##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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Form 10-Q



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|  |  |                                                                                                 
|- |  | ------------------------------------------------------------------------------------------------
|þ |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934 
| 
|  |  | For the quarterly period ended August 31,
    2002                                              
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-09911



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Capital Pacific Holdings, Inc.

(Exact name of Registrant as specified in its
charter)


|                                                                                                   |  |                                            
|-------------------------------------------------------------------------------------------------- |  | -------------------------------------------
|Delaware                                                                                           |  | 95-2956559                                 
|(State or other jurisdiction of
    incorporation or organization)                                 |  | (I.R.S. Employer
    Identification Number)
|                                                                                                  
|4100 MacArthur Blvd., Suite 200,
    Newport Beach, CA(Address of principal executive
    offices) |  | 92660(Zip Code)                            

Registrants telephone number, including
area code:

(949) 622-8400




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Indicate by check mark whether the Registrant
(1) 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 þ          No o

Indicate the number of shares outstanding of each
of the issuers classes of common stock, as of the latest
practicable date.

|                                         |  |                         
|---------------------------------------- |  | ------------------------
|Class and Title of                       |  | Shares Outstanding as of
|Capital Stock                            |  | September 30, 2002      
|                                         |  |                         
|Common Stock, $0.10 Par Value            |  | 13,679,362              
|Non-Voting Common Stock, $0.10 Par Value |  | 1,235,000               








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TABLE OF CONTENTS



|                                |                                                                                               |                                            |  |  |  |  |  | 
|------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION
|                                | Item 1. Financial Statements                                                                 
|                                |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                                |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME         
|                                |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                | Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
|                                | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                | Item 4. Controls and Procedures                                                              
|PART II -- OTHER INFORMATION   
|                                | Item 1. Legal Proceedings                                                                    
|                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                     
|CERTIFICATIONS                 
|EXHIBIT 99.1                   
|EXHIBIT 99.2                   



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##### Table of Contents



CAPITAL PACIFIC HOLDINGS, INC.

INDEX TO FORM 10-Q

|                                   |  |                                                                                                   |    |      |    | 
|---------------------------------- |  | ------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                   |  |                                                                                                   |    | Page
|                                   |  |                                                                                                   |    |     
|PART I  FINANCIAL
    INFORMATION
|Item 1.                            |  | Financial Statements                                                                              |    |      | 1  | 
|                                   |  | Consolidated Balance
    Sheets  August 31, 2002 and
    February 28, 2002                       |    |      | 1  | 
|                                   |  | Consolidated Statements of Income for the Three
    and Six Months Ended August 31, 2002 and 2001 |    |      | 2  | 
|                                   |  | Consolidated Statements of Cash Flows for the Six
    Months Ended August 31, 2002 and 2001       |    |      | 3  | 
|                                   |  | Notes to Consolidated Financial Statements                                                        |    |      | 4  | 
|Item 2.                            |  | Managements Discussion and Analysis of
    Results of Operations and Financial Condition         |    |      | 10 | 
|Item 3.                            |  | Quantitative and Qualitative Disclosures about
    Market Risk                                    |    |      | 15 | 
|Item 4.                            |  | Controls and Procedures                                                                           |    |      | 15 | 
|PART II  OTHER
    INFORMATION   
|Item 1.                            |  | Legal Proceedings                                                                                 |    |      | 16 | 
|Item 6.                            |  | Exhibits and Reports on Form 8-K                                                                  |    |      | 16 | 
|SIGNATURES                         |  |                                                                                                   | 17 |     
|CERTIFICATIONS                     |  |                                                                                                   | 18 |     

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##### Table of Contents






PART I  FINANCIAL
INFORMATION




Item 1.     Financial
Statements

CAPITAL PACIFIC HOLDINGS, INC. AND
SUBSIDIARIES






CONSOLIDATED BALANCE SHEETS


(In thousands, except share data)


|                                                                |                                                                                                                                                                                                      |                                            |         |              |         |   |         |          |         | 
|--------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------ | ------- | - | ------- | -------- | ------- | 
|                                                                |                                                                                                                                                                                                      | August 31,                                 |         | February 28,
|                                                                |                                                                                                                                                                                                      | 2002                                       |         | 2002        
|                                                                |                                                                                                                                                                                                      |                                            |         |             
|                                                                |                                                                                                                                                                                                      | (Unaudited)                                |         |             
|ASSETS                                                         
|Cash and cash equivalents                                       |                                                                                                                                                                                                      | $                                          | 4,892   |              |         | $ | 5,080   |         
|Restricted cash                                                 |                                                                                                                                                                                                      |                                            | 365     |              |         |   | 365     |         
|Accounts and notes receivable                                   |                                                                                                                                                                                                      |                                            | 10,567  |              |         |   | 14,537  |         
|Real estate projects                                            |                                                                                                                                                                                                      |                                            | 205,647 |              |         |   | 203,685 |         
|Property and equipment                                          |                                                                                                                                                                                                      |                                            | 7,807   |              |         |   | 971     |         
|Investment in and advances to unconsolidated
    joint ventures |                                                                                                                                                                                                      |                                            | 12,430  |              |         |   | 8,549   |         
|Prepaid expenses and other assets                               |                                                                                                                                                                                                      |                                            | 18,627  |              |         |   | 17,008  |         
|                                                                |                                                                                                                                                                                                      |                                            |         |              |         |   |         |         
|                                                                |                                                                                                                                                                                                      | Total assets                               |         | $            | 260,335 |   |         | $        | 250,195 | 
|                                                                |                                                                                                                                                                                                      |                                            |         |              |         |   |         |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY                       
|Accounts payable and accrued liabilities                        |                                                                                                                                                                                                      | $                                          | 23,664  |              |         | $ | 35,369  |         
|Notes payable                                                   |                                                                                                                                                                                                      |                                            | 137,969 |              |         |   | 116,265 |         
|                                                                |                                                                                                                                                                                                      |                                            |         |              |         |   |         |         
|                                                                |                                                                                                                                                                                                      | Total liabilities                          |         |              | 161,633 |   |         |          | 151,634 | 
|                                                                |                                                                                                                                                                                                      |                                            |         |              |         |   |         |         
|Negative goodwill                                               |                                                                                                                                                                                                      |                                            |        |              |         |   | 5,447   |         
|                                                                |                                                                                                                                                                                                      |                                            |         |              |         |   |         |         
|Stockholders equity:                                           |                                                                                                                                                                                                      |                                            |         |              |         |   |         |         
|                                                                | Common stock, par value $0.10 per share,
    60,000,000 shares authorized; 16,353,951 and 16,230,000 shares
    issued, respectively; 14,919,862 and 14,878,711 shares
    outstanding, respectively |                                            |         | 1,635        |         |   |         | 1,623    |        
|                                                                | Additional paid-in capital                                                                                                                                                                           |                                            |         | 217,249      |         |   |         | 216,853  |        
|                                                                | Accumulated deficit                                                                                                                                                                                  |                                            |         | (114,169     | )       |   |         | (120,762 | )      
|                                                                | Treasury stock                                                                                                                                                                                       |                                            |         | (4,853       | )       |   |         | (4,080   | )      
|                                                                | Accumulated other comprehensive income (loss)                                                                                                                                                        |                                            |         | (1,160       | )       |   |         | (520     | )      
|                                                                |                                                                                                                                                                                                      |                                            |         |              |         |   |         |         
|                                                                |                                                                                                                                                                                                      | Total stockholders equity                 |         |              | 98,702  |   |         |          | 93,114  | 
|                                                                |                                                                                                                                                                                                      |                                            |         |              |         |   |         |         
|                                                                |                                                                                                                                                                                                      | Total liabilities and stockholders equity |         | $            | 260,335 |   |         | $        | 250,195 | 
|                                                                |                                                                                                                                                                                                      |                                            |         |              |         |   |         |         

See accompanying notes to financial statements.

