##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE
ACT OF 1934
|--- | --------------------------------------------------------------------------------------

For the Quarterly Period Ended September 30, 2002

OR



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

For the Transition Period from __________________ to __________________

Commission File Number 0-26960

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

Number of shares of common stock of the registrant: 5,778,758 outstanding
as of November 8, 2002.





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TABLE OF CONTENTS



|                            |                                                                                               |                                                          |  |  |  |  |  | 
|--------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------- |  |  |  |  |  | 
|                            |                                                                                               | CONSOLIDATED BALANCE SHEETS                             
|                            |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME                       
|                            |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS                   
|                            |                                                                                               | NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|                            | ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                            | ITEM 3: MARKET RISK                                                                          
|                            | ITEM 4. CONTROLS AND PROCEDURES                                                              
|Part II  OTHER INFORMATION
|                            | Item 1 Legal Proceedings                                                                     
|                            | Item 2 Changes in Securities                                                                 
|                            | Item 3 Defaults Upon Senior Securities                                                       
|                            | Item 4 Submission of Matters to a Vote of Security Holders                                   
|                            | Item 5 Other Information                                                                     
|                            | Item 6 Exhibits and Reports on Form 8-K                                                      
|SIGNATURES                 



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##### Table of Contents



ITLA CAPITAL CORPORATION
FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002
TABLE OF CONTENTS

PART I  FINANCIAL INFORMATION

|                            |                                                                                       |                                                                                             |  |  |  |    |      |  |  | 
|--------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- |  |  |  | -- | ---- |  |  | 
|                            |                                                                                       |                                                                                             |  |  |  |    | Page
|                            |                                                                                       |                                                                                             |  |  |  |    |     
|Item 1.                     | Financial Statements                                                                  |                                                                                             |  |  |  |    |     
|                           
|                           
|                           
|                           
|                            |                                                                                       | Consolidated Balance Sheets  September 30, 2002 and December 31, 2001                      |  |  |  |    | 3    | 
|                           
|                           
|                           
|                           
|                            |                                                                                       | Consolidated Statements of Income  Three and Nine Months
Ended September 30, 2002 and 2001 |  |  |  |    | 4    | 
|                           
|                           
|                           
|                           
|                            |                                                                                       | Consolidated Statements of Cash Flows 
Nine Months Ended September 30, 2002 and 2001       |  |  |  |    | 5    | 
|                           
|                           
|                           
|                           
|                            |                                                                                       | Notes to Unaudited Consolidated Financial Statements                                        |  |  |  |    | 6    | 
|                           
|                           
|                           
|                           
|Item 2.                     | Managements Discussion and Analysis of Financial Condition and
Results of Operations |                                                                                             |  |  |  | 9  |     
|                           
|                           
|                           
|                           
|Item 3.                     | Market Risk                                                                           |                                                                                             |  |  |  | 20 |     
|                           
|                           
|                           
|                           
|Item 4.                     | Controls
and Procedures                                                               |                                                                                             |  |  |  | 20 |     
|                           
|                           
|                           
|                           
|PART II  OTHER INFORMATION |                                                                                       |                                                                                             |  | 
|                           
|                           
|                           
|                           
|Item 1.                     |                                                                                       | Legal Proceedings                                                                           |  |  |  | 21 |     
|                           
|                           
|                           
|                           
|Item 2.                     |                                                                                       | Changes in Securities                                                                       |  |  |  | 21 |     
|                           
|                           
|                           
|                           
|Item 3.                     |                                                                                       | Defaults Upon Senior Securities                                                             |  |  |  | 21 |     
|                           
|                           
|                           
|                           
|Item 4.                     |                                                                                       | Submission of Matters to a Vote of Security Holders                                         |  |  |  | 21 |     
|                           
|                           
|                           
|                           
|Item 5.                     |                                                                                       | Other Information                                                                           |  |  |  | 21 |     
|                           
|                           
|                           
|                           
|Item 6.                     |                                                                                       | Exhibits and Reports on Form 8-K                                                            |  |  |  | 21 |     
|                           
|                           
|                           
|                           
|                            |                                                                                       | Signatures                                                                                  |  |  |  | 22 |     
|                           
|                           
|                           
|                           
|                            |                                                                                       | Certifications                                                                              |  |  |  | 23 |     

Forward Looking Statements

Safe Harbor statement under the Private Securities Litigation Reform Act
of 1995: This Form 10-Q contains forward-looking statements that are subject
to risks and uncertainties, including, but not limited to; the economic impact
of the terrorist attacks on September 11, 2001 and the U.S. response to these
attacks, changes in economic conditions in our market areas, changes in
policies by regulatory agencies, the impact of competitive loan products, loan
demand risks, the quality or composition of the loan or investment portfolios,
including levels of nonperforming assets, fluctuations in interest rates, and
changes in the relative differences between short and long term interest rates,
and operating results and other risks detailed from time to time in our filings
with the Securities and Exchange Commission. We caution readers not to place
undue reliance on forward-looking statements. We do not undertake and
specifically disclaim any obligation to revise any forward-looking statements
to reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements. These risks could cause our
actual results for 2002 and beyond to differ materially from those expressed in
any forward-looking statements by, or on behalf of, us. As used throughout
this report, the terms we, our or Company refer to ITLA Capital
Corporation and its consolidated subsidiaries.

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##### Table of Contents






ITLA CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|                                                                                                                |                                                                                                                                                               |                            |                                            |         |                                     |           |              |         |         |           | 
|--------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ------- | ----------------------------------- | --------- | ------------ | ------- | ------- | --------- | 
|                                                                                                                |                                                                                                                                                               |                            |                                            |         | September 30,                       |           |              |         |        
|                                                                                                                |                                                                                                                                                               |                            |                                            |         | 2002                                |           | December 31,
|                                                                                                                |                                                                                                                                                               |                            |                                            |         | (unaudited)                         |           | 2001        
|                                                                                                                |                                                                                                                                                               |                            |                                            |         |                                     |           |             
|                                                                                                                |                                                                                                                                                               |                            |                                            |         | (in thousands except share amounts)
|Assets                                                                                                          |                                                                                                                                                               |                            |                                            |         |                                     |           |              |        
|Cash and cash equivalents                                                                                       |                                                                                                                                                               | $                          | 92,834                                     |         |                                     | $         | 134,241      |        
|Investment securities available for sale, at fair value                                                         |                                                                                                                                                               |                            | 53,616                                     |         |                                     |           | 29,411       |        
|Stock in Federal Home Loan Bank                                                                                 |                                                                                                                                                               |                            | 16,454                                     |         |                                     |           | 13,464       |        
|Real estate loans, net (net of allowance for loan losses of
$29,309 and $24,722 in 2002 and 2001, respectively) |                                                                                                                                                               |                            | 1,142,897                                  |         |                                     |           | 1,122,370    |        
|Real estate loans held in trust (net of allowance for loan
losses of $1,928 in 2002 and 2001, respectively)     |                                                                                                                                                               |                            | 132,389                                    |         |                                     |           | 162,158      |        
|Interest receivable                                                                                             |                                                                                                                                                               |                            | 9,017                                      |         |                                     |           | 11,144       |        
|Other real estate owned, net                                                                                    |                                                                                                                                                               |                            | 14,092                                     |         |                                     |           | 13,741       |        
|Premises and equipment, net                                                                                     |                                                                                                                                                               |                            | 3,787                                      |         |                                     |           | 2,177        |        
|Deferred income taxes                                                                                           |                                                                                                                                                               |                            | 11,626                                     |         |                                     |           | 11,869       |        
|Other assets                                                                                                    |                                                                                                                                                               |                            | 11,633                                     |         |                                     |           | 7,733        |        
|                                                                                                                |                                                                                                                                                               |                            |                                            |         |                                     |           |              |        
|                                                                                                                |                                                                                                                                                               |                            | Total assets                               |         | $                                   | 1,488,345 |              |         | $       | 1,508,308 | 
|                                                                                                                |                                                                                                                                                               |                            |                                            |         |                                     |           |              |        
|Liabilities and Shareholders Equity                                                                            |                                                                                                                                                               |                            |                                            |         |                                     |           |              |        
|Liabilities:                                                                                                    |                                                                                                                                                               |                            |                                            |         |                                     |           |              |        
|                                                                                                                | Deposit accounts                                                                                                                                              |                            | $                                          | 893,485 |                                     |           | $            | 953,654 |        
|                                                                                                                | Federal Home Loan Bank advances                                                                                                                               |                            |                                            | 329,085 |                                     |           |              | 269,285 |        
|                                                                                                                | Collateralized mortgage obligations                                                                                                                           |                            |                                            | 79,400  |                                     |           |              | 109,648 |        
|                                                                                                                | Accounts payable and other liabilities                                                                                                                        |                            |                                            | 7,144   |                                     |           |              | 9,674   |        
|                                                                                                                |                                                                                                                                                               |                            |                                            |         |                                     |           |              |        
|                                                                                                                |                                                                                                                                                               |                            | Total liabilities                          |         |                                     | 1,309,114 |              |         |         | 1,342,261 | 
|                                                                                                                |                                                                                                                                                               |                            |                                            |         |                                     |           |              |        
|Commitments
and contingencies                                                                                   |                                                                                                                                                               |                            |                                            |         |                                     |           |              |         |         |           | 
|                                                                                                                | Guaranteed preferred beneficial interests in the
Companys junior subordinated deferrable interest
debentures, net                                            |                            |                                            | 28,190  |                                     |           |              | 28,118  |        
|Shareholders equity:                                                                                           |                                                                                                                                                               |                            |                                            |         |                                     |           |              |        
|                                                                                                                | Preferred stock, 5,000,000 shares authorized, none issued                                                                                                     |                            |                                            |        |                                     |           |              |        |        
|                                                                                                                | Contributed capital-common stock, $.01 par value;
20,000,000 shares authorized, 8,226,414 and 8,212,749
issued and outstanding in 2002 and 2001, respectively |                            |                                            | 58,514  |                                     |           |              | 58,183  |        
|                                                                                                                | Retained earnings                                                                                                                                             |                            |                                            | 130,447 |                                     |           |              | 115,768 |        
|                                                                                                                | Accumulated other comprehensive income (loss)                                                                                                                 |                            |                                            | 438     |                                     |           |              | (7      | )      
|                                                                                                                |                                                                                                                                                               |                            |                                            |         |                                     |           |              |        
|                                                                                                                |                                                                                                                                                               |                            | 189,399                                    |         |                                     |           | 173,944      |        
|                                                                                                                | Less treasury stock, at cost  2,447,656 and 2,354,056
shares in 2002 and 2001, respectively                                                                  |                            |                                            | (38,358 | )                                   |           |              | (36,015 | )      
|                                                                                                                |                                                                                                                                                               |                            |                                            |         |                                     |           |              |        
|                                                                                                                |                                                                                                                                                               | Total shareholders equity |                                            |         | 151,041                             |           |              |         | 137,929 |          
|                                                                                                                |                                                                                                                                                               |                            |                                            |         |                                     |           |              |        
|                                                                                                                |                                                                                                                                                               |                            | Total liabilities and shareholders equity |         | $                                   | 1,488,345 |              |         | $       | 1,508,308 | 
|                                                                                                                |                                                                                                                                                               |                            |                                            |         |                                     |           |              |        

