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**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**WASHINGTON,        D.C. 20549**

**FORM        10-Q**

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

**For        the Quarterly Period Ended September 30, 2005**

| **£** | **TRANSITION                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                  ACT OF                  1934** |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

**For        the Transition Period from _____ to _____**

|   | **ITLA                  CAPITAL CORPORATION**                           |   |
|--------|-------------------------------------------------------------------------|--------|
|   | (Exact                  Name of Registrant as Specified in its Charter) |   |

| Delaware                                                                                         |   | 95-4596322                                         |
|--------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|
| (State                  or Other Jurisdiction of Incorporation or                  Organization) |   | (IRS                  Employer Identification No.) |
|                                                                                             |   |                                               |
| 888                  Prospect St., Suite 110, La Jolla, California                               |   | 92037                                              |
| (Address                  of Principal Executive Offices)                                        |   | (Zip                  Code)                        |

| (858)                  551-0511                                                              |
|----------------------------------------------------------------------------------------------|
| (Registrant’s                  Telephone Number, Including Area                  Code) |

| Indicate                  by check mark whether the registrant (1) has filed all reports                  required to                  be filed by Section 13 or 15(d) of the Securities Exchange Act                  of 1934                  during the preceding 12 months (or for such shorter period that                  the                  registrant was required to file such reports), and (2) has been                  subject to                  such filing requirements for the past 90 days. Yes R                  No                  £. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  Indicate                  by check mark whether the Registrant is an accelerated filer (as                  defined in Rule 12b-2 of the Exchange Act). Yes R                  No                  £.                                                                                                                                                                                                                                                                                                                                                     |
|  Indicate                  by check mark whether the Registrant is a shell company (as                  defined in Rule 12b-2 of the Exchange Act). Yes £                  No                  R.                                                                                                                                                                                                                                                                                                                                                          |
|  Number                  of shares of common stock of the registrant: 5,715,088 outstanding                  as of                  November 3, 2005.                                                                                                                                                                                                                                                                                                                                                                                                           |

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**Table            of            Contents**

**ITLA        CAPITAL CORPORATION **

**FORM        10-Q**

**FOR        THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005**

**TABLE        OF CONTENTS**

| **PART                  I - FINANCIAL                  INFORMATION** |                                                                                                                                      |
|----------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------|
| Item                  1.                                             | Financial                  Statements                                                                                                     | 3 |
|                                                                 | Consolidated                  Balance Sheets - September 30, 2005                  (Unaudited) and December 31, 2004                      | 3 |
|                                                                 | Consolidated                  Statements of Income - Three and Nine Months                  Ended September 30, 2005 and 2004 (Unaudited) | 4 |
|                                                                 | Consolidated                  Statements of Cash Flows - Nine Months Ended                  September 30, 2005 and 2004 (Unaudited)       | 5 |
|                                                                 | Notes                  to the Unaudited Consolidated Financial                  Statements                                                | 6 |
| Item                  2.                                             | Management’s                  Discussion and Analysis of Financial Condition                  and Results of Operations             | 12 |
| Item                  3.                                             | Quantitative                  and Qualitative Disclosures about Market                  Risk                                              | 26 |
| Item                  4.                                             | Controls                  and Procedures                                                                                                  | 26 |
|                                                                 |                                                                                                                                      |   |
| **PART                  II - OTHER                  INFORMATION**    |                                                                                                                                      |
| Item                  1.                                             | Legal                  Proceedings                                                                                                        | 27 |
| Item                  2.                                             | Unregistered                  Sales of Equity Securities and Use of                  Proceeds                                             | 27 |
| Item                  3.                                             | Defaults                  Upon Senior Securities                                                                                          | 27 |
| Item                  4.                                             | Submission                  of Matters to a Vote of Security                  Holders                                                     | 27 |
| Item                  5.                                             | Other                  Information                                                                                                        | 28 |
| Item                  6.                                             | Exhibits                                                                                                                                  | 28 |
|                                                                 | Signatures                                                                                                                                | 29 |
|                                                                 | Certifications                                                                                                                            | 31 |
|  Exhibit                31.1                                    |                                                                                                                                      |   |
|  Exhibit                31.2                                    |                                                                                                                                      |   |
|  Exhibit                32                                      |                                                                                                                                      |   |

**Forward        Looking Statements**

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**Table            of            Contents**

**PART        I - FINANCIAL INFORMATION**

| **ITLA                  CAPITAL CORPORATION AND                  SUBSIDIARIES**                                                                                                                                                                   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **CONSOLIDATED                  BALANCE SHEETS**                                                                                                                                                                                                  |   |
|                                                                                                                                                                                                                                              |   |   |   |   |   |
|                                                                                                                                                                                                                                              |   | **September                  30,** |   |   |   |
|                                                                                                                                                                                                                                              |   | **2005** |   | **December                  31,** |   |
|                                                                                                                                                                                                                                              |   | **(unaudited)** |   | **2004** |   |
|                                                                                                                                                                                                                                              |   | **(in                  thousands, except share data)** |   |
| **Assets**                                                                                                                                                                                                                                        |   |   |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                                                                        |   | $ | 56,224 |   | $ | 87,580 |   |
| Investment                  securities available for sale, at fair value                                                                                                                                                                          |   |   | 92,255 |   |   | 66,845 |   |
| Investment                  securities held-to-maturity, at amortized cost                                                                                                                                                                        |   |   | 251,889 |   |   | 296,028 |   |
| Stock                  in Federal Home Loan Bank                                                                                                                                                                                                  |   |   | 35,309 |   |   | 23,200 |   |
| Loans,                  net (net of allowance for loan losses of $38,661 and $35,483 as                  of September 30, 2005 and December 31, 2004, respectively)                                                                               |   |   | 2,504,777 |   |   | 1,793,815 |   |
| Interest                  receivable                                                                                                                                                                                                              |   |   | 14,976 |   |   | 10,695 |   |
| Premises                  and equipment, net                                                                                                                                                                                                      |   |   | 6,774 |   |   | 6,645 |   |
| Deferred                  income taxes                                                                                                                                                                                                            |   |   | 10,617 |   |   | 10,468 |   |
| Goodwill                                                                                                                                                                                                                                          |   |   | 3,118 |   |   | 3,118 |   |
| Other                  assets                                                                                                                                                                                                                     |   |   | 18,930 |   |   | 19,677 |   |
| Total                  assets                                                                                                                                                                                                                     |   | $ | 2,994,869 |   | $ | 2,318,071 |   |
|                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| **Liabilities                  and Shareholders’ Equity**                                                                                                                                                                                   |   |   |   |   |   |   |   |
| Liabilities:                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Deposit                  accounts                                                                                                                                                                                                                 |   | $ | 1,841,737 |   | $ | 1,432,032 |   |
| Federal                  Home Loan Bank advances and other borrowings                                                                                                                                                                             |   |   | 843,056 |   |   | 584,224 |   |
| Accounts                  payable and other liabilities                                                                                                                                                                                           |   |   | 23,685 |   |   | 20,491 |   |
| Junior                  subordinated debentures                                                                                                                                                                                                   |   |   | 86,600 |   |   | 86,600 |   |
| Total                  liabilities                                                                                                                                                                                                                |   |   | 2,795,078 |   |   | 2,123,347 |   |
|                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Commitments                  and contingencies                                                                                                                                                                                                    |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Shareholders’                  equity:                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Preferred                  stock, 5,000,000 shares authorized, none issued                                                                                                                                                                        |   |   | — |   |   | — |   |
| Contributed                  capital - common stock, $.01 par value; 20,000,000 shares authorized,                  8,949,898 and 8,703,894 issued as of September 30, 2005 and December                  31,                  2004, respectively |   |   | 77,019 |   |   | 69,327 |   |
| Retained                  earnings                                                                                                                                                                                                                |   |   | 213,790 |   |   | 196,032 |   |
| Accumulated                  other comprehensive (loss) income, net                                                                                                                                                                               |   |   | (155 | ) |   | 78 |   |
|                                                                                                                                                                                                                                              |   |   | 290,654 |   |   | 265,437 |   |
| Less                  treasury stock, at cost 3,537,398 and 3,154,290 shares as of September                  30, 2005 and December 31, 2004, respectively                                                                                        |   |   | (90,863 | ) |   | (70,713 | ) |
|                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Total                  shareholders' equity                                                                                                                                                                                                       |   |   | 199,791 |   |   | 194,724 |   |
|                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Total                  liabilities and shareholders' equity                                                                                                                                                                                       |   | $ | 2,994,869 |   | $ | 2,318,071 |   |

