Gross      |        | Gross |  |   |        | 
|                                 |  | Amortized              |           | Unrealized |  | Unrealized |        | Fair 
|                                 |  | Cost                   |           | Gain       |  | Loss       |        | Value
|                                 |  |                        |           |            |  |            |        |      
|                                 |  | (Dollars in thousands)
|GNMA certificates                |  | $                      | 2,137,787 |            |  | $          | 13,548 |       |  | $ | 20,796 |  |  | $ | 2,130,539 | 
|FNMA participation certificates  |  |                        | 47,148    |            |  |            | 574    |       |  |   |        |  |  |   | 47,722    | 
|FHLMC participation certificates |  |                        | 1,627     |            |  |            | 14     |       |  |   |        |  |  |   | 1,641     | 
|Other                            |  |                        | 2,203     |            |  |            |        |       |  |   |        |  |  |   | 2,203     | 
|                                 |  |                        |           |            |  |            |        |       |  |   |        |  |  |   |           | 
|                                 |  | $                      | 2,188,765 |            |  | $          | 14,136 |       |  | $ | 20,796 |  |  | $ | 2,182,105 | 
|                                 |  |                        |           |            |  |            |        |       |  |   |        |  |  |   |           | 

|                                 |  |                        |           |            |  |            |        |       |  |   |        |  |  |   |           | 
|-------------------------------- |  | ---------------------- | --------- | ---------- |  | ---------- | ------ | ----- |  | - | ------ |  |  | - | --------- | 
|                                 |  | December 31, 2001     
|                                 |  |                       
|                                 |  |                        |           |            |  | Gross      |        | Gross |  |   |        | 
|                                 |  | Amortized              |           | Unrealized |  | Unrealized |        | Fair 
|                                 |  | Cost                   |           | Gain       |  | Loss       |        | Value
|                                 |  |                        |           |            |  |            |        |      
|                                 |  | (Dollars in thousands)
|GNMA certificates                |  | $                      | 2,040,110 |            |  | $          | 12,527 |       |  | $ | 16,268 |  |  | $ | 2,036,369 | 
|FNMA participation certificates  |  |                        | 51,353    |            |  |            | 541    |       |  |   |        |  |  |   | 51,894    | 
|FHLMC participation certificates |  |                        | 1,679     |            |  |            | 13     |       |  |   |        |  |  |   | 1,692     | 
|Other                            |  |                        | 2,270     |            |  |            |        |       |  |   |        |  |  |   | 2,270     | 
|                                 |  |                        |           |            |  |            |        |       |  |   |        |  |  |   |           | 
|                                 |  | $                      | 2,095,412 |            |  | $          | 13,081 |       |  | $ | 16,268 |  |  | $ | 2,092,225 | 
|                                 |  |                        |           |            |  |            |        |       |  |   |        |  |  |   |           | 

8



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Note 3  Net Loans Receivable

Net loans receivable consisted of the following:

|                            |                                                     |   |                        |           |              |   |           |           |  
|--------------------------- | --------------------------------------------------- | - | ---------------------- | --------- | ------------ | - | --------- | --------- | -
|                            |                                                     |   | March 31,              |           | December 31,
|                            |                                                     |   | 2002                   |           | 2001        
|                            |                                                     |   |                        |           |             
|                            |                                                     |   | (Dollars in thousands)
|Consumer:                   |                                                     |   |                        |           |              |   |           |          
|                            | Automobile contracts                                |   | $                      | 7,506,590 |              |   | $         | 7,045,578 |  
|                            | Dealer participation, net of deferred contract fees |   |                        | 134,185   |              |   |           | 128,148   |  
|                            | Other                                               |   |                        | 7,812     |              |   |           | 8,826     |  
|                            | Unearned discounts                                  |   |                        | (106,517  | )            |   |           | (108,169  | )
|                            |                                                     |   |                        |           |              |   |           |          
|                            |                                                     |   | 7,542,070              |           |              |   | 7,074,383 |          
|Real Estate:                |                                                     |   |                        |           |              |   |           |          
|                            | Mortgage                                            |   |                        | 343,731   |              |   |           | 361,115   |  
|                            | Construction                                        |   |                        | 12,943    |              |   |           | 15,638    |  
|                            |                                                     |   |                        |           |              |   |           |          
|                            |                                                     |   | 356,674                |           |              |   | 376,753   |          
|Undisbursed loan proceeds   |                                                     |   | (2,564                 | )         |              |   | (3,298    | )        
|                            |                                                     |   |                        |           |              |   |           |          
|                            |                                                     |   | 354,110                |           |              |   | 373,455   |          
|Commercial                  |                                                     |   | 79,972                 |           |              |   | 85,312    |          
|                            |                                                     |   |                        |           |              |   |           |          
|                            |                                                     |   | 7,976,152              |           |              |   | 7,533,150 |          
|Allowance for credit losses |                                                     |   | (188,263               | )         |              |   | (171,432  | )        
|                            |                                                     |   |                        |           |              |   |           |          
|                            |                                                     | $ | 7,787,889              |           |              | $ | 7,361,718 |          
|                            |                                                     |   |                        |           |              |   |           |          

Loans managed by us totaled $8.9 billion as of March 31, 2002 compared with
$8.6 billion at December 31, 2001. Of the $8.9 billion, $7.9 billion were
owned by us and $1.0 billion were owned by securitization trusts. Of the $8.6
billion, $7.4 billion were owned by us and $1.2 billion were owned by
securitization trusts.

There were no impaired loans at March 31, 2002 and December 31, 2001.

Note 4  Retained Interest in Securitized Assets

The following table presents the activity of the RISA:

|                                           |  |                        |         |      |  |   |         |  
|------------------------------------------ |  | ---------------------- | ------- | ---- |  | - | ------- | -
|                                           |  | Three Months Ended    
|                                           |  | March 31,             
|                                           |  |                       
|                                           |  | 2002                   |         | 2001
|                                           |  |                        |         |     
|                                           |  | (Dollars in thousands)
|Beginning balance                          |  | $                      | 37,392  |      |  | $ | 111,558 |  
|Amortization                               |  |                        | (14,377 | )    |  |   | (14,366 | )
|Change in unrealized gain/loss on RISA (1) |  |                        | (479    | )    |  |   | 975     |  
|                                           |  |                        |         |      |  |   |         |  
|Balance at end of period (2)               |  | $                      | 22,536  |      |  | $ | 98,167  |  
|                                           |  |                        |         |      |  |   |         |  



---

|(1) |  | The change in unrealized gain/loss on RISA represents temporary changes
in valuation including changes in the discount rate based on the current
interest rate environment. Such amounts will not be realized unless the
RISA is sold. Changes in prepayment and credit loss assumptions for the
RISA are other than temporary in nature and impact the value of the RISA.
Such other than temporary differences are immediately recognized in income
as a component of retained interest income.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | There are no restrictions on the RISA.                                                                                                                                                                                                                                                                                                                                                                                                                                                           

9



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The following table presents the estimated future undiscounted retained
interest earnings to be received from securitizations:

|                                                                                                         |  |                        |           |              |  |   |           |  
|-------------------------------------------------------------------------------------------------------- |  | ---------------------- | --------- | ------------ |  | - | --------- | -
|                                                                                                         |  | March 31,              |           | December 31,
|                                                                                                         |  | 2002                   |           | 2001        
|                                                                                                         |  |                        |           |             
|                                                                                                         |  | (Dollars in thousands)
|Estimated net undiscounted RISA earnings                                                                 |  | $                      | 67,893    |              |  | $ | 87,358    |  
|Off balance sheet allowance for credit losses                                                            |  |                        | (43,483   | )            |  |   | (47,235   | )
|Discount to present value                                                                                |  |                        | (1,874    | )            |  |   | (2,731    | )
|                                                                                                         |  |                        |           |              |  |   |           |  
|Retained interest in securitized assets                                                                  |  | $                      | 22,536    |              |  | $ | 37,392    |  
|                                                                                                         |  |                        |           |              |  |   |           |  
|Outstanding balance of automobile contracts sold
through securitizations                                 |  | $                      | 1,005,549 |              |  | $ | 1,215,058 |  
|Off balance sheet allowance for losses as a
percent of automobile contracts sold through
securitizations |  |                        | 4.32      | %            |  |   | 3.89      | %

The decline in the off balance sheet allowance for credit losses on a dollar
basis is the result of our securitization transactions no longer being treated
as sales since the first quarter of 2000. We expect the RISA to be fully
amortized or otherwise eliminated by the end of 2002. Older transactions
treated as sales have lower losses each month after securitization as
estimated future credit losses are realized. We believe that the off balance
sheet allowance for credit losses is adequate to absorb probable losses in the
sold portfolio that can be reasonably estimated.

Note 5  Notes Payable on Automobile Secured Financing

For the three months ended March 31, 2002, we issued $2.6 billion of notes
secured by automobile contracts, of which $1.8 billion was through a public
transaction and $775 million was through a private placement. The private
placement was through a conduit facility established in January 2002. There
were $7.2 billion of notes payable on automobile secured financing outstanding
at March 31, 2002 compared with $5.9 billion at December 31, 2001. Of these
amounts, we had $775 million outstanding on a conduit facility at March 31,
2002, compared to $650 million at December 31, 2001. In March 2002, we
redeemed our $650 million conduit facility.

Interest payments on the public transactions are due quarterly, in arrears,
based on the respective notes interest rate. Interest payments on the conduit
facilities are due monthly, in arrears, based on the respective notes
interest rate. Interest expense on all notes payable on automobile secured
financing, including interest payments under interest rate swap agreements,
totaled $92.0 million and $73.0 million for the three months ended March 31,
2002 and 2001, respectively.

Note 6  Dividends

On February 20, 2002, we paid an $0.11 per share cash dividend to shareholders
of record as of February 6, 2002. On February 8, 2002, we declared a cash
dividend of $0.12 per share for shareholders of record as of May 6, 2002 with
a payable date of May 20, 2002.

Note 7  Rights Offerings

We completed a rights offering in March 2002 in which we raised a total of
$51.3 million through the issuance of 3.3 million additional common shares at
a price of $15.75 per share. With the completion of this offering, our total
number of common shares issued and outstanding increased 9.1% to 39.1 million
shares at March 31, 2002.

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##### Table of Contents



WFS completed a rights offering in March 2002 which raised a total of $110
million through the issuance of 6.1 million additional common shares at a
price of $18.00 per share. Of the 6.1 million additional common shares, we
purchased 5.2 million shares in the amount of approximately $94 million.

Note 8  Subsequent Events

On May 3, 2002, the Bank raised $300 million through a subordinated capital
debenture offering that closed on May 3, 2002. The debentures have a coupon
of 9.625% and a yield to maturity of 9.70%. The all-in cost of these
debentures, including issue costs, is 10.0%. The debentures mature on May 15,
2012.

In order to utilize the proceeds from the debentures to fund our growth, WFS
entered into a promissory note with the Bank for the sum of $300 million on
May 3, 2002. Interest payments are due semi-annually in arrears at a fixed
rate per annum of 10.25%. The promissory note is due on or before May 15,
2012.

On May 2, 2002, we declared a cash dividend of $0.12 per share for
shareholders of record as of August 6, 2002 with a payable date of August 20,
2002.

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##### Table of Contents






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

Overview

We are a diversified financial services holding company that provides
automobile lending services through our second tier subsidiary, WFS Financial
Inc, also known as WFS, and retail and commercial banking services through our
wholly owned subsidiary, Western Financial Bank, also known as the Bank. The
Bank currently owns 84% of the capital stock of WFS.