See accompanying notes to the unaudited consolidated financial statements.

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##### Table of Contents






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

|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |        |        |        | 
|-------------------------------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------ | ---------------------------------------------------- | ------ | --------------------------------------- | ------ | ------------------------- | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | 
|                                                                                       |                                                 |                                      |                                                      |        | For the Three Months Ended              |        | For the Nine Months Ended
|                                                                                       |                                                 |                                      |                                                      |        | September 30,                           |        | September 30,            
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                          
|                                                                                       |                                                 |                                      |                                                      |        | 2002                                    |        | 2001                      |        | 2002   |        | 2001  
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |       
|                                                                                       |                                                 |                                      |                                                      |        | (in thousands except per share amounts)
|Interest income:                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       | Real estate loans, including fees               |                                      | $                                                    | 24,020 |                                         |        | $                         | 25,445 |        |        | $      | 70,598 |        |        | $      | 78,863 |       
|                                                                                       | Real estate loans held in trust                 |                                      |                                                      | 2,458  |                                         |        |                           | 3,532  |        |        |        | 7,960  |        |        |        | 11,860 |       
|                                                                                       | Cash and investment securities                  |                                      |                                                      | 902    |                                         |        |                           | 656    |        |        |        | 2,427  |        |        |        | 2,604  |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       |                                                 | Total interest income                |                                                      |        | 27,380                                  |        |                           |        | 29,633 |        |        |        | 80,985 |        |        |        | 93,327 |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|Interest expense:                                                                      |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       | Deposit accounts                                |                                      |                                                      | 6,815  |                                         |        |                           | 12,250 |        |        |        | 22,203 |        |        |        | 42,161 |       
|                                                                                       | Federal Home Loan Bank advances                 |                                      |                                                      | 1,422  |                                         |        |                           | 1,561  |        |        |        | 4,310  |        |        |        | 3,219  |       
|                                                                                       | Collateralized mortgage obligations             |                                      |                                                      | 563    |                                         |        |                           | 1,412  |        |        |        | 1,852  |        |        |        | 5,394  |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       |                                                 | Total interest expense               |                                                      |        | 8,800                                   |        |                           |        | 15,223 |        |        |        | 28,365 |        |        |        | 50,774 |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       |                                                 |                                      | Net interest income before provision
for loan losses |        |                                         | 18,580 |                           |        |        | 14,410 |        |        |        | 52,620 |        |        |        | 42,553 | 
|Provision for loan losses                                                              |                                                 |                                      | 2,700                                                |        |                                         |        | 1,500                     |        |        |        | 6,125  |        |        |        | 2,450  |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       |                                                 |                                      | Net interest income after provision
for loan losses  |        |                                         | 15,880 |                           |        |        | 12,910 |        |        |        | 46,495 |        |        |        | 40,103 | 
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|Non-interest income:                                                                   |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       | Fee income from mortgage banking activities     |                                      |                                                      |       |                                         |        |                           | 15     |        |        |        |       |        |        |        | 75     |       
|                                                                                       | Gain on sale of loans, net                      |                                      |                                                      |       |                                         |        |                           |       |        |        |        | 32     |        |        |        |       |       
|                                                                                       | Other                                           |                                      |                                                      | (54    | )                                       |        |                           | 236    |        |        |        | 141    |        |        |        | 729    |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       |                                                 | Total non-interest income            |                                                      |        | (54                                     | )      |                           |        | 251    |        |        |        | 173    |        |        |        | 804    |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|Non-interest expense:                                                                  |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       | Compensation and benefits                       |                                      |                                                      | 3,303  |                                         |        |                           | 3,018  |        |        |        | 9,781  |        |        |        | 8,871  |       
|                                                                                       | Occupancy and equipment                         |                                      |                                                      | 777    |                                         |        |                           | 753    |        |        |        | 2,232  |        |        |        | 2,196  |       
|                                                                                       | FDIC assessment                                 |                                      |                                                      | 36     |                                         |        |                           | 46     |        |        |        | 120    |        |        |        | 139    |       
|                                                                                       | Other                                           |                                      |                                                      | 2,343  |                                         |        |                           | 1,855  |        |        |        | 6,956  |        |        |        | 5,378  |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       |                                                 | Total general and administrative     |                                                      |        | 6,459                                   |        |                           |        | 5,672  |        |        |        | 19,089 |        |        |        | 16,584 |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       | Real estate owned expense, net                  |                                      |                                                      | 71     |                                         |        |                           | 47     |        |        |        | 325    |        |        |        | 97     |       
|                                                                                       | Provision for losses on other real estate owned |                                      |                                                      |       |                                         |        |                           | 34     |        |        |        | 796    |        |        |        | 237    |       
|                                                                                       | Gain on sale of other real estate owned, net    |                                      |                                                      |       |                                         |        |                           | (13    | )      |        |        | (75    | )      |        |        | (50    | )     
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       |                                                 | Total real estate owned expense, net |                                                      |        | 71                                      |        |                           |        | 68     |        |        |        | 1,046  |        |        |        | 284    |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       |                                                 |                                      | Total non-interest expense                           |        |                                         | 6,530  |                           |        |        | 5,740  |        |        |        | 20,135 |        |        |        | 16,868 | 
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|Income before provision for income taxes and
minority interest in income of subsidiary |                                                 |                                      | 9,296                                                |        |                                         |        | 7,421                     |        |        |        | 26,533 |        |        |        | 24,039 |       
|Minority interest in income of subsidiary                                              |                                                 |                                      | 815                                                  |        |                                         |        | 799                       |        |        |        | 2,411  |        |        |        | 2,169  |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|Income before provision for income taxes                                               |                                                 |                                      | 8,481                                                |        |                                         |        | 6,622                     |        |        |        | 24,122 |        |        |        | 21,870 |       
|Provision for income taxes                                                             |                                                 |                                      | 3,326                                                |        |                                         |        | 2,583                     |        |        |        | 9,443  |        |        |        | 8,399  |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       | NET INCOME                                      |                                      | $                                                    | 5,155  |                                         |        | $                         | 4,039  |        |        | $      | 14,679 |        |        | $      | 13,471 |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       | BASIC EARNINGS PER SHARE                        |                                      | $                                                    | 0.86   |                                         |        | $                         | 0.64   |        |        | $      | 2.45   |        |        | $      | 2.06   |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       
|                                                                                       | DILUTED EARNINGS PER SHARE                      |                                      | $                                                    | 0.80   |                                         |        | $                         | 0.62   |        |        | $      | 2.29   |        |        | $      | 1.99   |       
|                                                                                       |                                                 |                                      |                                                      |        |                                         |        |                           |        |        |        |        |        |        |        |        |       

See accompanying notes to the unaudited consolidated financial statements.