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**Table            of            Contents**

| **ITLA                  CAPITAL CORPORATION AND                  SUBSIDIARIES** |
|---------------------------------------------------------------------------------|
| **CONSOLIDATED                  STATEMENTS OF INCOME**                          |
| **(Unaudited)**                                                                 |

|                                                                  |   |                                                                              |    |                                                                             |   |
|-----------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|---------|----------------------------------------------------------------------------------|--------|
|                                                                  |   | **For                  the Three Months Ended****September                  30,** |    | **For                  the Nine Months Ended****September                  30,** |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |
|                                                                  |   | **2005**                                                                          |    | **2004**                                                                         |   | **2005** |   | **2004** |   |
|                                                                  |   | **(in                  thousands, except per share data)**                        |    |
| Interest                  income:                                     |   |                                                                              |    |                                                                             |   |   |   |   |   |
| Loans,                  including fees                                |   | $                                                                                 | 44,278  |                                                                             | $      | 28,526 |   | $ | 113,399 |   | $ | 85,386 |   |
| Cash                  and investment securities                       |   |                                                                              | 4,552   |                                                                             |   | 2,152 |   |   | 13,863 |   |   | 5,563 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Total                  interest income                                |   |                                                                              | 48,830  |                                                                             |   | 30,678 |   |   | 127,262 |   |   | 90,949 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Interest                  expense:                                    |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Deposit                  accounts                                     |   |                                                                              | 15,527  |                                                                             |   | 6,632 |   |   | 36,922 |   |   | 19,631 |   |
| Federal                  Home Loan Bank advances and other borrowings |   |                                                                              | 7,634   |                                                                             |   | 2,343 |   |   | 17,366 |   |   | 4,319 |   |
| Junior                  subordinated debentures                       |   |                                                                              | 1,830   |                                                                             |   | 1,569 |   |   | 5,264 |   |   | 4,559 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Total                  interest expense                               |   |                                                                              | 24,991  |                                                                             |   | 10,544 |   |   | 59,552 |   |   | 28,509 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Net                  interest income before provision for loan losses |   |                                                                              | 23,839  |                                                                             |   | 20,134 |   |   | 67,710 |   |   | 62,440 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Provision                  for loan losses                            |   |                                                                              | 1,500   |                                                                             |   | 1,100 |   |   | 3,750 |   |   | 3,450 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Net                  interest income after provision for loan losses  |   |                                                                              | 22,339  |                                                                             |   | 19,034 |   |   | 63,960 |   |   | 58,990 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Non-interest                  income:                                 |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Premium                  on sale of loans, net                        |   |                                                                              | — |                                                                             |   | — |   |   | — |   |   | 9,284 |   |
| Late                  and collection fees                             |   |                                                                              | 181     |                                                                             |   | 74 |   |   | 384 |   |   | 259 |   |
| Other                                                                 |   |                                                                              | 304     |                                                                             |   | (239 | ) |   | 590 |   |   | 4,731 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Total                  non-interest income                            |   |                                                                              | 485     |                                                                             |   | (165 | ) |   | 974 |   |   | 14,274 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Non-interest                  expense:                                |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Compensation                  and benefits                            |   |                                                                              | 5,048   |                                                                             |   | 4,938 |   |   | 16,315 |   |   | 16,540 |   |
| Occupancy                  and equipment                              |   |                                                                              | 1,980   |                                                                             |   | 1,471 |   |   | 5,381 |   |   | 4,321 |   |
| Other                                                                 |   |                                                                              | 4,945   |                                                                             |   | 3,472 |   |   | 12,576 |   |   | 10,860 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Total                  general and administrative                     |   |                                                                              | 11,973  |                                                                             |   | 9,881 |   |   | 34,272 |   |   | 31,721 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Real                  estate owned expense, net                       |   |                                                                              | — |                                                                             |   | 32 |   |   | — |   |   | 113 |   |
| Provision                  for losses on other real estate owned      |   |                                                                              | — |                                                                             |   | — |   |   | — |   |   | 1,000 |   |
| Gain                  on sale of other real estate owned, net         |   |                                                                              | — |                                                                             |   | (61 | ) |   | (11 | ) |   | (415 | ) |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Total                  real estate owned expense, net                 |   |                                                                              | — |                                                                             |   | (29 | ) |   | (11 | ) |   | 698 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Total                  non-interest expense                           |   |                                                                              | 11,973  |                                                                             |   | 9,852 |   |   | 34,261 |   |   | 32,419 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| Income                  before provision for income taxes             |   |                                                                              | 10,851  |                                                                             |   | 9,017 |   |   | 30,673 |   |   | 40,845 |   |
| Provision                  for income taxes                           |   |                                                                              | 4,583   |                                                                             |   | 3,519 |   |   | 12,915 |   |   | 15,933 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| NET                  INCOME                                           |   | $                                                                                 | 6,268   |                                                                             | $      | 5,498 |   | $ | 17,758 |   | $ | 24,912 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| BASIC                  EARNINGS PER SHARE                             |   | $                                                                                 | 1.09    |                                                                             | $      | 0.91 |   | $ | 3.08 |   | $ | 4.04 |   |
|                                                                  |   |                                                                              |    |                                                                             |   |   |   |   |   |   |   |   |   |
| DILUTED                  EARNINGS PER SHARE                           |   | $                                                                                 | 1.06    |                                                                             | $      | 0.86 |   | $ | 2.96 |   | $ | 3.80 |   |

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**Table            of            Contents**