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##### Table of Contents



CAPITAL PACIFIC HOLDINGS, INC. AND
SUBSIDIARIES




CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


(In thousands, except per share
data)


|                                                                                               |                                                                                                      |                    |         |                  |     |      |         |        |       |   |         |        |       |   |          |        |       | 
|---------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ------------------ | ------- | ---------------- | --- | ---- | ------- | ------ | ----- | - | ------- | ------ | ----- | - | -------- | ------ | ----- | 
|                                                                                               |                                                                                                      |                    |         |                 
|                                                                                               |                                                                                                      | Three Months Ended |         | Six Months Ended
|                                                                                               |                                                                                                      | August 31,         |         | August 31,      
|                                                                                               |                                                                                                      |                    |         |                 
|                                                                                               |                                                                                                      | 2002               |         | 2001             |     | 2002 |         | 2001  
|                                                                                               |                                                                                                      |                    |         |                  |     |      |         |       
|Sales of homes and land                                                                        |                                                                                                      | $                  | 47,020  |                  |     | $    | 81,206  |        |       | $ | 91,866  |        |       | $ | 158,700  |       
|Cost of sales                                                                                  |                                                                                                      |                    | (34,814 | )                |     |      | (61,007 | )      |       |   | (69,057 | )      |       |   | (118,889 | )     
|Interest expense                                                                               |                                                                                                      |                    | (3,260  | )                |     |      | (7,986  | )      |       |   | (6,578  | )      |       |   | (15,654  | )     
|Selling, general and administrative expenses                                                   |                                                                                                      |                    | (8,591  | )                |     |      | (10,223 | )      |       |   | (15,298 | )      |       |   | (20,186  | )     
|Income (loss) from unconsolidated joint
    ventures                                           |                                                                                                      |                    | 156     |                  |     |      | (60     | )      |       |   | 512     |        |       |   | 109      |       
|Interest and other income, net                                                                 |                                                                                                      |                    | 102     |                  |     |      | 245     |        |       |   | 319     |        |       |   | 699      |       
|                                                                                               |                                                                                                      |                    |         |                  |     |      |         |        |       |   |         |        |       |   |          |       
|                                                                                               | Income from operations                                                                               |                    |         | 613              |     |      |         | 2,175  |       |   |         | 1,764  |       |   |          | 4,779  |      
|Minority interest                                                                              |                                                                                                      |                    |        |                  |     |      |        |        |       |   |        |        |       |   | (159     | )     
|                                                                                               |                                                                                                      |                    |         |                  |     |      |         |        |       |   |         |        |       |   |          |       
|                                                                                               | Income before provision for income taxes and
    cumulative effect of change in accounting principle |                    |         | 613              |     |      |         | 2,175  |       |   |         | 1,764  |       |   |          | 4,620  |      
|Provision for income taxes                                                                     |                                                                                                      |                    | 219     |                  |     |      | 960     |        |       |   | 618     |        |       |   | 1,975    |       
|                                                                                               |                                                                                                      |                    |         |                  |     |      |         |        |       |   |         |        |       |   |          |       
|                                                                                               | Income before cumulative effect of change in
    accounting principle                                |                    |         | 394              |     |      |         | 1,215  |       |   |         | 1,146  |       |   |          | 2,645  |      
|Cumulative effect of change in accounting
    principle  negative goodwill, net of tax effect |                                                                                                      |                    |        |                  |     |      |        |        |       |   | 5,447   |        |       |   |         |       
|                                                                                               |                                                                                                      |                    |         |                  |     |      |         |        |       |   |         |        |       |   |          |       
|                                                                                               |                                                                                                      | Net income         |         | $                | 394 |      |         | $      | 1,215 |   |         | $      | 6,593 |   |          | $      | 2,645 | 
|                                                                                               |                                                                                                      |                    |         |                  |     |      |         |        |       |   |         |        |       |   |          |       
|Earnings per common share  basic and
    diluted:                                             |                                                                                                      |                    |         |                  |     |      |         |        |       |   |         |        |       |   |          |       
|                                                                                               | Income before cumulative effect of change in
    accounting principle                                |                    | $       | 0.03             |     |      | $       | 0.08   |       |   | $       | 0.08   |       |   | $        | 0.18   |      
|                                                                                               | Cumulative effect of change in accounting
    principle  negative goodwill, net of tax effect       |                    |         |                 |     |      |         |       |       |   |         | 0.36   |       |   |          |       |      
|                                                                                               |                                                                                                      |                    |         |                  |     |      |         |        |       |   |         |        |       |   |          |       
|                                                                                               | Net income                                                                                           |                    | $       | 0.03             |     |      | $       | 0.08   |       |   | $       | 0.44   |       |   | $        | 0.18   |      
|                                                                                               |                                                                                                      |                    |         |                  |     |      |         |        |       |   |         |        |       |   |          |       
|                                                                                               | Weighted average common shares  basic                                                               |                    |         | 14,923           |     |      |         | 14,932 |       |   |         | 14,898 |       |   |          | 14,334 |      
|                                                                                               |                                                                                                      |                    |         |                  |     |      |         |        |       |   |         |        |       |   |          |       
|                                                                                               | Weighted average common shares  diluted                                                             |                    |         | 14,983           |     |      |         | 15,267 |       |   |         | 14,964 |       |   |          | 14,586 |      
|                                                                                               |                                                                                                      |                    |         |                  |     |      |         |        |       |   |         |        |       |   |          |       

See accompanying notes to financial statements.

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CAPITAL PACIFIC HOLDINGS, INC. AND
SUBSIDIARIES






CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


(In thousands)


|                                                                                                |                                                                                        |                                                         |       |         |         |   |       |         |         |  
|----------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- | ------------------------------------------------------- | ----- | ------- | ------- | - | ----- | ------- | ------- | -
|                                                                                                |                                                                                        |                                                        
|                                                                                                |                                                                                        | For the Six Months                                     
|                                                                                                |                                                                                        | Ended August 31,                                       
|                                                                                                |                                                                                        |                                                        
|                                                                                                |                                                                                        | 2002                                                    |       | 2001   
|                                                                                                |                                                                                        |                                                         |       |        
|Operating activities:                                                                           |                                                                                        |                                                         |       |         |         |   |       |        
|Net income                                                                                      |                                                                                        | $                                                       | 6,593 |         |         | $ | 2,645 |        
|Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                                                                        |                                                         |       |         |         |   |       |        
|                                                                                                | Depreciation and amortization                                                          |                                                         |       | 239     |         |   |       | 45      |        
|                                                                                                | Accretion of deferred gain                                                             |                                                         |       | (354    | )       |   |       | (354    | )      
|                                                                                                | Accretion of negative goodwill                                                         |                                                         |       |        |         |   |       | (658    | )      
|                                                                                                | Cumulative effect of change in accounting
    principle                                |                                                         |       | (5,447  | )       |   |       |        |        
|                                                                                                | (Increase) decrease in real estate projects                                            |                                                         |       | (1,962  | )       |   |       | 18,522  |        
|                                                                                                | (Increase) decrease in receivables, prepaid
    expenses and other assets              |                                                         |       | 2,351   |         |   |       | 9,227   |        
|                                                                                                | Increase (decrease) in accounts payable and
    accrued liabilities                    |                                                         |       | (11,991 | )       |   |       | (13,717 | )      
|                                                                                                | Minority interest                                                                      |                                                         |       |        |         |   |       | 159     |        
|                                                                                                |                                                                                        |                                                         |       |         |         |   |       |        
|                                                                                                |                                                                                        | Net cash provided by (used in) operating
    activities |       |         | (10,571 | ) |       |         | 15,869  |  
|                                                                                                |                                                                                        |                                                         |       |         |         |   |       |        
|Investing activities:                                                                           |                                                                                        |                                                         |       |         |         |   |       |        
|                                                                                                | Purchases of property and equipment, net                                               |                                                         |       | (7,075  | )       |   |       | (655    | )      
|                                                                                                | (Increase) decrease in investment in and advances
    to unconsolidated joint ventures |                                                         |       | (3,881  | )       |   |       | 355     |        
|                                                                                                |                                                                                        |                                                         |       |         |         |   |       |        
|                                                                                                |                                                                                        | Net cash used in investing activities                   |       |         | (10,956 | ) |       |         | (300    | )
|                                                                                                |                                                                                        |                                                         |       |         |         |   |       |        
|Financing activities:                                                                           |                                                                                        |                                                         |       |         |         |   |       |        
|                                                                                                | Borrowings (payments) on notes payable, net                                            |                                                         |       | 21,704  |         |   |       | (15,639 | )      
|                                                                                                | Issuance of common stock                                                               |                                                         |       | 408     |         |   |       |        |        
|                                                                                                | Repurchase of common stock and warrants                                                |                                                         |       | (773    | )       |   |       | (238    | )      
|                                                                                                |                                                                                        |                                                         |       |         |         |   |       |        
|                                                                                                |                                                                                        | Net cash provided by (used in) financing
    activities |       |         | 21,339  |   |       |         | (15,877 | )
|                                                                                                |                                                                                        |                                                         |       |         |         |   |       |        
|Net decrease in cash and cash equivalents                                                       |                                                                                        |                                                         | (188  | )       |         |   | (308  | )      
|Cash and cash equivalents at beginning of period                                                |                                                                                        |                                                         | 5,080 |         |         |   | 7,552 |        
|                                                                                                |                                                                                        |                                                         |       |         |         |   |       |        
|Cash and cash equivalents at end of period                                                      |                                                                                        | $                                                       | 4,892 |         |         | $ | 7,244 |        
|                                                                                                |                                                                                        |                                                         |       |         |         |   |       |        

Non-Cash Activities

During the six month period ended August 31,
2001, the Company issued 1,235,000 shares of non-voting common
stock to CHF in return for CHFs remaining 7% interest in
CPH LLC in connection with the Exchange Transaction
described in Note 3 to the financial statements. Below is a
summary of amounts recorded as a result of this transaction:

|                                                           |  |   |        |  
|---------------------------------------------------------- |  | - | ------ | -
|Minority interest acquired                                 |  | $ | 7,902  |  
|Issuance of non-voting common stock                        |  |   | (5,088 | )
|Deferred income taxes and accrued expenses
    recorded    |  |   | (2,061 | )
|Adjustment of remaining property and equipment to
    zero |  |   | (360   | )
|Negative goodwill recorded                                 |  |   | (393   | )
|                                                           |  |   |        |  
|                                                           |  | $ |       |  
|                                                           |  |   |        |  

See accompanying notes to financial statements.