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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,            
|                                      |                                                                                   |                                                                                  |                                                     |                                                      |         |                          
|                                      |                                                                                   |                                                                                  |                                                     |                                                      |         | 2002                      |         | 2001  
|                                      |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|                                      |                                                                                   |                                                                                  |                                                     |                                                      |         | (in thousands)           
|Cash Flows From Operating Activities: |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|                                      | Net Income                                                                        |                                                                                  | $                                                   | 14,679                                               |         |                           | $       | 13,471 |         
|                                      | Adjustments to reconcile net income to net cash provided
by operating activities: |                                                                                  |                                                     |                                                      |         |                           |         |        |         
|                                      |                                                                                   | Depreciation and amortization of premises and equipment                          |                                                     |                                                      | 674     |                           |         |        | 616      |       
|                                      |                                                                                   | Amortization of premium on purchased loans                                       |                                                     |                                                      | 1,532   |                           |         |        | 2,373    |       
|                                      |                                                                                   | Amortization of original issue discount and deferred debt
issuance costs on CMOs |                                                     |                                                      | 136     |                           |         |        | 234      |       
|                                      |                                                                                   | Accretion of deferred loan origination fees, net of costs                        |                                                     |                                                      | (868    | )                         |         |        | (1,219   | )     
|                                      |                                                                                   | Provision for loan losses                                                        |                                                     |                                                      | 6,125   |                           |         |        | 2,450    |       
|                                      |                                                                                   | Provision for losses on other real estate owned                                  |                                                     |                                                      | 796     |                           |         |        | 237      |       
|                                      |                                                                                   | Gain on sale of real estate loans, net                                           |                                                     |                                                      | (32     | )                         |         |        |         |       
|                                      |                                                                                   | Gain on the sale of other real estate owned                                      |                                                     |                                                      | (75     | )                         |         |        | (50      | )     
|                                      |                                                                                   | Decrease in interest receivable                                                  |                                                     |                                                      | 2,127   |                           |         |        | 820      |       
|                                      |                                                                                   | (Increase) decrease in other assets                                              |                                                     |                                                      | (912    | )                         |         |        | 977      |       
|                                      |                                                                                   | Decrease in accounts payable and other liabilities                               |                                                     |                                                      | (2,899  | )                         |         |        | (1,143   | )     
|                                      |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|                                      |                                                                                   |                                                                                  | Net cash provided by operating activities           |                                                      |         | 21,283                    |         |        |          | 18,766 |       
|                                      |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|Cash Flows From Investing Activities: |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|                                      |                                                                                   | Proceeds from securitization and sale of real estate loans                       |                                                     |                                                      | 98,155  |                           |         |        | 448      |       
|                                      |                                                                                   | (Increase) decrease in real estate loans, net                                    |                                                     |                                                      | (63,527 | )                         |         |        | 94,338   |       
|                                      |                                                                                   | Net cash paid to acquire Asahi Bank of California                                |                                                     |                                                      | (14,872 | )                         |         |        |         |       
|                                      |                                                                                   | Repayment of real estate loans held in trust                                     |                                                     |                                                      | 28,774  |                           |         |        | 34,829   |       
|                                      |                                                                                   | Purchases of real estate loans                                                   |                                                     |                                                      | (30,084 | )                         |         |        | (170,576 | )     
|                                      |                                                                                   | Purchases of investment securities available for sale                            |                                                     |                                                      | (77,670 | )                         |         |        | (16,000  | )     
|                                      |                                                                                   | Proceeds from maturity of investment securities available for sale               |                                                     |                                                      | 55,000  |                           |         |        | 59,260   |       
|                                      |                                                                                   | Increase in stock in Federal Home Loan Bank                                      |                                                     |                                                      | (2,990  | )                         |         |        | (6,066   | )     
|                                      |                                                                                   | Proceeds from the sale of other real estate owned                                |                                                     |                                                      | 2,720   |                           |         |        | 1,889    |       
|                                      |                                                                                   | Other, net                                                                       |                                                     |                                                      | (1,822  | )                         |         |        | (472     | )     
|                                      |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|                                      |                                                                                   |                                                                                  | Net cash used in investing activities               |                                                      |         | (6,316                    | )       |        |          | (2,350 | )     
|                                      |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|Cash Flows From Financing Activities: |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|                                      |                                                                                   | Decrease in deposit accounts                                                     |                                                     |                                                      | (68,938 | )                         |         |        | (83,540  | )     
|                                      |                                                                                   | Net proceeds from borrowings from the Federal Home Loan Bank                     |                                                     |                                                      | 59,800  |                           |         |        | 125,635  |       
|                                      |                                                                                   | Repayment of Asahi repurchase agreement, net                                     |                                                     |                                                      | (14,693 | )                         |         |        |         |       
|                                      |                                                                                   | Principal repayments on collateralized mortgage obligations                      |                                                     |                                                      | (30,384 | )                         |         |        | (38,670  | )     
|                                      |                                                                                   | Cash paid to acquire treasury stock                                              |                                                     |                                                      | (2,343  | )                         |         |        | (13,124  | )     
|                                      |                                                                                   | Proceeds from exercise of employee stock options                                 |                                                     |                                                      | 184     |                           |         |        | 74       |       
|                                      |                                                                                   | Proceeds from issuance of trust preferred securities                             |                                                     |                                                      |        |                           |         |        | 14,549   |       
|                                      |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|                                      |                                                                                   |                                                                                  | Net cash (used in) provided by financing activities |                                                      |         | (56,374                   | )       |        |          | 4,924  |       
|                                      |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|                                      |                                                                                   |                                                                                  |                                                     | Net (decrease) increase in cash and cash equivalents |         |                           | (41,407 | )      |          |        | 21,340 | 
|                                      |                                                                                   |                                                                                  |                                                     | Cash and cash equivalents at beginning of the period |         |                           | 134,241 |        |          |        | 70,950 | 
|                                      |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|                                      |                                                                                   |                                                                                  |                                                     | Cash and cash equivalents at end of period           |         | $                         | 92,834  |        |          | $      | 92,290 | 
|                                      |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|Supplemental Cash Flow Information:   |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|                                      |                                                                                   |                                                                                  | Cash paid during the period for interest            |                                                      | $       | 28,473                    |         |        | $        | 51,155 |       
|                                      |                                                                                   |                                                                                  | Cash paid during the period for income taxes        |                                                      | $       | 10,225                    |         |        | $        | 6,500  |       
|Noncash Investing Transactions:       |                                                                                   |                                                                                  |                                                     |                                                      |         |                           |         |       
|                                      |                                                                                   |                                                                                  | Loans transferred to other real estate owned        |                                                      | $       | 4,258                     |         |        | $        | 6,660  |       

See accompanying notes to the unaudited consolidated financial statements.

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##### Table of Contents






ITLA CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  BASIS OF PRESENTATION

The unaudited consolidated financial statements of ITLA Capital
Corporation (the Company) included herein reflect all normal recurring
adjustments which are, in the opinion of management, necessary to present
fairly the results of operations and financial position of the Company, as of
and for the interim periods indicated. The unaudited consolidated financial
statements include the accounts of ITLA Capital and its wholly-owned
subsidiaries, Imperial Capital Bank (the Bank) and Imperial Capital Real
Estate Investment Trust (Imperial Capital REIT), ITLA Capital Statutory Trust
I (Trust I) and ITLA Capital Statutory Trust II (Trust II). All
intercompany transactions and balances have been eliminated. Certain
information and disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in the United
States have been condensed or omitted pursuant to the rules and regulations of
the U.S. Securities and Exchange Commission. The results of operations for the
three and nine months ended September 30, 2002 are not necessarily indicative
of the results of operations for the remainder of the year.

These unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in our annual report on Form 10-K for the year ended December 31,
2001.

NOTE 2  EARNINGS PER SHARE

Basic Earnings Per Share (Basic EPS) is computed by dividing income
available to common shareholders by the weighted-average number of common
shares outstanding for the period. Diluted Earnings Per Share (Diluted EPS)
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock which shared in the Companys
earnings.

The following is a reconciliation of the calculation of Basic EPS and
Diluted EPS.

|                                 |  |                                          |       |                                         |  |                |       |            |  |             |       |        |  |                  |        |       |  |  |       |  |  |   |       |  
|-------------------------------- |  | ---------------------------------------- | ----- | --------------------------------------- |  | -------------- | ----- | ---------- |  | ----------- | ----- | ------ |  | ---------------- | ------ | ----- |  |  | ----- |  |  | - | ----- | -
|                                 |  | For the Three Months Ended September 30, |       | For the Nine Months Ended September 30,
|                                 |  |                                          |       |                                        
|                                 |  |                                          |       |                                         |  | Weighted-      |       | Per        |  |             |       |        |  | Weighted-Average |        | Per  
|                                 |  |                                          |       |                                         |  | Average Shares |       | Share      |  |             |       |        |  | Shares           |        | Share
|                                 |  | Net Income                               |       | Outstanding                             |  | Amount         |       | Net Income |  | Outstanding |       | Amount
|                                 |  |                                          |       |                                         |  |                |       |            |  |             |       |       
|                                 |  | (in thousands, except per share data)   
|2002                             |  |                                          |       |                                         |  |                |       |            |  |             |       |        |  |                  |        |       |  |  |       |  |  |   |       |  
|Basic EPS                        |  | $                                        | 5,155 |                                         |  |                | 5,966 |            |  | $           | 0.86  |        |  | $                | 14,679 |       |  |  | 5,984 |  |  | $ | 2.45  |  
|Effect of dilutive
stock options |  |                                          |      |                                         |  |                | 469   |            |  |             | (0.06 | )      |  |                  |       |       |  |  | 429   |  |  |   | (0.16 | )
|                                 |  |                                          |       |                                         |  |                |       |            |  |             |       |        |  |                  |        |       |  |  |       |  |  |   |       |  
|Diluted EPS                      |  | $                                        | 5,155 |                                         |  |                | 6,435 |            |  | $           | 0.80  |        |  | $                | 14,679 |       |  |  | 6,413 |  |  | $ | 2.29  |  
|                                 |  |                                          |       |                                         |  |                |       |            |  |             |       |        |  |                  |        |       |  |  |       |  |  |   |       |  
|2001                             |  |                                          |       |                                         |  |                |       |            |  |             |       |        |  |                  |        |       |  |  |       |  |  |   |       |  
|Basic EPS                        |  | $                                        | 4,039 |                                         |  |                | 6,277 |            |  | $           | 0.64  |        |  | $                | 13,471 |       |  |  | 6,542 |  |  | $ | 2.06  |  
|Effect of dilutive
stock options |  |                                          |      |                                         |  |                | 231   |            |  |             | (0.02 | )      |  |                  |       |       |  |  | 235   |  |  |   | (0.07 | )
|                                 |  |                                          |       |                                         |  |                |       |            |  |             |       |        |  |                  |        |       |  |  |       |  |  |   |       |  
|Diluted EPS                      |  | $                                        | 4,039 |                                         |  |                | 6,508 |            |  | $           | 0.62  |        |  | $                | 13,471 |       |  |  | 6,777 |  |  | $ | 1.99  |  
|                                 |  |                                          |       |                                         |  |                |       |            |  |             |       |        |  |                  |        |       |  |  |       |  |  |   |       |  

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NOTE 3  COMPREHENSIVE INCOME

Comprehensive income, which encompasses net income and the net change in
unrealized gains (losses) on investment securities available for sale, is
presented below:

|                                   |                                                                                                                                                                                                                                                                                                                    |   |                    |     |                   |   |       |     |      |   |        |     |  |   |        |     |  
|---------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | - | ------------------ | --- | ----------------- | - | ----- | --- | ---- | - | ------ | --- |  | - | ------ | --- | -
|                                   |                                                                                                                                                                                                                                                                                                                    |   | Three Months Ended |     | Nine Months Ended
|                                   |                                                                                                                                                                                                                                                                                                                    |   | September 30,      |     | September 30,    
|                                   |                                                                                                                                                                                                                                                                                                                    |   |                    |     |                  
|                                   |                                                                                                                                                                                                                                                                                                                    |   | 2002               |     | 2001              |   | 2002  |     | 2001
|                                   |                                                                                                                                                                                                                                                                                                                    |   |                    |     |                   |   |       |     |     
|                                   |                                                                                                                                                                                                                                                                                                                    |   | (in thousands)    
|Net Income                         |                                                                                                                                                                                                                                                                                                                    | $ | 5,155              |     |                   | $ | 4,039 |     |      | $ | 14,679 |     |  | $ | 13,471 |    
|Other comprehensive income (loss): |                                                                                                                                                                                                                                                                                                                    |   |                    |     |                   |   |       |     |      |   |        |     |  |   |        |    
|                                   | Unrealized gain (loss) on
investment securities
available for sale, net of tax
expense of $297 and net of tax
benefit of $18 for the three
months ended September 30,
2002 and 2001, and net of tax
expense of $141 and net tax
benefit of $65 for the nine
months ended September 30,
2002 and 2001, respectively |   |                    | 212 |                   |   |       | (27 | )    |   |        | 445 |  |   |        | (97 | )
|                                   |                                                                                                                                                                                                                                                                                                                    |   |                    |     |                   |   |       |     |      |   |        |     |  |   |        |    
|Comprehensive income               |                                                                                                                                                                                                                                                                                                                    | $ | 5,367              |     |                   | $ | 4,012 |     |      | $ | 15,124 |     |  | $ | 13,374 |    
|                                   |                                                                                                                                                                                                                                                                                                                    |   |                    |     |                   |   |       |     |      |   |        |     |  |   |        |    

NOTE 4  IMPAIRED LOANS RECEIVABLE

As of September 30, 2002 and December 31, 2001, the recorded investment in
impaired real estate loans and impaired real estate loans held in trust was
$9.3 million and $16.7 million, respectively. The average recorded investment
in impaired loans was $7.8 million for the three months ended September 30,
2002 and $28.3 million for the same period last year. The average recorded
investment in impaired loans was $10.8 million for the nine months ended
September 30, 2002 and $26.3 million for the same period last year. Interest
income recognized on impaired loans totaled $89,000 and $169,000 for the three
and nine months ended September 30, 2002 as compared to $33,000 and $45,000 for
the same periods last year.

NOTE 5  GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANYS JUNIOR
SUBORDINATED DEFERRABLE INTEREST DEBENTURES

The Company has two wholly-owned trust subsidiaries, Trust I and Trust II,
which issued $14.0 million of 10.60% cumulative trust preferred securities and
$15.0 million of 10.20% cumulative trust preferred securities, respectively,
(referred to collectively as the Trust Preferred securities.) ITLA Capital
has fully and unconditionally guaranteed the Trust Preferred securities along
with all obligations of each trust under their respective trust agreements.
Each trust was formed for the exclusive purpose of issuing their respective
Trust Preferred securities and common securities and using the proceeds to
acquire ITLA Capitals junior subordinated deferrable interest debentures.
Trust I acquired an aggregate principal amount of $14.4 million of ITLA
Capitals 10.60% junior subordinated deferrable interest debentures due
September 7, 2030 and Trust II acquired an aggregate principal amount of $15.5
million of ITLA Capitals 10.20% junior subordinated deferrable interest
debentures due February 22, 2031. The sole assets of each trust are the
debentures it holds. Each of the debentures is redeemable, in whole or in
part, at ITLA Capitals option on or after ten years after issuance, at
declining premiums to maturity. The Company used the proceeds from the
debentures for general corporate purposes, including an aggregate of $28.0
million in capital contributions to the Bank to support future growth.