| **ITLA                  CAPITAL CORPORATION AND                  SUBSIDIARIES**                                     |   |
|---------------------------------------------------------------------------------------------------------------------|--------|
| **CONSOLIDATED                  STATEMENTS OF CASH FLOWS**                                                          |   |
| **(Unaudited)**                                                                                                     |   |
|                                                                                                                |   | **For                  the Nine Months Ended****September                  30,** |   |
|                                                                                                                |   | **2005** |   | **2004** |   |
|                                                                                                                |   | **(in                  thousands)** |   |
| Cash                  Flows From Operating Activities:                                                              |   |   |   |   |   |
| Net                  Income                                                                                         |   | $ | 17,758 |   | $ | 24,912 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities: |   |   |   |   |   |   |   |
| Depreciation                  and amortization of premises and equipment                                            |   |   | 2,025 |   |   | 1,510 |   |
| Amortization                  of premium on purchased loans                                                         |   |   | 2,190 |   |   | 1,637 |   |
| Accretion                  of deferred loan origination fees, net of costs                                          |   |   | (2,209 | ) |   | (1,443 | ) |
| Provision                  for loan losses                                                                          |   |   | 3,750 |   |   | 3,450 |   |
| Premium                  on sale of RAL loans, net                                                                  |   |   | — |   |   | (9,284 | ) |
| Other,                  net                                                                                         |   |   | (725 | ) |   | 201 |   |
| Increase                  in interest receivable                                                                    |   |   | (4,281 | ) |   | (36 | ) |
| Decrease                  in other assets                                                                           |   |   | 4,453 |   |   | 3,314 |   |
| Increase                  in accounts payable and other liabilities                                                 |   |   | 3,194 |   |   | 4,239 |   |
|                                                                                                                |   |   |   |   |   |   |   |
| Net                  cash provided by operating activities                                                          |   |   | 26,155 |   |   | 28,500 |   |
|                                                                                                                |   |   |   |   |   |   |   |
| Cash                  Flows From Investing Activities:                                                              |   |   |   |   |   |   |   |
| Purchases                  of investment securities available for sale                                              |   |   | (32,811 | ) |   | (34,577 | ) |
| Proceeds                  from maturity and calls of investment securities available for                  sale      |   |   | 6,949 |   |   | 23,054 |   |
| Purchases                  of investment securities held-to-maturity                                                |   |   | — |   |   | (200,731 | ) |
| Proceeds                  from repayments of investment securities held-to-maturity                                 |   |   | 44,089 |   |   | 2,732 |   |
| Purchase                  of stock in Federal Home Loan Bank                                                        |   |   | (11,197 | ) |   | (4,457 | ) |
| Purchase                  of loans                                                                                  |   |   | (621,630 | ) |   | — |   |
| Origination                  of RAL loans                                                                           |   |   | — |   |   | (12,949,433 | ) |
| Proceeds                  from participation in RAL loans                                                           |   |   | — |   |   | 12,958,717 |   |
| Increase                  in loans, net                                                                             |   |   | (93,133 | ) |   | (124,240 | ) |
| Proceeds                  from sale of other real estate owned                                                      |   |   | 81 |   |   | 8,318 |   |
| Capital                  expenditures, net                                                                          |   |   | (2,154 | ) |   | (1,994 | ) |
|                                                                                                                |   |   |   |   |   |   |   |
| Net                  cash used in investing activities                                                              |   |   | (709,806 | ) |   | (322,611 | ) |
|                                                                                                                |   |   |   |   |   |   |   |
| Cash                  Flows From Financing Activities:                                                              |   |   |   |   |   |   |   |
| Proceeds                  from exercise of employee stock options                                                   |   |   | 3,908 |   |   | 2,319 |   |
| Cash                  paid to acquire treasury stock                                                                |   |   | (20,150 | ) |   | (20,639 | ) |
| Principal                  payments on collateralized mortgage obligations                                          |   |   | — |   |   | (15,868 | ) |
| Net                  increase in deposit accounts                                                                   |   |   | 409,705 |   |   | 89,042 |   |
| Net                  decrease in short-term borrowings                                                              |   |   | (136,000 | ) |   | (31,000 | ) |
| Proceeds                  from long-term borrowings                                                                 |   |   | 463,719 |   |   | 214,000 |   |
| Repayments                  of long-term borrowings                                                                 |   |   | (68,887 | ) |   | (55,600 | ) |
|                                                                                                                |   |   |   |   |   |   |   |
| Net                  cash provided by financing activities                                                          |   |   | 652,295 |   |   | 182,254 |   |
|                                                                                                                |   |   |   |   |   |   |   |
| Net                  decrease in cash and cash equivalents                                                          |   |   | (31,356 | ) |   | (111,857 | ) |
| Cash                  and cash equivalents at beginning of period                                                   |   |   | 87,580 |   |   | 178,318 |   |
|                                                                                                                |   |   |   |   |   |   |   |
| Cash                  and cash equivalents at end of period                                                         |   | $ | 56,224 |   | $ | 66,461 |   |
|                                                                                                                |   |   |   |   |   |   |   |
| Supplemental                  Cash Flow Information:                                                                |   |   |   |   |   |   |   |
| Cash                  paid during the period for interest                                                           |   | $ | 58,709 |   | $ | 28,769 |   |
| Cash                  paid during the period for income taxes                                                       |   | $ | 8,490 |   | $ | 8,835 |   |
| Non-Cash                  Investing Transactions-                                                                   |   |   |   |   |   |   |   |
| Loans                  transferred to other real estate owned                                                       |   | $ | 70 |   | $ | 1,855 |   |

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**Table            of            Contents**

**ITLA        CAPITAL CORPORATION AND SUBSIDIARIES**

**NOTES        TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE        1 - BASIS OF PRESENTATION**

**NOTE        2 - ACCOUNTING FOR STOCK-BASED COMPENSATION**

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**Table            of            Contents**

|                                                                                                                                                  |   | **For                  the Three Months Ended September 30,** |   | **For                  the Nine Months Ended September 30,** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|--------------------------------------------------------------|--------|
|                                                                                                                                                  |   | **2005**                                                      |   | **2004**                                                     |   | **2005** |   | **2004** |   |
|                                                                                                                                                  |   | **(in                  thousands, except per share data)**    |   |
| Net                  income, as reported                                                                                                              |   | $                                                             | 6,268  |                                                         | $      | 5,498 |   | $ | 17,758 |   | $ | 24,912 |   |
| Less:                  Stock-based employee compensation expense determined under the                  fair value                  method, net of tax |   |                                                          | 639    |                                                         |   | 350 |   |   | 1,100 |   |   | 1,025 |   |
| Pro                  forma net income                                                                                                                 |   | $                                                             | 5,629  |                                                         | $      | 5,148 |   | $ | 16,658 |   | $ | 23,887 |   |
|  Earnings                  per share:                                                                                                            |   |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |
| Basic                  - as reported                                                                                                                  |   | $                                                             | 1.09   |                                                         | $      | 0.91 |   | $ | 3.08 |   | $ | 4.04 |   |
| Basic                  - pro forma                                                                                                                    |   | $                                                             | 0.98   |                                                         | $      | 0.85 |   | $ | 2.89 |   | $ | 3.87 |   |
| Diluted                  - as reported                                                                                                                |   | $                                                             | 1.06   |                                                         | $      | 0.86 |   | $ | 2.96 |   | $ | 3.80 |   |
| Diluted                  - pro forma                                                                                                                  |   | $                                                             | 0.95   |                                                         | $      | 0.80 |   | $ | 2.78 |   | $ | 3.65 |   |

|                                      | **Weighted-Average                  Assumptions for Option Grants** |
|-------------------------------------------|---------------------------------------------------------------------|
|                                      | **2005**                                                            |   | **2004** |
|                                      |                                                                |   |   |
| Dividend                  Yield           | 0.00%                                                               |   | 0.00% |
| Expected                  Volatility      | 36.34%                                                              |   | 36.51% |
| Risk-Free                  Interest Rates | 4.10%                                                               |   | 4.16% |
| Expected                  Lives           | Seven                  Years                                        |   | Seven                  Years |

