<PAGE>

================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q

               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                      For the Quarter Ended June 30, 1999


                        Commission File Number: 0-11223

                          PROFESSIONAL BANCORP, INC.
            (Exact name of registrant as specified in its charter)



            Pennsylvania                                      95-3701137
   (State or other jurisdiction of                         (I.R.S. Employer
    incorporation or organization)                        Identification No.)


            606 Broadway
       Santa Monica, California                                  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
                                       ---    ---

As of July 31, 1999, 2,015,873 shares of the Registrant's $0.008 par value
common stock were outstanding.

                                       1
<PAGE>

                          PROFESSIONAL BANCORP, INC.
                                     INDEX

<TABLE>
<CAPTION>
                                                                                                   PAGE
                                                                                                   ----
<C>       <S>                                                                                      <C>
PART I.   FINANCIAL INFORMATION

          Item 1     Financial Statements

                     Consolidated Statements of Financial Condition as of
                     June 30, 1999 and December 31, 1998                                              3

                     Consolidated Statements of Operations
                     for the three and six months ended June 30, 1999 and 1998                        4

                     Consolidated Statements of Comprehensive Income
                     for the three and six months ended June 30, 1999 and 1998                        5

                     Consolidated Statements of Cash Flows for the six months
                     ended June 30, 1999 and 1998                                                     6

                     Notes to Consolidated Financial Statements                                       7

          Item 2     Management's Discussion and Analysis of Financial Condition
                     and Results of Operations                                                        8

          Item 3     Quantitative and Qualitative Disclosures About Market Risk                      22

PART II.  OTHER INFORMATION

          Item 6      Exhibits and Reports on Form 8-K                                               24

SIGNATURES                                                                                           25
</TABLE>

                                       2
<PAGE>

PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS

                   PROFESSIONAL BANCORP, INC. AND SUBSIDIARY
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                June 30,             December 31,
                                                                                  1999                  1998
                                                                                  ----                  ----
                                                                              (Unaudited)
<S>                                                                           <C>                    <C>
Assets
Cash and due from banks:
  Noninterest-bearing                                                         $ 28,975,000           $ 20,992,183
  Interest-bearing                                                               1,154,256                572,519
Federal funds sold                                                               4,400,000             10,400,000
                                                                              ------------           ------------
Cash and cash equivalents                                                       34,529,256             31,964,702

Securities available-for-sale (cost of $50,284,000 and
  $81,369,000 in 1999 and 1998, respectively)                                   47,989,575             80,891,072
Securities held-to-maturity (fair value of $20,559,000
  and $24,135,000 in 1999 and 1998, respectively)                               20,755,274             24,080,592
Loans (net of allowance for loan losses of $2,313,000
  and $2,200,000 in 1999 and 1998, respectively)                               142,905,623            115,518,693
Premises and equipment, net                                                      1,387,555              1,390,128
Deferred tax asset                                                               2,030,245              1,242,748
Accrued interest receivable and other assets                                     4,624,352              4,613,504
                                                                              ------------           ------------
                                                                              $254,221,880           $259,701,439
                                                                              ============           ============

Liabilities and Shareholders' Equity
Liabilities
Deposits:
  Demand, noninterest-bearing                                                 $102,328,229           $109,421,629
  Demand, interest-bearing                                                      12,763,382             16,710,541
  Savings and money market                                                      78,486,356             75,500,642
  Time deposits                                                                 32,753,589             28,947,934
                                                                              ------------           ------------
Total deposits                                                                 226,331,556            230,580,746

Convertible notes                                                                  868,000              1,116,000
Accrued interest payable and other liabilities                                   1,977,692              2,683,582
                                                                              ------------           ------------
Total liabilities                                                              229,177,248            234,380,328
                                                                              ------------           ------------

Commitments and contingent liabilities

Shareholders' equity:
Common stock, $.008 par value; 12,500,000 shares
  authorized; 2,064,710 and 2,064,710 issued
  and 2,015,873 and 1,996,344 outstanding in 1999 and 1998,                         16,683                 16,526
  respectively
Additional paid-in-capital                                                      21,098,088             20,873,603
Retained earnings                                                                5,766,336              5,239,275
Treasury stock, at cost  (69,467 shares in  both 1999 and 1998)                   (537,251)              (537,251)
Unrealized loss on securities available-for-sale, net of taxes                  (1,299,224)              (271,042)
                                                                              ------------           ------------
Total shareholders' equity                                                      25,044,632             25,321,111
                                                                              ------------           ------------
                                                                              $254,221,880           $259,701,439
                                                                              ============           ============
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                      PROFESSIONAL BANCORP AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>                                                                Three Months Ended           Six Months Ended
                                                                              June 30,                    June 30,

                                                                    -----------------------------------------------------
                                                                          1999         1998          1999         1998
                                                                    -----------------------------------------------------
<S>                                                                    <C>          <C>           <C>          <C>
Interest income
Loans                                                                  $3,193,826   $2,502,264    $6,078,172   $4,978,008
Securities                                                              1,057,459    1,071,114     2,379,203    2,356,289
Federal funds sold and securities purchased
     under agreements to resell                                           162,913      544,736       246,299      791,656
Interest-bearing deposits in other banks                                    4,595        1,589        36,062        3,135
                                                                    -----------------------------------------------------
Total interest income                                                   4,418,793    4,119,703     8,739,736    8,129,088
                                                                    -----------------------------------------------------

Interest expense
Deposits                                                                  737,257      814,435     1,461,101    1,604,529
Convertible notes                                                          13,242       81,559        29,789      189,748
Federal funds purchased and securities
     sold under agreements to repurchase                                        -            -       108,737        3,055
                                                                    -----------------------------------------------------
Total interest expense                                                    750,499      895,994     1,599,627    1,797,332
                                                                    -----------------------------------------------------
Net interest income                                                     3,668,294    3,223,709     7,140,109    6,331,756
Provision for loan losses                                                  47,000            -       172,000            -
                                                                    -----------------------------------------------------
Net interest income after provision
     for loan losses                                                    3,621,294    3,223,709     6,968,109    6,331,756
                                                                    -----------------------------------------------------

Other operating income
Net gain (loss) on sale securities available-for-sale                       4,266       (8,735)       39,610       (8,735)
Merchant discount                                                          78,980       50,593       140,492      109,277
Mortgage brokering fees                                                     8,308       69,577        63,094       83,523
Service charges on deposits                                               228,541      222,842       457,608      479,789
Other income                                                              127,459      125,795       262,894      263,153
                                                                    -----------------------------------------------------
Total other operating income                                              447,554      460,072       963,698      927,007
                                                                    -----------------------------------------------------
Other operating expenses
Salaries and employee benefits                                          1,785,603    1,653,224     3,491,048    3,191,079
Occupancy                                                                 350,966      352,892       737,957      701,463
Furniture and equipment                                                   214,247      199,793       423,206      390,265
Meetings and business development                                          47,764       61,875       120,755       93,950
Donations                                                                  66,365       25,816        90,146       62,752
Other promotion                                                            72,774       84,324       142,546      152,262
Legal fees                                                                226,477      159,551       318,112      251,897
Audit, accounting and examinations                                        129,615       40,495       172,605       84,035
Professional services                                                     334,163      282,215       642,605      639,229
Strategic planning and other outside consulting                            16,399       37,473        22,629       91,388
Office supplies                                                            63,458       55,481       126,657      121,494
Telephone                                                                  61,381       71,845       123,731      140,512
Postage                                                                    33,147       40,392        68,732       81,394
Messenger service                                                           8,087        8,280        14,128       17,498
FDIC assessment                                                             6,290        6,609        12,693       12,762
Other assessments                                                          47,961       44,648        91,633       87,829
Other expense                                                             139,742      170,637       299,368      308,388
                                                                    -----------------------------------------------------
Total other operating expenses                                          3,604,439    3,295,550     6,898,551    6,428,197
                                                                    -----------------------------------------------------
Earnings before taxes                                                     464,409      388,231     1,033,256      830,566
Provision for income taxes                                                172,141      164,000       405,445      302,000
                                                                    -----------------------------------------------------
Net earnings                                                           $  292,268   $  224,231    $  627,811   $  528,566
                                                                    =====================================================

