SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                    FORM 10-Q


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



For the Quarter ended September 30, 1996             Commission File No. 0-11223



                           PROFESSIONAL BANCORP, INC.

             (Exact name of registrant as specified in its charter)

              Pennsylvania                              95-3701137

         (State or other jurisdiction of                (IRS Employer
         incorporation or organization)                  Identification No.)

         606 Broadway, Santa Monica CA              90401
         (Address of principal executive offices)   (Zip code)

     Registrant's telephone number, including area code: (310) 458-1521


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


                      APPLICABLE ONLY TO CORPORATE ISSUERS

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

         Common Stock, $.008 par value                    1,341,182
         -----------------------------                    ---------
                    Class                     Outstanding on September 30, 1996





<PAGE>





                                      INDEX


                                                                     PAGE

                         PART I - FINANCIAL INFORMATION

Item 1 Financial Statements          

         Consolidated Balance sheets at September 30, 1996 and
          December 31, 1995                                            3

         Consolidated Statements of Earnings for the three months      4 
          ended September30, 1996 and 1995 and the nine months 
          ended September 30, 1996 and 1995

         Consolidated Statements of Cash flows for the nine months 
          ended September 30, 1996 and 1995                            5

         Notes to Consolidated Financial Statements                    6


Item 2   Management's Discussion and Analysis of Financial 
          Condition and Results of Operations                          7



                           PART II - OTHER INFORMATION


Item 5   Other Information                                            13

Item 6   Exhibits and Reports on Form 8K                              13

Exhibit 27.                                                           15



                                     - 2 -
<PAGE>



PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements


<TABLE>
<CAPTION>

                    PROFESSIONAL BANCORP, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                                     ASSETS
<S>                                                    <C>                        <C>

                                                         September 30, 1996         December 31, 1995
Cash and due from banks:
Noninterest bearing                                             $22,453,111               $41,791,145
Interest bearing                                                  1,076,018                 1,008,528
Federal funds sold                                                4,400,000                42,400,000
Cash and cash equivalents                                        27,929,129                85,199,673
Securities available-for-sale at fair value                      71,856,770                81,520,398
Held-to-maturity securities (Fair value of 
   $42,534,000 and $48,159,000, respectively)
   43,445,839                                                    48,517,017
Loans, net of allowance for loan losses of 
   $2,034,000 and $1,070,000 respectively                        90,013,532                98,944,274
Premises and equipment, net                                       1,672,375                 1,817,982
Accrued interest receivable and other assets                      8,615,362                 6,165,562
                                                               $243,533,007              $322,164,906

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing                                    $82,387,621               $97,641,982
Demand, interest-bearing                                         12,253,493                14,474,546
Savings and money market                                         87,542,555                97,209,310
Time certificates of deposit                                     39,990,683                88,139,864
Total deposits                                                  222,174,352               297,465,702
Convertible Notes                                                 4,843,210                 4,766,658
Accrued interest payable and other liabilities                    3,317,719                 2,424,792
Total liabilities                                               230,335,281               304,657,152
Shareholders' Equity:
Common stock, $.008 par value; 12,500,000 shares
    authorized; 1,410,649 and 1,388,169 issued and
    1,341,182 and 1,278,988 outstanding                              11,285                    10,620
Additional paid-in capital                                       12,487,925                11,682,752
Retained earnings                                                 2,181,590                 6,983,628
Treasury stock (69,467 and 109,181) shares                        (537,251)                 (655,085)
Net unrealized loss on securities available-for-sale              (945,823)                 (514,161)
Total shareholders' equity                                       13,197,726                17,507,754
                                                               $243,533,007              $322,164,906

</TABLE>

                See notes to consolidated financial statements.




                                     - 3 -


<PAGE>



<TABLE>
<CAPTION>

                   PROFESSIONAL BANCORP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF EARNINGS
                                  (Unaudited)