**NOTE        3 - EARNINGS PER SHARE**

|                                                          |   |                                                       |    |
|---------------------------------------------------------------|--------|------------------------------------------------------------|---------|
|                                                          |   |   **Net                  Income**                |    | **Weighted-****Average                  Shares****Outstanding** |   | **Per****Share****Amount** |   |
|                                                          |   | **(in                  thousands, except per share data)** |    |
| **For                  the Three Months Ended September 30,** |   |                                                       |    |   |   |   |   |
| **2005**                                                      |   |                                                       |    |   |   |   |   |
| Basic                  EPS                                    |   | $                                                          | 6,268   |   |   | 5,746 |   | $ | 1.09 |   |
| Effect                  of dilutive stock options             |   |                                                       | — |   |   | 185 |   |   | (0.03 | ) |
| Diluted                  EPS                                  |   | $                                                          | 6,268   |   |   | 5,931 |   | $ | 1.06 |   |
|                                                          |   |                                                       |    |   |   |   |   |   |   |   |
| **2004**                                                      |   |                                                       |    |   |   |   |   |   |   |   |
| Basic                  EPS                                    |   | $                                                          | 5,498   |   |   | 6,054 |   | $ | 0.91 |   |
| Effect                  of dilutive stock options             |   |                                                       | — |   |   | 351 |   |   | (0.05 | ) |
| Diluted                  EPS                                  |   | $                                                          | 5,498   |   |   | 6,405 |   | $ | 0.86 |   |
|                                                          |   |                                                       |    |   |   |   |   |   |   |   |
| **For                  the Nine Months Ended September 30,**  |   |                                                       |
| **2005**                                                      |   |                                                       |    |   |   |   |   |   |   |   |
| Basic                  EPS                                    |   | $                                                          | 17,758  |   |   | 5,769 |   | $ | 3.08 |   |
| Effect                  of dilutive stock options             |   |                                                       | — |   |   | 232 |   |   | (0.12 | ) |
| Diluted                  EPS                                  |   | $                                                          | 17,758  |   |   | 6,001 |   | $ | 2.96 |   |
|                                                          |   |                                                       |    |   |   |   |   |   |   |   |
| **2004**                                                      |   |                                                       |    |   |   |   |   |   |   |   |
| Basic                  EPS                                    |   | $                                                          | 24,912  |   |   | 6,166 |   | $ | 4.04 |   |
| Effect                  of dilutive stock options             |   |                                                       | — |   |   | 385 |   |   | (0.24 | ) |
| Diluted                  EPS                                  |   | $                                                          | 24,912  |   |   | 6,551 |   | $ | 3.80 |   |

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**Table            of            Contents**

**NOTE        4 - COMPREHENSIVE INCOME**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **Three                  Months Ended** |   | **Nine                  Months Ended** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **September                  30,**      |   | **September                  30,**     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **2005**                                |   | **2004**                               |   | **2005** |   | **2004** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **(in                  thousands)**     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                    |   |                                   |   |   |   |   |   |
| Net                  Income                                                                                                                                                                                                                                                                                                                                                                                                                             |   | $                                       | 6,268  |                                   | $      | 5,498 |   | $ | 17,758 |   | $ | 24,912 |   |
| Other                  comprehensive (loss) income:                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| Change                  in unrealized (losses) gains on investment securities available                  for sale,                  net of tax benefit (expense) of $17 and $(195) for the three months                  ended                  September 30, 2005 and 2004, and net of tax benefit (expense) of                  $154 and                  $(48) for the nine months ended September 30, 2005 and 2004,                  respectively. |   |                                    | (24    | )                                      |   | 320 |   |   | (233 | ) |   | 78 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| Comprehensive                  Income                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $                                       | 6,244  |                                   | $      | 5,818 |   | $ | 17,525 |   | $ | 24,990 |   |

**NOTE        5 - IMPAIRED LOANS RECEIVABLE **

**NOTE        6 - RESIDUAL INTEREST IN SECURITIZATION**

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**Table            of            Contents**

|                                                                      |   | **September                  30,****2005**  |      | **December                  31,****2004** |   |
|---------------------------------------------------------------------------|--------|---------------------------------------------|-----------|-------------------------------------------|--------|
|                                                                      |   | **(dollars                  in thousands)** |      |
|                                                                      |   |                                        |      |                                      |   |   |   |
| **Fair                  value of retained interest**                      |   | **$**                                       | **4,360** |                                      | **$**  | **5,368** |   |
| **Weighted                  average life (in years) - securities**        |   |                                        | **0.54**  |                                      |   | **0.68** |   |
| **Weighted                  average life (in years) - residual interest** |   |                                        | **2.87**  |                                      |   | **3.61** |   |
| **Weighted                  average annual prepayment speed**             |   |                                        | **40.0**  | **%**                                     |   | **26.5** | **%** |
| Impact                  of 10% adverse change                             |   | $                                           | (15       | )                                         | $      | (236 | ) |
| Impact                  of 25% adverse change                             |   | $                                           | (62       | )                                         | $      | (630 | ) |
| **Weighted                  average annual discount rate**                |   |                                        | **15.0**  | **%**                                     |   | **15.0** | **%** |
| Impact                  of 10% adverse change                             |   | $                                           | (159      | )                                         | $      | (243 | ) |
| Impact                  of 25% adverse change                             |   | $                                           | (388      | )                                         | $      | (630 | ) |
| **Weighted                  average lifetime credit losses**              |   |                                        | **14.7**  | **%**                                     |   | **25.0** | **%** |
| Impact                  of 10% adverse change                             |   | $                                           | (99       | )                                         | $      | (262 | ) |
| Impact                  of 25% adverse change                             |   | $                                           | (252      | )                                         | $      | (700 | ) |

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**Table            of            Contents**

**NOTE        7 - NEW ACCOUNTING PRONOUNCEMENTS**

**NOTE        8 - BUSINESS SEGMENT INFORMATION**

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**Table            of            Contents**

|                                                          |   | **Lending**                         |    |                           |   |             |   |             |    |
|---------------------------------------------------------------|--------|-------------------------------------|---------|--------------------------------|--------|------------------|--------|------------------|---------|
|                                                          |   | **Operations**                      |    | **All                  Other** |   | **Eliminations** |   | **Consolidated** |    |
|                                                          |   | **(in                  thousands)** |    |
| **For                  the three months ended September 30,** |   |                                |    |                           |   |             |   |             |    |
| **2005**                                                      |   |                                |    |                           |   |             |   |             |    |
| Revenues                  from external customers             |   | $                                   | 48,709  |                           | $      | 606              |   | $                | — |   | $ | 49,315 |   |
| Total                  interest income                        |   |                                | 48,265  |                           |   | 565              |   |             | — |   |   | 48,830 |   |
| Total                  interest expense                       |   |                                | 23,161  |                           |   | 1,830            |   |             | — |   |   | 24,991 |   |
| Net                  income                                   |   |                                | 7,568   |                           |   | (1,300           | )      |             | — |   |   | 6,268 |   |
|                                                          |   |                                |    |                           |   |             |   |             |    |   |   |   |   |
| **2004**                                                      |   |                                |    |                           |   |             |   |             |    |   |   |   |   |
| Revenues                  from external customers             |   | $                                   | 30,704  |                           | $      | 362              |   | $                | — |   | $ | 31,066 |   |
| Total                  interest income                        |   |                                | 30,935  |                           |   | 362              |   |             | (619    | ) |   | 30,678 |   |
| Total                  interest expense                       |   |                                | 9,594   |                           |   | 1,569            |   |             | (619    | ) |   | 10,544 |   |
| Net                  income                                   |   |                                | 7,189   |                           |   | (1,691           | )      |             | — |   |   | 5,498 |   |
|                                                          |   |                                |    |                           |   |             |   |             |    |   |   |   |   |
|                                                          |   |                                |    |                           |   |             |   |             |    |   |   |   |   |
| **For                  the nine months ended September 30,**  |   |                                |    |                           |   |             |   |             |    |   |   |   |   |
| **2005**                                                      |   |                                |    |                           |   |             |   |             |    |   |   |   |   |
| Revenues                  from external customers             |   | $                                   | 126,583 |                           | $      | 1,653            |   | $                | — |   | $ | 128,236 |   |
| Total                  interest income                        |   |                                | 125,285 |                           |   | 1,977            |   |             | — |   |   | 127,262 |   |
| Total                  interest expense                       |   |                                | 54,288  |                           |   | 5,264            |   |             | — |   |   | 59,552 |   |
| Net                  income                                   |   |                                | 21,576  |                           |   | (3,818           | )      |             | — |   |   | 17,758 |   |
|                                                          |   |                                |    |                           |   |             |   |             |    |   |   |   |   |
| **2004**                                                      |   |                                |    |                           |   |             |   |             |    |   |   |   |   |
| Revenues                  from external customers             |   | $                                   | 105,270 |                           | $      | 1,003            |   | $                | — |   | $ | 106,273 |   |
| Total                  interest income                        |   |                                | 91,086  |                           |   | 1,003            |   |             | (1,140  | ) |   | 90,949 |   |
| Total                  interest expense                       |   |                                | 24,916  |                           |   | 4,733            |   |             | (1,140  | ) |   | 28,509 |   |
| Net                  income                                   |   |                                | 29,859  |                           |   | (4,947           | )      |             | — |   |   | 24,912 |   |