Our primary sources of revenue are net interest income and noninterest income.
Net interest income is the difference between the income earned on interest
earning assets and the interest paid on interest bearing liabilities. We
generate interest income from our loan portfolio, which consists of consumer,
mortgage and commercial loans, and from investments in mortgage-backed
securities and other short-term investments. We fund our loan portfolio and
investments with deposits, advances from the Federal Home Loan Bank, securities
sold under agreements to repurchase, securitizations, other borrowings, and
equity.

Noninterest income is primarily made up of revenues generated from the sale and
servicing of automobile contracts and mortgage loans. The primary components of
noninterest income include retained interest income on automobile contracts
sold, contractually specified servicing fees for the servicing of loans, late
charges, gain on sale of automobile contracts and mortgage loans, and other
miscellaneous servicing fee income. Since March 2000, we have structured our
securitizations as secured financings and no longer record non-cash gain on
sale or subsequent contractual servicing and retained interest income.
Instead, the earnings of the automobile contracts in the trust and the related
financing costs are reflected over the life of the underlying pool of
automobile contracts as net interest income. Other components of noninterest
income include gains and losses from the sale of investment securities and
mortgage-backed securities, insurance income, fees related to the sales of
investment products such as mutual funds and annuities, and fee income from
depository accounts. The primary components of noninterest expense are
salaries, credit and collection expenses, and data processing costs.

Critical Accounting Policies

Management believes critical accounting policies are very important to the
portrayal of our financial condition and results of operations. Critical
accounting policies require difficult and complex judgments because they rely
on estimates about the effect of matters that are inherently uncertain due to
the impact of changing market conditions. The following is a summary of
accounting policies we consider critical.

Retained Interest in Securitized Assets

Retained interest in securitized assets, also known as RISA, is capitalized
upon the sale of automobile contracts to securitization trusts for transactions
treated as sales for accounting purposes. RISA represents the present value of
the estimated future cash flows to be received by us from the excess spread
created in securitization transactions. Future cash flows are calculated by
taking the coupon rate of the automobile contracts securitized less the
interest rate paid to the investors less contractually specified servicing fees
and guarantor fees, after giving effect to estimated credit losses and
prepayments.

RISA is classified in a manner similar to available for sale securities and as
such is marked to market each quarter. Market value changes are calculated by
discounting the estimated cash flows using a current market discount rate. Any
changes in the market value of the RISA are reported as a separate component of
shareholders equity on our Consolidated Statements of Financial Condition as
accumulated other comprehensive income (loss), net of applicable taxes. On a
quarterly basis, we evaluate the carrying value of the RISA in light of the
actual performance of the underlying automobile contracts and make adjustments
to reduce the carrying value, if appropriate.

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Allowance for Credit Losses

Management determines the amount of the allowance for credit losses based on a
review of various quantitative and qualitative analyses. Quantitative analyses
include the review of chargeoff trends by loan program and loan type on an
owned and managed basis; evaluation of cumulative loss curves on both a managed
and sold basis; evaluation of credit loss experience by credit tier and
geographic location. Other quantitative analyses include the evaluation of the
size of any particular asset group; the concentration of any credit tier; the
level of non-performance and the percentage of delinquency.

Qualitative analyses include trends in chargeoffs over various time periods and
at various statistical midpoints and high points; the severity of depreciated
values of repossessions or foreclosures; trends in the number of days
repossessions are held in inventory; trends in the number of loan
modifications; trends in delinquency roll rates; trends in deficiency balance
collections both internally and from collection agencies; trends in custom
scores and the effectiveness of our custom scores; and trends in the economy
generally or in specific geographic locations. Despite these analyses, we
recognize that establishing allowance for credit losses is not an exact science
and can be highly judgmental in nature.

The analysis of the adequacy of the allowance for credit losses is not only
dependent upon effective quantitative and qualitative analyses, but also
effective loan review and asset classification. We classify our assets in
accordance with regulatory guidance. Our multifamily and commercial loan
portfolios are evaluated individually while our single family and consumer
portfolios are evaluated in pools. We classify our loan portfolios into five
categories: Pass, Special Mention, Substandard, Doubtful and Loss. Based upon
our asset classifications, we establish general and specific valuation
allowances.

General valuation allowances are established based on analysis of individual
assets or asset pools and other qualitative factors. Specific valuation
allowances are established based on analysis of individual assets or asset
pools that are classified as Loss. General valuation allowances are determined
by applying various factors to loan balances that are classified as Pass,
Special Mention, Substandard or Doubtful. Specific valuation allowances
represent loan amounts that are classified as Loss. Some assets may be split
into more than one asset classification due to fair value or net realizable
value calculations. This approach allows for enhanced analysis as it highlights
the need for more allowance than would be generally allocated if held in one
classification.

All loans that are 60 to 90 days delinquent are automatically classified as
Special Mention. Real estate loans that are manifesting a weakness in
performance are classified as Special Mention. Any loan that is 90 or more days
delinquent is automatically classified as Substandard. Real estate loans that
are manifesting a significant weakness in performance are also classified as
Substandard. Any multifamily loan that is impaired is classified as
Substandard. Any consumer loan where the borrower has filed for bankruptcy or
any consumer loan where the vehicle has been repossessed by us and is subject
to a redemption period is classified as Substandard, with the difference
between the wholesale book value and loan balance classified as Loss.

The allowance for credit losses is reduced by net chargeoffs as well as
decreases in required allowances due to sales of loans and by lowering the
level of required reserves based upon improved loan performance. The allowance
for credit losses is increased by recording amounts to the provision for credit
losses.

Hedging Activities

Deposits and Securities Sold Under Agreements to Repurchase

We enter into cash flow hedges that will protect against potential changes in
interest rates affecting interest payments on future deposits gathered by us
and future securities sold under agreements to repurchase. The fair value of
the interest rate swap agreements is included in deposits and securities sold
under agreements to repurchase, respectively, and any change in the fair value
is reported as accumulated other comprehensive income (loss), net of tax, on
our Consolidated Statements of Financial Condition. Related interest income or

13



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##### Table of Contents



expense is settled on a quarterly basis and is recorded in accumulated other
comprehensive income (loss) and reclassified into earnings in the period during
which cash flows on the hedged items affect income.

Notes Payable on Automobile Secured Financing

The contracts originated and held by us are fixed rate and, accordingly, we
have exposure to changes in interest rates. To protect against potential
changes in interest rates affecting interest payments on future securitization
transactions, we enter into various hedge agreements. We enter into
Euro-dollar swap agreements and forward agreements in order to hedge our
future interest payments on our notes payable on automobile secured financing.
The market value of these hedge agreements responds inversely to changes in
interest rates. Because of this inverse relationship, we can effectively lock
in a gross interest rate spread at the time of entering into the hedge
transaction. Gains and losses on these agreements are recorded in accumulated
other comprehensive income (loss). Any ineffective portion is recognized in
interest expense during that period if the hedge is greater than 100%
effective. Upon completion of the securitization transaction, the gains or
losses are recognized in full as an adjustment to the gain or loss on the sale
of the contracts if the securitization transaction is treated as a sale or
amortized on a level yield basis over the duration of the notes issued if the
transaction is treated as a secured financing. These hedge instruments are
settled daily, and therefore, there are no related financial instruments
recorded on the Consolidated Statements of Financial Condition. Credit risk
related to these hedge instruments is minimal.

As we issued certain variable rate notes payable, we also enter into interest
rate swap agreements in order to hedge our variable interest rate exposure on
future interest payments. The fair value of the interest rate swap agreements
is included in notes payable on automobile secured financing, and any change in
the fair value is reported as accumulated other comprehensive income (loss),
net of tax, on our Consolidated Statements of Financial Condition. Any
ineffective portion is recorded in interest expense during that period if the
hedge is greater than 100% effective. Related interest income or expense is
settled on a quarterly basis and recognized as an adjustment to interest
expense in our Consolidated Statements of Income.

Results of Operations

Net Interest Income

Net interest income is affected by the difference between the rate earned on
our interest earning assets and the rate paid on our interest bearing
liabilities (interest rate spread) and the relative amounts of our interest
earning assets and interest bearing liabilities. Net interest income totaled
$142 million and $93.2 million for the three months ended March 31, 2002 and
2001, respectively. The increase in net interest income is the result of us
holding more automobile contracts on the balance sheet as we utilize our own
liquidity sources and completed a $1.8 billion public securitization and a
$775 million conduit financing accounted for as secured financings.

14



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Interest rates for interest earning assets and interest bearing liabilities for
the three months ended March 31, 2002 and 2001 were as follows:

|                                             |                                                |                    |                            |                                    |  |                    |       |        |  |       |       | 
|-------------------------------------------- | ---------------------------------------------- | ------------------ | -------------------------- | ---------------------------------- |  | ------------------ | ----- | ------ |  | ----- | ----- | 
|                                             |                                                |                    |                            |                                    |  | Three Months Ended
|                                             |                                                |                    |                            |                                    |  | March 31,         
|                                             |                                                |                    |                            |                                    |  |                   
|                                             |                                                |                    |                            |                                    |  | 2002               |       | 2001  
|                                             |                                                |                    |                            |                                    |  |                    |       |       
|                                             |                                                |                    |                            |                                    |  | Yield/             |       | Yield/
|                                             |                                                |                    |                            |                                    |  | Rate               |       | Rate  
|                                             |                                                |                    |                            |                                    |  |                    |       |       
|Interest earning assets:                     |                                                |                    |                            |                                    |  |                    |       |       
|                                             |                                                | Total investments: |                            |                                    |  |                    |       |        |  |      
|                                             |                                                |                    | Mortgage-backed securities |                                    |  | 5.30               | %     |        |  | 6.62  | %    
|                                             |                                                |                    | Other investments          |                                    |  | 3.39               |       |        |  | 5.81  |      
|                                             |                                                |                    |                            |                                    |  |                    |       |       
|                                             |                                                |                    |                            | Total investments                  |  |                    | 5.17  |        |  |       | 6.55  | 
|                                             |                                                | Total loans:       |                            |                                    |  |                    |       |        |  |      
|                                             |                                                |                    | Consumer loans             |                                    |  | 12.75              |       |        |  | 13.84 |      
|                                             |                                                |                    | Mortgage loans (1)         |                                    |  | 6.53               |       |        |  | 8.41  |      
|                                             |                                                |                    | Commercial loans           |                                    |  | 6.84               |       |        |  | 8.58  |      
|                                             |                                                |                    |                            |                                    |  |                    |       |       
|                                             |                                                |                    |                            | Total loans                        |  |                    | 12.38 |        |  |       | 13.21 | 
|                                             |                                                |                    |                            |                                    |  |                    |       |       
|                                             |                                                |                    |                            | Total interest earning assets      |  |                    | 10.73 |        |  |       | 11.09 | 
|Interest bearing liabilities:                |                                                |                    |                            |                                    |  |                    |       |       
|                                             | Deposits                                       |                    |                            | 3.64                               |  |                    |       | 5.69   | 
|                                             | Notes payable on automobile secured financing  |                    |                            | 5.92                               |  |                    |       | 7.22   | 
|                                             | Securities sold under agreements to repurchase |                    |                            | 2.84                               |  |                    |       | 5.63   | 
|                                             | FHLB advances and other borrowings             |                    |                            | 2.15                               |  |                    |       | 6.03   | 
|                                             | Subordinated debentures                        |                    |                            | 9.47                               |  |                    |       | 8.92   | 
|                                             |                                                |                    |                            |                                    |  |                    |       |       
|                                             |                                                |                    |                            | Total interest bearing liabilities |  |                    | 5.16  |        |  |       | 6.65  | 
|                                             |                                                |                    |                            |                                    |  |                    |       |       
|Interest rate spread                         |                                                |                    | 5.57                       | %                                  |  |                    | 4.44  | %     
|                                             |                                                |                    |                            |                                    |  |                    |       |       
|Net yield on average interest earning assets |                                                |                    | 5.86                       | %                                  |  |                    | 5.48  | %     
|                                             |                                                |                    |                            |                                    |  |                    |       |       



---

|(1) |  | For the purposes of these computations, non-accruing loans are included
in the average loan amounts outstanding.
|--- |  | ----------------------------------------------------------------------------------------------------------------

Provision for Credit Losses

We maintain an allowance for credit losses to cover probable losses that can be
reasonably estimated for the loans held on the balance sheet. The allowance for
credit losses is increased by charging the provision for credit losses and
decreased by actual losses on the loans or reversing the allowance for credit
losses through the provision for credit losses when the amount of loans held on
balance sheet is reduced through loan sales. The level of allowance is based
principally on the outstanding balance of loans held on balance sheet and
historical loss trends. We believe that the allowance for credit losses is
currently adequate to absorb probable losses in our owned loan portfolio that
can be reasonably estimated.