<S>                                      <C>               <C>              <C>                <C>

                                                   Three Month Periods               Nine Month Periods
                                                   Ended September 30,               Ended September 30,
                                                 1996              1995            1996               1995
Interest Income:
Loans                                      $2,205,761        $2,206,330      $6,761,004         $7,002,384
Securities                                  1,916,574         2,693,376       5,964,771          7,753,148
Federal funds sold and securities
    purchased under agreements to
    resell                                     79,175           394,699         717,718            915,225
Interest-bearing deposits in other banks        5,644             1,500          18,244              4,500
Total interest income                       4,207,154         5,295,905      13,461,737         15,675,257
Interest expense:
Deposits                                      825,480         1,656,472       3,327,656          4,268,956
Convertible notes                             119,604           121,260         357,987            365,635
Federal funds purchased and
   securities sold under agreements
   to repurchase                              107,665               161         171,592            193,514
Total interest expense                      1,052,749         1,777,893       3,857,235          4,828,105
Net interest income                         3,154,405         3,518,012       9,604,502         10,847,152
Less: provision for loan losses             (836,000)         (205,000)     (4,256,000)          (392,000)
Net interest income after provision for
   loan losses                              2,318,405         3,313,012       5,348,502         10,455,152
Other operating income:
Securities transactions - net
  Available-for-sale securities                20,921                 -          20,921            122,634
Merchant discount                              56,490            53,676         168,410            147,473
Mortgage banking fees                          35,601            15,631          97,018             40,055
Service charges on deposits                   186,514           169,893         492,209            490,312
Other income                                  153,285           127,495         429,682            385,923
Total other operating income                  452,811           366,695       1,208,240          1,186,397

Other operating expenses:
Salaries and employee benefits              1,600,954         1,329,652       4,605,157          4,292,593
Occupancy                                     345,358           344,193       1,036,224          1,021,078
Legal fees                                    431,211           182,932       2,430,574            505,560
Severance costs                                     -                 -       1,006,000                  -
Furniture and equipment                       205,142           173,085         633,401            526,209
Professional services                         267,403           155,444         704,484            494,921
Other assessment                               63,191            62,701         225,561            201,334
Office supplies                                64,680            62,429         225,837            202,664
Imprinted checks                               22,941            31,684         111,597             89,312
Telephone                                      72,511            63,790         191,106            169,630
Donations                                      29,850            15,327         115,379             65,555
Audit, accounting and examinations             47,695            45,705         160,190            106,579
Postage                                        40,808            31,219         115,506            104,284
Messenger service                              46,435            29,777         133,242             86,229
FDIC assessment                                     -          (17,416)           1,000            291,840
Other expense                                 234,521           237,895         814,012            721,699
Total other operating expenses              3,472,700         2,748,417      12,509,270          8,879,487
Income (loss) before taxes                  (701,484)           931,290     (5,952,528)          2,762,062
Provision for income taxes                   (94,000)           380,000     (1,894,700)          1,104,000
Net earnings (loss)                        $(607,484)          $551,290    $(4,057,828)         $1,658,062
Earnings (loss) per share:
  Primary                                     $(0.43)             $0.33         $(2.96)              $1.01
  Fully diluted                               $(0.43)             $0.30         $(2.96)              $0.93

</TABLE>

                 See notes to consolidated financial statements



                                     - 4 -

<PAGE>




<TABLE>
<CAPTION>

                      PROFESSIONAL BANCORP AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                             
                                                  Nine Month Period Ended
                                                       September 30, 
                                                     1996           1995
<S>                                             <C>             <C> 

Cash flows from operating activities:
 Net earnings (loss)                             $(4,057,828)    $1,658,061
 Adjustments to reconcile net income (loss)
  to net cash provided by operating activities:
   Depreciation and amortization                     466,812        389,354
   Provision for loan losses                       4,256,000        392,000
   Gain on securities available-for-sale             (20,921)      (122,634)
   Amortization of convertible note expense           78,252         79,898
   Decrease (increase) in accrued interest
    receivable and other assets                   (1,910,354)       352,583
   Increase in accrued interest payable and
    other liabilities                                892,927      1,194,917
   Net amortization of premiums and discounts
    on securities held-to-maturity                   346,088        (71,076)
   Net amortization of premiums and discounts
    on securities available-for-sale                  44,819       (276,221)

 Net cash provided by operating activities            95,795      3,596,882

Cash flows from investing activities:
 Proceeds from maturities of securities held-to-
  maturity                                         5,739,094      8,693,643
 Proceeds from maturities of securities
  available-for-sale                               8,974,771      2,509,291
 Proceeds from sales of securities available-
  for-sale                                         9,868,750     17,429,218
 Purchases of securities held-to-maturity         (1,014,004)   (14,596,152)
 Purchases of securities available-for-sale       (9,904,845)    (8,494,606)
 Principal disbursed on loans, net                 4,674,742      3,569,680
 Purchase of bank premises and equipment, net       (321,205)      (208,859)