Earnings per share
    Basic                                                              $     0.14   $     0.13    $     0.31   $     0.34
    Diluted                                                            $     0.14   $     0.13    $     0.30   $     0.30
</TABLE>
                  See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                  PROFESSIONAL BANCORP, INC.  AND SUBSIDAIRY
                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                 Three Months Ended                       Six Months Ended
                                                                      June 30,                                 June 30,
                                                                      --------                                 --------
                                                               1999                1998               1999                 1998
                                                               ----                ----               ----                 ----
<S>                                                         <C>                  <C>              <C>                    <C>
Net earnings                                                $ 292,268            $224,231         $   627,811            $528,566
Other Comprehensive Income, net of tax
  Unrealized gains (losses) on securities
      available for sale:
    Unrealized holding gains (losses) arising
       during the period                                     (857,157)            (80,767)         (1,047,417)            117,931
    Reclassification adjustment                                (1,787)            (11,434)             19,235             (11,434)
                                                            ---------------------------------------------------------------------
    Other Comprehensive Income                               (858,944)            (92,201)         (1,028,182)            106,497
                                                            ---------------------------------------------------------------------

Comprehensive Income (Loss)                                 $(566,676)           $132,030         $  (400,371)           $635,063
                                                            =====================================================================
</TABLE>
         See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

                  PROFESSIONAL BANCORP, INC.  AND SUBSIDAIRY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
                                                                                                    Six Months Ended June 30,
                                                                                                    1999                 1998
                                                                                                    ----                 ----
<S>                                                                                             <C>                <C>
Cash flows from operating activities:
  Net earnings                                                                                  $    627,811       $    528,566
  Adjustments to reconcile net earnings to net
   cash provided by operating activities:
    Depreciation and amortization                                                                    294,362            290,054
    Provision for loan losses                                                                        172,000                  -
    (Gain) loss on sales of securities available-for-sale                                            (39,610)             8,735
    Amortization of convertible note expense                                                           8,864             52,255
    Increase in deferred tax asset                                                                  (787,497)          (214,291)
    Decrease in accrued interest receivable and other assets                                         744,423              6,959
    Increase in accrued interest payable and other liabilities                                      (705,887)          (110,971)
    Net amortization of premiums and discounts
     on securities held-to-maturity                                                                  120,954            183,362
    Net amortization of premiums and discounts
     on securities available-for-sale                                                                149,000            161,142
                                                                                                ------------       ------------
   Net cash provided by operating activities                                                         584,420            905,811
                                                                                                ------------       ------------
Cash flows from investing activities:
  Proceeds from:
    Maturities of securities held-to-maturity                                                        250,000          3,056,168
    Maturities of securities available-for-sale                                                            -          6,870,516
    Sales of securities available-for-sale                                                        27,187,261         10,234,664
  Principal payments and maturities of:
    Mortgage-backed securities held-to-maturity                                                    2,954,364          2,544,830
    Mortgage-backed securities available-for-sale                                                  5,736,476          6,348,014
  Purchases of securities available-for-sale                                                      (1,947,308)       (10,637,813)
  Net (increase) decrease in loans                                                               (27,558,930)         5,618,520
  Purchase of bank premises and equipment, net                                                      (291,789)          (242,079)
                                                                                                ------------       ------------
  Net cash provided by investing activities                                                        6,330,074         23,792,820
                                                                                                ------------       ------------
Cash flows from financing activities:
  Net decrease in demand deposits and savings accounts                                            (8,054,845)       (11,749,284)
  Net increase (decrease) in time deposits                                                         3,805,655         (1,081,895)
  Cash dividends                                                                                    (100,750)           (83,825)
  Proceeds from exercise of stock options                                                                  -          3,794,363
                                                                                                ------------       ------------
Net cash used in financing activities                                                             (4,349,940)        (9,120,641)
                                                                                                ------------       ------------
Net decrease in cash and cash equivalents                                                          2,564,554         15,577,990
                                                                                                ------------       ------------
Cash and cash equivalents, beginning of period                                                    31,964,702         54,339,670
                                                                                                ------------       ------------
Cash and cash equivalents, end of period                                                        $ 34,529,256       $ 69,917,660
                                                                                                ============       ============
Supplemental disclosure of cash flow information -
     Cash paid during the period for:
     Interest                                                                                   $  1,605,992       $  1,925,902
     Income taxes                                                                               $  1,120,000       $    122,000
Supplemental disclosure of noncash items:
     Decrease in unrealized losses on securities available for sale securities, net of tax      $  1,815,678       $    170,509
     Conversion of notes                                                                        $    214,988       $  2,836,562
     Tax benefit on stock options exercised                                                                -       $    560,384
</TABLE>

            See accompanying notes to consolidated financial statements.

                                       6
<PAGE>

                   PROFESSIONAL BANCORP, INC. AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1 - BASIS OF PRESENTATION

         The unaudited consolidated financial statements included herein have
been prepared by Professional Bancorp, Inc. (the "Company") pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the results of operations for the periods covered
have been made. Certain information and note disclosures normally included in
financial statements presented in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Management believes that the disclosures are adequate to make the
information presented not misleading.

         The financial position at June 30, 1999, and the results of operations
for the three and six months ended June 30, 1999 are not necessarily indicative
of the results of operations that may be expected for the year ending December
31, 1999. These unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles on a basis
consistent with the Company's audited financial statements, and these interim
financial statements should be read in conjunction with the Company's audited
financial statements and notes thereto included in the Company's Form 10-K for
the year ended December 31, 1998.


Note 2 - Adoption of New Accounting Standards

         As of December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128), and has
restated all prior period earnings per share data. SFAS No. 128 replaces primary
EPS with basic EPS and fully diluted EPS with diluted EPS. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted from issuance of common stock that then shared in earnings.

         The Company adopted, effective January 1, 1998, Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130).
SFAS No. 130 requires companies to report comprehensive income and its
components in a financial statement and display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in-
capital. Comprehensive income includes all changes in equity during a period
except those resulting from investments by stockholders and distributions to
stockholders. For the three and six months ended June 30, 1999, net earnings
totaled $292,268 and $627,811, other comprehensive income (loss) totaled
$(848,944) and $(1,028,182) and total comprehensive income (loss) totaled
$(556,676) and $(400,371), respectively.

                                       7
<PAGE>

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


Financial Condition

         Professional Bancorp, Inc. (the "Company"), holding company for First
Professional Bank, N.A. (the "Bank"), recorded net earnings of $292,268 or $0.14
per share for the second quarter of 1999, compared with net earnings of $224,231
or $0.13 per share for the second quarter of 1998. For the six months ended June
30, 1999, the Company had net earnings of $627,811 or $0.31 per share, this
compares to net earnings of $528,566 or $0.34 per share for the first six months
of 1998. The Company had total assets of $254,221,880 at June 30, 1999, compared
to $259,701,439 at December 31, 1998.