The provision for credit losses totaled $65.7 million for the three months
ended March 31, 2002 compared with $27.0 million for the same period a year
earlier. Net chargeoffs were $47.5 million and $19.9 million for the same
respective periods. The increase in the provision for credit losses was a
result of our loans held on balance sheet increasing by approximately $443
million or 5.9% from March 31, 2001 as well as an increase in chargeoffs due to
the slowdown in the economy. We recorded $18.2 million in provisions for credit
losses in excess of chargeoffs this quarter as a result of the transitional
effects related to the elimination of off balance sheet accounting for
securitizations. The allowance for credit losses as a percentage of owned loans
outstanding was 2.4% at March 31, 2002 compared with 2.3% at December 31, 2001.

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Noninterest Income

Automobile Lending

We regularly securitize automobile contracts in the public asset-backed
securities market and retain the servicing rights. For accounting purposes,
these transactions are treated as either secured financings or sales to a
securitization trust. Since the first quarter of 2000, we have not completed
a securitization that has been accounted for as a sale. For transactions
treated as sales prior to April 2000, we recorded non-cash gain equal to the
present value of the estimated future cash flows from the portfolio of
automobile contracts sold less the write-off of dealer participation balances
and the effect of hedging activities. For these securitizations, net interest
earned on the automobile contracts sold and fees earned for servicing the
contract portfolios are recognized over the life of the transactions as
contractual servicing income, retained interest income and other fee income.

The components of automobile lending income were as follows:

|                                                             |                                 |   |                        |        |      |   |        |        | 
|------------------------------------------------------------ | ------------------------------- | - | ---------------------- | ------ | ---- | - | ------ | ------ | 
|                                                             |                                 |   | Three Months Ended    
|                                                             |                                 |   | March 31,             
|                                                             |                                 |   |                       
|                                                             |                                 |   | 2002                   |        | 2001
|                                                             |                                 |   |                        |        |     
|                                                             |                                 |   | (Dollars in thousands)
|Retained interest (expense) income, net of RISA
amortization |                                 | $ | (11,649                | )      |      | $ | 2,836  |       
|Contractual servicing income                                 |                                 |   | 3,539                  |        |      |   | 7,365  |       
|Other fee income                                             |                                 |   | 19,784                 |        |      |   | 16,733 |       
|                                                             |                                 |   |                        |        |      |   |        |       
|                                                             | Total automobile lending income |   | $                      | 11,674 |      |   | $      | 26,934 | 
|                                                             |                                 |   |                        |        |      |   |        |       

Contract securitizations totaled $2.6 billion and $1.0 billion for the three
months ended March 31, 2002 and 2001, respectively. All transactions have been
treated as secured financings.

Retained interest expense totaled $11.6 million for the three months ended
March 31, 2002, compared with retained interest income of $2.8 million for the
same period a year earlier. For accounting purposes, this income is only
recognized on contracts sold through securitizations treated as sales.
Retained interest income is dependent upon the average excess spread on the
contracts sold, credit losses and the size of the sold portfolio. The retained
interest expense recognized in 2002 is the result of higher chargeoffs on our
sold portfolio as well as revised estimates of future charge-offs due to the
slowdown in the economy.

According to the terms of each securitization transaction, contractual
servicing income is generally earned at rates ranging from 1.0% to 1.25% per
annum on the outstanding balance of contracts securitized. For accounting
purposes, this income is only recognized on contracts sold through
securitizations treated as sales. For the three months ended March 31, 2002
and 2001, contractual servicing income totaled $3.5 million and $7.4 million,
respectively. The decline was the result of the decrease in the average
balance of the sold portfolio over those periods.

Other fee income consists primarily of documentation fees, late charges and
deferment fees on our managed portfolio, including loans securitized in
transactions accounted for as sales and secured financings, as well as
automobile contracts not securitized. The increase in other fee income is due
to the growth in our average managed automobile contract portfolio to $8.3
billion from $7.0 billion for the three months ended March 31, 2002 and 2001,
respectively.

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Noninterest Expense

For the three months ended March 31, 2002 and 2001, noninterest expense totaled
$60.9 million and $61.3 million, respectively. Noninterest expense as a
percent of total revenues improved to 38% for the three months ended March 31,
2002 compared to 50% for the same period a year ago as a result of improved
operating efficiencies.

Income Taxes

We file federal and certain state tax returns on a consolidated basis. Other
state tax returns are filed for each subsidiary separately. Our effective tax
rate was 40% for each of the three months ended March 31, 2002 and 2001.

Pro Forma Statements of Income

During the first quarter of 2000, we changed the structure of our
securitizations so that they would no longer be accounted for as sales but
rather be recorded as secured financings. This decision is consistent with our
business strategy to record high quality earnings and to maintain a
conservative, well-capitalized balance sheet. If treated as secured financings,
no gain on sale or subsequent contractual servicing and retained interest
income is recognized. Instead, the earnings of the automobile contracts in the
trust and the related financing costs are reflected over the life of the
underlying pool of automobile contracts as net interest income. Additionally,
no RISA is recorded on the balance sheet, which must be written off over the
life of a securitization. This asset is subject to impairment if assumptions
made about the performance of a securitization are not realized.

Over time, our securitizations that were recorded as sales will mature and an
increasing percentage of securitized automobile contracts will be represented
by securitizations that are accounted for as secured financings. In the
interim, we will present pro forma portfolio basis statement of income that
present our results under the assumption that all our outstanding
securitizations are treated as secured financings rather than as sales. These
statements provide a method by which to gauge our year to year performance
while we make this transition.

We believe that such a presentation is an important performance measure of our
operations during this transitory period. Differences between portfolio basis
earnings and reported earnings represent the transitional effect of treating
securitizations as secured financings rather than sales. Ultimately, our
reported earnings will approach our portfolio basis earnings as we continue to
treat future securitizations as secured financings. We refer to these pro forma
results as portfolio basis statements of income since all automobile
contracts would have remained in our on balance sheet contract portfolio if we
accounted for the transactions as secured financings.

The growth in our portfolio basis earnings reflects the growth in our managed
automobile contract portfolio to $8.4 billion at March 31, 2002 compared with
$7.2 billion at March 31, 2001. We monitor the periodic portfolio basis
earnings of our managed contract portfolio and believe these portfolio basis
statements assist in better understanding our business.

17



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##### Table of Contents



The following tables present the portfolio basis statements of income and
reconciliation to net income as reflected in our Consolidated Statements of
Income presented under Generally Accepted Accounting Principles, also known as
GAAP:

PORTFOLIO BASIS STATEMENTS OF INCOME
(Unaudited)

|                                                      |                                                       |   |                           |         |      |   |         |         | 
|----------------------------------------------------- | ----------------------------------------------------- | - | ------------------------- | ------- | ---- | - | ------- | ------- | 
|                                                      |                                                       |   | Three Months Ended       
|                                                      |                                                       |   | March 31,                
|                                                      |                                                       |   |                          
|                                                      |                                                       |   | 2002                      |         | 2001
|                                                      |                                                       |   |                           |         |     
|                                                      |                                                       |   | (Dollars in thousands,   
|                                                      |                                                       |   | except per share amounts)
|Interest income                                       |                                                       | $ | 296,076                   |         |      | $ | 284,780 |        
|Interest expense                                      |                                                       |   | 141,307                   |         |      |   | 162,303 |        
|                                                      |                                                       |   |                           |         |      |   |         |        
|                                                      | Net interest income                                   |   |                           | 154,769 |      |   |         | 122,477 | 
|Net chargeoffs (1)                                    |                                                       |   | 57,230                    |         |      |   | 32,667  |        
|Provision for growth (2)                              |                                                       |   | 1,023                     |         |      |   | 5,607   |        
|                                                      |                                                       |   |                           |         |      |   |         |        
|                                                      | Provision for credit losses                           |   |                           | 58,253  |      |   |         | 38,274  | 
|                                                      |                                                       |   |                           |         |      |   |         |        
|                                                      | Net interest income after provision for credit losses |   |                           | 96,516  |      |   |         | 84,203  | 
|Noninterest income                                    |                                                       |   | 25,269                    |         |      |   | 20,267  |        
|Noninterest expense                                   |                                                       |   | 60,897                    |         |      |   | 61,345  |        
|                                                      |                                                       |   |                           |         |      |   |         |        
|                                                      | Income before income tax                              |   |                           | 60,888  |      |   |         | 43,125  | 
|Income tax (3)                                        |                                                       |   | 24,119                    |         |      |   | 17,460  |        
|                                                      |                                                       |   |                           |         |      |   |         |        
|                                                      | Income before minority interest                       |   |                           | 36,769  |      |   |         | 25,665  | 
|Minority interest in earnings                         |                                                       |   | 4,784                     |         |      |   | 4,167   |        
|                                                      |                                                       |   |                           |         |      |   |         |        
|                                                      | Income before extraordinary item                      |   |                           | 31,985  |      |   |         | 21,498  | 
|Extraordinary gain from early extinguishment of debt  |                                                       |   |                           |         |      |   | 8       |        
|                                                      |                                                       |   |                           |         |      |   |         |        
|Portfolio basis net income                            |                                                       | $ | 31,985                    |         |      | $ | 21,506  |        
|                                                      |                                                       |   |                           |         |      |   |         |        
|Portfolio basis net income per common share  diluted |                                                       | $ | 0.86                      |         |      | $ | 0.67    |        
|                                                      |                                                       |   |                           |         |      |   |         |        
|GAAP basis net income per common share  diluted      |                                                       | $ | 0.46                      |         |      | $ | 0.55    |        
|                                                      |                                                       |   |                           |         |      |   |         |        



---

|(1) |  | Represents actual chargeoffs incurred during the period, net of
recoveries.                                               
|--- |  | --------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Represents additional allowance for credit losses we would set aside
due to an increase in the managed contract portfolio.
|   
|   
|   
|   
|(3) |  | Such tax effect is based upon our tax rate for the respective period.                                                     

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RECONCILIATION OF GAAP BASIS NET INCOME
TO PORTFOLIO BASIS NET INCOME
(Unaudited)

|                             |                                    |                                   |        |                        |        |      |        |         |       | 
|---------------------------- | ---------------------------------- | --------------------------------- | ------ | ---------------------- | ------ | ---- | ------ | ------- | ----- | 
|                             |                                    |                                   |        | Three Months Ended    
|                             |                                    |                                   |        | March 31,             
|                             |                                    |                                   |        |                       
|                             |                                    |                                   |        | 2002                   |        | 2001
|                             |                                    |                                   |        |                        |        |     
|                             |                                    |                                   |        | (Dollars in thousands)
|GAAP basis net income        |                                    | $                                 | 16,853 |                        |        | $    | 17,716 |        
|Portfolio basis adjustments: |                                    |                                   |        |                        |        |      |        |        
|                             | Retained interest expense (income) |                                   |        | 11,649                 |        |      |        | (2,836  | )    
|                             | Contractual servicing income       |                                   |        | (3,539                 | )      |      |        | (7,365  | )    
|                             | Net interest income                |                                   |        | 12,643                 |        |      |        | 29,268  |      
|                             | Provision for credit losses        |                                   |        | 7,445                  |        |      |        | (11,292 | )    
|                             | Operating expenses                 |                                   |        | (38                    | )      |      |        | (51     | )    
|                             | Minority interest                  |                                   |        | (1,873                 | )      |      |        | (807    | )    
|                             |                                    |                                   |        |                        |        |      |        |        
|                             |                                    | Total portfolio basis adjustments |        |                        | 26,287 |      |        |         | 6,917 | 
|Net tax effect (1)           |                                    |                                   | 11,155 |                        |        |      | 3,127  |        
|                             |                                    |                                   |        |                        |        |      |        |        
|Portfolio basis net income   |                                    | $                                 | 31,985 |                        |        | $    | 21,506 |        
|                             |                                    |                                   |        |                        |        |      |        |        



---

|(1) |  | Such tax is based on our tax rate for the respective period.
|--- |  | ------------------------------------------------------------

Financial Condition

Overview

Total assets increased $740 million or 7.3% to $10.8 billion at March 31, 2002
from $10.1 billion at December 31, 2001. The increase was primarily a result
of $1.3 billion of automobile contracts originated during the quarter.