The costs associated with the Trust Preferred securities issuance have
been capitalized and are being amortized using a method that approximates the
interest method over a period of ten years. The distributions payable on the
Trust Preferred securities are reflected as Minority interest in income of
subsidiary in the Consolidated Statements of Income. The Trust preferred
securities are reflected on the Consolidated Statement of Financial Condition
as Guaranteed Preferred Beneficial Interests in the Companys Junior
Subordinated Deferrable Interest Debentures.

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NOTE 6  RESIDUAL INTEREST IN SECURITIZATION

During the quarter ended March 31, 2002, the Company formed a limited
liability company to issue $86.3 million of asset-backed notes in a
securitization of substantially all of its residential loan portfolio. The
Company recognized a gain of $3.7 million on the securitization of these loans,
although cash (representing the excess spread and servicing fees) is received
by us over the lives of the loans. Concurrent with recognizing such gain on
sale, the Company recorded the excess spread as a residual interest of $5.6
million which is recorded on the consolidated balance sheet in the Investment
securities available for sale, at fair value. The value of the residual
interest is subject to substantial credit, prepayment, and interest rate risk
on the sold residential loans. In accordance with the provisions of Statement
of Financial Accounting Standards, or SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities, the residual interest is classified
as available-for-sale and, as such, recorded at fair value with the
resultant changes in fair value recorded as unrealized gain or loss in a
separate component of shareholders equity entitled accumulated other
comprehensive income or loss, until realized. Fair value is determined on a
monthly basis based on a discounted cash flow analysis. These cash flows are
projected over the lives of the receivables using prepayment, default, and
interest rate assumptions that we believe market participants would use for
similar financial instruments.

At September 30, 2002, key assumptions used to estimate the fair value of
the residual interest based on projected cash flows, and the sensitivity of the
value to immediate adverse changes in those assumptions is as follows:

|                                         |                                          |   |                    |   | 
|---------------------------------------- | ---------------------------------------- | - | ------------------ | - | 
|                                         |                                          |   | September 30, 2002
|                                         |                                          |   |                   
|                                         | Dollars in thousands, except percentages |   |                    |   | 
|Fair value of retained interest          |                                          | $ | 5,619              |  
|Weighted average life (in years)         |                                          |   | 1.71               |  
|Weighted average annual prepayment speed |                                          |   | 35.0               | %
|Impact of 10% adverse change             |                                          | $ | (135               | )
|Impact of 25% adverse change             |                                          | $ | (302               | )
|Weighted average annual discount rate    |                                          |   | 15.0               | %
|Impact of 10% adverse change             |                                          | $ | (281               | )
|Impact of 25% adverse change             |                                          | $ | (668               | )
|Weighted average lifetime credit losses  |                                          |   | 3.3                | %
|Impact of 10% adverse change             |                                          | $ | (151               | )
|Impact of 25% adverse change             |                                          | $ | (375               | )

These sensitivities are hypothetical and should be used with caution. As
the figures indicate, changes in the fair value of the residual is based on a
variation in assumptions and generally cannot be extrapolated because the
relationship of the change in assumption to the change in fair value may not be
linear. Also, in the above table, the effect of a variation in a particular
assumption on the fair value of the residual interest is calculated without
changing any other assumption; in reality, changes in one factor may result in
changes in another (for example, increases in market interest rates may result
in lower prepayments but increased credit losses), which might magnify or
counteract the sensitivities, and depending on the severity of such changes,
the results of operations may be materially effected.

NOTE 7  ACQUISITION OF ASAHI BANK OF CALIFORNIA

During the quarter ended March 31, 2002, the Bank completed its
acquisition of Asahi Bank of California a wholly-owned subsidiary of Asahi Bank
Ltd  Japan, for approximately $14.9 million. The acquisition was structured
as a statutory merger of Asahi Bank of California into the Bank. On the date
of acquisition, Asahi Bank of California had total assets of approximately
$50.0 million, including $35.0 million of commercial real estate and business
loans and $15.0 million of cash and securities which were acquired by the Bank
at the closing of the transaction.

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##### Table of Contents



NOTE 8  SUBSEQUENT EVENTS

On October 25,
2002, we announced the acquisition of operating assets and loan
portfolio of The
Lewis Horwitz Organization (LHO) from Imperial Credit Industries, Inc. and
its wholly-owned subsidiary, Southern Pacific Bank, in an all cash
transaction valued at approximately $100
million. LHO is an internationally
recognized lender to the independent film and television production industry.
The transaction was approved by the California Department of Financial
Institutions. LHO will operate as a division of the Bank.

On October 30,
2002, the Company formed a wholly-owned trust subsidiary, Imperial
Capital Statutory Trust III, which issued $20.0 million of variable rate
cumulative trust preferred securities, (referred to collectively as
the New Trust
Preferred Securities.) ITLA Capital has fully and unconditionally guaranteed
the New Trust Preferred Securities along with all obligations of the trust under
the trust agreement. The trust was formed for the exclusive purpose of issuing
the New Trust Preferred securities and common securities and using the proceeds to
acquire ITLA Capitals junior subordinated deferrable interest debentures. The
Imperial Capital Statutory Trust III acquired an aggregate principal amount of
$20.6 million of ITLA Capitals variable rate junior subordinated deferrable
interest debentures due October 30, 2032. The initial rate for
both the New Trust Preferred Securities and the debentures is 5.0%. The sole assets of the trust is the
debenture it holds. The debentures are redeemable, in whole or in part, at ITLA
Capitals option on or after five years after issuance, at declining premiums to
maturity. The Company used the proceeds from the debentures for general
corporate purposes, including an aggregate of $19.4 million in capital
contributions to the Bank to support future growth.




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

The following discussion and analysis is intended to identify the major
factors that influenced the financial condition and results of operations for
the three months and nine months ended September 30, 2002.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001

General

Consolidated net income totaled $5.2 million for the three months ended
September 30, 2002 compared to $4.0 million for the same period last year, an
increase of 27.6%. The increase in net income was primarily due to an increase
in net interest income, partially offset by an increase in the provision for
loan losses and an increase in non-interest expense. Diluted EPS was $0.80 for
the three months ended September 30, 2002 compared to $0.62 for the same period
last year, an increase of 29.0%.

The return on average assets was 1.49% for the three months ended
September 30, 2002 compared to 1.18% for the same period last year. The return
on average shareholders equity was 13.64% for the three months ended September
30, 2002, compared to 11.86% for the same period last year.

Total loan production for the three months ended
September 30, 2002, consisted of the origination and/or purchase of $144.7
million of commercial real estate loans. Loan production during the same period
last year totaled $138.2 million, consisting of the origination and/or purchase
of $101.7 million of commercial real estate loans, the purchase of $12.7
million of residential real estate loans and $23.8 million of franchise loans.

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##### Table of Contents



Net Interest Income and Margin

The following table presents, for the three months ended September 30,
2002 and 2001, our condensed average balance sheet information, together with
interest income and yields earned on average interest-earning assets and
interest expense and rates paid on average interest-bearing liabilities.
Average balances are computed using daily average balances. Nonaccrual loans
are included in loans receivable.