 Net cash provided by investing activities        18,017,303      8,902,215

Cash flows from financing activities: 
 Net decrease in demand deposits and savings 
  accounts                                       (27,142,169)    (32,833,662)
 Net proceeds from issuing certificates 
  of deposit                                     (48,149,181)     33,009,823
 Purchase of treasury shares                        (270,450)          -
 Fractional shares paid in lieu of stock
  dividend                                            (3,664)         (3,269)
 Exercise of options                                 181,822           -
 
Net cash provided (used) by financing
  activities                                     (75,383,642)        172,892

Net increase (decrease) in cash and cash    
  equivalents                                    (57,270,544)     12,671,989

Cash and cash equivalents, beginning of year      85,199,673      37,133,189

Cash and cash equivalents, September 30,          27,929,129      49,805,178

Supplemental disclosure of cash flow 
  information-cash paid during the year for:
  Interest                                       $ 4,319,733     $ 4,555,578
  Income Taxes                                   $       300     $   964,734

Supplemental disclosure of noncash items:
  Tax benefit from stock options exercised/sold  $   270,054     $     -
  Change in unrealized losses on securities
   available-for-sale                            $  (836,856)    $  (142,903)
  Conversion of notes                            $     1,700     $   110,316

</TABLE>

                See notes to consolidated financial statements.


   
                                     - 5 -

<PAGE>



                    PROFESSIONAL BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


Note 1 - BASIS OF PRESENTATION AND MANAGEMENT REPRESENTATION

         The unaudited  consolidated  financial statements have been prepared in
accordance  with the  instructions of Form 10-Q and therefore do not include all
footnotes   normally   required  for  complete   financial   disclosure.   While
Professional  Bancorp,  Inc.  (the  "Company")  believes  that  the  disclosures
presented are sufficient to make the information  not misleading,  reference may
be made to the Company's  Annual report on Form 10-K for the year ended December
31, 1995.

         The accompanying  consolidated  balance sheets,  statements of earnings
and statements of cash flows reflect all material adjustments necessary for fair
presentation  of the Company's  financial  position as of September 30, 1996 and
December  31,  1995 and the results of  operations  for the three  months  ended
September  30, 1996 and 1995 and the nine months  ended  September  30, 1996 and
1995.  Interim  operating  results are not  necessarily  indicative of operating
results for a full year.


Note 2 - EARNINGS PER SHARE

         Earnings per share are based on the number of common shares outstanding
during each year and the assumed  exercise of dilutive  employee  stock  options
(less the number of treasury  shares  assumed to be purchased  using the average
market price of the Company's  common  stock).  Due to the number of outstanding
options and warrants, earnings per share has been based on the modified treasury
stock method. The modified treasury stock method counts all outstanding warrants
and stock  options as  outstanding  and then  assumes the  proceeds  are used to
repurchase up to 20% of the  outstanding  shares at the average market price for
the  period.  The  remaining  proceeds  are then  assumed to be invested in U.S.
Treasury  securities  yielding  6.0%. For the three and nine month periods ended
September  30,  1996,  the earnings  per share  calculation,  using the modified
treasury stock method is antidilutive;  therefore,  for the three and nine month
periods ended September 30, 1996,  earnings per share are based on 1,353,954 and
1,362,153 shares, respectively,  which represents the actual average outstanding
shares.  For the three and nine month periods ended September 30, 1995,  primary
earnings are based upon 1,806,565 and 1,806,505  shares,  respectively.  For the
three and nine month periods ended  September 30, 1995,  fully diluted  earnings
are based upon 2,249,061 and 2,249,001 shares, respectively.



                                     - 6 -

<PAGE>




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


Financial Condition

         The  Company  posted a net loss of  $4,058,000  during  the first  nine
months of 1996  compared  to net  earnings of  $1,658,000  during the first nine
months of 1995.  The  Company  posted a net loss of  $607,000  during  the third
quarter of 1996 compared to net earnings of $551,000 during the third quarter in
1995. The losses in 1996 were primarily due to a decline in net interest  income
resulting  from a reduced  asset base, a provision for loan losses of $4,256,000
for the first nine months of 1996 and $836,000 in the third  quarter,  and costs
associated  with  the  recent  proxy  contest  and  management  changes.   Costs
associated  with a proxy  contest and  subsequent  management  changes  totaling
$2,646,000 were charged in the quarter ended June 30, 1996.