Loan Portfolio

The following table sets forth the composition of our loan portfolio by type of
loan, including loans held for sale, as of the dates indicated:

|                                |                     |                      |           |                        |           |                   |      |        |       |   |           |           |           |  |      |      |       |  
|------------------------------- | ------------------- | -------------------- | --------- | ---------------------- | --------- | ----------------- | ---- | ------ | ----- | - | --------- | --------- | --------- |  | ---- | ---- | ----- | -
|                                |                     |                      |           | March 31, 2002         |           | December 31, 2001
|                                |                     |                      |           |                        |           |                  
|                                |                     |                      |           | Amount                 |           | %                 |      | Amount |       | %
|                                |                     |                      |           |                        |           |                   |      |        |       |  
|                                |                     |                      |           | (Dollars in thousands)
|Consumer loans:                 |                     |                      |           |                        |           |                   |      |        |       |   |           |           |           |  |      |     
|                                | Automobile contract |                      | $         | 7,640,775              |           |                   |      | 95.8   | %     |   | $         | 7,173,726 |           |  |      | 95.2 | %    
|                                | Other               |                      |           | 7,812                  |           |                   |      | 0.1    |       |   |           | 8,826     |           |  |      | 0.1  |      
|                                |                     |                      |           |                        |           |                   |      |        |       |   |           |           |           |  |      |     
|                                |                     |                      | 7,648,587 |                        |           |                   | 95.9 |        |       |   | 7,182,552 |           |           |  | 95.3 |     
|Less: unearned interest         |                     |                      | 106,517   |                        |           |                   | 1.3  |        |       |   | 108,169   |           |           |  | 1.4  |     
|                                |                     |                      |           |                        |           |                   |      |        |       |   |           |           |           |  |      |     
|                                |                     | Total consumer loans |           |                        | 7,542,070 |                   |      |        | 94.6  |   |           |           | 7,074,383 |  |      |      | 93.9  |  
|Mortgage loans:                 |                     |                      |           |                        |           |                   |      |        |       |   |           |           |           |  |      |     
|                                | Existing properties |                      |           | 343,731                |           |                   |      | 4.3    |       |   |           | 361,115   |           |  |      | 4.8  |      
|                                | Construction        |                      |           | 12,943                 |           |                   |      | 0.1    |       |   |           | 15,638    |           |  |      | 0.2  |      
|                                |                     |                      |           |                        |           |                   |      |        |       |   |           |           |           |  |      |     
|                                |                     |                      | 356,674   |                        |           |                   | 4.4  |        |       |   | 376,753   |           |           |  | 5.0  |     
|Less: undisbursed loan proceeds |                     |                      | 2,564     |                        |           |                   |      |        |       |   | 3,298     |           |           |  |      |     
|                                |                     |                      |           |                        |           |                   |      |        |       |   |           |           |           |  |      |     
|                                |                     | Total mortgage loans |           |                        | 354,110   |                   |      |        | 4.4   |   |           |           | 373,455   |  |      |      | 5.0   |  
|Commercial loans                |                     |                      | 79,972    |                        |           |                   | 1.0  |        |       |   | 85,312    |           |           |  | 1.1  |     
|                                |                     |                      |           |                        |           |                   |      |        |       |   |           |           |           |  |      |     
|                                |                     | Total loans          |           | $                      | 7,976,152 |                   |      |        | 100.0 | % |           | $         | 7,533,150 |  |      |      | 100.0 | %
|                                |                     |                      |           |                        |           |                   |      |        |       |   |           |           |           |  |      |     

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Mortgage Loan Portfolio

Our total mortgage loan portfolio consisted of the following:

|                                 |                    |                      |         |                        |         |                   |       |        |       |   |         |         |         |  |       |      |       |  
|-------------------------------- | ------------------ | -------------------- | ------- | ---------------------- | ------- | ----------------- | ----- | ------ | ----- | - | ------- | ------- | ------- |  | ----- | ---- | ----- | -
|                                 |                    |                      |         | March 31, 2002         |         | December 31, 2001
|                                 |                    |                      |         |                        |         |                  
|                                 |                    |                      |         | Amount                 |         | %                 |       | Amount |       | %
|                                 |                    |                      |         |                        |         |                   |       |        |       |  
|                                 |                    |                      |         | (Dollars in thousands)
|Single family residential loans: |                    |                      |         |                        |         |                   |       |        |       |   |         |         |         |  |       |     
|                                 | First trust deeds  |                      | $       | 132,782                |         |                   |       | 37.5   | %     |   | $       | 146,895 |         |  |       | 39.3 | %    
|                                 | Second trust deeds |                      |         | 4,231                  |         |                   |       | 1.2    |       |   |         | 4,645   |         |  |       | 1.3  |      
|                                 |                    |                      |         |                        |         |                   |       |        |       |   |         |         |         |  |       |     
|                                 |                    |                      | 137,013 |                        |         |                   | 38.7  |        |       |   | 151,540 |         |         |  | 40.6  |     
|Multifamily residential loans    |                    |                      | 171,559 |                        |         |                   | 48.4  |        |       |   | 180,850 |         |         |  | 48.4  |     
|Construction loans               |                    |                      | 12,943  |                        |         |                   | 3.7   |        |       |   | 15,638  |         |         |  | 4.2   |     
|Other                            |                    |                      | 35,159  |                        |         |                   | 9.9   |        |       |   | 28,725  |         |         |  | 7.7   |     
|                                 |                    |                      |         |                        |         |                   |       |        |       |   |         |         |         |  |       |     
|                                 |                    |                      | 356,674 |                        |         |                   | 100.7 |        |       |   | 376,753 |         |         |  | 100.9 |     
|Less: undisbursed loan proceeds  |                    |                      | 2,564   |                        |         |                   | 0.7   |        |       |   | 3,298   |         |         |  | 0.9   |     
|                                 |                    |                      |         |                        |         |                   |       |        |       |   |         |         |         |  |       |     
|                                 |                    | Total mortgage loans |         | $                      | 354,110 |                   |       |        | 100.0 | % |         | $       | 373,455 |  |       |      | 100.0 | %
|                                 |                    |                      |         |                        |         |                   |       |        |       |   |         |         |         |  |       |     

Commercial Loan Portfolio

We had outstanding loan commitments of $137 million at March 31, 2002 compared
with $141 million at December 31, 2001. For the three months ended March 31,
2002 and 2001, we originated $61.6 million and $51.8 million of commercial
loans, respectively. Amounts outstanding at March 31, 2002 and December 31,
2001 were $80.0 million and $85.3 million, respectively. Though we continue to
focus on expanding our commercial banking operation, it has not been a
significant source of revenue.

Asset Quality

Overview

Nonperforming assets, repossessions, loan delinquency and credit losses are
considered by us as key measures of asset quality. Asset quality, in turn,
affects our determination of the allowance for credit losses. We also take into
consideration general economic conditions in the markets we serve, individual
loan reviews, and the level of assets relative to reserves in determining the
adequacy of the allowance for credit losses.

Automobile Contract Quality

We provide financing in a market where there is a risk of default by borrowers.
Chargeoffs directly impact our earnings and cash flows. To minimize the amount
of credit losses we incur, we monitor delinquent accounts, promptly repossess
and remarket vehicles, and seek to collect on deficiency balances.

At March 31, 2002, the percentage of managed accounts delinquent 30 days or
greater was 2.51% compared with 3.72% at December 31, 2001. We calculate
delinquency based on the contractual due date. For the three months ended March
31, 2002 and 2001, net chargeoffs on average automobile contracts managed were
2.76% and 1.86%, respectively. The increase in credit loss experience is
primarily a result of the current recession. Delinquencies improved over the
prior quarter as the economic slowdown abates.

20



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The following table sets forth information with respect to the delinquency of
our portfolio of automobile contracts managed, which includes automobile
contracts that are owned by us and automobile contracts that have been sold but
are managed by us:

|                                                                                                        |                 |   |                        |         |                   |  |        |      |            |   |           |         |  |  |      |      |  
|------------------------------------------------------------------------------------------------------- | --------------- | - | ---------------------- | ------- | ----------------- |  | ------ | ---- | ---------- | - | --------- | ------- |  |  | ---- | ---- | -
|                                                                                                        |                 |   | March 31, 2002         |         | December 31, 2001
|                                                                                                        |                 |   |                        |         |                  
|                                                                                                        |                 |   | Amount                 |         | Percentage        |  | Amount |      | Percentage
|                                                                                                        |                 |   |                        |         |                   |  |        |      |           
|                                                                                                        |                 |   | (Dollars in thousands)
|Automobile contracts managed                                                                            |                 | $ | 8,405,634              |         |                   |  |        |      |            | $ | 8,152,882 |         |  |  |      |     
|                                                                                                        |                 |   |                        |         |                   |  |        |      |            |   |           |         |  |  |      |     
|Period of delinquency                                                                                   |                 |   |                        |         |                   |  |        |      |            |   |           |         |  |  |      |     
|                                                                                                        | 30-59 days      |   | $                      | 149,217 |                   |  |        | 1.78 | %          |   | $         | 217,873 |  |  |      | 2.67 | %
|                                                                                                        | 60 days or more |   |                        | 62,026  |                   |  |        | 0.73 |            |   |           | 85,290  |  |  |      | 1.05 |  
|                                                                                                        |                 |   |                        |         |                   |  |        |      |            |   |           |         |  |  |      |     
|Total automobile contracts delinquent
and delinquencies as a
percentage of automobile
contracts managed |                 | $ | 211,243                |         |                   |  | 2.51   | %    |            | $ | 303,163   |         |  |  | 3.72 | %   
|                                                                                                        |                 |   |                        |         |                   |  |        |      |            |   |           |         |  |  |      |     