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**Table            of            Contents**

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

**Application        of Critical Accounting Policies and Accounting Estimates**

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**Table            of            Contents**

**RESULTS        OF OPERATIONS**

**Three        Months Ended September 30, 2005 Compared to Three Months Ended September        30,        2004**

**Executive        Summary**

**Net        Interest Income and Margin**

----

**Table            of            Contents**

|                                                                                   |   | **For                  the Three Months Ended September 30,** |      |
|----------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|-----------|
|                                                                                   |   | **2005**                                                      |      | **2004** |   |
|                                                                                   |   | **Average                  Balance**                          |      | **Income/****Expense** |   | **Yield/****Rate** |   | **Average                  Balance** |   | **Income/****Expense** |   | **Yield/****Rate** |   |
|                                                                                   |   | **(dollars                  in thousands)**                   |      |
| **Assets**                                                                             |   |                                                          |      |   |   |   |   |   |   |   |   |   |   |
| Cash                  and investment securities                                        |   | $                                                             | 430,410   |   | $ | 4,552 |   |   | 4.20 | % | $ | 252,540 |   | $ | 2,152 |   |   | 3.39 | % |
| Loans                  receivable:                                                     |   |                                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                                  |   |                                                          | 2,480,856 |   |   | 43,895 |   |   | 7.01 | % |   | 1,577,422 |   |   | 27,983 |   |   | 7.01 | % |
| Real                  estate loans held at REIT                                        |   |                                                          | 26,058    |   |   | 383 |   |   | 5.83 | % |   | 47,342 |   |   | 543 |   |   | 4.56 | % |
| Total                  loans receivable                                                |   |                                                          | 2,506,914 |   |   | 44,278 |   |   | 7.01 | % |   | 1,624,764 |   |   | 28,526 |   |   | 6.98 | % |
|                                                                                   |   |                                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  interest earning assets                                         |   |                                                          | 2,937,324 |   | $ | 48,830 |   |   | 6.60 | % |   | 1,877,304 |   | $ | 30,678 |   |   | 6.50 | % |
| Non-interest                  earning assets                                           |   |                                                          | 53,352    |   |   |   |   |   |   |   |   | 57,937 |   |   |   |   |   |   |   |
| Allowance                  for loan losses                                             |   |                                                          | (37,952   | ) |   |   |   |   |   |   |   | (35,449 | ) |   |   |   |   |   |   |
| Total                  assets                                                          |   | $                                                             | 2,952,724 |   |   |   |   |   |   |   | $ | 1,899,792 |   |   |   |   |   |   |   |
|                                                                                   |   |                                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and Shareholders’ Equity**                        |   |                                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  bearing deposit accounts:                                    |   |                                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  bearing demand                                               |   | $                                                             | 44,613    |   | $ | 286 |   |   | 2.54 | % | $ | 85,129 |   | $ | 402 |   |   | 1.88 | % |
| Money                  market and passbook                                             |   |                                                          | 184,428   |   |   | 1,476 |   |   | 3.18 | % |   | 127,470 |   |   | 641 |   |   | 2.00 | % |
| Time                  certificates                                                     |   |                                                          | 1,588,757 |   |   | 13,765 |   |   | 3.44 | % |   | 946,844 |   |   | 5,589 |   |   | 2.35 | % |
| Total                  interest bearing deposit accounts                               |   |                                                          | 1,817,798 |   |   | 15,527 |   |   | 3.39 | % |   | 1,159,443 |   |   | 6,632 |   |   | 2.28 | % |
| FHLB                  advances and other borrowings                                    |   |                                                          | 804,757   |   |   | 7,634 |   |   | 3.76 | % |   | 387,792 |   |   | 2,343 |   |   | 2.40 | % |
| Junior                  subordinated debentures                                        |   |                                                          | 86,600    |   |   | 1,830 |   |   | 8.38 | % |   | 86,600 |   |   | 1,569 |   |   | 7.21 | % |
|                                                                                   |   |                                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  interest bearing liabilities                                    |   |                                                          | 2,709,155 |   | $ | 24,991 |   |   | 3.66 | % |   | 1,633,835 |   | $ | 10,544 |   |   | 2.57 | % |
| Non-interest                  bearing demand accounts                                  |   |                                                          | 15,671    |   |   |   |   |   |   |   |   | 16,286 |   |   |   |   |   |   |   |
| Other                  non-interest bearing liabilities                                |   |                                                          | 27,743    |   |   |   |   |   |   |   |   | 48,212 |   |   |   |   |   |   |   |
| Shareholders’                  equity                                            |   |                                                          | 200,155   |   |   |   |   |   |   |   |   | 201,459 |   |   |   |   |   |   |   |
| Total                  liabilities and shareholders’                  equity     |   | $                                                             | 2,952,724 |   |   |   |   |   |   |   | $ | 1,899,792 |   |   |   |   |   |   |   |
| Net                  interest spread *(1)*                                             |   |                                                          |      |   |   |   |   |   | 2.94 | % |   |   |   |   |   |   |   | 3.93 | % |
|                                                                                   |   |                                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income before provision for                  loan losses |   |                                                          |      |   | $ | 23,839 |   |   |   |   |   |   |   | $ | 20,134 |   |   |   |   |
| Net                  interest margin *(2)*                                             |   |                                                          |      |   |   |   |   |   | 3.22 | % |   |   |   |   |   |   |   | 4.27 | % |

*(1)*
*Average        yield on interest earning assets minus average rate paid on interest bearing        liabilities. *

*(2)*
*Net        interest income divided by total average interest earning assets.*

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**Table            of            Contents**

|                                                        |   | **For                  the Three Months Ended****September                  30, 2005 and 2004** |   |
|-------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|--------|
|                                                        |   | **Increase                  (Decrease) Due to:**                                                |   |
|                                                        |   | **Rate**                                                                                        |   | **Volume** |   | **Total** |   |
|                                                        |   | **(in                  thousands)**                                                             |   |
| Interest                  and fees earned from:             |   |                                                                                            |   |   |   |   |   |
| Cash                  and investment securities             |   | $                                                                                               | 608    |   | $ | 1,792 |   | $ | 2,400 |   |
| Loans                                                       |   |                                                                                            | 131    |   |   | 15,621 |   |   | 15,752 |   |
|                                                        |   |                                                                                            |   |   |   |   |   |   |   |   |
| Total                  increase in interest income          |   |                                                                                            | 739    |   |   | 17,413 |   |   | 18,152 |   |
|                                                        |   |                                                                                            |   |   |   |   |   |   |   |   |
| Interest                  paid on:                          |   |                                                                                            |   |   |   |   |   |   |   |   |
| Deposit                  accounts                           |   |                                                                                            | 4,106  |   |   | 4,789 |   |   | 8,895 |   |
| FHLB                  advances and other borrowings         |   |                                                                                            | 1,826  |   |   | 3,465 |   |   | 5,291 |   |
| Junior                  subordinated debentures             |   |                                                                                            | 261    |   |   | — |   |   | 261 |   |
|                                                        |   |                                                                                            |   |   |   |   |   |   |   |   |
| Total                  increase in interest expense         |   |                                                                                            | 6,193  |   |   | 8,254 |   |   | 14,447 |   |
|                                                        |   |                                                                                            |   |   |   |   |   |   |   |   |
| Increase                  (decrease) in net interest income |   | $                                                                                               | (5,454 | ) | $ | 9,159 |   | $ | 3,705 |   |