|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |      |      |      |  
|---------------------------------------------------- | ------------------------------- | ------------------------------------------ | ---------------------- | --------- | ---------------------------------------- | ------- | ------- | ------ | ------ | ----- | ------- | ---- | ------- | ---- | --------- | --------- | --------- | ------- | ------ | ------ | ------ | ------ | ---- | ---- | ---- | ---- | -
|                                                     |                                 |                                            |                        |           | For the Three Months Ended September 30,
|                                                     |                                 |                                            |                        |           |                                         
|                                                     |                                 |                                            |                        |           | 2002                                     |         | 2001   
|                                                     |                                 |                                            |                        |           |                                          |         |        
|                                                     |                                 |                                            |                        |           | Average                                  |         | Income/ |        | Yield/ |       | Average |      | Income/ |      | Yield/   
|                                                     |                                 |                                            |                        |           | Balance                                  |         | Expense |        | Rate   |       | Balance |      | Expense |      | Rate     
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |          
|                                                     |                                 |                                            |                        |           | (dollars in thousands)                  
|Assets                                               |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|Cash and investments                                 |                                 | $                                          | 69,738                 |           |                                          | $       | 902     |        |        |       | 5.13    | %    |         | $    | 63,667    |           |           | $       | 656    |        |        |        | 4.09 | %   
|Loans receivable:                                    |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|                                                     | Real estate loans               |                                            |                        | 1,147,784 |                                          |         |         | 24,020 |        |       |         | 8.30 | %       |      |           | 1,108,442 |           |         |        | 25,445 |        |        |      | 9.11 | %   
|                                                     | Real estate loans
held in trust |                                            |                        | 138,906   |                                          |         |         | 2,458  |        |       |         | 7.02 | %       |      |           | 182,988   |           |         |        | 3,532  |        |        |      | 7.66 | %   
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|Total loans receivable                               |                                 |                                            | 1,286,690              |           |                                          |         | 26,478  |        |        |       | 8.16    | %    |         |      | 1,291,430 |           |           |         | 28,977 |        |        |        | 8.90 | %   
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|Total interest-earning assets                        |                                 |                                            | 1,356,428              |           |                                          | $       | 27,380  |        |        |       | 8.01    | %    |         |      | 1,355,097 |           |           | $       | 29,633 |        |        |        | 8.68 | %   
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|Non-interest-earning assets                          |                                 |                                            | 45,321                 |           |                                          |         |         |        |        |       |         |      |         |      | 34,143    |           |           |         |        |        |        |        |      |     
|Allowance for loan losses                            |                                 |                                            | (30,156                | )         |                                          |         |         |        |        |       |         |      |         |      | (27,101   | )         |           |         |        |        |        |        |      |     
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|                                                     |                                 | Total assets                               |                        | $         | 1,371,593                                |         |         |        |        |       |         |      |         |      |           | $         | 1,362,139 |         |        |        |        |        |      |      |      |     
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|Liabilities and Shareholders Equity                 |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|Deposit accounts:                                    |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|                                                     |                                 | Money market and
passbook accounts         |                        | $         | 136,569                                  |         |         | $      | 642    |       |         |      | 1.87    | %    |           | $         | 120,757   |         |        | $      | 1,164  |        |      |      | 3.82 | %   
|                                                     |                                 | Time certificates                          |                        |           | 754,340                                  |         |         |        | 6,173  |       |         |      | 3.25    | %    |           |           | 797,794   |         |        |        | 11,086 |        |      |      | 5.51 | %   
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|                                                     |                                 |                                            | Total deposit accounts |           |                                          | 890,909 |         |        |        | 6,815 |         |      |         | 3.03 | %         |           |           | 918,551 |        |        |        | 12,250 |      |      |      | 5.29 | %
|Collateralized mortgage
obligations                  |                                 |                                            | 83,530                 |           |                                          |         | 563     |        |        |       | 2.67    | %    |         |      | 128,528   |           |           |         | 1,412  |        |        |        | 4.36 | %   
|FHLB advances                                        |                                 |                                            | 211,101                |           |                                          |         | 1,422   |        |        |       | 2.66    | %    |         |      | 135,881   |           |           |         | 1,561  |        |        |        | 4.56 | %   
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|Total interest-bearing
liabilities                   |                                 |                                            | 1,185,540              |           |                                          | $       | 8,800   |        |        |       | 2.94    | %    |         |      | 1,182,960 |           |           | $       | 15,223 |        |        |        | 5.11 | %   
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|Non-interest-bearing
liabilities                     |                                 |                                            | 7,884                  |           |                                          |         |         |        |        |       |         |      |         |      | 15,958    |           |           |         |        |        |        |        |      |     
|Trust preferred securities                           |                                 |                                            | 28,174                 |           |                                          |         |         |        |        |       |         |      |         |      | 28,081    |           |           |         |        |        |        |        |      |     
|Shareholders equity                                 |                                 |                                            | 149,995                |           |                                          |         |         |        |        |       |         |      |         |      | 135,140   |           |           |         |        |        |        |        |      |     
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|                                                     |                                 | Total liabilities
and shareholders equity |                        | $         | 1,371,593                                |         |         |        |        |       |         |      |         |      |           | $         | 1,362,139 |         |        |        |        |        |      |      |      |     
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|Net interest spread                                  |                                 |                                            |                        |           |                                          |         |         |        |        |       | 5.07    | %    |         |      |           |           |           |         |        |        |        |        | 3.57 | %   
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|Net interest income
before provision for
loan losses |                                 |                                            |                        |           |                                          | $       | 18,580  |        |        |       |         |      |         |      |           |           |           | $       | 14,410 |        |        |        |      |     
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     
|Net interest margin                                  |                                 |                                            |                        |           |                                          |         |         |        |        |       | 5.43    | %    |         |      |           |           |           |         |        |        |        |        | 4.22 | %   
|                                                     |                                 |                                            |                        |           |                                          |         |         |        |        |       |         |      |         |      |           |           |           |         |        |        |        |        |      |     

10



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The following table sets forth a summary of the changes in interest income
and interest expense resulting from changes in average interest-earning asset
and interest-bearing liability balances and changes in average interest rates.
The change in interest due to both volume and rate has been allocated to change
due to volume and rate in proportion to the relationship of absolute dollar
amounts of each.

|                                |                                     |                                              |     |                             |      |      |       |        |        |   |       |        |        |  
|------------------------------- | ----------------------------------- | -------------------------------------------- | --- | --------------------------- | ---- | ---- | ----- | ------ | ------ | - | ----- | ------ | ------ | -
|                                |                                     |                                              |     | For the Three Months Ended 
|                                |                                     |                                              |     | September 30, 2002 and 2001
|                                |                                     |                                              |     | Increase (Decrease) Due to:
|                                |                                     |                                              |     |                            
|                                |                                     |                                              |     | Volume                      |      | Rate |       | Total 
|                                |                                     |                                              |     |                             |      |      |       |       
|                                |                                     |                                              |     | (In thousands)             
|Interest and fees earned from:  |                                     |                                              |     |                             |      |      |       |        |        |   |       |       
|                                | Real estate loans                   |                                              | $   | 827                         |      |      | $     | (2,252 | )      |   | $     | (1,425 | )     
|                                | Real estate loans held in trust     |                                              |     | (779                        | )    |      |       | (295   | )      |   |       | (1,074 | )     
|                                | Cash and investment securities      |                                              |     | 79                          |      |      |       | 167    |        |   |       | 246    |       
|                                |                                     |                                              |     |                             |      |      |       |        |        |   |       |       
|                                |                                     | Total increase (decrease) in interest income |     |                             | 127  |      |       |        | (2,380 | ) |       |        | (2,253 | )
|                                |                                     |                                              |     |                             |      |      |       |        |        |   |       |       
|Interest paid on:               |                                     |                                              |     |                             |      |      |       |        |        |   |       |       
|                                | Deposit accounts                    |                                              |     | (516                        | )    |      |       | (4,919 | )      |   |       | (5,435 | )     
|                                | Collateralized mortgage obligations |                                              |     | (332                        | )    |      |       | (517   | )      |   |       | (849   | )     
|                                | FHLB advances                       |                                              |     | 470                         |      |      |       | (609   | )      |   |       | (139   | )     
|                                |                                     |                                              |     |                             |      |      |       |        |        |   |       |       
|                                |                                     | Total decrease in interest expense           |     |                             | (378 | )    |       |        | (6,045 | ) |       |        | (6,423 | )
|                                |                                     |                                              |     |                             |      |      |       |        |        |   |       |       
|Increase in net interest income |                                     | $                                            | 505 |                             |      | $    | 3,665 |        |        | $ | 4,170 |       
|                                |                                     |                                              |     |                             |      |      |       |        |        |   |       |       

Total interest income decreased $2.2 million to $27.4 million in the third
quarter of 2002 compared to $29.6 million for the same period last year. The
decrease in interest income was due primarily to lower yields on interest
earning assets.

The average balance of real estate loans held by the Bank was essentially
the same at $1.1 billion for the three months ended September 30, 2002 as
compared to the same period last year. Loans secured by income producing
properties and construction loans had an average balance of $1.1 billion during
the quarter ended September 30, 2002 compared to $981.9 million during the same
period last year. The average balance of purchased single family residential
mortgages was $533,000 during the quarter ended September 30, 2002, compared to
$126.5 million in the same period in the prior year. The
decrease is a result of the
disposition of substantially all of our single family loan portfolio during the
first quarter of 2002.

The average balance of real estate loans held in trust was $138.9 million
for the three months ended September 30, 2002 as compared to $183.0 million for
the same period last year. This decrease was due to loan prepayments and
principal amortization.

The average yield earned on real estate loans decreased 81 basis points to
8.30% in the quarter ended September 30, 2002 as compared to 9.11% in the same
period last year. The decrease in the yield on real estate loans was primarily
due to the repricing of variable rate loans at lower interest rates resulting
from the general decline in market interest rates. Our commercial real estate
loan portfolio is primarily comprised of adjustable rate mortgages indexed to
the six month LIBOR.