Loans

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

<TABLE>
<CAPTION>

                                                    June 30, 1999                      December 31, 1998
                                            -----------------------------------------------------------------
(in thousands)                                 Amount        % of Total              Amount       % of Total
                                            -------------   ------------          ------------   ------------
<S>                                         <C>             <C>                   <C>            <C>
Commercial                                       $111,534          76.7%              $ 93,952          79.7%
Real estate secured commercial                     23,289          16.0                 11,698           9.9
                                                 --------         -----               --------         -----
                                                  134,823          92.7                105,650          89.6
Equity lines of credit                              4,407           3.0                  5,931           5.0
Other lines of credit                               4,687           3.2                  4,817           4.1
Installment                                         1,545           1.1                  1,482           1.3
Lease financing                                         -             -                     32             -
                                                 --------         -----               --------         -----
         Gross loans                              145,462         100.0%               117,912         100.0%

Less:
     Allowance for loan losses                      2,313                                2,200
     Deferred loan fees, net                          243                                  193
                                                 --------                             --------
         Net loans                               $142,906                             $115,519
                                                 ========                             ========
</TABLE>

         In accordance with management's credit administration and regulatory
policy, loans are placed on nonaccrual status when the collection of principal
or interest is questionable. Generally, this means that loans are placed on
nonaccrual status when interest is 90 days or more past due, unless the loan is
well secured and in the process of collection or in the process of renewal.
Nonperforming loans and nonperforming assets do not include accruing loans 90
days or more past due where loan quality is not impaired, but rather the renewal
in process is pending receipt of the borrower's updated financial information.

         Credit administrative policies discourage the use of "short-term"
extensions while awaiting receipt of updated financial packages from borrowers.
The policy is aimed at facilitating timely credit renewals. However, as a result
of this policy, aggregate "past due" volumes will not necessarily be correlative
to absolute asset quality measurement.

                                       8
<PAGE>

         The following table sets forth information about nonperforming assets
(which include nonaccrual loans, other real estate owned and other repossessed
assets), accruing loans 90 days or more past due, and certain ratios.

<TABLE>
<CAPTION>
                                                                        June 30,                 December 31,
(in thousands)                                                           1999                       1998
                                                                         ----                       ----
<S>                                                                     <C>                      <C>
Nonperforming loans                                                     $2,301                      $1,359
Other real estate owned (OREO)                                               -                           -
Other repossessed assets                                                   272                         272
                                                                        ------                      ------
     Total nonperforming assets                                         $2,573                      $1,631
                                                                        ======                      ======

Accruing loans 90 days or more past due                                 $1,579                      $  100
                                                                        ======                      ======

Nonperforming loans to total loans(1)                                     1.58%                       1.15%
Nonperforming assets(1)
     to total loans                                                       1.77%                       1.38%
     to total loans, OREO and repossessed assets                          1.77%                       1.38%
     to total assets                                                      1.01%                       0.63%
</TABLE>

         (1) Nonperforming loans and nonperforming assets do not include
accruing loans 90 days or more past due.

         The total accrued interest on loans 90 days or more past due and still
accruing was approximately $4,855 at June 30, 1999, and the Company had no
accrued interest due on loans 90 days past due at December 31, 1998. The
$1,579,000 in accruing loans over 90 days or more past due and still accruing as
of June 30, 1999 were all in the process of being renewed, paid off or the
credit quality was not impaired. As a result of the Company's practice to
discourage "short-term" extensions, these loans are carried as "past due" to
ensure proper underwriting and administrative controls.

         The Company maintains the allowance for loan losses at a level
considered adequate by management to provide for potential loan losses. While
the Company's policy is to charge-off in the current period those loans for
which a loss is considered probable, there also exists the risk of future losses
which cannot be precisely quantified or attributed to particular loans.
Reasonable estimates of these future amounts are included in the allowance for
loan losses.

                                       9
<PAGE>

         The following table provides a summary of the Company's allowance for
loan losses and charge-off and recovery activity during the six months ended
June 30, 1999, the year ended December 31, 1998, and the six months ended June
30, 1998:

<TABLE>
<CAPTION>
                                                                                  Period Ended
                                                                                  ------------
                                                             June 30,                December 31,          June 30,
(in thousands)                                                 1999                     1998                 1998
                                                               ----                     ----                 ----
<S>                                                          <C>                     <C>                   <C>
Balance at beginning of period                                $  2,200                $  1,802             $  1,802
Provision for loan losses                                          172                     406                    -
                                                              --------                --------             --------
                                                                 2,372                   2,208                1,802
                                                              --------                --------             --------
Loan charge-offs                                                   136                     269                   60
Recoveries on loans previously charged-off                         (77)                   (261)                (109)
                                                              --------                --------             --------
   Net charge-offs (recoveries)                                     59                       8                  (49)
                                                              --------                --------             --------
Balance at end of period                                      $  2,313                $  2,200             $  1,851
                                                              ========                ========             ========

Loans outstanding at end of period                            $145,462                $117,912             $100,213
Average loans outstanding during period                        133,369                 103,548              101,342

Net charge-offs (recoveries) to average loans outstanding         0.04%                   0.01%               -0.10%
Allowance for loan losses:

   to total loans                                                 1.59                    1.87                 1.85
   to nonperforming loans/(1)/                                  100.52                  161.88               351.23
   to nonperforming assets/(1)/                                  89.90                  134.89               231.66
</TABLE>
/(1)/ Nonperforming loans and nonperforming assets do not include accruing loans
90 days or more past due.


         Management considers a loan to be impaired when, based upon available
information and current events, it believes that it is probable the Company will
be unable to collect all amounts due on a timely basis in accordance with the
contractual terms of the loan agreement. Impairment of a loan is measured by the
present value of expected future cash flows discounted at the loan's effective
interest rate, the loan's observable market price, or the fair value of the
collateral if the loan is collateral dependent. Impairment is recognized by the
establishment of a valuation allowance equal to the excess of the Company's
recorded investment in the loan over its measured value.

         The Company had $2,535,000 in impaired loans as of June 30,1999. The
carrying value of impaired loans for which there is a related allowance for loan
losses was $280,000, with the amount of specific allowance for loan losses
allocated to these loans of $56,000. There was $2,255,000 in impaired loans for
which there were a general allowance allocated consistent with the Company's
allowance for loan loss methodology. The average recorded investment in impaired
loans during the first six months of 1999 was approximately $2,371,000 and
income recorded utilizing the cash basis and accrual basis method of accounting
was $11,000. Impaired loans at June 30, 1999, included $1,230,000 of nonaccrual
loans. Included in impaired loans as of June 30, 1999 were $1,213,000 of
troubled debt restructured loans, $808,000 of which were on nonaccrual and the
remaining $404,000 were in compliance with the modified terms.

                                       10
<PAGE>

         The Company had approximately $1,836,000 in impaired loans as of
December 31, 1998. The carrying value of impaired loans for which there is a
related allowance for loan losses was $153,000, with the amount of specific
allowance for loan losses allocated to these loans of $41,000. There were
$1,683,000 in impaired loans for which there was no related specific allowance
for loan losses. However, general allowance consistent with the level of
allowance for similar loans with similar risk characteristics were maintained
for impaired loans without specific allowance. The average recorded investment
in impaired loans during 1998 was $1,131,000. Impaired loans at December 31,
1998 included $1,359,000 of nonaccrual loans. Included in impaired loans as of
December 31, 1998 were $614,000 of troubled debt restructured loans, $341,000 of
which were on nonaccrual and the remaining $273,000 were in compliance with the
modified terms.