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**Table            of            Contents**

**Provision        for Loan Losses**

| ·   | general                  portfolio trends relative to asset and portfolio size; |
|--------------------|---------------------------------------------------------------------------------|

| ·   | asset                    categories; |
|--------------------|--------------------------------------|

| ·   | credit                  and geographic concentrations; |
|--------------------|--------------------------------------------------------|

| ·   | delinquency                  trends and nonaccrual loan levels; |
|--------------------|-----------------------------------------------------------------|

| ·   | historical                  loss experience and risks associated with changes in economic,                  social and                  business conditions; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                  underwriting standards in effect when the loan was                  made. |
|--------------------|------------------------------------------------------------------------------------------------|

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**Table            of            Contents**

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**Table            of            Contents**

**Non-Interest        Income**

**Non-Interest        Expense**

**Nine        Months Ended September 30, 2005 Compared to Nine Months Ended September 30,        2004**

**Executive        Summary**

----

**Table            of            Contents**

**Net        Interest Income and Margin**

|                                                                                   |   | **For                  the Nine Months Ended September 30,** |      |
|----------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|-----------|
|                                                                                   |   | **2005**                                                     |      | **2004** |   |
|                                                                                   |   | **Average                  Balance**                         |      | **Income/****Expense** |   | **Yield/****Rate** |   | **Average                  Balance** |   | **Income/****Expense** |   | **Yield/****Rate** |   |
|                                                                                   |   | **(dollars                  in thousands)**                  |      |
| **Assets**                                                                             |   |                                                         |      |   |   |   |   |   |   |   |   |   |   |
| Cash                  and investments                                                  |   | $                                                            | 430,250   |   | $ | 13,863 |   |   | 4.31 | % | $ | 438,168 |   | $ | 5,563 |   |   | 1.70 | % |
| Loans                  receivable:                                                     |   |                                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                                  |   |                                                         | 2,119,908 |   |   | 112,103 |   |   | 7.07 | % |   | 1,518,865 |   |   | 83,321 |   |   | 7.33 | % |
| Real                  estate loans held in trust                                       |   |                                                         | 29,209    |   |   | 1,296 |   |   | 5.93 | % |   | 54,176 |   |   | 2,065 |   |   | 5.09 | % |
| Total                  loans receivable                                                |   |                                                         | 2,149,117 |   |   | 113,399 |   |   | 7.05 | % |   | 1,573,041 |   |   | 85,386 |   |   | 7.25 | % |
|                                                                                   |   |                                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  interest earning assets                                         |   |                                                         | 2,579,367 |   | $ | 127,262 |   |   | 6.60 | % |   | 2,011,209 |   | $ | 90,949 |   |   | 6.04 | % |
| Non-interest                  earning assets                                           |   |                                                         | 49,474    |   |   |   |   |   |   |   |   | 110,235 |   |   |   |   |   |   |   |
| Allowance                  for loan losses                                             |   |                                                         | (36,870   | ) |   |   |   |   |   |   |   | (34,970 | ) |   |   |   |   |   |   |
| Total                  assets                                                          |   | $                                                            | 2,591,971 |   |   |   |   |   |   |   | $ | 2,086,474 |   |   |   |   |   |   |   |
|                                                                                   |   |                                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and Shareholders’ Equity**                        |   |                                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  bearing deposit accounts:                                    |   |                                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  bearing demand                                               |   | $                                                            | 55,609    |   | $ | 967 |   |   | 2.32 | % | $ | 72,973 |   | $ | 1,017 |   |   | 1.86 | % |
| Money                  market and passbook                                             |   |                                                         | 174,153   |   |   | 3,685 |   |   | 2.83 | % |   | 135,228 |   |   | 1,776 |   |   | 1.75 | % |
| Time                  certificates                                                     |   |                                                         | 1,371,507 |   |   | 32,270 |   |   | 3.15 | % |   | 971,355 |   |   | 16,838 |   |   | 2.32 | % |
| Total                  interest bearing deposit accounts                               |   |                                                         | 1,601,269 |   |   | 36,922 |   |   | 3.08 | % |   | 1,179,556 |   |   | 19,631 |   |   | 2.22 | % |
| FHLB                  advances and other borrowings                                    |   |                                                         | 665,660   |   |   | 17,366 |   |   | 3.49 | % |   | 226,662 |   |   | 4,319 |   |   | 2.55 | % |
| Junior                  subordinated debentures                                        |   |                                                         | 86,600    |   |   | 5,264 |   |   | 8.13 | % |   | 86,600 |   |   | 4,559 |   |   | 7.03 | % |
|                                                                                   |   |                                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  interest bearing liabilities                                    |   |                                                         | 2,353,529 |   | $ | 59,552 |   |   | 3.38 | % |   | 1,492,818 |   | $ | 28,509 |   |   | 2.55 | % |
| Non-interest                  bearing demand accounts                                  |   |                                                         | 14,884    |   |   |   |   |   |   |   |   | 15,359 |   |   |   |   |   |   |   |
| Other                  non-interest bearing liabilities                                |   |                                                         | 26,598    |   |   |   |   |   |   |   |   | 378,404 |   |   |   |   |   |   |   |
| Shareholders’                  equity                                            |   |                                                         | 196,960   |   |   |   |   |   |   |   |   | 199,893 |   |   |   |   |   |   |   |
| Total                  liabilities and                  shareholders’ equity     |   | $                                                            | 2,591,971 |   |   |   |   |   |   |   | $ | 2,086,474 |   |   |   |   |   |   |   |
| Net                  interest spread *(1)*                                             |   |                                                         |      |   |   |   |   |   | 3.22 | % |   |   |   |   |   |   |   | 3.49 | % |
|                                                                                   |   |                                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income before provision for                  loan losses |   |                                                         |      |   | $ | 67,710 |   |   |   |   |   |   |   | $ | 62,440 |   |   |   |   |
| Net                  interest margin *(2)*                                             |   |                                                         |      |   |   |   |   |   | 3.51 | % |   |   |   |   |   |   |   | 4.15 | % |

*(1)*
*Average        yield on interest earning assets minus average rate paid on interest bearing        liabilities. *

*(2)*
*Net        interest income divided by total average interest earning assets.*