The following table sets forth information with respect to repossessions in
our portfolio of managed automobile contracts:

|                                                                                          |  |                        |         |                   |  |           |           |           |  |  |         |   |  |   |           |  
|----------------------------------------------------------------------------------------- |  | ---------------------- | ------- | ----------------- |  | --------- | --------- | --------- |  |  | ------- | - |  | - | --------- | -
|                                                                                          |  | March 31, 2002         |         | December 31, 2001
|                                                                                          |  |                        |         |                  
|                                                                                          |  | Number of              |         |                   |  |           |           | Number of |  |  |         |  
|                                                                                          |  | Contracts              |         | Amount            |  | Contracts |           | Amount   
|                                                                                          |  |                        |         |                   |  |           |           |          
|                                                                                          |  | (Dollars in thousands)
|Automobile contracts managed                                                              |  |                        | 704,438 |                   |  | $         | 8,405,634 |           |  |  | 690,401 |   |  | $ | 8,152,882 |  
|                                                                                          |  |                        |         |                   |  |           |           |           |  |  |         |   |  |   |           |  
|Repossessed vehicles                                                                      |  |                        | 979     |                   |  | $         | 6,141     |           |  |  | 1,168   |   |  | $ | 7,553     |  
|                                                                                          |  |                        |         |                   |  |           |           |           |  |  |         |   |  |   |           |  
|Repossessed vehicles as a percentage
of number and amount of automobile
contracts managed |  |                        | 0.14    | %                 |  |           | 0.07      | %         |  |  | 0.17    | % |  |   | 0.09      | %

The following table sets forth information with respect to actual credit loss
experience on our portfolio of automobile contracts managed:

|                                                                                     |  |                        |           |      |  |   |           |  
|------------------------------------------------------------------------------------ |  | ---------------------- | --------- | ---- |  | - | --------- | -
|                                                                                     |  | Three Months Ended    
|                                                                                     |  | March 31,             
|                                                                                     |  |                       
|                                                                                     |  | 2002                   |           | 2001
|                                                                                     |  |                        |           |     
|                                                                                     |  | (Dollars in thousands)
|Average automobile contracts managed during period                                   |  | $                      | 8,273,297 |      |  | $ | 6,998,682 |  
|                                                                                     |  |                        |           |      |  |   |           |  
|Gross chargeoffs                                                                     |  | $                      | 79,792    |      |  | $ | 48,226    |  
|Recoveries                                                                           |  |                        | 22,633    |      |  |   | 15,746    |  
|                                                                                     |  |                        |           |      |  |   |           |  
|Net chargeoffs                                                                       |  | $                      | 57,159    |      |  | $ | 32,480    |  
|                                                                                     |  |                        |           |      |  |   |           |  
|Net chargeoffs as a percentage of average
automobile contracts managed during period |  |                        | 2.76      | %    |  |   | 1.86      | %
|                                                                                     |  |                        |           |      |  |   |           |  

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The following table sets forth the cumulative static pool losses by month for
all outstanding public securitized pools:

CUMULATIVE STATIC POOL LOSS CURVES
AT MARCH 31, 2002
(Unaudited)

|              |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|------------- |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | -
|Period (1)    |  | 1998-A |      | 1998-B |  | 1998-C |      | 1999-A |  | 1999-B |      | 1999-C |  | 2000-A |      | 2000-B |  | 2000-C |      | 2000-D |  | 2001-A |      | 2001-B |  | 2001-C |      | 2002-1
|              |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |       
|1             |  |        | 0.00 | %      |  |        | 0.00 | %      |  |        | 0.00 | %      |  |        | 0.00 | %      |  |        | 0.00 | %      |  |        | 0.00 | %      |  |        | 0.00 | %      |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | %
|2             |  |        | 0.04 | %      |  |        | 0.02 | %      |  |        | 0.04 | %      |  |        | 0.04 | %      |  |        | 0.04 | %      |  |        | 0.02 | %      |  |        | 0.03 | %      |  |  | 0.02 | % |  |  | 0.04 | % |  |  | 0.04 | % |  |  | 0.03 | % |  |  | 0.03 | % |  |  | 0.04 | % |  |  |      |  
|3             |  |        | 0.11 | %      |  |        | 0.08 | %      |  |        | 0.11 | %      |  |        | 0.11 | %      |  |        | 0.11 | %      |  |        | 0.10 | %      |  |        | 0.10 | %      |  |  | 0.09 | % |  |  | 0.13 | % |  |  | 0.11 | % |  |  | 0.09 | % |  |  | 0.10 | % |  |  | 0.09 | % |  |  |      |  
|4             |  |        | 0.25 | %      |  |        | 0.18 | %      |  |        | 0.23 | %      |  |        | 0.20 | %      |  |        | 0.26 | %      |  |        | 0.25 | %      |  |        | 0.20 | %      |  |  | 0.24 | % |  |  | 0.27 | % |  |  | 0.24 | % |  |  | 0.20 | % |  |  | 0.21 | % |  |  | 0.20 | % |  |  |      |  
|5             |  |        | 0.44 | %      |  |        | 0.38 | %      |  |        | 0.39 | %      |  |        | 0.33 | %      |  |        | 0.47 | %      |  |        | 0.40 | %      |  |        | 0.36 | %      |  |  | 0.39 | % |  |  | 0.46 | % |  |  | 0.39 | % |  |  | 0.33 | % |  |  | 0.33 | % |  |  | 0.35 | % |  |  |      |  
|6             |  |        | 0.66 | %      |  |        | 0.59 | %      |  |        | 0.50 | %      |  |        | 0.46 | %      |  |        | 0.66 | %      |  |        | 0.56 | %      |  |        | 0.55 | %      |  |  | 0.59 | % |  |  | 0.65 | % |  |  | 0.54 | % |  |  | 0.50 | % |  |  | 0.50 | % |  |  | 0.49 | % |  |  |      |  
|7             |  |        | 0.95 | %      |  |        | 0.83 | %      |  |        | 0.61 | %      |  |        | 0.62 | %      |  |        | 0.87 | %      |  |        | 0.71 | %      |  |        | 0.71 | %      |  |  | 0.78 | % |  |  | 0.81 | % |  |  | 0.74 | % |  |  | 0.70 | % |  |  | 0.69 | % |  |  | 0.65 | % |  |  |      |  
|8             |  |        | 1.23 | %      |  |        | 1.03 | %      |  |        | 0.75 | %      |  |        | 0.76 | %      |  |        | 1.00 | %      |  |        | 0.86 | %      |  |        | 0.91 | %      |  |  | 0.99 | % |  |  | 0.93 | % |  |  | 0.93 | % |  |  | 0.84 | % |  |  | 0.87 | % |  |  | 0.81 | % |  |  |      |  
|9             |  |        | 1.50 | %      |  |        | 1.21 | %      |  |        | 0.86 | %      |  |        | 0.92 | %      |  |        | 1.13 | %      |  |        | 1.01 | %      |  |        | 1.10 | %      |  |  | 1.17 | % |  |  | 1.07 | % |  |  | 1.13 | % |  |  | 1.04 | % |  |  | 1.05 | % |  |  |      |   |  |  |      |  
|10            |  |        | 1.79 | %      |  |        | 1.40 | %      |  |        | 1.00 | %      |  |        | 1.11 | %      |  |        | 1.24 | %      |  |        | 1.14 | %      |  |        | 1.27 | %      |  |  | 1.33 | % |  |  | 1.24 | % |  |  | 1.34 | % |  |  | 1.24 | % |  |  | 1.22 | % |  |  |      |   |  |  |      |  
|11            |  |        | 2.03 | %      |  |        | 1.53 | %      |  |        | 1.17 | %      |  |        | 1.30 | %      |  |        | 1.35 | %      |  |        | 1.34 | %      |  |        | 1.45 | %      |  |  | 1.44 | % |  |  | 1.41 | % |  |  | 1.50 | % |  |  | 1.45 | % |  |  | 1.36 | % |  |  |      |   |  |  |      |  
|12            |  |        | 2.21 | %      |  |        | 1.62 | %      |  |        | 1.32 | %      |  |        | 1.47 | %      |  |        | 1.44 | %      |  |        | 1.52 | %      |  |        | 1.58 | %      |  |  | 1.57 | % |  |  | 1.62 | % |  |  | 1.74 | % |  |  | 1.67 | % |  |  |      |   |  |  |      |   |  |  |      |  
|13            |  |        | 2.39 | %      |  |        | 1.74 | %      |  |        | 1.48 | %      |  |        | 1.61 | %      |  |        | 1.58 | %      |  |        | 1.74 | %      |  |        | 1.73 | %      |  |  | 1.72 | % |  |  | 1.86 | % |  |  | 1.95 | % |  |  | 1.90 | % |  |  |      |   |  |  |      |   |  |  |      |  
|14            |  |        | 2.49 | %      |  |        | 1.84 | %      |  |        | 1.66 | %      |  |        | 1.73 | %      |  |        | 1.74 | %      |  |        | 1.94 | %      |  |        | 1.85 | %      |  |  | 1.86 | % |  |  | 2.04 | % |  |  | 2.21 | % |  |  | 2.09 | % |  |  |      |   |  |  |      |   |  |  |      |  
|15            |  |        | 2.60 | %      |  |        | 1.96 | %      |  |        | 1.79 | %      |  |        | 1.81 | %      |  |        | 1.85 | %      |  |        | 2.09 | %      |  |        | 2.00 | %      |  |  | 2.04 | % |  |  | 2.25 | % |  |  | 2.48 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|16            |  |        | 2.72 | %      |  |        | 2.10 | %      |  |        | 1.91 | %      |  |        | 1.89 | %      |  |        | 2.03 | %      |  |        | 2.27 | %      |  |        | 2.15 | %      |  |  | 2.24 | % |  |  | 2.45 | % |  |  | 2.71 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|17            |  |        | 2.85 | %      |  |        | 2.22 | %      |  |        | 2.01 | %      |  |        | 2.00 | %      |  |        | 2.16 | %      |  |        | 2.39 | %      |  |        | 2.37 | %      |  |  | 2.39 | % |  |  | 2.68 | % |  |  | 2.89 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|18            |  |        | 2.98 | %      |  |        | 2.40 | %      |  |        | 2.07 | %      |  |        | 2.10 | %      |  |        | 2.30 | %      |  |        | 2.53 | %      |  |        | 2.52 | %      |  |  | 2.55 | % |  |  | 2.88 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|19            |  |        | 3.11 | %      |  |        | 2.55 | %      |  |        | 2.11 | %      |  |        | 2.24 | %      |  |        | 2.42 | %      |  |        | 2.67 | %      |  |        | 2.67 | %      |  |  | 2.73 | % |  |  | 3.08 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|20            |  |        | 3.25 | %      |  |        | 2.69 | %      |  |        | 2.17 | %      |  |        | 2.35 | %      |  |        | 2.50 | %      |  |        | 2.81 | %      |  |        | 2.83 | %      |  |  | 2.93 | % |  |  | 3.23 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|21            |  |        | 3.35 | %      |  |        | 2.79 | %      |  |        | 2.24 | %      |  |        | 2.46 | %      |  |        | 2.58 | %      |  |        | 2.92 | %      |  |        | 2.99 | %      |  |  | 3.12 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|22            |  |        | 3.48 | %      |  |        | 2.85 | %      |  |        | 2.34 | %      |  |        | 2.55 | %      |  |        | 2.67 | %      |  |        | 3.10 | %      |  |        | 3.16 | %      |  |  | 3.27 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|23            |  |        | 3.62 | %      |  |        | 2.89 | %      |  |        | 2.43 | %      |  |        | 2.63 | %      |  |        | 2.77 | %      |  |        | 3.28 | %      |  |        | 3.34 | %      |  |  | 3.38 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|24            |  |        | 3.70 | %      |  |        | 2.92 | %      |  |        | 2.52 | %      |  |        | 2.71 | %      |  |        | 2.87 | %      |  |        | 3.38 | %      |  |        | 3.49 | %      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|25            |  |        | 3.75 | %      |  |        | 2.97 | %      |  |        | 2.62 | %      |  |        | 2.77 | %      |  |        | 3.01 | %      |  |        | 3.55 | %      |  |        | 3.63 | %      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|26            |  |        | 3.80 | %      |  |        | 3.04 | %      |  |        | 2.71 | %      |  |        | 2.82 | %      |  |        | 3.14 | %      |  |        | 3.68 | %      |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|27            |  |        | 3.87 | %      |  |        | 3.13 | %      |  |        | 2.80 | %      |  |        | 2.89 | %      |  |        | 3.16 | %      |  |        | 3.84 | %      |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|28            |  |        | 3.92 | %      |  |        | 3.18 | %      |  |        | 2.87 | %      |  |        | 2.96 | %      |  |        | 3.29 | %      |  |        | 3.98 | %      |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|29            |  |        | 3.98 | %      |  |        | 3.24 | %      |  |        | 2.90 | %      |  |        | 3.02 | %      |  |        | 3.40 | %      |  |        | 4.14 | %      |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|30            |  |        | 4.06 | %      |  |        | 3.32 | %      |  |        | 2.95 | %      |  |        | 3.09 | %      |  |        | 3.50 | %      |  |        | 4.19 | %      |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|31            |  |        | 4.11 | %      |  |        | 3.38 | %      |  |        | 3.00 | %      |  |        | 3.17 | %      |  |        | 3.61 | %      |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|32            |  |        | 4.17 | %      |  |        | 3.43 | %      |  |        | 3.02 | %      |  |        | 3.20 | %      |  |        | 3.68 | %      |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|33            |  |        | 4.22 | %      |  |        | 3.47 | %      |  |        | 3.08 | %      |  |        | 3.27 | %      |  |        | 3.74 | %      |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|34            |  |        | 4.27 | %      |  |        | 3.48 | %      |  |        | 3.14 | %      |  |        | 3.35 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|35            |  |        | 4.32 | %      |  |        | 3.52 | %      |  |        | 3.15 | %      |  |        | 3.41 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|36            |  |        | 4.34 | %      |  |        | 3.54 | %      |  |        | 3.21 | %      |  |        | 3.47 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|37            |  |        | 4.35 | %      |  |        | 3.58 | %      |  |        | 3.25 | %      |  |        | 3.52 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|38            |  |        | 4.38 | %      |  |        | 3.63 | %      |  |        | 3.30 | %      |  |        | 3.55 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|39            |  |        | 4.39 | %      |  |        | 3.66 | %      |  |        | 3.35 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|40            |  |        | 4.43 | %      |  |        | 3.65 | %      |  |        | 3.39 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|41            |  |        | 4.45 | %      |  |        | 3.69 | %      |  |        | 3.39 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|42            |  |        | 4.50 | %      |  |        | 3.73 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|43            |  |        | 4.47 | %      |  |        | 3.75 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|44            |  |        | 4.50 | %      |  |        | 3.79 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|45            |  |        | 4.52 | %      |  |        | 3.81 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|46            |  |        | 4.55 | %      |  |        | 3.81 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|47            |  |        | 4.56 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|48            |  |        | 4.56 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|49            |  |        | 4.56 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|Prime Mix (2) |  |        | 57   | %      |  |        | 67   | %      |  |        | 70   | %      |  |        | 70   | %      |  |        | 70   | %      |  |        | 67   | %      |  |        | 68   | %      |  |  | 69   | % |  |  | 68   | % |  |  | 68   | % |  |  | 71   | % |  |  | 71   | % |  |  | 76   | % |  |  | 70   | %