         The Company had $839,000 in impaired loans as of June 30, 1998. The
carrying value of impaired loans for which there is a related allowance for loan
losses was $193,000, with the amount of specific allowance for loan losses
allocated to these loans of $59,000. There were $646,000 in impaired loans for
which there was a general allowance allocated consistent with the Company's
allowance for loan loss methodology. The average recorded investment in impaired
loans during the first six months of 1998 was approximately $981,000 and income
recorded utilizing the cash basis and accrual basis method of accounting was
$33,000. Included in impaired loans as of June 30, 1998 were $374,000 of
troubled debt restructured loans, $62,000 of which were on nonaccrual and the
remaining $312,000 were in compliance with the modified terms.

Investment Securities

         The following table sets forth the amortized cost and fair value of
securities available-for-sale as of June 30, 1999 and December 31, 1998:

<TABLE>
<CAPTION>
                                                                            June 30, 1999
                                                    -------------------------------------------------------------
                                                                        Gross           Gross
                                                     Amortized       Unrealized       Unrealized          Fair
(in thousands)                                         Cost             Gain             Loss             Value
                                                       ----             ----             ----             -----
<S>                                                  <C>             <C>              <C>                <C>
U.S. Government securities                            $     -        $         -       $      -          $     -
U.S. Government agency and
   mortgage-backed securities                          39,358                  -          1,675           37,683
Small Business Administration securities                  767                  -             24              743
Municipal securities                                    2,551                  -            124            2,427
Federal Reserve Bank Stock                                439                  -             25              414
Collateralized mortgage obligations                     7,169                  -            446            6,723
                                                      -------        -----------       --------          -------
        Total                                         $50,284        $         -       $  2,294          $47,990
                                                      =======        ===========       ========          =======

<CAPTION>
                                                                          December 31, 1998
                                                    -------------------------------------------------------------
                                                                        Gross           Gross
                                                     Amortized       Unrealized       Unrealized          Fair
(in thousands)                                          Cost            Gain             Loss             Value
                                                        ----            ----             ----             -----
<S>                                                  <C>             <C>              <C>                <C>
U.S. Government securities                            $     -        $        -        $      -          $     -
U.S. Government agency and
   mortgage-backed securities                          68,487               153             514           68,126
Small Business Administration securities                  858                 1               7              852
Municipal securities                                    2,551                 3               8            2,546
Federal Reserve Bank Stock                                439                 -               -              439
Collateralized mortgage obligations                     9,034                 -             106            8,928
                                                      -------        -----------       ---------         -------
        Total                                         $81,369        $      157        $    635          $80,891
                                                      =======        ==========        ========          =======
</TABLE>


                                       11
<PAGE>

         The amortized cost and fair value of securities held-to-maturity as of
June 30, 1999, and December 31, 1998 are as follows:

<TABLE>
<CAPTION>
                                                                        June 30, 1999
                                           ------------------------------------------------------------------------
                                                                  Gross               Gross
                                            Amortized           Unrealized          Unrealized              Fair
(in thousands)                                 Cost                Gain                Loss                 Value
                                               ----                ----                ----                 -----
<S>                                        <C>                  <C>                 <C>                    <C>
U.S. Government securities                   $ 3,038               $ 22                $  4                $ 3,056
U.S. Government agency securities              2,000                  -                  20                  1,980
U.S. Government agency
   mortgage-backed securities                 15,717                  5                 199                 15,523
                                             -------               ----                ----                -------
        Total                                $20,755               $ 27                $223                $20,559
                                             =======               ====                ====                =======

<CAPTION>
                                                                        December 31, 1998
                                           ------------------------------------------------------------------------
                                                                  Gross               Gross
                                            Amortized           Unrealized          Unrealized              Fair
(in thousands)                                 Cost                Gain                Loss                 Value
                                               ----                ----                ----                 -----
<S>                                        <C>                  <C>                 <C>                    <C>
U.S. Government securities                   $ 3,043               $151                $  -                $ 3,194
U.S. Government agency securities              2,250                 21                   -                  2,271
U.S. Government agency                             -                  -                   -                      -
   mortgage-backed securities                 18,788                  1                 119                 18,670
                                             -------               ----                ----                -------
        Total                                $24,081               $173                $119                $24,135
                                             =======               ====                ====                =======
</TABLE>

         During the six months ended June 30, 1999 and the twelve months ended
December 31, 1998, securities available-for-sale were sold for aggregate
proceeds of $27,148,000 and $15,337,000, respectively. These sales resulted in
gross realized gains and losses of $97,000 and ($57,000) for the six months
ended June 30, 1999 and $12,000 and ($18,000) for the twelve months period ended
December 31, 1998.

Deposits

         Total deposits at June 30, 1999 were $226,332,000, a decrease of
$4,249,000 or 1.84% from $230,581,000 at December 31, 1998. The Company attracts
deposits primarily from individuals and businesses related to the health care
services industry, as well as other professionals and professional services
firms. The Company has no brokered deposits and the Company's practice is to not
purchase brokered deposits.

         The following table sets forth the amount of deposits by category and
the percentage of each category to total deposits as of June 30, 1999 and
December 31, 1998:

<TABLE>
<CAPTION>

                                                         June 30, 1999                         December 31, 1998
(in thousands)                                     Amount           % of Total             Amount           % of Total
                                                   ------           ----------             ------           ----------
<S>                                               <C>               <C>                   <C>               <C>
Demand, noninterest-bearing                       $102,329             45.21%             $109,422             47.46%
Demand, interest-bearing                            12,764              5.64                16,710              7.25
Savings deposits                                    12,782              5.65                12,553              5.44
Money market deposits                               65,704             29.03                62,948             27.30
Time deposits under $100,000                         8,335              3.68                 8,625              3.74
Time deposits of $100,000 and over                  24,418             10.79                20,323               .81
                                                  --------            ------              --------            ------
                                                  $226,332            100.00%             $230,581            100.00%
                                                  ========            ======              ========            ======
</TABLE>


                                       12
<PAGE>

     Historically, deposit levels increase substantially at year-end as clients
increase cash reserves required for first and second quarter tax payments and
bonuses.   In addition, increasing competition for operating cash deposits comes
from broker dealer products and accounts.  In order to minimize the effects of
such "disintermediation" from the Company to such accounts, the Company is
currently offering to clientele such accounts through its CNET products. The
CNET product is a money market mutual fund. The goal of the fund is to provide
as high a level of current income as is consistent with preservation of
principal and liquidity.  The fund is managed by The Cadre Network Health
Financial Services Liquid Asset Fund, and is not insured by the FDIC and is not
an obligation of, or guaranteed by the Company or its subsidiaries and is
subject to investment risk, including possible loss of principal invested.

Capital

     The Office of the Comptroller of the Currency (the "OCC"), the Bank's
primary regulator, 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 average total assets) of 3.0% 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% 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 Bank, as Bancorp'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% 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% plus an
additional cushion of 100 to 200 basis points. The Federal Reserve Bank has not
advised the Bancorp of any specific minimum Tier 1 capital leverage ratio
applicable to it.

     Risk-based capital standards were implemented on December 31, 1992. Since
December 31, 1992, banking organizations have been expected to meet a minimum
ratio for qualifying total capital to risk-weighted assets of 8.0%, 4.0% of
which must be Tier 1 capital. A banking organization's risk-based capital ratios
are obtained by dividing its qualifying capital by its total risk-adjusted
assets and risk-weighted off-balance sheet items.

     The Federal Deposit Insurance Act of 1991 contains "prompt correction
action" provisions pursuant to which insured depository institutions are to be
classified into one of five categories based primarily upon capital adequacy,
ranging from "well-capitalized" to "critically undercapitalized" and which
require, subject to certain exceptions, the appropriate federal banking agency
to take prompt corrective action with respect to an institution which becomes
"undercapitalized" and to take additional actions if the institution becomes
"significantly undercapitalized" or "critically undercapitalized."