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**Table            of            Contents**

|                                                        |   | **For                  the Nine Months Ended****September                  30, 2005 and 2004** |   |
|-------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|--------|
|                                                        |   | **Increase                  (Decrease) Due to:**                                               |   |
|                                                        |   | **Rate**                                                                                       |   | **Volume** |   | **Total** |   |
|                                                        |   | **(in                  thousands)**                                                            |   |
| Interest                  and fees earned from:             |   |                                                                                           |   |  |   |   |   |
| Cash                  and investment securities             |   | $                                                                                              | 8,403  |   | $ | (103 | ) | $ | 8,300 |   |
| Loans                                                       |   |                                                                                           | (1,265 | ) |   | 29,278 |   |   | 28,013 |   |
|                                                        |   |                                                                                           |   |   |   |   |   |   |   |   |
| Total                  increase in interest income          |   |                                                                                           | 7,138  |   |   | 29,175 |   |   | 36,313 |   |
|                                                        |   |                                                                                           |   |   |   |   |   |   |   |   |
| Interest                  paid on:                          |   |                                                                                           |   |   |   |   |   |   |   |   |
| Deposit                  accounts                           |   |                                                                                           | 8,992  |   |   | 8,299 |   |   | 17,291 |   |
| FHLB                  advances and other borrowings         |   |                                                                                           | 2,087  |   |   | 10,960 |   |   | 13,047 |   |
| Junior                  subordinated debentures             |   |                                                                                           | 705    |   |   | — |   |   | 705 |   |
|                                                        |   |                                                                                           |   |   |   |   |   |   |   |   |
| Total                  increase in interest expense         |   |                                                                                           | 11,784 |   |   | 19,259 |   |   | 31,043 |   |
|                                                        |   |                                                                                           |   |   |   |   |   |   |   |   |
| Increase                  (decrease) in net interest income |   | $                                                                                              | (4,646 | ) | $ | 9,916 |   | $ | 5,270 |   |

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**Table            of            Contents**

**Provision        for Loan Losses**

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**Table            of            Contents**

**Non-Interest        Income **

**Non-Interest        Expense**

**FINANCIAL        CONDITION**

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**Table            of            Contents**

**CREDIT        RISK**

**Nonperforming        Assets, Other Loans of Concern and Allowance for Loan        Losses**

|                                                                                  |   | **September                  30,****2005**  |    | **December                  31,****2004** |   |
|---------------------------------------------------------------------------------------|--------|---------------------------------------------|---------|-------------------------------------------|--------|
|                                                                                  |   | **(dollars                  in thousands)** |    |
| Nonaccrual                  loans:                                                    |   |                                        |    |                                      |   |   |   |
| Real                  estate                                                          |   | $                                           | 8,858   |                                      | $      | 7,057 |   |
| Franchise                                                                             |   |                                        | 694     |                                      |   | 3,874 |   |
| Entertainment                  finance                                                |   |                                        | 12,897  |                                      |   | 3,721 |   |
| Total                  nonaccrual loans                                               |   |                                        | 22,449  |                                      |   | 14,652 |   |
| Other                  real estate owned, net                                         |   |                                        | — |                                      |   | — |   |
| Total                  nonperforming assets                                           |   |                                        | 22,449  |                                      |   | 14,652 |   |
| Performing                  troubled debt restructurings                              |   |                                        | 17,453  |                                      |   | 3,096 |   |
| Total                nonperforming assets and performing troubled debt restructurings |   | $                                           | 39,902  |                                      | $      | 17,748 |   |
|                                                                                  |   |                                        |    |                                      |   |   |   |
| Nonaccrual                  loans to total loans                                      |   |                                        | 0.89    | %                                         |   | 0.80 | % |
| Allowance                  for loan losses to nonaccrual loans                        |   |                                        | 172.22  | %                                         |   | 242.17 | % |
| Nonperforming                  assets to total assets                                 |   |                                        | 0.75    | %                                         |   | 0.63 | % |

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**Table            of            Contents**

|                                                                                      |   | **For                  the Nine****Months                  Ended****September                  30,****2005** |   | **For                  the Year****Ended****December                  31,****2004** |   | **For                  the Nine Months Ended****September                  30,****2004** |   |
|-------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|
|                                                                                      |   | **(dollars                  in thousands)**                                                                  |   |
|                                                                                      |   |                                                                                                         |   |                                                                                |   |                                                                                     |   |
| Balance                  at beginning of period                                           |   | $                                                                                                            | 35,483 |                                                                                | $      | 33,401                                                                                   |   | $ | 33,401 |   |
| Provision                  for loan losses                                                |   |                                                                                                         | 3,750  |                                                                                |   | 4,725                                                                                    |   |   | 3,450 |   |
| Charge-offs                                                                               |   |                                                                                                         | (959   | )                                                                                   |   | (3,490                                                                                   | )      |   | (2,300 | ) |
| Recoveries                                                                                |   |                                                                                                         | 387    |                                                                                |   | 847                                                                                      |   |   | 132 |   |
| Net                  (charge-offs) recoveries                                             |   |                                                                                                         | (572   | )                                                                                   |   | (2,643                                                                                   | )      |   | (2,168 | ) |
|                                                                                      |   |                                                                                                         |   |                                                                                |   |                                                                                     |   |   |   |   |
| Balance                  at end of period                                                 |   | $                                                                                                            | 38,661 |                                                                                | $      | 35,483                                                                                   |   | $ | 34,683 |   |
|                                                                                      |   |                                                                                                         |   |                                                                                |   |                                                                                     |   |   |   |   |
| Allowance                  for loan losses as a percentage of                  loans, net |   |                                                                                                         | 1.52   | %                                                                                   |   | 1.94                                                                                     | %      |   | 2.09 | % |

**Liquidity**

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**Table            of            Contents**

**Capital        Resources**

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**Table            of            Contents**

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

**Item        4. Controls and Procedures**

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**Table            of            Contents**

**PART        II - OTHER INFORMATION**

**Item        1.** **Legal        Proceedings**

**Item        2.** **Unregistered        Sales of Equity Securities and Use of Proceeds**

|     **Period**                                        |   |    **Total                  Number of Shares Purchased** |    |    **Average                  Price Paid per Share** |   | **Total                  Number of Shares Purchased as Part of Publicly Announced Plans                  or                  Programs** |   | **Maximum                  Number of Shares that May Yet Be Purchased Under the Plans or                  Programs****(1)** |    |
|---------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|---------|---------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------|---------|
| July                  1, 2005 to July                  31, 2005           |   |                                                                    | — |                                                                | $      | —                                                                                                                                 |   |                                                                                                                        | — |   |   | 127,172 |   |
| August                  1, 2005 to August                  31, 2005       |   |                                                                    | 60,920  |                                                                |   | 54.05                                                                                                                                   |   |                                                                                                                        | 60,920  |   |   | 66,252 |   |
| September                  1, 2005 to September                  30, 2005 |   |                                                                    | 55,490  |                                                                |   | 52.32                                                                                                                                   |   |                                                                                                                        | 55,490  |   |   | 10,762 |   |
| Total                                                                     |   |                                                                    | 116,410 |                                                                | $      | 53.23                                                                                                                                   |   |                                                                                                                        | 116,410 |   |   | 10,762 |   |

**Item        3** **.** **Defaults        Upon Senior Securities**

**Item        4** **.** **Submission        of Matters to a Vote of Security Holders**

| Votes  |   | For    |      | Withheld |   |
|--------|--------|--------|-----------|----------|--------|
|   |   |   | 5,837,809 |     |   | 607,274 |   |

| Votes  |   | For    |      | Withheld |   |
|--------|--------|--------|-----------|----------|--------|
|   |   |   | 5,914,458 |     |   | 530,625 |   |

| Votes  |   | For    |      | Against |   | Withheld |   | Broker                        Non-Vote |   |
|--------|--------|--------|-----------|---------|--------|----------|--------|----------------------------------------|--------|
|   |   |   | 3,910,163 |    |   | 971,975  |   |                                   | 2,880  |   |   | 1,560,065 |   |

| Votes  |   | For    |      | Against |   | Withheld |   | Broker                        Non-Vote |   |
|--------|--------|--------|-----------|---------|--------|----------|--------|----------------------------------------|--------|
|   |   |   | 4,132,372 |    |   | 749,766  |   |                                   | 2,880  |   |   | 1,560,065 |   |

| Votes  |   | For    |      | Against |   | Withheld |   |
|--------|--------|--------|-----------|---------|--------|----------|--------|
|   |   |   | 6,172,371 |    |   | 270,812  |   |   | 1,900 |   |