         Deposits  decreased  $75.3  million or 25.3% from  December 31, 1995 to
September  30,  1996 and  decreased  $9.0  million or 3.9% from June 30, 1996 to
September  30,  1996.  The decline in deposits  while  occurring  in all deposit
categories was most prevalent  among the Company's Time  Certificates of deposit
(TCDs). TCDs declined $48.1 million or 54.6% from December 31, 1995 to September
30, 1996, but increased $4.9 million or 13.9% during the third quarter.  Savings
and Money Market  accounts have  decreased  $9.7 million or 9.9% during 1996 and
$9.3  million  or 9.6%  during the third  quarter.  Noninterest  bearing  demand
deposits  ("DDAs")  have  decreased  $15.3 million or 15.6% during 1996 and $3.3
million or 3.8% during the third quarter. While the decline in TCDs was reversed
during the third quarter,  balances in other deposits declined.  As the Board of
Directors and  management  refocus  efforts to business  development  and client
retention,  deposit  levels are  expected  to  stabilize  and grow,  although no
assurance can be given that such will occur.  Savings and money market  accounts
continued  to represent  the largest  category of deposits  comprising  39.4% of
total  deposits at September 30, 1996 compared to 32.7% at December 31, 1995 and
36.6% at September 30, 1995.  TCD's comprised 18.0% of deposits at September 30,
1996  compared to 29.6% at December  31, 1995 and 29.6% of deposits at September
30, 1995. DDA deposits  continued to form a solid deposit base comprising  37.1%
of deposits at  September  30, 1996  compared to 32.8% at December  31, 1995 and
29.1% at September 30, 1995.

         The Company  continued to  experience  decreasing  loan demand as gross
loans totaled $92.1 million at September 30, 1996 compared to $100.1  million at
December  31, 1995 for an annual rate of decline of 10.6%.  The decrease was due
primarily to a decrease in commercial loans.  Management expects some additional
loan  demand  during the fourth  quarter of 1996 as the  Company  refocuses  its
efforts in building the loan portfolio.



                                     - 7 -

<PAGE>




         The  following  table  sets forth the  amount of loans  outstanding  by
category and the percentage of each category to the total loan portfolio:



<TABLE>

<S>                                   <C>         <C>       <C>         <C>  
                                           September 30,         December 31,
                                               1996                  1995
                                       Amount   Percentage   Amount   Percentage
                                                 (Amounts in Thousands)

Commercial                             $72,081     78.2%     $77,012    77.0%
Real estate secured commercial          10,605     11.5       13,241    13.2

  Subtotal                              82,686     89.7       90,253    90.2       

Equity lines of credit                   6,300      6.8        6,070     6.1
Other lines of credit                    1,777      1.9        1,997     2.0
Installment                              1,327      1.5        1,625     1.6
Lease financing                             63      0.1          140     0.1

         Total loans                   $92,153    100.0%    $100,085   100.0%

Less:
  Allowance for loan losses              2,034                 1,070
  Deferred loan fees, net                  105                    71
         Loans - net                   $90,014               $98,944

</TABLE>


         The Company does not originate  mortgage loans or accept trust deeds on
property  outside the state of California as primary  collateral  for a loan. At
September 30, 1996 nonperforming  loans (loans put on nonaccrual status) totaled
$1,783,000 or 1.93% of total loans.  At December 31, 1995,  nonperforming  loans
totaled $4,173,000 or 4.18% of total loans. At September 30, 1996, nonperforming
assets  (nonperforming loans plus Other Real Estate Owned) totaled $2,055,000 or
 .84%  of  total  assets  and  2.23%  of  total  loans.  At  December  31,  1995,
nonperforming  assets  totaled  $4,263,000 or 1.32% of total assets and 4.26% of
total loans.  The  decrease in  nonperforming  assets was due  primarily to loan
charge-offs of $3,312,000 taken during the third quarter. Additionally, accruing
loans 90 days or more past due  decreased  to  $122,000  at  September  30, 1996
compared to $632,000 at December 31, 1995.

         For the Company,  impaired loans generally  include loans classified as
nonaccrual and troubled debt restructurings.  At September 30, 1996, the Company
had troubled debt  restructurings  totaling  $436,000,  $182,000 of which was on
nonaccrual.  At December 31, 1995 the Company had troubled  debt  restructurings
totaling $1,167,000 of which $104,000 was on nonaccrual.