---

|(1) |  | Represents the number of months since the inception of the
securitization.                    
|--- |  | ----------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Represents the original percentage of prime automobile contracts
securitized within each pool.

22



---



##### Table of Contents



Real Estate Loan Quality

Our only category of mortgage delinquencies over 60 days was single family
mortgages. We had $6.0 million mortgage loans, or 3.38% of total mortgage
loans, past due over 60 days at March 31, 2002 compared with $7.0 million, or
3.79% of total mortgage loans, at December 31, 2001.

Nonperforming Assets

Nonperforming assets, also known as NPAs, consist of nonperforming loans, also
known as NPLs, Chapter 13 bankruptcy accounts greater than 120 days delinquent,
repossessed automobiles, and real estate owned, also known as REO. For those
accounts that are in Chapter 13 bankruptcy and are contractually past due
greater than 120 days, all accrued interest is reversed and income is
recognized on a cash basis. REO is carried at lower of cost or fair value.
NPLs are defined as all nonaccrual loans. This includes mortgage loans 90 days
or more past due and impaired loans where full collection of principal and
interest is not reasonably assured. NPAs increased $0.8 million to $29.1
million at March 31, 2002 compared with $28.3 million at December 31, 2001.
NPAs represented 0.3% of total assets at both March 31, 2002 and December 31,
2001. There were no impaired loans at March 31, 2002 and December 31, 2001.

When a loan is designated as nonaccrual, all previously accrued but unpaid
interest is reversed. For the three months ended March 31, 2002 and 2001,
nonperforming loans excluded from interest income was $0.6 million and $0.4
million, respectively.

Allowance for Credit Losses

Our allowance for credit losses was $188 million at March 31, 2002 compared to
$171 million at December 31, 2001. For the three months ended March 31, 2002
and 2001, the provision for credit losses was $65.7 million and $27.0 million.
For the three months ended March 31, 2002 and 2001, net chargeoffs totaled
$47.5 million and $19.9 million, respectively. The increase in the allowance
for credit losses was the result of a higher level of automobile contracts held
on balance sheet as well as higher chargeoffs related to a slowing economy.
The allowance for credit losses as a percentage of owned loans outstanding was
2.4% at March 31, 2002 compared to 2.3% at December 31, 2001.

We believe that the allowance for credit losses is currently adequate to cover
probable losses in our owned portfolio that can be reasonably estimated. No
single loan, borrower or series of such loans comprises a significant portion
of the total portfolio. The provision and allowance for credit losses are
indicative of loan volumes, loss trends and managements analysis of market
conditions.

23



---



##### Table of Contents



The following table sets forth the activity in the allowance for credit losses:

|                                                                                                |                |   |                        |         |      |   |         |         |  
|----------------------------------------------------------------------------------------------- | -------------- | - | ---------------------- | ------- | ---- | - | ------- | ------- | -
|                                                                                                |                |   | Three Months Ended    
|                                                                                                |                |   | March 31,             
|                                                                                                |                |   |                       
|                                                                                                |                |   | 2002                   |         | 2001
|                                                                                                |                |   |                        |         |     
|                                                                                                |                |   | (Dollars in thousands)
|Balance at beginning of period                                                                  |                | $ | 171,432                |         |      | $ | 104,006 |        
|Chargeoffs:                                                                                     |                |   |                        |         |      |   |         |        
|                                                                                                | Mortgage loans |   |                        | (68     | )    |   |         | (161    | )
|                                                                                                | Consumer loans |   |                        | (64,600 | )    |   |         | (28,303 | )
|                                                                                                |                |   |                        |         |      |   |         |        
|                                                                                                |                |   | (64,668                | )       |      |   | (28,464 | )      
|Recoveries:                                                                                     |                |   |                        |         |      |   |         |        
|                                                                                                | Mortgage loans |   |                        |         |      |   |         | 1       |  
|                                                                                                | Consumer loans |   |                        | 17,161  |      |   |         | 8,567   |  
|                                                                                                |                |   |                        |         |      |   |         |        
|                                                                                                |                |   | 17,161                 |         |      |   | 8,568   |        
|                                                                                                |                |   |                        |         |      |   |         |        
|Net chargeoffs                                                                                  |                |   | (47,507                | )       |      |   | (19,896 | )      
|Write-down on nonperforming assets                                                              |                |   | (1,360                 | )       |      |   | (1,032  | )      
|Provision for credit losses                                                                     |                |   | 65,698                 |         |      |   | 26,982  |        
|                                                                                                |                |   |                        |         |      |   |         |        
|Balance at end of period                                                                        |                | $ | 188,263                |         |      | $ | 110,060 |        
|                                                                                                |                |   |                        |         |      |   |         |        
|Ratio of net chargeoffs during the period
(annualized) to average loans owned during the
period |                |   | 2.49                   | %       |      |   | 1.52    | %      

The following table presents summarized data relative to the allowance for
credit and real estate losses at the dates indicated:

|                                                                                      |                                |   |                        |         |              |   |           |         |  
|------------------------------------------------------------------------------------- | ------------------------------ | - | ---------------------- | ------- | ------------ | - | --------- | ------- | -
|                                                                                      |                                |   | March 31,              |         | December 31,
|                                                                                      |                                |   | 2002                   |         | 2001        
|                                                                                      |                                |   |                        |         |             
|                                                                                      |                                |   | (Dollars in thousands)
|Total loans (1)                                                                       |                                | $ | 7,976,152              |         |              | $ | 7,533,150 |        
|Allowance for credit losses                                                           |                                |   | 188,263                |         |              |   | 171,432   |        
|Allowance for real estate owned losses                                                |                                |   | 250                    |         |              |   | 250       |        
|Loans past due 60 days or more                                                        |                                |   | 56,573                 |         |              |   | 74,851    |        
|Nonperforming loans (2)                                                               |                                |   | 5,166                  |         |              |   | 6,772     |        
|Nonperforming assets (3)                                                              |                                |   | 29,103                 |         |              |   | 28,341    |        
|Allowance for credit losses as a percent of:                                          |                                |   |                        |         |              |   |           |        
|                                                                                      | Total loans (1)                |   |                        | 2.4     | %            |   |           | 2.3     | %
|                                                                                      | Loans past due 60 days or more |   |                        | 332.8   | %            |   |           | 229.0   | %
|                                                                                      | Nonperforming loans            |   |                        | 3,644.3 | %            |   |           | 2,531.5 | %
|Total allowance for credit losses and REO losses as a percent
of nonperforming assets |                                |   | 647.7                  | %       |              |   | 605.8     | %      
|Nonperforming loans as a percent of total loans                                       |                                |   | 0.1                    | %       |              |   | 0.1       | %      
|Nonperforming assets as a percent of total assets                                     |                                |   | 0.3                    | %       |              |   | 0.3       | %      



---

|(1) |  | Loans net of unearned interest and undisbursed loan proceeds.                                                                       
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | All nonperforming loans are on nonaccrual.                                                                                          
|   
|   
|   
|   
|(3) |  | Nonperforming loans, Chapter 13 bankruptcy accounts greater than 120
days delinquent, repossessed automobiles and real estate owned.

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Capital Resources and Liquidity

Overview

We require substantial capital resources and cash to support our business. Our
ability to maintain positive cash flows from operations is the result of
consistent managed growth, favorable loss experience and efficient operations.

In addition to our indirect statement of cash flows as presented GAAP, we also
analyze the key cash flows from our automobile lending operations on a direct
basis excluding certain items such as the purchase or sale of loans. The
following table shows our operating cash flows from our automobile lending
operations:

|                             |  |                        |         |      |  |   |        | 
|---------------------------- |  | ---------------------- | ------- | ---- |  | - | ------ | 
|                             |  | Three Months Ended    
|                             |  | March 31,             
|                             |  |                       
|                             |  | 2002                   |         | 2001
|                             |  |                        |         |     
|                             |  | (Dollars in thousands)
|Cash flows from owned loans  |  | $                      | 102,539 |      |  | $ | 75,635 | 
|Cash flows from trusts       |  |                        | 2,729   |      |  |   | 16,395 | 
|Contractual servicing income |  |                        | 3,539   |      |  |   | 7,365  | 
|Other fee income             |  |                        | 21,588  |      |  |   | 18,002 | 
|Less:                        |  |                        |         |      |  |   |        | 
|Dealer participation         |  |                        | 29,603  |      |  |   | 29,295 | 
|Operating costs              |  |                        | 51,540  |      |  |   | 52,297 | 
|                             |  |                        |         |      |  |   |        | 
|Operating cash flows         |  | $                      | 49,252  |      |  | $ | 35,805 | 
|                             |  |                        |         |      |  |   |        | 

Operating cash flows improved for the three months ended March 31, 2002
compared with the three months ended March 31, 2001 as a result of an increase
in the managed portfolio and improved operating efficiencies over the prior
year.