                                       13
<PAGE>

     The following table presents the capital ratios for the Company and the
Bank, compared with the standards for "well-capitalized" depository institutions
(which standards do not apply to bank holding companies) and the minimum
required capital ratios to be deemed "adequately capitalized" under applicable
federal regulations, as of June 30, 1999.

<TABLE>
<CAPTION>
                                                                                              To Be Well
                                                                                           Capitalized Under
                                                                For Capital                Prompt Corrective
                                      Actual                 Adequacy Purposes             Action Provisions
                                 ---------------             -----------------             -----------------
(in thousands)                   Amount    Ratio              Amount     Ratio             Amount     Ratio
                                 ------    -----              ------     -----             ------     -----
<S>                              <C>       <C>                <C>        <C>               <C>        <C>
Company
Leverage/(1)/                    $26,344   10.29%             $10,238    4.00%             $12,797    5.00%
Tier 1 Risk-Based                 26,344   15.31%               6,884    4.00%              10,326    6.00%
Total Risk-Based                  29,365   17.06%              13,768    8.00%              17,210   10.00%

Bank
Leverage                         $23,342    9.16%             $10,190    4.00%             $12,737    5.00%
Tier 1 Risk-Based                 23,342   13.69%               6,821    4.00%              10,231    6.00%
Total Risk-Based                  25,476   14.94%              13,641    8.00%              17,051   10.00%
</TABLE>


/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.

     The Company and the Bank, at June 30,1999, were considered "well-
capitalized" and exceeded all applicable minimum capital requirements. Capital
requirements of the federal banking regulators, however, could limit the
Company's future growth if the Company were to rely solely on the retention of
earnings to generate additional capital or rapid growth.

     On May 29, 1998, the Company gave notice of its' intent to call for partial
redemption of $2,625,000 principal amount of the Professional Bancorp, Inc.,
8.50% Convertible Subordinated Reset Notes due March 1, 2004. As a result of
this call, approximately $2,552,000 of the notes converted to 200,955 shares of
common stock and $73,000 in notes were redeemed by the June 30, 1998 redemption
date. For the six months ended June 30, 1999, approximately $248,000 of notes
were converted to 19,529 shares of common stock.

Liquidity

     The Company's primary source of liquidity is dividends from the Bank.
Dividends from the Bank to the Company are subject to certain regulatory
restrictions. Under federal banking law, dividends declared by the Bank in any
calendar year may not, without the approval of the OCC, exceed its net earnings,
as defined, for that year combined with its retained net earnings for the
proceeding two years.

     The Bank's primary sources of liquidity are federal funds sold to other
banks and the investment securities portfolio. For the six months ended June 30,
1999, federal funds sold averaged $10,413,000 and compared to $29,395,000 for
the same period in 1998. In addition, securities in the available-for-sale
portfolio can be sold in response to liquidity needs or used as collateral under
reverse repurchase agreements. Securities held-to-maturity are available for
liquidity needs primarily as collateral for reverse repurchase agreements. The
fair value of securities available-for-sale and securities held-to-maturity at
June 30, 1999, were $47,990,000 and $20,559,000, respectively.

     The Bank sells securities under agreements to repurchase. Securities sold
under repurchase agreements are recorded as short-term obligations. During the
first six months of 1999, the highest daily outstanding balance and the average
balance of securities sold under agreements to repurchase were $25,000,000 and
$4,368,000, respectively; the average rate paid was 4.95%. At June 30, 1999,
there were no securities sold under agreements to repurchase.

                                       14
<PAGE>

Year 2000

The Year 2000 issue presents a very real and significant challenge to the
Company, along with the entire financial services industry. This problem has the
potential to affect a wide range of systems and equipment, including software
and hardware, utilities, communications platforms and devices, and facilities.
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to represent the calendar year.  Software so developed
and not corrected could produce inaccurate or unpredictable results when dates
change in the year 2000. Such occurrences may have a material adverse effect on
the Company's financial condition, results of operations, or business as the
Company, like most financial organizations, is significantly subject to the
potential Year 2000 issues due to the nature of financial information.

While no one can accurately predict what will happen with the date change to the
Year 2000, the Company's management and Board of Directors take the potential
risks seriously, and have been working since early in 1997, and will continue to
work hard, to be prepared for the Year 2000 transition.

There are a number of broad concerns that may affect the Company, our customers,
and business partners. In the event of a Year 2000 failure, the Company could be
adversely impacted in a number of ways.  Internal operations problems and
problems resulting from primary vendors and suppliers inability to perform could
cause increased costs in determining correct results and lost customers
resulting in lost revenue.  Large customers negatively effected by Year 2000
problems could lead to deposit outflows or increased risk of collecting loans.
As part of our efforts to ensure compliance with government regulatory standards
and establish prudent business practices for Year 2000 issues, the Board of
Directors and senior management have previously developed and approved a Year
2000 preparedness plan, which is currently being implemented.  The Company's
Year 2000 risk mitigation program is a dynamic process of reassessment,
evaluation and testing.  As a result, responses may change especially as vendors
and manufacturers find and report Year 2000 product and services issues.  The
following outlines major areas within the plan and provides the status of our
efforts:

Awareness: Our plan provides for a Year 2000 task force which reports at least
quarterly reporting to the Audit Committee and Board of Directors of the
Company.  The task force, which meets monthly, consists of members of senior
management representatives from key areas within the Company.  The task force,
among other roles, monitors and report progress, and provides direction toward
preparation for the Year 2000 date change.

Assessment:  The task force has developed an overall strategy which identifies
and categorizes internal information and operating systems, and external
vendors, customers, auditors and business partners, according to risk of
business disruption. Each operating system, process, vendor, or other business
partner is risk assessed based upon the impact on the Company's business.  High
risk processes and systems have been categorized as "mission critical" and have
been prioritized in our Year 2000 risk mitigation process. Testing plans have
been developed, and we have completed testing all mission critical and many
other identified systems. The testing of substantially all systems was completed
by June 30, 1999. We have identified contingency plans and alternatives,
including replacement or elimination, for mission critical systems and other
systems in the event that such actions become necessary. Also, we have
integrated the Year 2000 business risks into our overall bankwide business
resumption plans.
                                       15
<PAGE>

In addition, as a lending institution, the Company is exposed to potential risk
if it's customers suffer Year 2000 related difficulties. Therefore, we have
developed, and implemented, a process to assess the potential risks to the
Company of both our lending and deposit customer's preparedness for the Year
2000 date change. Also, potential borrower's readiness for Year 2000 is assessed
and included within the credit underwriting and approval process.

Remediation:  The remediation phase includes upgrading or replacing information
or operating systems, vendor certifications, and other associated changes.  We
have begun renovation of systems, including non-information technology systems,
that have been identified as non-compliant to Year 2000, including replacing
some personal computers, or upgrading software and other operating systems.  The
renovation of mission critical systems where indicated is complete. The extent
of our identified renovation needs have been budgeted within our corporate
budgeting process.

Additionally, we have received vendor responses or certification for all of our
mission critical systems, along with most of our other information and operating
systems.  These responses are monitored continually to determine the vendors'
progress toward preparedness.

Validation/Implementation: As operating systems are validated, upgraded, and
successfully tested the systems are integrated into ongoing operations. As with
any new system, or system change, internal/external users are provided training,
connectivity with other systems is determined and integration into current
processes occurs. Validation and implementation of mission critical systems was
completed by December 31, 1998.  In addition, we have instituted an independent
third party review of our Year 2000 efforts for all mission critical systems.