         The following table sets forth the impaired loans and specific  related
allowance for loan losses at September 30, 1996 and December 31, 1995:



                                     - 8 -

<PAGE>



<TABLE>

<S>                                      <C>                      <C> 
                                          September 30, 1996       December 31,
                                                 1996                  1995
Carrying value of impaired loans with
 a specific allowance                       $  893,000             $2,633,000
Carrying value of impaired loans without
 a specific allowance                       $1,143,000              2,607,000
         Total impaired loans               $2,036,000             $5,240,000

Specific allowance on impaired loans        $  275,000             $  311,000

</TABLE>


The average  recorded  investment in impaired loans during the first nine months
of 1996 was $6.5 million with  interest  income of $15,000  recorded  during the
period.

Capital

         The Office of the Comptroller of the Currency (the "OCC"),  the primary
regulator of the Company's wholly owned  subsidiary,  First  Professional  Bank,
N.A. (the  "Bank"),  has  established  minimum  leverage  ratio  guidelines  for
national banks.  These guidelines  provide for a minimum Tier 1 capital leverage
ratio (Tier 1 capital to adjusted total assets less goodwill) of 3.0 percent for
national  banks  that meet  certain  specified  criteria,  including  having the
highest  regulatory  rating. All other national banks will generally be required
to  maintain a minimum  Tier 1 capital  leverage  ratio of 3.0  percent  plus an
additional  cushion of 100 to 200 basis points. The OCC has not advised the Bank
of any specific minimum Tier 1 capital leverage ratio applicable to it.

         The Federal  Reserve Board,  as the Company's  primary  regulator,  has
similarly  established  minimum  leverage  ratio  guidelines  for  bank  holding
companies.  These guidelines also provide for a minimum Tier 1 leverage ratio of
3.0 percent for bank holding  companies  that meet certain  specified  criteria,
including having the highest regulatory rating. All other bank holding companies
will  generally be required to maintain a minimum Tier 1 capital  leverage ratio
of 3.0  percent  plus an  additional  cushion  of 100 to 200 basis  points.  The
Federal Reserve Board has not advised the Company of any specific minimum Tier 1
capital leverage ratio applicable to it.

         Risk-based  capital  standards  were  implemented on December 31, 1990.
Since December 31, 1992,  banking  organizations  are expected to meet a minimum
ratio for qualifying  total capital to risk-weighted  assets of 8.00%,  4.00% of
which must be Tier 1 capital.














         The  following  tables  present the capital  ratios for a bank  holding
company and bank, and various federal  regulatory  capital ratios of the Company
and the Bank at September 30, 1996 and December 31, 1995.



                                     - 9 -


<PAGE>



<TABLE>
<S>                           <C>             <C>                <C>       <C> 

                                         Company
                                                                  Minimum      Well-
                               September 30,   December 31,       Capital   Capitalized
                                   1996            1995           Ratios      Ratios


Capital Ratios:           
Tier 1 risk-based                 11.13%          12.47%           4.00%       6.00%
Teir risk-based                   16.88%          16.91            8.00       10.00
Leverage                           5.49            5.72            3.00        5.00



                                         Bank
                                                                  Minimum      Well-
                               September 30,   December 31,       Capital   Capitalized
                                   1996            1995           Ratios      Ratios


Capital Ratios:           
Tier 1 risk-based                 15.16%          15.84%           4.00%       6.00%
Teir risk-based                   16.42%          16.40%           8.00       10.00
Leverage                           7.45            7.24            3.00        5.00



<FN>
1 The minimum required by the FRB is 3%; for all but the most  highly-rated bank
holding companies,  the FRB expects a leverage ratio of 3% plus 100 to 200 basis
points.
</FN>
</TABLE>


         At September 30, 1996 the Company and the Bank exceeded all  applicable
federal capital standards.  Additionally,  the Company and the Bank exceeded the
required  minimum  ratios  for  "well-capitalized"  institutions.  The  Bank has
approximately $6,181,000 of capital in excess of the required minimum ratios for
"well-capitalized"  institutions while the Company has approximately  $1,248,000
of capital in excess of the  required  minimum  ratios for "well-capitalized"
institutions. The Company does not currently intend to raise additional capital.
Dividends from the Bank to the Company in the amount of approximately $750,000
will be necessary in 1997 for the Company to meet its operating expenses and
interest obligations with respect to its convertible notes. Due to losses
sustained during 1996, the Bank will be required to obtain regulatory approval
in order to pay such dividends to the Company during 1997.

Liquidity

         The Company continued to actively manage its liquidity and on September
30, 1996, the Bank sold $4.4 million in Federal funds. In addition, at September
30, 1996 the Company had  securities  available-for-sale  totaling $68.0 million
available for either sale or for borrowing through repurchase agreements.