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##### Table of Contents



CAPITAL PACIFIC HOLDINGS, INC., AND
SUBSIDIARIES






NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


(Unaudited)


1.     Basis of
Presentation

The unaudited financial statements presented
herein have been prepared in accordance with the instructions to
Form 10-Q and do not include all of the information and
note disclosures required by accounting principles generally
accepted in the United States. These statements should be read
in conjunction with the consolidated financial statements, and
notes thereto, included in the Form 10-K for the fiscal
year ended February 28, 2002, of Capital Pacific Holdings,
Inc. (the Company or CPH, Inc.). In the
opinion of management, the financial statements presented herein
include all adjustments (which are solely of a normal recurring
nature) necessary to present fairly the Companys financial
position and results of operations. The results of operations
for the three and six month periods ended August 31, 2002,
are not necessarily indicative of the results that may be
expected for the year ending February 28, 2003. The
consolidated financial statements include the accounts of the
Company, wholly-owned subsidiaries and certain majority owned
joint ventures, as well as the accounts of Capital Pacific
Holdings, LLC (CPH LLC), which is now
wholly-owned by the Company. All other investments are accounted
for on the equity method. All significant intercompany balances
and transactions have been eliminated in consolidation.

2.     Reclassifications

Certain items in prior period financial
statements have been reclassified in order to conform with the
current year presentation.

3.     Company
Organization and Operations

The Company is a regional builder and developer
with operations throughout selected metropolitan areas of
California, Texas, Arizona, Colorado and, until recently,
Nevada. The Companys principal business activities are to
develop subdivisions and master-planned communities and build
and sell single-family homes. The Companys single-family
homes are targeted to entry-level, move-up and luxury buyers.

In fiscal year 1998, the Company consummated an
equity and restructuring transaction whereby the Company and
certain of its subsidiaries transferred to CPH LLC substantially
all of their respective assets and CPH LLC assumed all the
liabilities of the Company and its subsidiaries. An unaffiliated
investment company, California Housing Finance, L.P.
(CHF) then acquired a 32.07% minority interest in
CPH LLC as a result of a cash investment in CPH LLC.
From fiscal 1998 through fiscal 2001, the Company expanded its
operating strategy to encompass the acquisition and development
of commercial and mixed-use projects, as well as ownership of
existing commercial properties, primarily through non-majority
investments in limited liability companies, with 99.25% of the
capital for these projects being provided by CHF. CPH, Inc. and
CHF had contingent profits interests (after repayment of debt,
the costs of the project, invested capital and preferred return,
the latter typically 12%) of approximately 30% to CPH, Inc.
and 70% to CHF.

Effective February 23, 2001, CPH, Inc. and
CHF consummated the first portion of an interest exchange
transaction (the Exchange Transaction), whereby CPH,
Inc. exchanged its 0.75% capital interests and contingent
profits interest in the majority of the joint ventures
capitalized by CHF, including certain entities which were
previously consolidated, (the Divested Joint
Ventures) for approximately 78% of CHFs interest in
CPH LLC and all of CHFs interests in certain
residential joint ventures. At February 28, 2001 and during
the three month period ended May 31, 2001, CPH, Inc. had a
93% interest in CPH LLC and CHF held a 7% minority interest (as
compared to 32.07% formerly). As a result of the first portion
of the Exchange Transaction, CPH Inc.s interest in
the total capital of CPH LLC increased by 37% or
$27.2 million. Both CPH, Inc. and CHF had an option to
convert CHFs remaining 7% interest in CPH LLC into
1,235,000 shares of non-voting Common Stock of CPH, Inc. at
the equivalent of approximately $6.40 per share. This option was
exercised by CPH, Inc. on May 31, 2001, and as the result
of this second portion of the Exchange Transaction,
CPH, Inc. owned 100% of CPH LLC, and had obtained an
additional increment of CPH LLCs

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##### Table of Contents



CAPITAL PACIFIC HOLDINGS, INC., AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

total capital of $7.9 million. In addition,
Capital Pacific Homes, Inc., a wholly-owned subsidiary of
the Company, has entered into construction, management and
marketing agreements relating to certain of the Divested Joint
Ventures with residential components, (the Managed
Projects), whereby the Company is compensated for
performing such services through a management fee arrangement,
including reimbursement of all project costs. As a result of the
Exchange Transaction, the Company has no further exposure to the
economic or entitlement risks associated with the Divested Joint
Ventures or the Managed Projects, including no obligation to
provide any capital.

The Exchange Transaction was accounted for as the
simultaneous acquisition of CHFs minority interest in
CPH LLC and certain other residential joint ventures and
the disposition of the Companys interest in the Divested
Joint Ventures. As a result, no gain was initially recognized,
the remaining balance of the Companys property and
equipment was adjusted to zero at February 28, 2001, and
again at May 31, 2001, a deferred gain of approximately
$3.5 million was recorded on the disposition of one of the
Divested Joint Ventures, and the balance of the transaction was
recorded as negative goodwill. Negative goodwill in the amount
of $6.8 million represents a portion of the positive
difference between the Companys basis in the assets
acquired in the Exchange Transaction as compared to the assets
which were divested. Both negative goodwill and the deferred
gain were being accreted over five years, which accretion was
included as a reduction in selling, general and administrative
expenses. As further discussed in Note 9 below, due to a
recently promulgated change in accounting principles, the
remaining $5.4 million in unaccreted negative goodwill as
of February 28, 2002 increased net income in the quarter
ended May 31, 2002 through a cumulative effect of change in
accounting principle. The remaining deferred gain will continue
to be accreted over the four years of its remaining expected
life.

Assets under management, including assets owned
by unconsolidated joint ventures and Managed Projects, totaled
$504 million at August 31, 2002 in 57 residential
projects. At August 31, 2002, CPH LLC, which is now
100% owned by the Company, had $230 million in assets and a
net worth of $107 million. The Company and its subsidiaries
perform their respective management functions for unconsolidated
joint ventures and the Managed Projects, pursuant to management
agreements, which include provisions for the reimbursement of
Company and subsidiary costs and a management fee. The Company
and its subsidiaries maintain certain licenses and other assets
as is necessary to fulfill their respective obligations as
managing member and under management agreements.

References to the Company are, unless the context
indicates otherwise, also references to CPH LLC and the
project-specific entities in which the Company has an equity
ownership interest. At the current time, all significant
financing transactions and arrangements are incurred either by
CPH LLC or by the project-specific entities, or in the case
of Managed Projects, by the owner of such projects.

5



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##### Table of Contents



CAPITAL PACIFIC HOLDINGS, INC., AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

4.     Investments in
and Advances to Unconsolidated Entities

The Company is a general partner or a direct or
indirect managing member and has a 50 percent or lesser
ownership in 13 unconsolidated entities at August 31,
2002. The Companys net investment in and advances to
unconsolidated entities are as follows at August 31, 2002
and February 28, 2002 (in thousands):

|                               |                               |          |         |            |        |              |  |   |       |       | 
|------------------------------ | ----------------------------- | -------- | ------- | ---------- | ------ | ------------ |  | - | ----- | ----- | 
|                               |                               | Capital  |         | August 31, |        | February 28,
|                               |                               | Interest |         | 2002       |        | 2002        
|                               |                               |          |         |            |        |             
|Unconsolidated Joint Ventures: |                               |          |         |            |        |              |  |   |       |      
|                               | JMP Canyon Estates, L.P.      |          | 10%     |            | $      | 112          |  |   | $     | 112   | 
|                               | JMP Harbor View, L.P.         |          | 10%     |            |        | 309          |  |   |       | 318   | 
|                               | Grand Coto Estates, L.P.      |          | 10%     |            |        | 603          |  |   |       | 546   | 
|                               | M.P.E. Partners, L.P.         |          | 10%     |            |        | 254          |  |   |       | 989   | 
|                               | LB/L  CPH Providence, LLC    |          | 10%     |            |        | 1,035        |  |   |       | 1,065 | 
|                               | LB/L  CPH Longmont, LLC      |          | 10%     |            |        | 1,146        |  |   |       | 1,004 | 
|                               | LB/L  CPH Laguna Street, LLC |          | 10%     |            |        | 857          |  |   |       | 946   | 
|                               | CPH Daily Ranch, L.P.         |          | 10%     |            |        | 3,202        |  |   |       | 3,103 | 
|                               | CPH Sierra Peak, L.P.         |          | 50%     |            |        | 4,720        |  |   |       |      | 
|                               | Other                         |          | Various |            |        | 192          |  |   |       | 466   | 
|                               |                               |          |         |            |        |              |  |   |       |      
|                               |                               |          |         | $          | 12,430 |              |  | $ | 8,549 |      
|                               |                               |          |         |            |        |              |  |   |       |      

The Companys economic interests in the
unconsolidated joint ventures vary. Generally, the Company
receives a portion of earnings after a preferred return on
invested capital is provided. Typically, the majority of capital
is provided by capital partners. The Company is typically the
direct or indirect managing entity pursuant to terms in each
ventures agreement. In the case of Divested Joint Ventures
which are now Managed Projects, the Company or a subsidiary
manages the development of the project under a management
contract. Such management contracts as well as the
unconsolidated joint venture agreements typically provide for
the payment of a fee to compensate the Company for overhead
expenditures as well as reimbursement of all direct project
costs. The Company provides for income taxes currently on its
share of distributed and undistributed earnings and losses from
the investments.