Significant progress has been accomplished in our efforts to prepare for the
Year 2000-century date change. All of our mission critical systems have been
tested and none have failed. Additionally, we are 95% complete assessing,
renovating, testing and implementing Year 2000 preparedness for all other
identified systems. Management currently estimates the overall cost of Year 2000
risk mitigation not to exceed $100,000 in operating expenses and $300,000 in
fixed asset purchases for fiscal 1999 of which approximately 85% has been
incurred. These costs are included within our ongoing budget and planning
process.

We continue with the execution of our Year 2000 Preparedness Plan and remain on
schedule to meet our internal timeline and regulatory expectations. Also, we
have developed and presented internal and external awareness programs, which
reinforce the awareness and the need for preparedness to the Year 2000 problem
for the Company's Board of Directors, employees, and our customers. Based upon
the information we have developed through our Year 2000 Preparedness Plan, we
have not identified risks associated with the date change to Year 2000 that will
have a material financial impact on the Company.

Results of Operations

          The Company reported consolidated net earnings of $292,268 for the
second quarter of 1999, compared with net earnings of $224,231 for the second
quarter of 1998.  Basic and diluted earnings per share for the second quarter of
1999 were $0.14, compared to $0.13 basic and diluted earnings per share for the
same period in 1998.  Return on average shareholders' equity for the second
quarter of 1999 and 1998, were 4.54% and 4.14%, respectively.  Additionally,
return on average assets for the second quarter of 1999 and 1998, were 0.46% and
0.36%, respectively.

                                       16
<PAGE>

     For the first six months of 1999, the Company reported net earnings of
$627,811 compared to $528,566 for the same period in 1998.  Basic and diluted
earnings per share for the six months ended June 30, 1999 were,  $0.31 and
$0.30, respectively.  Comparatively, basic and diluted earnings per share for
the six months ended June 30, 1998, were $0.34 and $0.30, respectively.  Return
on average shareholders' equity for the six months ended June 30, 1999 and 1998,
were 4.90% and 5.48%, respectively.  Additionally, return on average assets for
the six months ended June 30, 1999 and 1998, were 0.49% and 0.44%, respectively.

     The comparative improvement in net earnings for the second quarter and
first six months of 1999, as compared to the same periods in 1998, resulted from
increased interest income from loans and reduced interest expense for deposits
and other borrowings. In addition, net earnings for the second quarter and first
six months of 1999, were adversely impacted by higher than anticipated levels of
professional service expenses, primarily due to expenses related to completing
the 1998 audit and increased legal fees for corporate and lending activities.

Net Interest Income

     The Company's earnings depend primarily on net interest income, which is
the difference between the interest and fees earned on loans and investments
less the interest paid on deposits, borrowings and convertible notes. For the
quarter ended June 30, 1999, net interest income increased 13.8% to $3,668,000
from $3,224,000 for the quarter ended June 30, 1998. For the six months ended
June 30, 1999 and 1998 net interest income was $7,140,000 and $6,332,000,
respectively. The increase in net interest income for the second quarter June
30, 1999 as compared to the same period in 1998, is primarily the result of a
39% or $39,027,000 increase in average loans outstanding during the quarter. For
the six months ended June 30, 1999 average loans outstanding grew 31.6% to
$133,369,000 as compared to $101,342,000 for the same period in 1998. For the
three and six months ended June 30, 1999, the net interest margin was 6.50% and
6.34%, respectively, compared to 5.96% and 6.03% for the same respective periods
in 1998.

                                       17
<PAGE>

     The following tables present the distribution of average assets,
liabilities and shareholders' equity as well as the total dollar amount of
interest income from average interest-earning assets and resultant yields, and
the dollar amounts of interest expense and average interest-bearing liabilities,
expressed both in dollars and rates for the three months ended June 30, 1999 and
1998.
<TABLE>
<CAPTION>

                                                                            Three Months Ended June 30,
                                                                            ---------------------------
                                                                     1999                                 1998
                                                                     ----                                 ----

                                                        Average     Yield/                   Average     Yield/
(in thousands)                                          Balance      Rate     Interest       Balance      Rate     Interest
                                                       ----------   -------   --------      ----------   -------   --------
<S>                                                     <C>         <C>       <C>            <C>         <C>       <C>
Assets
Interest-earning assets:
   Securities                                           $ 72,389      5.86%     $1,057       $ 76,045      5.65%     $1,071
   Loans/(1)/                                            139,089      9.21       3,194        100,062     10.03       2,502
   Federal funds sold                                     13,751      4.75         163         40,328      5.42         545
   Interest-earning deposits - banks                       1,317      1.40           5            614      1.31           2
                                                        --------                ------       --------                ------
        Total interest-earning assets                    226,546      7.82       4,419        217,049      7.61       4,120
                                                        --------                ------       --------                ------
Deferred loan fees                                          (219)                                 (92)
Allowance for loan losses                                 (2,303)                              (1,843)
Noninterest-earning assets:
   Cash and due from banks                                24,700                               23,619
   Premises and equipment                                  1,404                                1,557
   Other assets                                            5,986                                5,897
                                                        --------                             --------
        Total assets                                    $256,114                             $246,187
                                                        ========                             ========

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
   Interest-bearing demand deposits                     $ 13,688      0.70%     $   24       $ 12,927      0.94%     $   30
   Savings and money market deposits                      79,559      1.81         359         81,094      2.06         417
   Time deposits under $100,000                            8,716      4.19          91          7,881      4.68          92
   Time deposits of $100,000 and over                     25,107      4.20         263         24,012      4.61         275
   Convertible notes                                         879      6.04          13          4,224      7.76          82
   Repurchase agreements                                       -         -           -              -         -           -
                                                        --------                ------       --------                ------
        Total interest-bearing liabilities               127,949      2.35         750        130,137      2.76         896
                                                        --------                ------       --------                ------

Noninterest-bearing liabilities:
   Noninterest-bearing demand deposits                    99,951                               92,091
   Other liabilities                                       2,405                                2,253
   Shareholders' equity                                   25,809                               21,706
                                                        --------                             --------
        Total liabilities and shareholders'             $256,114                             $246,187
         equity                                         ========                             ========

Interest income as a percentage of average
   earning assets                                                     7.82%                                7.61%
Interest expense as a percentage of average
   interest-bearing liabilities                                       2.35%                                2.76%
Net interest margin and income                                        6.50%     $3,669                     5.96%     $3,224
                                                                                ======                               ======
</TABLE>

/(1)/  Nonaccrual loans are included in average balances and rate calculations.