Results of Operations

         The  Company  reported a loss of  $4,058,000  or $2.96 per  primary and
fully diluted share for the nine months ended  September 30, 1996. This compares
with  earnings  of  $1,658,000  or $1.01  per  primary  share and $.93 per fully
diluted  share  for the nine  months  ended  September  30,  1995.  The loss was
primarily  due to costs  associated  with a proxy contest  ($2,646,000  in legal
fees,  printing,  proxy solicitation and severance costs) and a higher provision
for loan  losses  ($4,256,000  for the first  nine  months of 1996  compared  to
$392,000 in the year earlier  period).  The Company  reported a loss of $607,000
for the three months ended  September  30, 1996.  This compares with earnings of
$551,000  or $.33 per  primary  share and $.30 per fully  diluted  share for the
three months ended September 30, 1995. The loss during the third quarter of 1996
was due primarily to a $836,000 provision for loan losses as well as $310,000 in
nonrecurring  settlement related expenses. Also affecting earnings was a decline
in net interest  income  resulting from a declining  asset base.  Earning assets
averaged $244.8 million for the nine months ended September 30, 1996 compared to
$283.1  million  for the year  earlier  period.  Due to the  decrease in earning
assets,  net interest  income for the nine



                                     - 10 -


<PAGE>



months ended  September  30, 1996 was $9,605,000,  a decrease of $1,243,000  
(11.5%) below the amount  recorded during the same period in 1995.  Similarly,
earning assets averaged $222.7 million for the three months ended  
September  30, 1996  compared to $291.5  million for the year earlier period  
resulting in a decrease in net interest  income of $364,000 (10.3%) during the 
third quarter of 1996 compared to the third quarter of 1995.

         The Company's net interest margin  increased  slightly to 5.24% for the
nine  months  ended  September  30,  1996 from 5.15% for the nine  months  ended
September 30, 1995. Positively impacting the net interest margin in 1996 was the
termination of two interest rate swaps totaling $40 million notional (principal)
amount.  Under the terms of the two swaps,  the Company received a fixed rate of
7.215% for three years ended January 1996, while the Company paid the prime rate
over the same period of time.  From January  1993 to January 30,  1996,  the two
swaps  decreased net interest  income by $281,000  including  $15,000 during the
first nine  months of 1996 and  $524,000  during the first nine  months of 1995.
Also positively impacting the net interest margin has been the continued decline
of TCD's which tend to pay higher rates than other  deposits.  At September  30,
1996,  TCD's totaled $40.0 million versus $88.1 million at December 31, 1995 and
$87.0 million at September 30, 1995.

         In November 1993,  the Bank entered into a swap with a notional  amount
of $15,000,000. The effective start date of the swap was May 26, 1994 covering a
period of five years ending in May 1999.  Under the terms of the swap,  the Bank
pays a rate of prime  less 190 basis  points  while  receiving  the  three-month
LIBOR.  The rate the Bank pays  adjusts  daily while the rate the Bank  receives
adjusts  quarterly.  Net interest income from May 1994 to September 30, 1996 was
reduced by the swap by $312,000  including $101,000 during the first nine months
of 1996 and $100,000  during the first nine months of 1995.  At the date of this
report, the Company is paying 6.35% and receiving 5.49%.

         As  protection  against  lower  interest  rates,  in December  1994 and
January 1995, the Company  entered into three interest rate floor contracts with
a notional  (principal)  amount of  $60,000,000.  The  agreements  entitled  the
Company to receive from counterparties on a monthly basis the amounts, if any by
which the one-month  LIBOR rate falls below 6%. The floor  agreements were for a
period of three years.  The average  premium paid for the floor  agreements  was
approximately  20 basis points  ($120,000)  and was being  amortized  over three
years. In May 1995, the Company sold the floor contracts for total consideration
of $722,500. This amount is being amortized over the original three year term at
approximately  $20,000 per month.  From December 1994 to September 30, 1996, net
interest  income was  increased  by the floors by  $343,000  including  $176,000
during the first nine months of 1996 and  $108,000  during the first nine months
of 1995.

         In order to protect the fair value of a portion of the  Company's  GNMA
variable rate securities,  in December 1995, the Company  purchased two interest
rate caps with a notional (principal) amount of $10,000,000 each. The agreements
entitle  the Company to receive  from  counterparties  on a quarterly  basis the
amounts,  if any by which the one year Constant  Maturity  Treasury  Index rises
above 6.50% for one of the agreements and 6.75% on the other. The cap agreements
are for a period of three years. The average premium paid for the cap agreements
was 63.5 basis points  ($127,000)  which is being  amortized over the three year
period. From December 1995 to September 1996, net interest income was reduced by
the caps by $33,000 including $32,000 during the first nine months of 1996.