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**Table                of                Contents**

**Item        5** **.** **Other        Information**

**Item        6** **.** **Exhibits**

----

**Table              of              Contents**

**SIGNATURES**

|                                    | **ITLA                  CAPITAL CORPORATION**         |   |
|-----------------------------------------|-------------------------------------------------------|--------|
|                                    |                                                  |   |
| Date:                  November 9, 2005 | /s/                  George W. Haligowski             |   |
|                                    | George                  W. Haligowski                 |   |
|                                    | Chairman                  of the Board, President and |   |
|                                    | Chief                  Executive Officer              |   |

| Date:                  November 9, 2005 | /s/                  Timothy M. Doyle            |   |
|-----------------------------------------|--------------------------------------------------|--------|
|                                    | Timothy                  M. Doyle                |   |
|                                    | Executive                  Managing Director and |   |
|                                    | Chief                  Financial Officer         |   |

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**Table            of            Contents**

**EXHIBIT        INDEX**

| **Regulation                  S-K Exhibit Number** |   | **Document**                                                                                                                                                    |   | **Reference                  to Prior Filling or Exhibit Number Attached                  Hereto** |
|----------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|
|                                               |   |                                                                                                                                                            |   |                                                                                               |
| 3.1                                                |   | Certificate                  of Incorporation                                                                                                                   |   | **                                                                                                 |
| 3.2                                                |   | Bylaws,                  as amended                                                                                                                             |   | ****                                                                                               |
| 4                                                  |   | Instruments                  Defining the Rights of Security Holders, Including                  Indentures                                                     |   | ********                                                                                           |
| 10.1                                               |   | 2005                  Re-Designated, Amended and Restated Stock Option Plan For Nonemployee                  Directors                                          |   | ******                                                                                             |
| 10.2                                               |   | 2005                  Re-Designated, Amended and Restated Employee Stock Incentive                  Plan                                                        |   | ******                                                                                             |
| 10.3a                                              |   | Nonqualified                  (Non-Employer Securities) Deferred Compensation Plan                                                                              |   | *******                                                                                            |
| 10.3b                                              |   | Nonqualified                  (Employer Securities Only) Deferred Compensation Plan                                                                             |   | *******                                                                                            |
| 10.4                                               |   | Supplemental                  Salary Savings Plan                                                                                                               |   | *                                                                                                  |
| 10.5                                               |   | Data                  Processing Agreement                                                                                                                      |   | *                                                                                                  |
| 10.6                                               |   | Employment                  Agreement with George W. Haligowski                                                                                                 |   | ****                                                                                               |
| 10.7                                               |   | Form                  of Change of Control Agreements with Norval L. Bruce, Timothy M.                  Doyle,                  Don Nickbarg, and Scott Wallace |   | ***                                                                                                |
| 10.8                                               |   | Recognition                  and Retention Plan                                                                                                                 |   | **                                                                                                 |
| 10.9                                               |   | Voluntary                  Retainer Stock and Deferred Compensation Plan for Outside                  Directors                                                 |   | *****                                                                                              |
| 10.10                                              |   | Supplemental                  Executive Retirement Plan                                                                                                         |   | *******                                                                                            |
| 10.11                                              |   | ITLA                  Capital Corporation Rabbi Trust Agreement                                                                                                 |   | ***                                                                                                |
| 10.12                                              |   | Salary                  Continuation Plan                                                                                                                       |   | ****                                                                                               |
| 10.13                                              |   | Form                  of Incentive Stock Option Agreement under Employee Stock Incentive                  Plan                                             |   | **********                                                                                         |
| 10.14                                              |   | Form                  of Non-Qualified Stock Option Agreement under Employee                  Stock Incentive Plan                                         |   | **********                                                                                         |
| 10.15                                              |   | Form                of Non-Qualified Stock Option Agreement under Stock Option                Plan for                Nonemployee Directors                |   | ***********                                                                                        |
| 10.16                                              |   | Description                  of Named Executive Officer Salary, Bonus and Perquisite Arrangements                  for 2005                                     |   | *********                                                                                          |
| 10.17                                              |   | Description                  of Director Fee Arrangements                                                                                                       |   | *********                                                                                          |
| 11                                                 |   | Statement                  Regarding Computation of Per Share Earnings                                                                                          |   | Not                  Required                                                                      |
| 15                                                 |   | Letter                  Regarding Unaudited Interim Financial Information                                                                                       |   | None                                                                                               |
| 18                                                 |   | Letter                  Regarding Change in Accounting Principles                                                                                               |   | None                                                                                               |
| 19                                                 |   | Report                  furnished to Security Holders                                                                                                           |   | None                                                                                               |
| 22                                                 |   | Published                  Report Regarding Matters Submitted to Vote of Security                  Holders                                                      |   | None                                                                                               |
| 23.1                                               |   | Consent                  of Experts                                                                                                                             |   | None                                                                                               |
| 24                                                 |   | Power                  of Attorney                                                                                                                              |   | None                                                                                               |
| 31.1                                               |   | Rule                  13a-14(a)/15d-14(a) Certification of Chief Executive                  Officer                                                             |   | 31.1                                                                                               |
| 31.2                                               |   | Rule                  13a-14(a)/15d-14(a) Certification of Chief Financial                  Officer                                                             |   | 31.2                                                                                               |
| 32                                                 |   | Section                  1350 Certifications of Chief Executive Officer and Chief Financial                  Officer                                            |   | 32                                                                                                 |

| *                                                            | Filed                  as an exhibit to Imperial’s Registration Statement on Form S-1 (File No.                  33-96518) filed with the Commission on September 1, 1995, pursuant                  to                  Section 5 of the Securities Act of 1933. |
|--------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *                  *                                         | Filed                  as an exhibit to the Company’s Registration Statement on Form S-4 (File                  No. 333-03551) filed with the Commission on May 10, 1996, pursuant                  to                  Section 5 of the Securities Act of 1933.  |
| *                  *                  *                      | Filed                  as an exhibit to the Company’s Form 10-K for the year ended December 31,                  1999 (File No. 0-26960).                                                                                                                         |
| *                  *                  * *                    | Filed                  as an exhibit to the Company’s Form 10-Q for the quarter ended June 30,                  2000 (File No. 0-26960).                                                                                                                          |
| *                  *                  * * *                  | Filed                  as an exhibit to Amendment No. Two to the Company’s Registration Statement                  on Form S-4 (File No. 333-03551) filed with the Commission on June                  19,                  1996.                                 |
| *                  *                  * * * *                | Filed                  as an appendix to the Company’s definitive proxy materials filed on June                  27, 2005.                                                                                                                                        |
| *                  *                  * * * * *              | Filed                  as an exhibit to the Company’s Quarterly Report on Form 10-Q for the                  quarter ended September 30, 2003 (File No. 0-26960).                                                                                                 |
| *                  *                  * * * * * *            | The                  Company hereby agrees to furnish the SEC, upon request, copies                  of the                  instruments defining the rights of the holders of each issue of                  the                  Company's long-term debt.            |
| *                  *                  * * * * * * *          | Filed                  as an exhibit to the Company’s Form 10-K for the year ended December 31,                  2004.                                                                                                                                            |
| *                  * * * * * * * * *                    | Filed                  as an exhibit to the Company’s Current Report on Form 8-K filed on August                  9, 2005 (File No. 0-26960).                                                                                                                     |
| *                  *                  * * * * * * * * * | Filed                  as an exhibit to the Company’s Current Report on Form 8-K filed on                  November 4, 2005 (File No.                  0-26960).                                                                                                  |