The Company uses the equity method of accounting
for its investments in the unconsolidated 50 percent or
less owned entities. The accounting policies of the entities are
substantially the same as those of the Company.

Following is summarized, combined financial
information for the unconsolidated entities at August 31,
2002 and February 28, 2002 and for the three and six month
periods ended August 31, 2002 and August 31, 2001 (in
thousands). This information includes in each case the interest
of all equity owners of the entities, not just that of the
Company and its subsidiaries.

Assets

|                     |  |            |         |              |  |   |        | 
|-------------------- |  | ---------- | ------- | ------------ |  | - | ------ | 
|                     |  | August 31, |         | February 28,
|                     |  | 2002       |         | 2002        
|                     |  |            |         |             
|Cash                 |  | $          | 1,744   |              |  | $ | 1,163  | 
|Real estate projects |  |            | 103,896 |              |  |   | 94,818 | 
|Other assets         |  |            | 4,199   |              |  |   | 1,275  | 
|                     |  |            |         |              |  |   |        | 
|                     |  | $          | 109,839 |              |  | $ | 97,256 | 
|                     |  |            |         |              |  |   |        | 

6



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##### Table of Contents



CAPITAL PACIFIC HOLDINGS, INC., AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Liabilities and Equity

|                                       |  |            |         |              |  |   |        | 
|-------------------------------------- |  | ---------- | ------- | ------------ |  | - | ------ | 
|                                       |  | August 31, |         | February 28,
|                                       |  | 2002       |         | 2002        
|                                       |  |            |         |             
|Accounts payable and other liabilities |  | $          | 4,006   |              |  | $ | 5,818  | 
|Notes payable                          |  |            | 3,540   |              |  |   | 5,539  | 
|                                       |  |            |         |              |  |   |        | 
|                                       |  |            | 7,546   |              |  |   | 11,357 | 
|                                       |  |            |         |              |  |   |        | 
|Equity                                 |  |            | 102,293 |              |  |   | 85,899 | 
|                                       |  |            |         |              |  |   |        | 
|                                       |  | $          | 109,839 |              |  | $ | 97,256 | 
|                                       |  |            |         |              |  |   |        | 

Income Statement

|                               |  |                    |       |                  |  |            |       |            |  |   |        |  |  |   |       | 
|------------------------------ |  | ------------------ | ----- | ---------------- |  | ---------- | ----- | ---------- |  | - | ------ |  |  | - | ----- | 
|                               |  |                    |       |                 
|                               |  | Three Months Ended |       | Six Months Ended
|                               |  |                    |       |                 
|                               |  | August 31,         |       | August 31,       |  | August 31, |       | August 31,
|                               |  | 2002               |       | 2001             |  | 2002       |       | 2001      
|                               |  |                    |       |                  |  |            |       |           
|Sales of homes and land        |  | $                  | 1,595 |                  |  | $          | 1,859 |            |  | $ | 11,112 |  |  | $ | 2,968 | 
|Interest and other income, net |  |                    | 163   |                  |  |            | 15    |            |  |   | 411    |  |  |   | 18    | 
|                               |  |                    |       |                  |  |            |       |            |  |   |        |  |  |   |       | 
|                               |  |                    | 1,758 |                  |  |            | 1,874 |            |  |   | 11,523 |  |  |   | 2,986 | 
|Costs and expenses             |  |                    | 1,450 |                  |  |            | 1,654 |            |  |   | 10,101 |  |  |   | 2,703 | 
|                               |  |                    |       |                  |  |            |       |            |  |   |        |  |  |   |       | 
|Net income                     |  | $                  | 308   |                  |  | $          | 220   |            |  | $ | 1,422  |  |  | $ | 283   | 
|                               |  |                    |       |                  |  |            |       |            |  |   |        |  |  |   |       | 

5.     Notes
Payable

Notes payable at August 31, 2002 and
February 28, 2002, are summarized as follows (in thousands):

|                                                                                                                                                                                                                                                                             |  |            |         |              |  |   |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | ------- | ------------ |  | - | ------- | 
|                                                                                                                                                                                                                                                                             |  | August 31, |         | February 28,
|                                                                                                                                                                                                                                                                             |  | 2002       |         | 2002        
|                                                                                                                                                                                                                                                                             |  |            |         |             
|Senior unsecured revolving credit facility,
    bearing interest varying from LIBOR to prime, as selected by the
    Company, plus applicable margins                                                                                                                        |  | $          | 107,458 |              |  | $ | 90,658  | 
|Notes payable to banks, including interest
    varying from prime plus one quarter percent to LIBOR plus four
    and one quarter percent, maturing between November 30, 2002
    and November 30, 2003, secured by certain real estate
    projects on a non-recourse basis |  |            | 23,590  |              |  |   | 18,011  | 
|Other                                                                                                                                                                                                                                                                        |  |            | 6,921   |              |  |   | 7,596   | 
|                                                                                                                                                                                                                                                                             |  |            |         |              |  |   |         | 
|                                                                                                                                                                                                                                                                             |  | $          | 137,969 |              |  | $ | 116,265 | 
|                                                                                                                                                                                                                                                                             |  |            |         |              |  |   |         | 

During the third quarter of fiscal 2002, CPH LLC
entered into a senior unsecured revolving credit facility (the
Senior Facility) with several participant banks. The
facility had a maximum commitment of $125 million and a two
year revolving term. Proceeds from this facility were used to
pay down CPH LLCs existing facilities and retire the
remaining $55.6 million of 12 3/4% Senior Notes (the
Senior Notes) at face value. In addition, the
Company fixed the interest rate on $50 million and
$25 million of borrowings at 5.68% and 5.62%, respectively,
until September 2003 through interest rate swap agreements with
a bank. In October 2002, the Company extended the maturity of
the Senior Facility to October 2005 and increased the maximum
commitment to $130 million. In addition, the Company
entered into a Senior Subordinated Note Agreement in the initial
amount of $20 million, with a maturity date in October 2007.

7



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##### Table of Contents



CAPITAL PACIFIC HOLDINGS, INC., AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

6.     Earnings Per
Common Share

Basic earnings per common share is computed by
dividing income available to common stockholders by the weighted
average number of common shares outstanding. Diluted earnings
per common share includes the effect of the potential shares
outstanding, including dilutive securities using the treasury
stock method. The table below reconciles the components of the
basic earnings per common share calculation to diluted earnings
per common share (in thousands, except per share data):

|                                                                                                 |                                                                                                        |                    |     |                 |  |     |        |        |  |        |      |      |  |   |       |       |  |  |        |        |  |   |      |      | 
|------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------ | ------------------ | --- | --------------- |  | --- | ------ | ------ |  | ------ | ---- | ---- |  | - | ----- | ----- |  |  | ------ | ------ |  | - | ---- | ---- | 
|                                                                                                 |                                                                                                        |                   
|                                                                                                 |                                                                                                        | Three Months Ended
|                                                                                                 |                                                                                                        |                   
|                                                                                                 |                                                                                                        |                    |     |                
|                                                                                                 |                                                                                                        | August 31, 2002    |     | August 30, 2001
|                                                                                                 |                                                                                                        |                    |     |                
|                                                                                                 |                                                                                                        | Income             |     | Shares          |  | EPS |        | Income |  | Shares |      | EPS 
|                                                                                                 |                                                                                                        |                    |     |                 |  |     |        |        |  |        |      |     
|Basic earnings per common share:                                                                 |                                                                                                        |                    |     |                 |  |     |        |        |  |        |      |      |  |   |       |       |  |  |        |        |  |   |      |     
|                                                                                                 | Income available to common stockholders before
    cumulative effect of change in accounting principle |                    | $   | 394             |  |     |        | 14,923 |  |        | $    | 0.03 |  |   | $     | 1,215 |  |  |        | 14,932 |  |   | $    | 0.08 | 
|Effect of dilutive securities:                                                                   |                                                                                                        |                    |     |                 |  |     |        |        |  |        |      |      |  |   |       |       |  |  |        |        |  |   |      |     
|                                                                                                 | Warrants                                                                                               |                    |     |                |  |     |        |       |  |        |      |     |  |   |       |      |  |  |        | 95     |  |   |      |     | 
|                                                                                                 | Stock options                                                                                          |                    |     |                |  |     |        | 60     |  |        |      |     |  |   |       |      |  |  |        | 240    |  |   |      |     | 
|                                                                                                 |                                                                                                        |                    |     |                 |  |     |        |        |  |        |      |      |  |   |       |       |  |  |        |        |  |   |      |     
|Diluted earnings per common share before
    cumulative effect of change in accounting principle |                                                                                                        | $                  | 394 |                 |  |     | 14,983 |        |  | $      | 0.03 |      |  | $ | 1,215 |       |  |  | 15,267 |        |  | $ | 0.08 |     
|                                                                                                 |                                                                                                        |                    |     |                 |  |     |        |        |  |        |      |      |  |   |       |       |  |  |        |        |  |   |      |     