Approximately 90.8% of our real estate loan portfolio (including real
estate loans held in trust) are adjustable rate mortgages at September 30,
2002. These adjustable rate mortgages generally reprice on a quarterly basis
and approximately $1.1 billion or 94.5% of our real estate loan portfolio
contain interest rate floors, below which the loans contractual interest rate
may not adjust. At September 30, 2002, the weighted average floor interest rate
of these loans was 8.09%. At that date, approximately $1.1 billion or 97.4% of
those loans were at the floor interest rate, approximately $687,000 or 0.1%
were within 50 basis points of their floor interest rate, and approximately
$4.3 million or 0.4% were greater than 50 but less than 100 basis points from
their floor interest rate. If market interest rates decline further, because
most of our portfolio has reached the floor interest rates, our loans may be
more susceptible to prepayments.

11



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##### Table of Contents



Total interest
expense decreased by $6.4 million to $8.8 million in the
third quarter of 2002, compared to $15.2 million for the same period last year.
This decrease was primarily attributable to lower interest rates paid on all
interest bearing liabilities and lower average balances on deposit accounts and
Collateralized Mortgage Obligations (CMOs), partially offset by higher
average balances on Federal Home Loan Bank (FHLB) advances.

Our cost of funds decreased to 2.94% during the three months ended
September 30, 2002, compared to 5.11% for the same period last year. This
decrease in funding costs was due primarily to lower rates being paid on our
deposit accounts and CMOs, as compared to the same period last year due to the
general decline in market interest rates, and to a lesser extent, lower average
balances of interest-bearing liabilities. The average rate paid on deposit
accounts was 3.03% during the three months ended September 30, 2002, compared
to 5.29% for the same period last year. The average rate paid on CMOs was
2.67% during the three months ended September 30, 2002 compared to 4.36% for
the same period last year, corresponding to the reduction in real
estate loans held in trust. The average balance of deposit accounts decreased
$27.7 million to $890.9 million for the three months ended September 30, 2002,
compared to $918.6 million for the same period last year,
corresponding to the reduction in real estate loans held in trust. The average balance
of our CMOs was $83.5 million during the third quarter of 2002, compared to
$128.5 million for the same period last year. FHLB advances averaged $211.1
million in the current quarter, compared to $135.9 million for the same period
last year. While the rate paid
on advances was 2.66% during the three months ended
September 30, 2002 compared to 4.56% for the same period last
year.

Net interest margin increased to 5.43% for the three months ended
September 30, 2002 as compared to 4.22% for the same period last year primarily
due to the 217 basis point decrease in the average cost of funds partially
offset by the 67 basis point decrease in the average yield on interest-earning
assets.

Provision for Loan Losses

Management periodically assesses the adequacy of the allowance for loan
losses by reference to many factors which may be weighted differently at
various times depending on prevailing conditions. These factors include, among
other elements;



| |  |  | 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.

Accordingly, the calculation of the adequacy of the allowance for loan
losses is not based solely on the level of nonperforming assets. Management
believes that the allowance for loan losses as of September 30, 2002 was
adequate to absorb the known and inherent risks of loss in the loan portfolio
at that date. While management believes the estimates and assumptions used in
its determination of the adequacy of the allowance are reasonable, there can be
no assurance that such estimates and assumptions will not be proven incorrect
in the future, or that the actual amount of future provisions will not exceed
the amount of past provisions or that any increased provisions that may be
required will not adversely impact our financial condition and results of
operations. In addition, the determination of the amount of the Banks
allowance for loan losses is subject to review by the Banks regulators, as
part of the routine examination process, which may result in the establishment
of additional reserves based upon their judgment of information available to
them at the time of their examination.

The consolidated provision for loan losses totaled $2.7 million in the
third quarter of 2002, compared to $1.5 million for the same period in the
prior year. The current period provision for loan losses was recorded to
provide for reserves based on the growth in the loan portfolio, an analysis of the factors referred to above and
the valuation of certain nonperforming loans and other loans of concern. The
allowance for loan losses was 2.39% of total real estate loans and real estate
loans held in trust at September 30, 2002 as compared to 2.03% at December 31,
2001. See also-Financial Condition-Credit Risk.

12



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##### Table of Contents



Non-interest Income

Non-interest income
was a net loss of $54,000 for the three months ended
September 30, 2002, compared to net income of $251,000 for the same period last year. The
decrease was primarily related to a $250,000 valuation provision for
the companys residual interest relating to the securitization
of our residential loans. See also  Note
6  Residual Interest in Securitization.

Non-interest Expense

Non-interest expense totaled $6.5 million for the three months ended
September 30, 2002, compared to $5.7 million for the same period last year. The
increase was primarily attributable to certain infrastructure costs relating to
the Banks charter conversion activities including core processing system
conversion costs and additions to the information technology and savings
operations staff.

For the three months ended September 30, 2002, our ratio of consolidated
general and administrative expense to average assets, on an annualized basis,
increased to 1.88% compared to 1.67% for the same period last year. Our
efficiency ratio, (excluding real estate operations), which is defined as
general and administrative expenses as a percentage of net interest income and
non-interest income was 34.86% for the quarter ended September 30, 2002,
compared to 38.69% for the same period last year.

Minority Interest in Income of Subsidiary

Minority interest in income of subsidiary was $815,000 during the three
month period ended September 30, 2002 as compared to $799,000 for the same
period last year, consisting of accrued distributions payable on our Trust
Preferred securities. See Note 5 to the unaudited Consolidated Financial
Statements for further information.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended September
30, 2001

General

Consolidated net income totaled $14.7 million for the nine months ended
September 30, 2002 compared to $13.5 million for the same period last year.
The increase in net income was primarily due to increases in net interest
income, partially offset by increases in the provision for loan losses,
non-interest expense and in minority interest in income of subsidiary. Diluted
EPS was $2.29 for the nine months ended September 30, 2002, compared to $1.99
for the same period last year, an increase of 15.1%. The return on average
assets was 1.44% for the nine months ended September 30, 2002, compared to
1.32% for the same period last year. The return on average shareholders
equity was 13.54% for the nine months ended September 30, 2002, compared to
13.20% for the same period last year.

Total loan production was $374.6 million for the nine months ended
September 30, 2002, consisting of the origination and/or purchase of $331.8
million of commercial real estate loans including $36.8 million of loans
obtained as part of the acquisition of Asahi Bank of California, and $6.0 million of franchise
loans. Loan production during the same period last year totaled $385.6
million, consisting of the origination and/or purchase of $301.8 million of
commercial real estate loans, $30.5 million of residential real estate loans
and $53.3 million of franchise loans.

13



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##### Table of Contents



Net Interest Income and Margin

The following table presents, for the nine months ended September 30, 2002
and 2001, our condensed average balance sheet information, together with
interest income and yields earned on average interest-earning assets and
interest expense and rates paid on average interest-bearing liabilities.
Average balances are computed using daily average balances. Nonaccrual loans
are included in loans receivable.