         At  September  30, 1996,  the  Company's  available-for-sale  portfolio
totaled  $71,857,000 fair value compared to $81,520,000 at December 31, 1995 and
$35,958,000 at September 30, 1995. All of the Company's securities which reprice
with  a  frequency   of  annually  or  more   frequently   are   classified   as
available-for-sale.  Additionally,  all of the Company's Collateralized Mortgage
Obligations (CMO's) are also classified as available-for-sale.  At September 30,
1996, the Company's  CMO's had a total fair value of $33,619,000  which included
several  securities.  One CMO,  with a fair  value of  $4,113,000  was a Planned
Amortization  Class  ("PAC")  bond with a fixed 6.5%  coupon  and all  principal
scheduled to be paid between  1996 and 2000.  Another CMO,  with a fair value of
$9,893,000  was a PAC bond that floats at 110 basis over the  eleventh  district
cost of funds index and has a cap of 10%. The remaining CMO's, with a fair value
of  $19,613,000,  were all variable  rate using the one-month  London  Interbank
Offering Rate ("LIBOR") as the rate index. 



                                     - 11 -

<PAGE>




Three of these CMO's had rates capped at between 9% and 10% of which with a 
total fair value of $15,524,000  repricing monthly thereafter at 55 to 65 
basis points over the one-month LIBOR. The fourth CMO had a fair value of 
$4,089,000  which reprices monthly at a stated 200 basis points over the  
one-month  LIBOR with the rate capped at 10%.  This security is known commonly 
as a "kitchen sink" bond whose actual rate and cash flows are not predictable.  
The scheduled principal payments on the CMO's are derived from the market's 
median assumptions on mortgage  prepayments.  Actual principal payments on these
securities may vary significantly  from those  assumptions.  In October 1996, 
the Company sold  $12,114,000 of its CMOs including the "kitchen sink" for
a net loss of $92,000.

         The Company also holds  approximately  $36.4 million of GNMA adjustable
rate mortgage-backed  securities.  These securities which are available-for-sale
have current coupon rates between 6.50% and 7.125% and reprice annually with the
repricing dates of the securities  held spread over the next twelve months.  The
coupon rate is based on the one-year  Constant  Maturity  Treasury index ("CMT")
plus 150 basis points. At September 30, 1996 the one-year CMT rate was 5.685%.

         At September 30, 1996, the Company's held-to-maturity portfolio totaled
$43,446,000  compared to  $48,517,000 at December 31, 1995 and  $126,708,000  at
September   30,   1995.   The  most   significant   holdings   in  the   Company
held-to-maturity  portfolio  include $13.6  million  Federal  National  Mortgage
Association  (FNMA)  pass-through  securities  and $23.1 million fixed rate GNMA
pass-through  securities.  The FNMA securities have coupons of between 6.39% and
7.114%,  are fixed until between September 1999 and January 2000, then float off
the one year CMT plus between 204.5 basis points and 219 basis points thereafter
with 2.0% annual limits to the change in the coupon rate.  Many of the Company's
mortgaged-backed  securities were purchased at a significant  premium.  This was
especially true with respect to the Company's GNMA pass-through securities which
have fixed coupon  rates  between 7% and 9%.  These  securities,  which are also
held-to-maturity,  mature  between  the years  2004 and 2008  with the  majority
maturing in 2007,  experience  various prepayment speeds with higher prepayments
reducing  the yield and  slower  prepayments  raising  the  yield.  Overall,  as
interest  rates  declined,  the  yield on the  Company's  investment  securities
decreased from 6.46% during the first nine months of 1995 to 6.24% for the first
nine  months  of 1996.  Contributing  to the  decline  in yield  was the sale of
securities in December,  1995. While a gain of $870,000 was realized,  the yield
going forward was negatively  impacted.  As the Company's focus becomes oriented
more to loan  production,  it is expected  that the  securities  portfolio  will
become a smaller portion of the balance sheet.