Principal Sources of Cash



| |  | Collections of Principal and Interest from Automobile Contracts For the three months ended March 31, 2002, principal
and interest collections totaled $1.8 billion compared with $1.5 billion for the same period in 2001.                                                                                                               
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Deposits Deposits were $2.3 billion at March 31, 2002 and December 31, 2001.                                                                                                                                                                                                                                                             
| 
| |  | Automobile Contract
Securitizations Securitizations totaled $2.6 billion for the three months ended March 31, 2002,
of which approximately $1.8 billion was through a public transaction and $775 million was a private placement through
a conduit facility. Securitizations totaled $1.0 billion for the same period in the prior year.
| 
| |  | Other Borrowings Other borrowings, which include securities sold under agreements to repurchase and FHLB advances,
decreased to $139 million at March 31, 2002 from $699 million at December 31, 2001.                                                                                                                                   

Principal Uses of Cash



| |  | Acquisition of Loans and Investment Securities For the three months ended March 31, 2002, loan originations totaled
$1.3 billion compared with $1.2 billion for the same period in 2001. We purchased $355 million of MBS and other
investment securities during the three months ended March 31, 2002 compared with $209 million during the same
respective period in 2001.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents





| |  | Payments of Principal and
Interest on Securitizations  Payments of principal and interest to noteholders and
certificateholders totaled $1.6 billion, including the redemption of our $650 million conduit facility, for the three
months ended March 31, 2002 compared with $778 million for the same period in the prior year.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Amounts Paid to Dealers
 For the three months ended March 31, 2002, participation paid by us to dealers was $29.6
million compared with $29.3 for the same period in 2001.                                                                                                                                                      
| 
| |  | Advances to Spread Accounts The amounts due from trusts, including initial advances not yet returned, was $128
million at March 31, 2002 compared with $136 million at December 31, 2001.                                                                                                                                       
| 
| |  | Operating Our Business For the three months ended March 31, 2002, operating expenses totaled $60.9 million compared
with $61.3 million for the same respective period in 2001.                                                                                                                                                  

Capital Requirements

The Bank is a federally chartered savings bank. As such, it is subject to
certain minimum capital requirements imposed by the Financial Institutions
Reform, Recovery and Enforcement Act, also known as FIRREA and the Federal
Deposit Insurance Corporation Improvement Act, also known as FDICIA. FDICIA
separates all financial institutions into one of five capital categories: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. In order to be considered
well capitalized, an institution must have a total risk-based capital ratio
of 10.0% or greater, a Tier 1 or core risk-based capital ratio of 6.0% or
greater, a leverage ratio of 5.0% or greater and not be subject to any OTS
order. The Bank currently meets all of the requirements of a well capitalized
institution.

26



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##### Table of Contents



The following table summarizes the Banks actual capital and required capital
as of March 31, 2002 and December 31, 2001:

|                                          |               |  |                        |         |         |  |            |         |            |  |        |         |   |  |   |         |  
|----------------------------------------- | ------------- |  | ---------------------- | ------- | ------- |  | ---------- | ------- | ---------- |  | ------ | ------- | - |  | - | ------- | -
|                                          |               |  |                        |         |         |  |            |         |            |  | Tier 1 |         |   |  |  
|                                          |               |  | Tangible               |         | Core    |  | Risk-Based |         | Risk-Based
|                                          |               |  | Capital                |         | Capital |  | Capital    |         | Capital   
|                                          |               |  |                        |         |         |  |            |         |           
|                                          |               |  | (Dollars in thousands)
|March 31, 2002                            |               |  |                        |         |         |  |            |         |            |  |        |         |   |  |   |        
|Actual Capital:                           |               |  |                        |         |         |  |            |         |            |  |        |         |   |  |   |        
|                                          | Amount        |  | $                      | 658,151 |         |  | $          | 658,151 |            |  | $      | 658,151 |   |  | $ | 903,409 |  
|                                          | Capital ratio |  |                        | 7.18    | %       |  |            | 7.18    | %          |  |        | 8.64    | % |  |   | 11.87   | %
|FIRREA minimum required capital:          |               |  |                        |         |         |  |            |         |            |  |        |         |   |  |   |        
|                                          | Amount        |  | $                      | 137,565 |         |  | $          | 275,130 |            |  |        | N/A     |   |  | $ | 609,067 |  
|                                          | Capital ratio |  |                        | 1.50    | %       |  |            | 3.00    | %          |  |        | N/A     |   |  |   | 8.00    | %
|                                          | Excess        |  | $                      | 520,586 |         |  | $          | 383,021 |            |  |        | N/A     |   |  | $ | 294,342 |  
|FDICIA well capitalized required capital: |               |  |                        |         |         |  |            |         |            |  |        |         |   |  |   |        
|                                          | Amount        |  |                        | N/A     |         |  | $          | 458,550 |            |  | $      | 456,800 |   |  | $ | 761,333 |  
|                                          | Capital ratio |  |                        | N/A     |         |  |            | 5.00    | %          |  |        | 6.00    | % |  |   | 10.00   | %
|                                          | Excess        |  |                        | N/A     |         |  | $          | 199,601 |            |  | $      | 201,351 |   |  | $ | 142,076 |  
|December 31, 2001                         |               |  |                        |         |         |  |            |         |            |  |        |         |   |  |   |        
|Actual Capital:                           |               |  |                        |         |         |  |            |         |            |  |        |         |   |  |   |        
|                                          | Amount        |  | $                      | 602,491 |         |  | $          | 602,491 |            |  | $      | 602,491 |   |  | $ | 841,144 |  
|                                          | Capital ratio |  |                        | 7.29    | %       |  |            | 7.29    | %          |  |        | 8.49    | % |  |   | 11.86   | %
|FIRREA minimum required capital:          |               |  |                        |         |         |  |            |         |            |  |        |         |   |  |   |        
|                                          | Amount        |  | $                      | 123,957 |         |  | $          | 247,915 |            |  |        | N/A     |   |  | $ | 567,523 |  
|                                          | Capital ratio |  |                        | 1.50    | %       |  |            | 3.00    | %          |  |        | N/A     |   |  |   | 8.00    | %
|                                          | Excess        |  | $                      | 478,534 |         |  | $          | 354,576 |            |  |        | N/A     |   |  | $ | 273,621 |  
|FDICIA well capitalized required capital: |               |  |                        |         |         |  |            |         |            |  |        |         |   |  |   |        
|                                          | Amount        |  |                        | N/A     |         |  | $          | 413,192 |            |  | $      | 425,642 |   |  | $ | 709,404 |  
|                                          | Capital ratio |  |                        | N/A     |         |  |            | 5.00    | %          |  |        | 6.00    | % |  |   | 10.00   | %
|                                          | Excess        |  |                        | N/A     |         |  | $          | 189,299 |            |  | $      | 176,849 |   |  | $ | 131,740 |  

The following table reconciles the Banks capital in accordance with GAAP to
the Banks tangible, core and risk-based capital:

|                                           |                                               |   |                        |         |              |   |         |         |  
|------------------------------------------ | --------------------------------------------- | - | ---------------------- | ------- | ------------ | - | ------- | ------- | -
|                                           |                                               |   | March 31,              |         | December 31,
|                                           |                                               |   | 2002                   |         | 2001        
|                                           |                                               |   |                        |         |             
|                                           |                                               |   | (Dollars in thousands)
|Banks shareholders equity  GAAP basis   |                                               | $ | 515,597                |         |              | $ | 472,132 |        
|Adjustments for tangible and core capital: |                                               |   |                        |         |              |   |         |        
|                                           | Unrealized losses under SFAS 115 and SFAS 133 |   |                        | 47,273  |              |   |         | 52,214  |  
|                                           | Non-permissible activities                    |   |                        | (142    | )            |   |         | (116    | )
|                                           | Minority interest in equity of subsidiaries   |   |                        | 95,423  |              |   |         | 78,261  |  
|                                           |                                               |   |                        |         |              |   |         |        
|Total tangible and core capital            |                                               |   | 658,151                |         |              |   | 602,491 |        
|Adjustments for risk-based capital:        |                                               |   |                        |         |              |   |         |        
|                                           | Subordinated debentures (1)                   |   |                        | 149,579 |              |   |         | 149,554 |  
|                                           | General loan valuation allowance (2)          |   |                        | 95,679  |              |   |         | 89,099  |  
|                                           |                                               |   |                        |         |              |   |         |        
|Risk-based capital                         |                                               | $ | 903,409                |         |              | $ | 841,144 |        
|                                           |                                               |   |                        |         |              |   |         |        



---

|(1) |  | Excludes capitalized discounts and issue costs.
|--- |  | -----------------------------------------------
|   
|   
|   
|   
|(2) |  | Limited to 1.25% of risk-weighted assets.      

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##### Table of Contents



Forward-Looking Statements

This Form 10-Q includes and incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements relate to analyses and other information, which are
based on forecasts of future results and estimates of amounts not yet
determinable. These statements also relate to our future prospects,
developments and business strategies. These statements are subject to
uncertainties and factors relating to our operations and business environment,
all of which are difficult to predict and many of which are beyond our
control, that could cause actual results to differ materially from those
expressed in or implied by these forward-looking statements.

These forward-looking statements are identified by their use of terms and
phrases such as anticipate, believe, could, estimate, expect,
intend, may, plan, predict, project, will, and similar terms and
phrases, including references to assumptions.

The following factors are among those that may cause actual results to differ
materially from the forward-looking statements:



| |  |  | changes in general economic and business conditions;                             
| | - |  | ---------------------------------------------------------------------------------
|
| |  |  | interest rate fluctuations;                                                      
|
| |  |  | our financial condition and liquidity, as well as future cash flows and earnings;
|
| |  |  | competition;                                                                     
|
| |  |  | our level of operating expenses;                                                 
|
| |  |  | the effect of new laws, regulations and court decisions;                         
|
| |  |  | the availability of sources of funding;                                          
|
| |  |  | the level of chargeoffs on the automobile contracts that we originate; and       
|
| |  |  | significant litigation.                                                          

If one or more of these risks or uncertainties materialize, or if underlying
assumptions prove incorrect, our actual results may vary materially from those
expected, estimated or projected.

We do not undertake to update our forward-looking statements or risk factors
to reflect future events or circumstances.

Available Information

The company provides access to all filings with the Securities and Exchange
Commission on its Web site at http:\\www.westcorpinc.com free of charge on the
same day as these reports are electronically filed with the Commission. The
information contained in our Web site does not constitute part of this filing.

28



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##### Table of Contents






ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Credit and Pricing Committee is responsible for setting credit and pricing
policies and for monitoring credit quality. Our Asset/Liability Committee is
responsible for the management of interest rate and prepayment risks.
Asset/liability management is the process of measuring and controlling interest
rate risk through matching the maturity and repricing characteristics of
interest earning assets with those of interest bearing liabilities.