|                                                                                                 |                                                                                                        |                  |       |                 |  |     |        |        |  |        |      |      |  |   |       |       |  |  |        |        |  |   |      |      | 
|------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------ | ---------------- | ----- | --------------- |  | --- | ------ | ------ |  | ------ | ---- | ---- |  | - | ----- | ----- |  |  | ------ | ------ |  | - | ---- | ---- | 
|                                                                                                 |                                                                                                        |                 
|                                                                                                 |                                                                                                        | Six Months Ended
|                                                                                                 |                                                                                                        |                 
|                                                                                                 |                                                                                                        |                  |       |                
|                                                                                                 |                                                                                                        | August 31, 2002  |       | August 30, 2001
|                                                                                                 |                                                                                                        |                  |       |                
|                                                                                                 |                                                                                                        | Income           |       | Shares          |  | EPS |        | Income |  | Shares |      | EPS 
|                                                                                                 |                                                                                                        |                  |       |                 |  |     |        |        |  |        |      |     
|Basic earnings per common share:                                                                 |                                                                                                        |                  |       |                 |  |     |        |        |  |        |      |      |  |   |       |       |  |  |        |        |  |   |      |     
|                                                                                                 | Income available to common stockholders before
    cumulative effect of change in accounting principle |                  | $     | 1,146           |  |     |        | 14,898 |  |        | $    | 0.08 |  |   | $     | 2,645 |  |  |        | 14,334 |  |   | $    | 0.18 | 
|Effect of dilutive securities:                                                                   |                                                                                                        |                  |       |                 |  |     |        |        |  |        |      |      |  |   |       |       |  |  |        |        |  |   |      |     
|                                                                                                 | Warrants                                                                                               |                  |       |                |  |     |        |       |  |        |      |     |  |   |       |      |  |  |        | 49     |  |   |      |     | 
|                                                                                                 | Stock options                                                                                          |                  |       |                |  |     |        | 66     |  |        |      |     |  |   |       |      |  |  |        | 203    |  |   |      |     | 
|                                                                                                 |                                                                                                        |                  |       |                 |  |     |        |        |  |        |      |      |  |   |       |       |  |  |        |        |  |   |      |     
|Diluted earnings per common share before
    cumulative effect of change in accounting principle |                                                                                                        | $                | 1,146 |                 |  |     | 14,964 |        |  | $      | 0.08 |      |  | $ | 2,645 |       |  |  | 14,586 |        |  | $ | 0.18 |     
|                                                                                                 |                                                                                                        |                  |       |                 |  |     |        |        |  |        |      |      |  |   |       |       |  |  |        |        |  |   |      |     

7.     Stockholders
Equity

The Company has a stock repurchase program in
place whereby up to 1,000,000 shares of the Companys
outstanding common stock may be repurchased. As of
August 31, 2002, 744,600 shares have been repurchased
cumulatively under this program. In addition, the Company has
repurchased, on a cumulative basis, 657,095 of the 790,000
warrants originally issued in connection with the issuance of
the Senior Notes. Of the remaining warrants, 123,951 were
exercised and 8,954 expired unexercised during the quarter ended
May 31, 2002.

8.     Comprehensive
Income and Implementation of SFAS No. 133

Effective March 1, 2001, the Company adopted
Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging
Activities (SFAS 133), as amended.
SFAS 133

8



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##### Table of Contents



CAPITAL PACIFIC HOLDINGS, INC., AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

establishes accounting and reporting standards
for derivative instruments and for hedging activities by
requiring that all derivatives be recognized in the balance
sheet and measured at fair value. The Companys policy is
to designate at a derivatives inception the specific
assets, liabilities, or future commitments being hedged and
monitor the derivative to determine if it remains an effective
hedge.

The Company was required under the terms of the
Senior Facility to enter into interest rate swap agreements
which effectively fix the variable interest rate on a notional
amount of $75 million of outstandings under the Senior
Facility. The swap agreements have been designated as cash flow
hedges and, accordingly, are reflected at their fair value in
the consolidated balance sheet at August 31, 2002. Since
applicable interest rates are somewhat lower as of
August 31, 2002 than at the time of the swap, the current
fair value of the swaps is negative. The unrealized loss, as of
August 31, 2002, of $1.2 million is recorded in
stockholders equity as accumulated other comprehensive
loss.

Amounts to be received or paid as a result of the
swap agreements are recognized as adjustments to interest
incurred on the related debt instruments. The Company believes
that there will be no ineffectiveness related to the interest
rate swaps and therefore no portion of the accumulated other
comprehensive loss would be reclassified into future earnings.
The net effect on the Companys operating results is that
interest on the variable-rate debt being hedged is recorded and
paid based on fixed interest rates.

9.     New Accounting
Pronouncements

In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards No. 141, Business
Combinations (SFAS 141). This Statement
addresses financial accounting and reporting for business
combinations and supersedes APB Opinion No. 16,
Business Combinations, and FASB Statement
No. 38, Accounting for Preacquisition Contingencies
of Purchased Enterprises. All business combinations in the
scope of this Statement are to be accounted for using one
method, the purchase method. The Company has adopted
SFAS 141 for all business combinations initiated after
June 30, 2001.

Also in June 2001, the FASB issued Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets (SFAS 142).
SFAS 142 addresses financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes APB
Opinion No. 17, Intangible Assets. This
pronouncement addresses, among other things, how goodwill and
other intangible assets should be accounted for after they have
been initially recognized in the financial statements. Goodwill
will no longer be amortized but will be assessed at least
annually for impairment using a fair value methodology. The
Company has adopted this statement for all goodwill and other
intangible assets acquired after June 30, 2001 and for all
existing goodwill and other intangible assets beginning
March 1, 2002. Upon adoption of this standard on
March 1, 2002, the Company was required to accrete the
remaining balance of negative goodwill through a cumulative
effect of change in accounting principle, which increased net
income in the first quarter of fiscal 2003 by $5.4 million,
or $0.36 per diluted share. Other than the accretion of the
remaining negative goodwill, the adoption of SFAS 142 did
not have a material impact on the Companys financial
position or results of operations.

In August 2001, the FASB issued Statement of
Financial Accounting Standards No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets
(SFAS 144). SFAS 144 addresses financial
accounting and reporting for the impairment or disposal of
long-lived assets. SFAS 144 supersedes SFAS No. 121,
and the accounting and reporting provisions of APB Opinion
No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the
disposal of a segment of a business. The provisions of
SFAS 144 are effective for financial statements issued for
fiscal years beginning after December 15, 2001. The
adoption of SFAS 144 did not have a material impact on the
Companys financial position or results of operations.

9



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##### Table of Contents






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

Forward-Looking Information Is Subject to Risk
and Uncertainty

Certain statements in the financial discussion
and analysis by management contain forward-looking
information (as defined in the Private Securities Litigation
Reform Act of 1995 and within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended) that involves risk
and uncertainty, including projections and assumptions regarding
the business environment in which the Company operates. Actual
future results and trends may differ materially depending on a
variety of factors, including the Companys successful
execution of internal performance strategies; changes in general
national and regional economic conditions, such as levels of
employment, consumer confidence and income; uncertainty arising
from acts of terrorism and similar factors; availability to
homebuilders of financing for acquisitions, development and
construction; availability to homebuyers of permanent mortgages
and interest rate levels; the demand for housing; supply levels
of land, labor and materials; difficulties in obtaining permits
or approvals from governmental authorities; difficulties in
marketing homes; regulatory changes and weather and other
environmental uncertainties, including water and power
shortages; competitive influences; and the outcome of pending
and future legal claims and proceedings.

Results of Operations 
General

As is noted in Note 1 to the financial statements
presented herein, the Company is reporting its results on a
consolidated basis with the results of its wholly-owned
subsidiaries, including CPH LLC. References to the Company in
this Item 2 are, unless the context indicates otherwise,
also references to such subsidiaries. At the current time, all
significant financing transactions and arrangements are incurred
either by CPH LLC or by project-specific entities, or in the
case of Managed Projects, by the owner of such projects.

The following table illustrates the actual
results of the Companys operations, as well as the results
including the Companys unconsolidated joint ventures, for
the three and six months ended August 31, 2002 and 2001.
The actual results have been adjusted to reflect the inclusion
of the operating results of the Companys unconsolidated
joint ventures, including the portion attributable to the
Companys Joint Venture partners, in order to facilitate
the discussion of the overall results in certain portions of the
discussion below.