         Other operating  income,  excluding  securities  transactions,  totaled
$1,187,000  for the first  nine  months of 1996 and  $432,000  during  the third
quarter,  compared to $1,064,000  for the first nine months of 1995 and $367,000
during the third  quarter of 1995.  The  increase in 1996 was due  primarily  to
higher  mortgage  banking fees which reflects the continuing  pickup in Southern
California  for both mortgage  refinancing  as well as purchases.  The Company's
mortgage banking  operations  consist solely of a broker function.  The Bank, as
broker,  packages all of the  underwriting  criteria and sends the material to a
funding institution.  The funding institution then approves or declines the loan
and if approved,  subsequently  funds the loan  directly.  The Company earns the
points  and any  documentation  fees  charged on the loan but is  otherwise  not
involved in the loan.  Other income also  increased  from certain fee  increases
which took effect on July 1, 1996.

         For the first nine months of 1996, other operating  expenses  increased
$3,630,000  or 48.9%  compared  to the same  period in 1995.  $2,646,000  of the
increase  related to costs incurred in the second quarter as a result of a proxy
contest and related  litigation;  such costs were mainly  incurred as legal fees
and  severance  costs.  Approximately  $115,000  was due to  printing  and proxy
solicitation.  Excluding such costs, other operating expenses increased $984,000
or 11.1%.  There were increases in several  areas,  the largest being legal fees
which increased  $400,000 or 79.1%. This increase was primarily due to increased
costs of loan collections most of which was  substantially  concluded by the end
of the third quarter.  The increase of $313,000 in salary and employee  benefits
was due primarily to nonrecurring  expenses related to management changes during
the third quarter.  Furniture and equipment  increased  $107,000 or 20.4% as the
Company  installed  a wide area  network;  this cost is  moderating  and  should
continue to do so in the fourth quarter of 1996. Other increases included audit,
accounting and examinations  ($54,000) due to an increase in 



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<PAGE>




audits performed in all areas of the Bank's operations, donations ($50,000) and
messenger service ($47,000) due to increased use of outside couriers. These 
increases were largely offset by a reduction in the FDIC assessment of $291,000.
Noninterest expense is expected to be reduced in the fourth quarter.

         The  management  of the  Company  is not aware of any  trends,  events,
uncertainties  or  recommendations  by regulatory  authorities that will have or
that are reasonably  likely to have material  effect on the  liquidity,  capital
resources or operations of the Company.


                           PART II - OTHER INFORMATION



Item 5. Other Information.

         In August 1996,  the Company  entered into a consulting  agreement with
Network Health Financial  Services  (NHFS),  a financial  management and service
firm, pursuant to which NHFS provides consulting services to the Company and the
Bank with respect to policies, staffing and operation. During the third quarter,
the  Company  also  entered  into  negotiations  with  NHFS to form a  strategic
alliance.  Melinda McIntyre-Kolpin is the founder, president and chief executive
officer of NHFS and former  president of First  Professional  Bank. On September
24,  1996,  Ms.  McIntyre-Kolpin  was  appointed  interim  president  and  chief
executive  officer  of  First  Professional  Bank in a first  step in the  joint
creation  of a  comprehensive  set  of  financial  products  and  services.  The
framework of the strategic  alliance between NHFS and First Professional Bank is
expected to be confirmed by the end of the year.


Item 6. Exhibits and Reports on Form 8-K

1.   An 8-K was filed  July 12,  1996 which had  attached  as Exhibit 1, a press
     release dated July 11, 1996 announcing a new Board of Directors, the end of
     litigation and the appointment of an interim Chief Executive Officer.

2.   An 8-K was  filed  July  22,  1996  which  had  attached  as  Exhibit  1, a
     settlement agreement between Professional Bancorp, Inc., First Professional
     Bank,  N.A.,  certain  officers  and  directors  of the  Company,  and  the
     Shareholders  Protective  Committee (the "Settlement  Agreement") which set
     the terms  and  conditions  of the  change in  management  of  Professional
     Bancorp,  Inc. including the makeup of the Board of Directors,  the interim
     Chief Executive Officer,  payments to certain outgoing executive  officers,
     termination of litigation and indemnification of the parties involved.

3.   An 8-K was filed  July 24,  1996 which had  attached  as Exhibit 1, a press
     release,  dated July 18, 1996 detailing the Company's second quarter,  1996
     reported loss.

Exhibit 27.  Financial Data Schedule.




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<PAGE>



                                   SIGNATURES



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


Date:    November 14, 1996                PROFESSIONAL BANCORP, INC.
                                          (Registrant)





                                          Daniel S. Rader
                                          Chief Financial Officer and Treasurer









                                     - 14 -