                                       18
<PAGE>

     The following tables present the distribution of average assets,
liabilities and shareholders' equity as well as the total dollar amount of
interest income from average interest-earning assets and resultant yields, and
the dollar amounts of interest expense and average interest-bearing liabilities,
expressed both in dollars and rates for the six months ended June 30, 1999 and
1998.
<TABLE>
<CAPTION>


                                                                            Six Months Ended June 30,
                                                                            -------------------------
                                                                     1999                                1998
                                                                     ----                                ----

                                                        Average     Yield/                   Average    Yield/
(in thousands)                                          Balance      Rate     Interest       Balance     Rate     Interest
                                                       ----------   -------   --------      ---------   -------   --------
<S>                                                     <C>         <C>       <C>           <C>         <C>       <C>
Assets
Interest-earning assets:
   Securities                                           $ 82,045      5.85%     $2,379      $ 80,541      5.90%     $2,356
   Loans/(1)/                                            133,369      9.19       6,078       101,342      9.91       4,978
   Federal funds sold                                     10,413      4.77         246        29,395      5.43         792
   Interest-earning deposits - banks                       1,359      5.35          36           411      1.54           3
                                                        --------                ------      --------                ------
        Total interest-earning assets                    227,186      7.76       8,740       211,689      7.74       8,129
                                                        --------                ------      --------                ------
Deferred loan fees                                          (212)                               (118)
Allowance for loan losses                                 (2,089)                             (1,826)
Noninterest-earning assets:
   Cash and due from banks                                24,293                              24,754
   Premises and equipment                                  1,424                               1,553
   Other assets                                            5,940                               6,228
                                                        --------                            --------
        Total assets                                    $256,542                            $242,280
                                                        ========                            ========

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
   Interest-bearing demand deposits                     $ 13,699      0.73%     $   50      $ 13,276      0.93%     $   61
   Savings and money market deposits                      80,078      1.90         755        80,723      2.07         828
   Time deposits under $100,000                            8,707      4.27         184         7,705      4.65         178
   Time deposits of $100,000 and over                     22,460      4.24         472        23,476      4.62         538
   Convertible notes                                         919      6.54          30         4,800      7.97         190
   Repurchase agreements                                   4,368      5.02         109           110      5.60           3
                                                        --------                ------      --------                ------
        Total interest-bearing liabilities               130,231      2.48       1,600       130,090      2.79       1,797
                                                        --------                ------      --------                ------

Noninterest-bearing liabilities:
   Noninterest-bearing demand deposits                    97,795                              90,008
   Other liabilities                                       2,656                               2,741
   Shareholders' equity                                   25,860                              19,441
                                                        --------                            --------
        Total liabilities and shareholders'             $256,542                            $242,280
         equity                                         ========                            ========

Interest income as a percentage of average
   earning assets                                                     7.76%                               7.74%
Interest expense as a percentage of average
   interest-bearing liabilities                                       2.48%                               2.79%
Net interest margin and income                                        6.34%     $7,140                    6.03%     $6,332
                                                                                ======                              ======
</TABLE>
/(1)/  Nonaccrual loans are included in average balances and rate calculations.

                                       19
<PAGE>

     The Company's net interest income is affected by changes in the amount and
mix of interest-earning assets and interest-bearing liabilities, referred to as
"volume change."  It is also affected by changes in yields earned on interest-
earning assets and interest rates paid on interest-bearing deposits and other
borrowed funds, referred to as a "rate change."  The following table sets forth
changes in interest income and interest expense for each major category of
interest-earning assets and interest-bearing liabilities, and the amount of
change attributable to volume and rate changes for the three and six months
ended June 30,1999 and 1998.  The changes due to both rate and volume have been
allocated to rate and volume in proportion to the relationship between their
absolute dollar amounts.



<TABLE>
<CAPTION>
                                              Three Months Ended              Six Months Ended
                                            June 30, 1999 and 1998         June 30, 1999 and 1998

(in thousands)                            Volume     Rate     Total       Volume     Rate     Total
                                          -------   -------   ------      -------   ------   -------
<S>                                       <C>        <C>      <C>         <C>       <C>      <C>
Increase (decrease) in interest income:
     Securities                            $ (53)    $  39    $ (14)      $   44    $ (21)   $   23
     Loans                                   911      (219)     692        1,480     (380)    1,100
     Federal funds sold                     (322)      (60)    (382)        (459)     (86)     (545)
     Interest-bearing deposits - banks         2         1        3           16       17        33
                                           -----     -----    -----       ------    -----    ------
                                             538      (239)     299        1,081     (470)      611
                                           -----     -----    -----       ------    -----    ------

Increase (decrease) in interest expense:
     Interest-bearing demand deposits          2        (7)      (5)           2      (14)      (12)
     Savings and money market deposits        (8)      (50)     (58)          (7)     (66)      (73)
     Time deposits under $100,000              9       (10)      (1)          22      (15)        7
     Time deposits of $100,000 and over       12       (25)     (13)         (23)     (43)      (66)
     Convertible notes                       (53)      (15)     (68)        (131)     (28)     (159)
     Repurchase agreements                     -         -        -          106        -       106
                                           -----     -----    -----       ------    -----    ------
                                             (38)     (107)    (145)         (31)    (166)     (197)
                                           -----     -----    -----       ------    -----    ------
Increase (decrease) in net interest income $ 576     $(132)   $ 444       $1,112    $ 304    $  808
                                           =====     =====    =====       ======    =====    ======
</TABLE>

     Interest income represents interest earned on loans, investment securities
and federal funds sold. Interest income increased $299,000 to $4,419,000 for the
three months ended June 30, 1999 from $4,120,000 for the same period in 1998.
For the six months ended June 30, 1999, interest income increase 7.5% to
$8,740,000 from $8,129,000 for the same period in 1998. Interest earned on loans
increased 28% and 22% for the three and six months ended June 30, 1999 and 1998,
respectively. The Company continues to benefit from strong loan demand, which
has been funded by the sale of investment securities and reduced level of
federal funds sold during the three and six months ended June 30, 1999. Overall
average interest earning assets increased $15,497,000 or 7.3% for the six months
ended June 30, 1999 as compared to the same period in 1998.

     Interest expense represents interest paid on deposits, Company borrowings
and convertible notes. Interest expense for the three months ended June 30, 1999
was $750,000 compared to $896,000 for the same period in 1998, a decrease of
16.3%. For the six months ended June 30, 1999, interest expense decreased to
$1,600,000 from 1,797,000 for the same period in 1998. The decrease in interest
expense is primarily related to a $69,000 and a $160,000 decrease in interest
expenses on convertible notes, for the three and six months periods ended June
30, 1999 as compared to the same periods in 1998. Average convertible notes
outstanding decreased to $879,000 and $919,000 for the three and six months
period ended June 30, 1999, from $4,224,000 and $4,800,000 for the same periods
in 1998. In addition, interest expense was further impacted by an increase in
average repurchase agreements outstanding during the six month period ended June
30, 1999 as compared to the same period in 1998. Interest expense on repurchase
agreements increased to $109,000 for the six months period ended June 30, 1999
from $3,000 for the same period in 1998. The increase in average repurchase
agreements outstanding during the periods presented, was a result of the reduced
level of federal funds sold and the growth in the loan portfolio.

                                       20
<PAGE>

Provision for Loan Losses

     The provision for loan losses is determined by management based upon the
Company's loan loss experience, the performance of loans in the Company's
portfolio, the quality of loans in the Company's portfolio, evaluation of
collateral for such loans, the economic conditions affecting collectibility of
loans, the prospects and financial condition of the respective borrowers or
guarantors and such other factors which in management's judgment deserve
recognition in the estimation of probable loan losses. In addition, regulatory
agencies, as an integral part of their examination process, periodically review
the Bank's allowance for loan losses.  Such agencies may require the Bank to
recognize additions to the allowance or to take charge-offs (reductions in the
allowance) in anticipation of losses.

     The Company recorded provisions for loan losses of $47,000 and $172,000 for
the three and six months period ended June 30, 1999, respectively.  The Company
had made no provision for loan losses for the same periods in 1998.  The
increase in the provision for loan losses in 1999 is in response to growth in
the loan portfolio and increases in nonperforming loans. Net charge-offs
(recoveries) to average outstanding loans for the first six months of 1999 and
1998 were (0.04%) and (0.10%), respectively.