The Asset/Liability Committee closely monitors interest rate and prepayment
risks and recommends policies for managing such risks. The primary measurement
tool for evaluating this risk is the use of interest rate shock analysis. This
analysis simulates the effects of an instantaneous and sustained change in
interest rates (in increments of 100 basis points) on our assets and
liabilities and measures the resulting increase or decrease to our net
portfolio value, also known as NPV. NPV is the discounted value of the future
cash flows (or paths of cash flows in the presence of options based on
volatility assumptions and an arbitrage free Monte Carlo simulation method to
achieve the current market price) of all assets minus all liabilities whose
value is affected by interest rate changes plus the book value of non-interest
rate sensitive assets minus the book value of non-interest rate sensitive
liabilities. The NPV ratio is the ratio of the NPV to the market value of our
assets as calculated above. In general, an increase in interest rates would
more adversely affect our NPV than would a decrease in interest rates.

Another important measurement of our interest rate risk is GAP analysis. GAP
is defined as the difference between the amount of interest sensitive assets
that reprice versus the amount of interest sensitive liabilities that also
reprice within a defined period of time. We have more interest sensitive
liabilities rather than assets repricing in shorter term maturity buckets and
more interest sensitive assets rather than liabilities repricing in longer term
maturity buckets.

29



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##### Table of Contents



The following table summarizes our maturity GAP position:

|                                                                   |                                                    |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         |           |           |            | 
|------------------------------------------------------------------ | -------------------------------------------------- | -------------------------------------------- | ---------------------------------- | --------- | ---------------------------------------------------- | --------- | ---------- | --------- | --------- | --------- | ---------- | --------- | ------- | --------- | --------- | --------- | ------- | --------- | -------- | ------- | ----- | ------- | ------- | --------- | --------- | ---------- | 
|                                                                   |                                                    |                                              |                                    |           | Interest Rate Sensitivity Analysis at March 31, 2002
|                                                                   |                                                    |                                              |                                    |           |                                                     
|                                                                   |                                                    |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           | 3 Years |           |          |         |       |         |         |           |          
|                                                                   |                                                    |                                              |                                    |           | Within                                               |           | 3 Months   |           | 1 Year to |           | to         |           | After 5 |           |           |           |        
|                                                                   |                                                    |                                              |                                    |           | 3 Months                                             |           | to 1 Year  |           | 3 Years   |           | 5 Years    |           | Years   |           | Total    
|                                                                   |                                                    |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |          
|                                                                   |                                                    |                                              |                                    |           | (Dollars in thousands)                              
|Interest earning assets:                                           |                                                    |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         |          
|                                                                   | Investment securities                              |                                              | $                                  | 9,662     |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           | $        | 1,020   |       |         | $       | 10,682    |          
|                                                                   | Other investments                                  |                                              |                                    | 300,133   |                                                      |           | $          | 510       |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         | 300,643   |          
|                                                                   | Mortgage-backed securities                         |                                              |                                    | 378,226   |                                                      |           |            | 765,441   |           |           | $          | 670,623   |         |           | $         | 237,916   |         |           |          | 129,899 |       |         |         | 2,182,105 |          
|                                                                   |                                                    |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         |          
|                                                                   |                                                    |                                              | Total investments                  |           |                                                      | 688,021   |            |           |           | 765,951   |            |           |         | 670,623   |           |           |         | 237,916   |          |         |       | 130,919 |         |           |           | 2,493,430  | 
|                                                                   | Consumer loans (1)                                 |                                              |                                    | 549,404   |                                                      |           |            | 1,946,562 |           |           |            | 3,590,512 |         |           |           | 1,418,350 |         |           |          | 37,241  |       |         |         | 7,542,069 |          
|                                                                   | Mortgage loans:                                    |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         |           |          
|                                                                   |                                                    | Adjustable rate (2)                          |                                    |           | 279,418                                              |           |            |           | 44,379    |           |            |           |         |           |           |           |         |           |          |         |       |         |         |           | 323,797   |           
|                                                                   |                                                    | Fixed rate (2)                               |                                    |           | 2,293                                                |           |            |           | 5,086     |           |            |           | 7,305   |           |           |           | 2,918   |           |          |         | 2,333 |         |         |           | 19,935    |           
|                                                                   | Construction loans (2)                             |                                              |                                    | 10,379    |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         | 10,379    |          
|                                                                   | Commercial loans (2)                               |                                              |                                    | 72,832    |                                                      |           |            | 4,168     |           |           |            | 1,389     |         |           |           | 445       |         |           |          | 1,138   |       |         |         | 79,972    |          
|                                                                   |                                                    |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         |          
|                                                                   |                                                    |                                              | Total interest
earning assets      |           |                                                      | 1,602,347 |            |           |           | 2,766,146 |            |           |         | 4,269,829 |           |           |         | 1,659,629 |          |         |       | 171,631 |         |           |           | 10,469,582 | 
|Interest bearing liabilities:                                      |                                                    |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         |          
|                                                                   | Deposits:                                          |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         |           |          
|                                                                   |                                                    | Passbook accounts (3)                        |                                    |           | 2,029                                                |           |            |           | 5,447     |           |            |           | 3,150   |           |           |           |         |           |          |         |       |         |         |           | 10,626    |           
|                                                                   |                                                    | Demand deposit and money
market accounts (3) |                                    |           | 110,920                                              |           |            |           | 225,294   |           |            |           | 444,619 |           |           |           |         |           |          |         |       |         |         |           | 780,833   |           
|                                                                   |                                                    | Certificate accounts (4)                     |                                    |           | 281,519                                              |           |            |           | 861,685   |           |            |           | 187,919 |           |           |           | 3,669   |           |          |         |       |         |         |           | 1,334,792 |           
|                                                                   | FHLB advances (4)                                  |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          | 2,881   |       |         |         | 2,881     |          
|                                                                   | Securities sold under agreements
to repurchase (4) |                                              |                                    | 136,365   |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         | 136,365   |          
|                                                                   | Subordinated debentures (4)                        |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          | 147,850 |       |         |         | 147,850   |          
|                                                                   | Notes payable on automobile
secured financing (4)  |                                              |                                    | 3,838,611 |                                                      |           |            | 1,718,221 |           |           |            | 1,510,992 |         |           |           | 144,086   |         |           |          |         |       |         |         | 7,211,910 |          
|                                                                   | Other borrowings (4)                               |                                              |                                    | 8,700     |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         | 8,700     |          
|                                                                   |                                                    |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         |          
|                                                                   |                                                    |                                              | Total interest bearing
liabilities |           |                                                      | 4,378,144 |            |           |           | 2,810,647 |            |           |         | 2,146,680 |           |           |         | 147,755   |          |         |       | 150,731 |         |           |           | 9,633,957  | 
|                                                                   |                                                    |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         |          
|Excess interest earning/bearing assets
(liabilities)               |                                                    |                                              | (2,775,797                         | )         |                                                      |           | (44,501    | )         |           |           | 2,123,149  |           |         |           | 1,511,874 |           |         |           | 20,900   |         |       |         | 835,625 |          
|Effect of hedging activities (5)                                   |                                                    |                                              | 4,162,875                          |           |                                                      |           | (1,164,165 | )         |           |           | (2,159,278 | )         |         |           | (364,932  | )         |         |           | (474,500 | )       |       |         |         |          
|                                                                   |                                                    |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         |          
|Hedged excess (deficit)                                            |                                                    | $                                            | 1,387,078                          |           |                                                      | $         | (1,208,666 | )         |           | $         | (36,129    | )         |         | $         | 1,146,942 |           |         | $         | (453,600 | )       |       | $       | 835,625 |          
|                                                                   |                                                    |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         |          
|Cumulative excess                                                  |                                                    | $                                            | 1,387,078                          |           |                                                      | $         | 178,412    |           |           | $         | 142,283    |           |         | $         | 1,289,225 |           |         | $         | 835,625  |         |       | $       | 835,625 |          
|                                                                   |                                                    |                                              |                                    |           |                                                      |           |            |           |           |           |            |           |         |           |           |           |         |           |          |         |       |         |         |          
|Cumulative excess as a percentage
of total interest earning assets |                                                    |                                              | 13.25                              | %         |                                                      |           | 1.70       | %         |           |           | 1.36       | %         |         |           | 12.31     | %         |         |           | 7.98     | %       |       |         | 7.98    | %        



---

|(1) |  | Based on contractual maturities adjusted by our historical prepayment
rate.                                           
|--- |  | ----------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Based on interest rate repricing adjusted for projected prepayments.                                                  
|   
|   
|   
|   
|(3) |  | Based on assumptions established by the OTS.                                                                          
|   
|   
|   
|   
|(4) |  | Based on contractual maturity.                                                                                        
|   
|   
|   
|   
|(5) |  | Includes effect of interest rate swaps designated against deposits and
securities sold under agreements to repurchase.

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##### Table of Contents






PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS



| |  |  | We or our subsidiaries are involved as parties to certain
legal proceedings incidental to our businesses. We are
vigorously defending these actions and do not believe that
the outcome of these proceedings will have a material
effect upon our financial condition, results of operations
and cash flows.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




ITEM 2. CHANGES IN SECURITIES



| |  |  | None
| |  |  | ----




ITEM 3. DEFAULTS UPON SENIOR SECURITIES



| |  |  | None
| |  |  | ----




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



| |  |  | On May 2, 2002, we held our annual shareholders meeting.
There were 39,096,116 shares of common stock outstanding
entitled to vote, and a total of 38,225,964 (98.08%) were
represented at the meeting in person or by proxy. The
following summarizes vote results of proposals submitted
to our shareholders:
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 1. |  | Proposal to elect one
Class I Director for term expiring 2003 and three
Class II Directors for terms expiring in 2004
| | -- |  | ---------------------------------------------------------------------------------------------------------------------

|                             |  |     |            |          |  |  |           | 
|---------------------------- |  | --- | ---------- | -------- |  |  | --------- | 
|NAME                         |  | FOR |            | WITHHELD
|                             |  |     |            |         
|Thomas A. Wolfe, Class I     |  |     | 36,746,491 |          |  |  | 1,509,473 | 
|Ernest S. Rady, Class II     |  |     | 36,756,028 |          |  |  | 1,499,936 | 
|James R. Dowlan, Class II    |  |     | 38,045,656 |          |  |  | 210,308   | 
|Judith M. Bardwick, Class II |  |     | 38,188,776 |          |  |  | 67,188    | 



| | 2. |  | Proposal to ratify the
appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending December 31,
2002
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------

|           |  |         |         |         |  |  |        | 
|---------- |  | ------- | ------- | ------- |  |  | ------ | 
|FOR        |  | AGAINST |         | ABSTAIN
|           |  |         |         |        
|37,940,176 |  |         | 292,052 |         |  |  | 23,736 | 




ITEM 5. OTHER INFORMATION



| |  |  | None
| |  |  | ----




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | Exhibits                                                                                                                                                                                                    
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | None                                                                                                                                                                                                        
|
| | (b) |  | Reports on Form 8-K                                                                                                                                                                                         
|
| |     |  | We filed a report on Form 8-K on February 11, 2002 to
present the consolidated financial statements as of
December 31, 2001 and 2000, and for each of the three years
in the period ended December 31, 2001.

31



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##### Table of Contents






SIGNATURES

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

Westcorp

---

(Registrant)


|      |              |                                        |     |                      
|----- | ------------ | -------------------------------------- | --- | ---------------------
|     
|Date: | May 14, 2002 |                                        | By: | /s/   Thomas A. Wolfe
|      |              |                                        |    
|      |              | Thomas A. Wolfe
President and Director

|      |              |                                                                                                                                            |     |                      
|----- | ------------ | ------------------------------------------------------------------------------------------------------------------------------------------ | --- | ---------------------
|     
|Date: | May 14, 2002 |                                                                                                                                            | By: | /s/   Lee a. Whatcott
|      |              |                                                                                                                                            |    
|      |              | Lee A. Whatcott
Executive Vice President (Principal Financial and
Accounting Officer), Chief Financial Officer and
Chief Operating Officer

32