Results of Operations

|                        |              |                        |        |                 |  |              |        |                |  |   |        |        |  |   |        |        | 
|----------------------- | ------------ | ---------------------- | ------ | --------------- |  | ------------ | ------ | -------------- |  | - | ------ | ------ |  | - | ------ | ------ | 
|                        |              |                       
|                        |              | Three Months Ended    
|                        |              |                       
|                        |              |                        |        |                
|                        |              | August 31, 2002        |        | August 31, 2001
|                        |              |                        |        |                
|                        |              |                        |        | Including       |  |              |        | Including     
|                        |              | Consolidated           |        | Joint Ventures  |  | Consolidated |        | Joint Ventures
|                        |              |                        |        |                 |  |              |        |               
|                        |              |                       
|                        |              | (Amounts in thousands)
|Sales of homes and land |              | $                      | 47,020 |                 |  | $            | 48,614 |                |  | $ | 81,206 |        |  | $ | 83,065 |       
|Cost of sales           |              |                        | 34,814 |                 |  |              | 36,078 |                |  |   | 61,007 |        |  |   | 62,562 |       
|                        |              |                        |        |                 |  |              |        |                |  |   |        |        |  |   |        |       
|                        | Gross margin |                        | $      | 12,206          |  |              | $      | 12,536         |  |   | $      | 20,199 |  |   | $      | 20,503 | 
|                        |              |                        |        |                 |  |              |        |                |  |   |        |        |  |   |        |       

|                        |              |                        |        |                 |  |              |         |                |  |   |         |        |  |   |         |        | 
|----------------------- | ------------ | ---------------------- | ------ | --------------- |  | ------------ | ------- | -------------- |  | - | ------- | ------ |  | - | ------- | ------ | 
|                        |              |                       
|                        |              | Six Months Ended      
|                        |              |                       
|                        |              |                        |        |                
|                        |              | August 31, 2002        |        | August 31, 2001
|                        |              |                        |        |                
|                        |              |                        |        | Including       |  |              |         | Including     
|                        |              | Consolidated           |        | Joint Ventures  |  | Consolidated |         | Joint Ventures
|                        |              |                        |        |                 |  |              |         |               
|                        |              |                       
|                        |              | (Amounts in thousands)
|Sales of homes and land |              | $                      | 91,866 |                 |  | $            | 102,978 |                |  | $ | 158,700 |        |  | $ | 161,668 |       
|Cost of sales           |              |                        | 69,057 |                 |  |              | 78,293  |                |  |   | 118,889 |        |  |   | 121,392 |       
|                        |              |                        |        |                 |  |              |         |                |  |   |         |        |  |   |         |       
|                        | Gross margin |                        | $      | 22,809          |  |              | $       | 24,685         |  |   | $       | 39,811 |  |   | $       | 40,276 | 
|                        |              |                        |        |                 |  |              |         |                |  |   |         |        |  |   |         |       

Cost of sales, as shown above, does not include
the amount of previously capitalized interest costs which are
included in interest expense. As a result, the gross margin also
does not reflect the impact of current interest expense.
Industry practice among homebuilders varies, but Company
management feels that gross

10



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##### Table of Contents



margin, exclusive of interest expense, is the
most relevant comparable measure given the Companys
historical capital structure.


In addition to the results shown above, the
Company was responsible for the following activity in certain
Managed Projects (including the Divested Joint Ventures) for the
three months ended August 31, 2002 and 2001:

Managed and Divested Operations

|                           |  |                               |       |                  |  |            |       |            |  |   |        |  |  |   |        | 
|-------------------------- |  | ----------------------------- | ----- | ---------------- |  | ---------- | ----- | ---------- |  | - | ------ |  |  | - | ------ | 
|                           |  |                               |       |                 
|                           |  | Three Months Ended            |       | Six Months Ended
|                           |  |                               |       |                 
|                           |  | August 31,                    |       | August 31,       |  | August 31, |       | August 31,
|                           |  | 2002                          |       | 2001             |  | 2002       |       | 2001      
|                           |  |                               |       |                  |  |            |       |           
|                           |  |                              
|                           |  | (Dollar amounts in thousands)
|Number of Managed Projects |  |                               | 1     |                  |  |            | 3     |            |  |   | 1      |  |  |   | 3      | 
|Unit closings              |  |                               | 2     |                  |  |            | 5     |            |  |   | 4      |  |  |   | 11     | 
|Revenues                   |  | $                             | 9,406 |                  |  | $          | 8,649 |            |  | $ | 14,180 |  |  | $ | 18,642 | 

During the three and six months ended
August 31, 2002 and 2001, the Company was responsible for
construction and marketing activity in the Managed Projects and
the Companys sole economic interest is through management
arrangements.

Operating Data

The following table shows new home deliveries,
lot deliveries, net new orders and average sales prices for the
three and six months ended August 31, 2003 and 2002,
including unconsolidated joint ventures but excluding Managed
Projects:

|                               |                                            |                    |                       |                  |     |            |     |            |     |     |     |         |     |     |     |           |     |     | 
|------------------------------ | ------------------------------------------ | ------------------ | --------------------- | ---------------- | --- | ---------- | --- | ---------- | --- | --- | --- | ------- | --- | --- | --- | --------- | --- | --- | 
|                               |                                            |                    |                       |                 
|                               |                                            | Three Months Ended |                       | Six Months Ended
|                               |                                            |                    |                       |                 
|                               |                                            | August 31,         |                       | August 31,       |     | August 31, |     | August 31,
|                               |                                            | 2002               |                       | 2001             |     | 2002       |     | 2001      
|                               |                                            |                    |                       |                  |     |            |     |           
|New homes delivered:           |                                            |                    |                       |                  |     |            |     |            |     |     |     |         |     |     |     |          
|                               | California                                 |                    |                       | 28               |     |            |     | 18         |     |     |     | 53      |     |     |     | 42        |    
|                               | Texas                                      |                    |                       | 49               |     |            |     | 87         |     |     |     | 85      |     |     |     | 174       |    
|                               | Nevada                                     |                    |                       |                 |     |            |     | 22         |     |     |     |        |     |     |     | 68        |    
|                               | Arizona                                    |                    |                       | 31               |     |            |     | 37         |     |     |     | 50      |     |     |     | 85        |    
|                               | Colorado                                   |                    |                       | 17               |     |            |     | 24         |     |     |     | 44      |     |     |     | 68        |    
|                               |                                            |                    |                       |                  |     |            |     |            |     |     |     |         |     |     |     |          
|                               |                                            | Subtotal           |                       |                  | 125 |            |     |            | 188 |     |     |         | 232 |     |     |           | 437 |    
|                               | Unconsolidated Joint Ventures (California) |                    |                       | 5                |     |            |     | 7          |     |     |     | 38      |     |     |     | 11        |    
|                               |                                            |                    |                       |                  |     |            |     |            |     |     |     |         |     |     |     |          
|                               |                                            |                    | Total homes delivered |                  |     | 130        |     |            |     | 195 |     |         |     | 270 |     |           |     | 448 | 
|Lots delivered                 |                                            |                    | 26                    |                  |     |            | 65  |            |     |     | 88  |         |     |     | 76  |          
|                               |                                            |                    |                       |                  |     |            |     |            |     |     |     |         |     |     |     |          
|Total homes and lots delivered |                                            |                    | 156                   |                  |     |            | 260 |            |     |     | 358 |         |     |     | 524 |          
|                               |                                            |                    |                       |                  |     |            |     |            |     |     |     |         |     |     |     |          
|Homes and lots net new orders  |                                            |                    | 220                   |                  |     |            | 119 |            |     |     | 443 |         |     |     | 328 |          
|                               |                                            |                    |                       |                  |     |            |     |            |     |     |     |         |     |     |     |          
|Average home sales price:      |                                            |                    |                       |                  |     |            |     |            |     |     |     |         |     |     |     |          
|                               | California                                 |                    | $                     | 864,000          |     |            | $   | 1,528,000  |     |     | $   | 809,000 |     |     | $   | 1,281,000 |    
|                               | Texas                                      |                    |                       | 229,000          |     |            |     | 251,000    |     |     |     | 270,000 |     |     |     | 247,000   |    
|                               | Nevada                                     |                    |                       |                 |     |            |     | 304,000    |     |     |     |        |     |     |     | 235,000   |    
|                               | Arizona                                    |                    |                       | 148,000          |     |            |     | 157,000    |     |     |     | 145,000 |     |     |     | 154,000   |    
|                               | Colorado                                   |                    |                       | 245,000          |     |            |     | 229,000    |     |     |     | 252,000 |     |     |     | 227,000   |    
|                               | Combined                                   |                    |                       | 352,000          |     |            |     | 400,000    |     |     |     | 353,000 |     |     |     | 347,000   |    

11



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##### Table of Contents



The following table shows backlog in units and
dollars at August 31, 2002 and 2001 for each of the
Companys operations, including unconsolidated joint
ventures:

|           |       |                 |     |                 |  |       |        |         |  |  |     |     |  |   |        |         | 
|---------- | ----- | --------------- | --- | --------------- |  | ----- | ------ | ------- |  |  | --- | --- |  | - | ------ | ------- | 
|           |       |                
|           |       | Ending Backlog 
|           |       |                
|           |       |                 |     |                
|           |       | August 31, 2002 |     | August 31, 2001
|           |       |                 |     |                
|           |       | Units           |     | ($000s)         |  | Units |        | ($000s)
|           |       |                 |     |                 |  |       |        |        
|California |       |                 | 135 |                 |  | $     | 68,500 |         |  |  | 75  |     |  | $ | 53,800 |        
|Texas      |       |                 | 96  |                 |  |       | 20,600 |         |  |  | 161 |     |  |   | 43,400 |        
|Arizona    |       |                 | 60  |                 |  |       | 9,000  |         |  |  | 54  |     |  |   | 8,100  |        
|Colorado   |       |                 | 60  |                 |  |       | 11,600 |         |  |  | 60  |     |  |   | 11,400 |        
|           |       |                 |     |                 |  |       |        |         |  |  |     |     |  |   |        |        
|           | Total |                 |     | 351             |  |       | $      | 109,700 |  |  |     | 350 |  |   | $      | 116,700 | 
|           |       |                 |     |                 |  |       |        |         |  |  |     |     |  |   |        |        



| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | Second Quarter of Fiscal 2003 (Ended
    August 31, 2002) Compared to Second Quarter of Fiscal 2002
    (Ended August 31, 2001)

The Company reported net income of $394,000, or
$0.03 per share, in the second quarter of fiscal 2003, as
compared to net income of $1.2 million, or $0.08 per share,
in the second quarter of fiscal 2002.