Other Operating Income

     For the six months ended June 30, 1999, other operating income totaled
$964,000 compared with $927,000 for the same period in 1998.  The increase was
primarily related to a $40,000 net gain recognized on the sale of investment
securities and a $31,000 increase in merchant discount income during the first
six months of 1999 as compared to 1998. In addition, other operating income was
adversely impacted by declines in mortgage brokering fees on a comparative
basis, for the periods presented.

Other Operating Expense

     Other operating expenses for the first six months of 1999, increased to
$6,899,000 from $6,428,000 for the same period in 1998. The increase primarily
occurred in salaries and other employee benefits, legal fees and audit
accounting fees.

     Salaries and other employee benefits increased approximately $300,000 to
$3,491,000 for the first six months of 1999 from $3,191,000 for the same period
in 1998.  The increase primarily relates to an increase number of employees as
the Company became more fully staffed and increased group health insurance
expenses. Legal fees and audit/accounting fees increased $155,000 during the
first six months of 1999 as compared to the same period in 1998, primarily as a
result of accounting fee overages related to completing the 1998 audit and
additional legal fees expended for corporate and lending activities.

Income Taxes

     For the six months ended June 30, 1999, the provision for income taxes was
$405,000 compared to $302,000 for the same period in 1998.

     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 a material effect on the liquidity, capital resources
or operations of the Company.

                                       21
<PAGE>

Item 3.  Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------

     Interest Rate Sensitivity

     The table below provides information about the Company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates, including interest rate swaps.  Investment securities
and loans are presented based upon contractual maturity and related weighted
average interest rates by expected maturity dates.  The information is presented
in US dollar equivalents, which is the Company's reporting currency.

<TABLE>
<CAPTION>
                                                                                                      There                   Fair
                                                  1999     2000       2001      2002       2003       After      Total       Value
                                                -------   -------    ------    -------    -------    -------    --------    --------
                                                                              (U.S. $ equivalent in thousands)
<S>                                             <C>       <C>        <C>       <C>        <C>        <C>        <C>         <C>
ASSETS (1)
----------

Securities
  U.S. government securities
          Fixed                                 $     -   $     -    $1,015    $     -    $ 2,023    $     -    $  3,038    $  3,056
              Weighted average interest rate                           6.81%                 5.89%                  6.20%
  U.S. government agency and
    mortgage-backed securities
          Fixed                                       -         -         -          -      2,000     38,056      40,056      38,556
              Weighted average interest rate                                                 5.65%      6.26%       5.96%
          Variable                                    -         -         -          -          -     16,996      16,996      16,605
              Weighted average interest rate                                                            5.66%       5.66%
  Municipal securities
           Fixed                                      -         -         -          -          -      2,551       2,551       2,427
              Weighted average interest rate                                                            6.47%       6.47%
  Small Business Administration securities
          Variable                                    -         -         -          -          -        694         694         670
              Weighted average interest rate                                                            5.40%       5.40%
  Collateralized mortgage securities
          Fixed                                       -         -         -          -          -      7,169       7,169       6,723
              Weighted average interest rate                                                            6.32%       6.32%
          Variable                                    -         -         -          -          -          -           -           -
              Weighted average interest rate
  Federal Reserve Bank Stock
          Fixed                                       -         -         -          -          -        439         439         414
              Weighted average interest rate          -         -         -          -          -       6.08%       6.08%

Loans
          Fixed                                 $ 9,270   $ 4,716    $2,316    $ 4,641    $ 3,674    $ 9,506    $ 34,123    $ 33,857
              Weighted average interest rate       8.97%     9.37%     9.47%      9.69%      9.85%      7.87%       9.20%
          Variable                               37,544    20,753     7,807     10,354     15,485     17,977     109,920     109,920
              Weighted average interest rate       9.35%     9.45%     9.52%      9.48%      9.44%      9.18%       9.41%
</TABLE>

                                       22
<PAGE>

     The table below provides information about the Company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates, including rate interest swaps.  Certificates of
deposit and convertible notes are presented based upon contractual maturity and
related weighted average interest rates by expected maturity dates.  For
interest rate swaps and caps, the table present notional amounts and weighted
average interest rates by contractual maturity dates.  The information is
presented in US dollar equivalents, which is the Company's reporting currency.

<TABLE>
<CAPTION>

                                                                                                  There                 Fair
                                                    1999       2000       2001    2002    2003    After     Total       Value
                                                    -----      ----       -----   ----    ----    -----     ------      -----
                                                                          (U.S. $ equivalent in thousands)
<S>                                                 <C>        <C>        <C>     <C>     <C>     <C>       <C>         <C>
LIABILITIES (1)
---------------

Deposits
  Noninterest-bearing transaction accounts         $102,328    $    -     $   -   $   -   $   -   $   -    $102,328    $102,328
       Weighted average interest rate                 0.00%         -         -       -       -       -       0.00%
  Interest-bearing transaction accounts              12,763         -         -       -       -       -      12,763      12,763
       Weighted average interest rate                 0.73%         -         -       -       -       -       0.73%
  Savings and money market accounts                  78,486         -         -       -       -       -      78,486      78,486
       Weighted average interest rate                 1.90%         -         -       -       -       -       1.90%
  Certificates of deposit and other time deposits
     Fixed                                           30,114     2,639         -       -       -       -      32,753      32,636
        Weighted average interest rate                4.50%     4.03%         -       -       -       -       4.33%

Convertible notes                                         -         -         -       -       -     868         868         864
        Weighted average interest rate                    -         -         -       -       -   6.54%       6.54%

OFF-BALANCE SHEET ASSETS                                  -         -         -       -       -       -           -           -
------------------------
</TABLE>

(1)  The Company used certain assumptions to estimate fair values and expected
maturities.  For loans, expected maturities are contractual maturities adjusted
for estimated prepayments of principal based on market indicators.  Investment
securities are at quoted market rates and stated maturities.  For loan fair
value computations, the company used a discounted cashflow model with discount
rates based upon prevailing market rates for similar types of loans,
incorporating adjustments for credit risk.  For deposit liabilities, fair values
were calculated using discounted cashflow models based on market interest rates
for different product types and maturity dates for which the deposits are held.

     Exchange Rate Sensitivity

     All of the Company's derivative financial instruments and other financial
instruments are denominated in US dollars. The Company does not have, or
anticipate having, any foreign currency exchange rate exposure.

     Commodity Price Sensitivity

     The Company does not have, or anticipate having, any derivative commodity
instruments.

                                       23
<PAGE>

                          PART II - OTHER INFORMATION



Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

              11   Statement regarding computation of per share earnings


              (b)  Reports on Form 8-K

                           Form Type:               8-K
                           SEC File Number:         001-10937
                           File Number:             99596263
                           Date Filed:              April 16, 1999
                           Description: Press release, dated April 16, 1999,
                           announcing delay in filing Form 10-K for the fiscal
                           year-end December 31, 1998 and temporary halt in
                           trading.


                           Form Type:               8-K
                           SEC File Number:         001-10937
                           File Number:             99655219
                           Date Filed:              June 28, 1999
                           Description: On June 28, 1999, Professional Bancorp,
                           Inc. (the "Company") announced through a press
                           release that the Company has agreed in principle to
                           terms of a transaction under which it and its wholly
                           owned subsidiary First Professional Bank, N.A. are to
                           be acquired by FirstFed Financial Corp.



                                       24
<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.



                                PROFESSIONAL BANCORP, INC.
                                --------------------------
                                (Registrant)



Date:  August 10, 1999          /s/ Julie P. Thompson
                                --------------------------
                                Julie P. Thompson
                                Chairman of the Board


Date:  August 10, 1999          /s/ Eric J. Woodstrom
                                --------------------------------
                                Acting - Chief Financial Officer


                                       25