On a consolidated basis, sales of homes and land
decreased to $47.0 million for the second quarter of fiscal
2003 compared to $81.2 million for the second quarter of
fiscal 2002. This decrease is due to a decrease in total home
closings, combined with a decrease in the Companys average
sales price per home to $352,000 in the second quarter of fiscal
2003 from $400,000 in the second quarter of fiscal 2002. Sales
of homes and land including unconsolidated joint ventures, but
excluding Managed Projects, decreased to $48.6 million from
$83.1 million for the respective quarters. Total home
closings decreased from 195 in the second quarter of fiscal 2002
to 130 in the second quarter of fiscal 2003, including 7 and 5
homes, respectively, closed in unconsolidated joint ventures. In
addition, there was a decrease in lot closings from 65 in the
second quarter of fiscal 2002 to 26 in the second quarter of
fiscal 2003. The number of actively selling projects has
increased from 22 at August 31, 2001 to 25 at
August 31, 2002, which affected both backlog and net new
orders. The Company currently anticipates opening between 9 and
13 net new communities over the next few quarters.

Backlog has increased from 194 units at
February 28, 2002 to 351 units at August 31, 2002, due
to the opening of several new communities which have experienced
strong sales activity during the current fiscal year as well as
increased demand in certain of the Companys markets.
However, demand continues to be weak in certain other markets,
in particular Colorado and Texas. In order to continue to sell
and close homes in these markets, it may become necessary to
offer additional incentives to homebuyers, which could have a
negative impact on future profitability.

The Companys gross margin on home and lot
closings increased to 26.0% for the second quarter of fiscal
2003 as compared to 24.9% for the second quarter of fiscal 2002,
due to a temporary change in the mix of closings to certain
higher-margin projects in the current quarter. This trend is not
expected to continue, as the Company is generally moving towards
a lower-margin, higher-volume product mix. The gross margin,
including unconsolidated joint ventures, increased from 24.7% in
the second quarter of fiscal 2002 to 25.8% in the second quarter
of fiscal 2003. The Companys measure of gross margin may
differ from other homebuilders due to the exclusion of interest
expense from cost of sales, as discussed above.

Selling, general and administrative expense of
$8.6 million for the second quarter of fiscal 2003
decreased $1.6 million or 16.0% as compared to the second
quarter of fiscal 2002 due principally to a reduction in
volume-related sales and marketing costs. As a percentage of
revenue, selling, general and administrative expense increased
from 12.6% for the second quarter of fiscal 2002 to 18.3% for
the second quarter of fiscal 2003. The increased percentage of
such expense compared to revenue is primarily due to a lower
level of sales activity in the current quarter.

Income from unconsolidated joint ventures
increased from a loss of $60,000 in the second quarter of fiscal
2002 to income of $156,000 in the second quarter of fiscal 2003,
due to an increased level of profit participation in the active
joint ventures in the current quarter.

12



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##### Table of Contents



Interest and other income decreased from $245,000
in the second quarter of fiscal 2002 to $102,000 in the second
quarter of fiscal 2003.

Interest incurred was $2.7 million in the
second quarter of fiscal 2003, as compared to $3.9 million
in the second quarter of fiscal 2002, while previously
capitalized interest expensed was $3.3 million during the
second quarter of fiscal 2003, as compared to $8.0 million
in the second quarter of fiscal 2002. Once the Company sells out
of certain older projects with higher capitalized interest, it
anticipates that interest expensed will be closer to its
currently lower level of interest incurred.

The Company recorded a provision for income taxes
of $219,000 in the second quarter of fiscal 2003, utilizing an
effective tax rate of 35.7%, as compared to $1.0 million in
the second quarter of fiscal 2002, with an effective tax rate of
44.1%. The effective tax rate was lower than statutory rates in
the second quarter of fiscal 2003 as a result of non-taxable
accretion of deferred gain.



| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | First Six Months of Fiscal 2003 (Ended
    August 31, 2002) Compared to First Six Months of Fiscal
    2002 (Ended August 31, 2001)

The Company reported net income of
$6.6 million, or $0.44 per share, for the first six months
of fiscal 2003, as compared to net income of $2.6 million,
or $0.18 per share, for the first six months of fiscal 2002.
Income for the six months ended August 31, 2002 included a
cumulative effect of change in accounting principle which
increased income by $5.4 million, or $0.36 per share.
Excluding the effect of cumulative change in accounting
principle, net income decreased from $2.6 million for the
six months ended August 31, 2001 to $1.1 million in
the six months ended August 31, 2002.

On a consolidated basis, sales of homes and land
decreased to $91.9 million for the first six months of
fiscal 2003 compared to $158.7 million for the first six
months of fiscal 2002. This decrease is due primarily to a
decrease in total home closings in the current period. The
Companys average sales price per home increased slightly
to $353,000 in the first six months of fiscal 2003 from $347,000
in the first six months of fiscal 2002. Sales of homes and land
including unconsolidated joint ventures, but excluding Managed
Projects, decreased to $103.0 million from
$161.7 million for the respective periods. Total home
closings decreased from 448 in the first six months of fiscal
2002 to 270 in the first six months of fiscal 2003, including 11
and 38 homes, respectively, closed in unconsolidated joint
ventures. This was partially offset by an increase in lot
closings from 76 in the first six months of fiscal 2002 to 88 in
the first six months of fiscal 2003.

The Companys gross margin on home and lot
closings decreased slightly to 24.8% for the first six months of
fiscal 2003 as compared to 25.1% for the first six months of
fiscal 2002. The gross margin, including unconsolidated joint
ventures, decreased from 24.9% in the first six months of fiscal
2002 to 24.0% in the first six months of fiscal 2003. The
Companys measure of gross margin may differ from other
homebuilders due to the exclusion of interest expense from cost
of sales, as discussed above.

Selling, general and administrative expense of
$15.3 million for the first six months of fiscal 2003
decreased $4.9 million or 24.2% as compared to the first
six months of fiscal 2002 due principally to a reduction in
volume-related sales and marketing costs. As a percentage of
revenue, selling, general and administrative expense increased
from 12.7% for the first six months of fiscal 2002 to 16.7% for
the first six months of fiscal 2003. The increased percentage of
such expense compared to revenue is primarily due to a lower
level of sales activity in the current period.

Income from unconsolidated joint ventures
increased from $109,000 in the first six months of fiscal 2002
to $512,000 in the first six months of fiscal 2003, due to an
increased level of profit participation in the active joint
ventures in the current quarter.

Interest and other income decreased from $699,000
in the first six months of fiscal 2002 to $319,000 in the first
six months of fiscal 2003.

Minority interest of $159,000 for the first six
months of fiscal 2002 primarily represents the share of CPH
LLCs income attributable to CHF, until the Company
acquired the remaining minority interest in CPH,

13



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##### Table of Contents



LLC on May 31, 2001. Due to the fact that
CHF no longer holds an ownership interest in CPH LLC, no
minority interest was recorded in the current period.


Interest incurred was $4.9 million in the
first six months of fiscal 2003, as compared to
$9.0 million in the first six months of fiscal 2002, while
previously capitalized interest expensed was $6.6 million
during the first six months of fiscal 2003, as compared to
$15.7 million in the first six months of fiscal 2002. Once
the Company sells out of certain older projects with higher
capitalized interest, it anticipates that interest expensed will
be closer to its currently lower level of interest incurred.

The Company recorded a provision for income taxes
of $618,000 in the first six months of fiscal 2003, utilizing an
effective tax rate of 35.0%, as compared to $2.0 million in
the first six months of fiscal 2002, with an effective tax rate
of 42.7%. The effective tax rate was lower than statutory rates
in the first six months of fiscal 2003 as a result of
non-taxable accretion of deferred gain.

Liquidity and Capital Resources

The Companys principal cash requirements
are for the acquisition, development, construction, marketing
and overhead of its projects. When building inventory, the
Company uses substantial amounts of cash that are generally
obtained from borrowings, available cash flow from operations
and partners contributions to joint ventures.

At the current time, all material financing
transactions and arrangements are incurred either by CPH LLC or
by certain project specific entities. During the third quarter
of fiscal 2002, CPH LLC entered into a senior unsecured
revolving credit facility (the Senior Facility) with
several participant banks. The Senior Facility had a maximum
commitment of $125 million and a two year revolving term.
Proceeds from the Senior Facility were used to pay down CPH
LLCs existing facilities and retire the remaining
12 3/4% Senior Notes during the quarter ending
November 30, 2001, as discussed below. The Senior Facility
has substantially more favorable pricing than the 12 3/4%
Senior Notes which have been retired. In October 2002, the
Company extended the maturity of the Senior Facility to October
2005 and increased the maximum commitment to $130 million.
In addition, the Company entered into a Senior Subordinated Note
Agreement in the initial amount of $20 million, with a
maturity date in October 2007.

As of August 31, 2002, the Company has in
place several credit facilities, including the Senior Facility,
totaling $181 million (the Facilities) with
various bank lenders (the Banks), of which
approximately $131 million was outstanding. The Facilities
other than the Senior Facility are secured by liens on various
completed or under construction homes and lots held by CPH LLC,
CPH Newport Coast, LLC and CPH Yucaipa I, LLC, all of which are
wholly-owned subsidiaries. Pursuant to the Facilities, the
Company is subject to certain covenants, which require, among
other things, the maintenance of a consolidated liabilities to
net worth ratio, minimum liquidity, minimum net worth and loss
limitations, all as defined in the documents that evidence the
Facilities. At August 31, 2002, the Company was in
compliance with these covenants. The Facilities also define
certain events that constitute events of default. As of
August 31, 2002, no such event had occurred. Commitment
fees are payable annually on some of the Facilities.

Homebuilding activity, excluding Managed
Projects, is being financed out of CPH LLC cash, bank
financing, and the existing joint ventures, including joint
ventures with institutional investors. In addition, development
work undertaken in certain of the Companys joint ventures
is financed through various non-recourse lending arrangements.
The Company anticipates that it will continue to utilize both
third party financing and joint ventures to cover financing
needs in excess of internally generated cash flow.

Management expects that cash flow generated from
operations and from bank financing will be sufficient to cover
the debt service and to fund CPH LLCs current
development and homebuilding activities for the reasonably
foreseeable future, absent force majeure or other unforeseen
events, and expects that capital commitments from its joint
venture partners and other bank facilities will provide
sufficient financing for the operation of its joint ventures.

14



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##### Table of Contents



Critical Accounting Policies

The Companys financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these
financial statements requires management to make estimates and
judgments that affect the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and costs and expenses during the
reporting period. Management evaluates its estimates and
judgments, including those which impact its most critical
accounting policies on an ongoing basis. Management bases its
estimates and judgments on historical experience and on various
other factors that are believed to be reasonable under the
circumstances, within the framework of current accounting
literature. Actual results may differ from these estimates under
different assumptions or conditions. The Companys key
accounting policies are discussed in detail in the
Companys Form 10-K for the fiscal year ended
February 28, 2002.




Item 3.     Quantitative
and Qualitative Disclosures About Market Risk

The Market Risk Exposure paragraphs
are presented to provide an update about material changes to the
Quantitative and Qualitative Disclosures about Market
Risk paragraphs included in the Companys 2002 Annual
Report on Form 10-K filed with the Securities and Exchange
Commission and should be read in conjunction with those
paragraphs.

The Company is exposed to market risks related to
fluctuations in interest rates on its debt. Under the Senior
Facility, the Company has utilized interest rate swaps in order
to fix the interest rate on $75 million of its variable
rate debt. The Company has not used forward or option contracts
on foreign currencies or commodities, or other types of
derivative financial instruments.

The Company uses debt financing primarily for the
purpose of acquiring and developing land and constructing and
selling homes. Historically, the Company has made short-term
borrowings under its revolving credit facilities to fund those
expenditures. In addition, the Company had previously issued
$100 million in fixed-rate 12 3/4% Senior Notes to
provide longer-term financing. Prior to the third quarter of
fiscal 2002, the Company had repurchased Senior Notes with a
face value of $44.4 million. During the third quarter of
fiscal 2002, the Company redeemed at face value the remaining
$55.6 million of the Senior Notes.

For fixed rate debt, changes in interest rates
generally affect the fair market value, but not the
Companys earnings or cash flows. Conversely, for variable
rate debt, changes in interest rates generally do not have an
impact on fair market value, but do affect the Companys
future earnings and cash flows. The Company does not have an
obligation to prepay fixed rate debt prior to maturity, and as a
result, interest rate risk and changes in fair market value
should not have a significant impact on such debt until the
Company would be required to refinance such debt. Based upon the
amount of variable rate debt outstanding at the end of the
second quarter, and holding the variable rate debt balance
constant, each one percentage point increase in interest rates
occurring on the first day of an annual period would result in
an increase in interest incurred for the coming year of
approximately $600,000.

The Company does not believe that future market
interest rate risks related to its debt obligations will have a
material impact on the Companys financial position,
results of operations or liquidity.




Item 4.     Controls
and Procedures

As of September 30, 2002, an evaluation was
performed under the supervision and with the participation of
the Companys management, including the CEO, CFO, COO and
CLO, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures. Based on that
evaluation, the Companys management, including the CEO,
CFO, COO and CLO, concluded that the Companys significant
disclosure controls and procedures were effective as of
September 30, 2002. There have been no significant changes
in the Companys internal controls or in other factors that
could significantly affect internal controls subsequent to
September 30, 2002.

15



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##### Table of Contents






PART II  OTHER
INFORMATION




Item 1.     Legal
Proceedings

The Company is involved in routine claims and
litigation arising in the ordinary course of its business. A
former senior executive officer of the Company has filed a suit
styled in part as a shareholder derivative suit which the
Company considers to be without merit challenging the Exchange
Transaction (described in Note 3 of the Notes to
Consolidated Financial Statements). The legal responsibility and
financial impact to the Company with respect to pending
litigation cannot be presently ascertained.




Item 6.     Exhibits
and Reports on Form 8-K

(a) Exhibits

|        |      |             |  |                                                                                                      
|------- | ---- | ----------- |  | -----------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 99.1 |             |  | Certification of Hadi Makarechian pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002      
|        | 99.2 |             |  | Certification of Steven O. Spelman, Jr. pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

None filed.

16



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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.



| |     |                     
| | --- | --------------------
| | By: | /s/ HADI MAKARECHIAN

| |                                          
| | -----------------------------------------
| |                                          
| | Hadi Makarechian                         
| | Chairman of the Board,                   
| | Chief Executive Officer and
    President
| | (Principal Executive Officer)            

Date: October 15, 2002



| |     |                           
| | --- | --------------------------
| | By: | /s/ STEVEN O. SPELMAN, JR.

| |                                                    
| | ---------------------------------------------------
| |                                                    
| | Steven O. Spelman, Jr.                             
| | Chief Financial Officer and Corporate
    Secretary
| | (Principal Financial Officer)                      

Date: October 15, 2002

17



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##### Table of Contents






CERTIFICATIONS

I, Hadi Makarechian, certify that:



| |                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this quarterly report on Form 10-Q of Capital Pacific
    Holdings, Inc.:                                                                                                                                                                                                                                                         
|
| | 2.     Based on my
    knowledge, this quarterly report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this quarterly
    report;
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this quarterly report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    periods presented in this quarterly report;                       
|
| | 4.     The
    registrants other certifying officers and I are
    responsible for establishing and maintaining disclosure controls
    and procedures (as defined in Exchange Act Rules 13a-14 and
    15d-14) for the registrant and have:                                                                                                                



| |                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.     The
    registrants other certifying officers and I have
    disclosed, based on our most recent evaluation, to the
    registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.     The
    registrants other certifying officers and I have indicated
    in this quarterly report whether there were significant changes
    in internal controls or in other factors that could
    significantly affect internal controls subsequent to the date of
    our most recent evaluation, including any corrective actions
    with regard to significant deficiencies and material weaknesses.



| |     |                     
| | --- | --------------------
| | By: | /s/ HADI MAKARECHIAN

| |                                          
| | -----------------------------------------
| |                                          
| | Hadi Makarechian                         
| | Chairman of the Board,                   
| | Chief Executive Officer and
    President
| | (Principal Executive Officer)            

Date: October 15, 2002

18



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##### Table of Contents



I, Steven O. Spelman, Jr., certify that:



| |                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this quarterly report on Form 10-Q of Capital Pacific
    Holdings, Inc.:                                                                                                                                                                                                                                                         
|
| | 2.     Based on my
    knowledge, this quarterly report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this quarterly
    report;
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this quarterly report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    periods presented in this quarterly report;                       
|
| | 4.     The
    registrants other certifying officers and I are
    responsible for establishing and maintaining disclosure controls
    and procedures (as defined in Exchange Act Rules 13a-14 and
    15d-14) for the registrant and have:                                                                                                                



| |                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.     The
    registrants other certifying officers and I have
    disclosed, based on our most recent evaluation, to the
    registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.     The
    registrants other certifying officers and I have indicated
    in this quarterly report whether there were significant changes
    in internal controls or in other factors that could
    significantly affect internal controls subsequent to the date of
    our most recent evaluation, including any corrective actions
    with regard to significant deficiencies and material weaknesses.



| |     |                           
| | --- | --------------------------
| | By: | /s/ STEVEN O. SPELMAN, JR.

| |                                                    
| | ---------------------------------------------------
| |                                                    
| | Steven O. Spelman, Jr.                             
| | Chief Financial Officer and Corporate
    Secretary
| | (Principal Financial Officer)                      

Date: October 15, 2002

19



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##### Table of Contents



EXHIBIT INDEX

|        |      |             |  |                                                                                                      
|------- | ---- | ----------- |  | -----------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 99.1 |             |  | Certification of Hadi Makarechian pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002      
|        | 99.2 |             |  | Certification of Steven O. Spelman, Jr. pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002