|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |      |      |      |   | 
|---------------------------------------------------- | ------------------------------- | ---------------------------------- | ---------------------- | --------- | ------- | --------------------------------------- | ------ | ------- | ------ | ------ | ---- | ------- | ---- | ------- | --------- | --------- | ------- | --------- | ------ | ------ | ------ | ------ | ---- | ---- | ---- | ---- | - | 
|                                                     |                                 |                                    |                        |           |         | For the Nine Months Ended September 30,
|                                                     |                                 |                                    |                        |           |         |                                        
|                                                     |                                 |                                    |                        |           |         | 2002                                    |        | 2001   
|                                                     |                                 |                                    |                        |           |         |                                         |        |        
|                                                     |                                 |                                    |                        |           |         | Average                                 |        | Income/ |        | Yield/ |      | Average |      | Income/ |           | Yield/   
|                                                     |                                 |                                    |                        |           |         | Balance                                 |        | Expense |        | Rate   |      | Balance |      | Expense |           | Rate     
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |          
|                                                     |                                 |                                    |                        |           |         | (dollars in thousands)                 
|                                                     |                                 |                                    |                        | Assets    |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |      |      |      |   | 
|Cash and investments                                 |                                 | $                                  | 69,626                 |           |         | $                                       | 2,427  |         |        |        | 4.66 | %       |      | $       | 68,487    |           |         | $         | 2,604  |        |        |        | 5.08 | %   
|Loans receivable:                                    |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|                                                     | Real estate loans               |                                    |                        | 1,123,084 |         |                                         |        | 70,598  |        |        |      | 8.40    | %    |         |           | 1,099,425 |         |           |        | 78,863 |        |        |      | 9.59 | %   
|                                                     | Real estate loans
held in trust |                                    |                        | 148,589   |         |                                         |        | 7,960   |        |        |      | 7.16    | %    |         |           | 195,737   |         |           |        | 11,860 |        |        |      | 8.10 | %   
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|Total loans receivable                               |                                 |                                    | 1,271,673              |           |         |                                         | 78,558 |         |        |        | 8.26 | %       |      |         | 1,295,162 |           |         |           | 90,723 |        |        |        | 9.37 | %   
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|Total interest-earning assets                        |                                 |                                    | 1,341,299              |           |         | $                                       | 80,985 |         |        |        | 8.07 | %       |      |         | 1,363,649 |           |         | $         | 93,327 |        |        |        | 9.15 | %   
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|Non-interest-earning assets                          |                                 |                                    | 54,522                 |           |         |                                         |        |         |        |        |      |         |      |         | 33,287    |           |         |           |        |        |        |        |      |     
|Allowance for loan losses                            |                                 |                                    | (29,299                | )         |         |                                         |        |         |        |        |      |         |      |         | (27,335   | )         |         |           |        |        |        |        |      |     
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|                                                     |                                 |                                    | Total assets           |           | $       | 1,366,522                               |        |         |        |        |      |         |      |         |           |           | $       | 1,369,601 |        |        |        |        |      |      |      |      |  
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|Liabilities and
Shareholders Equity                 |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|Deposit accounts:                                    |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|                                                     |                                 | Money market and
passbook accounts |                        | $         | 149,874 |                                         |        | $       | 2,279  |        |      |         | 2.03 | %       |           | $         | 110,521 |           |        | $      | 3,656  |        |      |      | 4.42 | %   
|                                                     |                                 | Time certificates                  |                        |           | 755,317 |                                         |        |         | 19,924 |        |      |         | 3.53 | %       |           |           | 854,121 |           |        |        | 38,505 |        |      |      | 6.03 | %   
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|                                                     |                                 |                                    | Total deposit accounts |           |         | 905,191                                 |        |         |        | 22,203 |      |         |      | 3.28    | %         |           |         | 964,642   |        |        |        | 42,161 |      |      |      | 5.84 | %
|Collateralized mortgage
obligations                  |                                 |                                    | 93,534                 |           |         |                                         | 1,852  |         |        |        | 2.65 | %       |      |         | 141,260   |           |         |           | 5,394  |        |        |        | 5.11 | %   
|FHLB advances                                        |                                 |                                    | 186,328                |           |         |                                         | 4,310  |         |        |        | 3.09 | %       |      |         | 87,096    |           |         |           | 3,219  |        |        |        | 4.94 | %   
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|Total interest-bearing liabilities                   |                                 |                                    | 1,185,053              |           |         | $                                       | 28,365 |         |        |        | 3.20 | %       |      |         | 1,192,998 |           |         | $         | 50,774 |        |        |        | 5.69 | %   
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|Non-interest-bearing liabilities                     |                                 |                                    | 8,403                  |           |         |                                         |        |         |        |        |      |         |      |         | 14,847    |           |         |           |        |        |        |        |      |     
|Trust preferred securities                           |                                 |                                    | 28,153                 |           |         |                                         |        |         |        |        |      |         |      |         | 25,300    |           |         |           |        |        |        |        |      |     
|Shareholders equity                                 |                                 |                                    | 144,913                |           |         |                                         |        |         |        |        |      |         |      |         | 136,456   |           |         |           |        |        |        |        |      |     
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|Total liabilities
and shareholders equity           |                                 | $                                  | 1,366,522              |           |         |                                         |        |         |        |        |      |         |      | $       | 1,369,601 |           |         |           |        |        |        |        |      |     
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|Net interest spread                                  |                                 |                                    |                        |           |         |                                         |        |         |        |        | 4.87 | %       |      |         |           |           |         |           |        |        |        |        | 3.46 | %   
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|Net interest income
before provision for
loan losses |                                 |                                    |                        |           |         | $                                       | 52,620 |         |        |        |      |         |      |         |           |           |         | $         | 42,553 |        |        |        |      |     
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     
|Net interest margin                                  |                                 |                                    |                        |           |         |                                         |        |         |        |        | 5.25 | %       |      |         |           |           |         |           |        |        |        |        | 4.17 | %   
|                                                     |                                 |                                    |                        |           |         |                                         |        |         |        |        |      |         |      |         |           |           |         |           |        |        |        |        |      |     

14



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##### Table of Contents



The following table sets forth a summary of the changes in interest income
and interest expense resulting from changes in average interest-earning asset
and interest-bearing liability balances and changes in average interest rates.
The change in interest due to both volume and rate has been allocated to change
due to volume and rate in proportion to the relationship of the absolute dollar
amounts of each.

|                                           |                                     |                                    |      |                             |      |      |        |         |         |   |        |         |         |  
|------------------------------------------ | ----------------------------------- | ---------------------------------- | ---- | --------------------------- | ---- | ---- | ------ | ------- | ------- | - | ------ | ------- | ------- | -
|                                           |                                     |                                    |      | For the Nine Months Ended  
|                                           |                                     |                                    |      | September 30, 2002 and 2001
|                                           |                                     |                                    |      |                            
|                                           |                                     |                                    |      | Increase (Decrease) Due to:
|                                           |                                     |                                    |      |                            
|                                           |                                     |                                    |      | Volume                      |      | Rate |        | Total  
|                                           |                                     |                                    |      |                             |      |      |        |        
|                                           |                                     |                                    |      | (In thousands)             
|Interest and fees earned from:             |                                     |                                    |      |                             |      |      |        |         |         |   |        |        
|                                           | Real estate loans                   |                                    | $    | 1,491                       |      |      | $      | (9,756  | )       |   | $      | (8,265  | )      
|                                           | Real estate loans held in trust     |                                    |      | (2,524                      | )    |      |        | (1,376  | )       |   |        | (3,900  | )      
|                                           | Cash and investments                |                                    |      | 39                          |      |      |        | (216    | )       |   |        | (177    | )      
|                                           |                                     |                                    |      |                             |      |      |        |         |         |   |        |        
|                                           |                                     | Total decrease in interest income  |      |                             | (994 | )    |        |         | (11,348 | ) |        | $       | (12,342 | )
|                                           |                                     |                                    |      |                             |      |      |        |         |         |   |        |        
|Interest paid on:                          |                                     |                                    |      |                             |      |      |        |         |         |   |        |        
|                                           | Deposit accounts                    |                                    |      | (1,461                      | )    |      |        | (18,497 | )       |   |        | (19,958 | )      
|                                           | Collateralized mortgage obligations |                                    |      | (945                        | )    |      |        | (2,597  | )       |   |        | (3,542  | )      
|                                           | FHLB advances                       |                                    |      | 2,295                       |      |      |        | (1,204  | )       |   |        | 1,091   |        
|                                           |                                     |                                    |      |                             |      |      |        |         |         |   |        |        
|                                           |                                     | Total decrease in interest expense |      |                             | (111 | )    |        |         | (22,298 | ) |        |         | (22,409 | )
|                                           |                                     |                                    |      |                             |      |      |        |         |         |   |        |        
|(Decrease) increase in net interest income |                                     | $                                  | (883 | )                           |      | $    | 10,950 |         |         | $ | 10,067 |        
|                                           |                                     |                                    |      |                             |      |      |        |         |         |   |        |        

Total interest income decreased $12.3 million to $81.0 million in the nine
months ended September 30, 2002, compared to $93.3 million for the same period
last year. The net decrease in interest income was due primarily to lower
yields on interest earning assets.

The average balance of real estate loans held by the Bank was essentially
the same at $1.1 billion for the nine months ended September 30, 2002 as
compared to the same period last year. Loans secured by income producing
properties and construction loans had an average balance of $1.1 billion during
the nine months ended September 30, 2002 compared to $967.1 million during the
same period last year. The average balance of purchased single family
residential mortgages decreased to $25.2 million during the nine months ended
September 30, 2002, compared to $132.3 million in the same period in the prior
year, as a result of the disposition of substantially all of our single family
loan portfolio during the first quarter of 2002.

The average balance of real estate loans held in trust decreased to $148.6
million for the nine months ended September 30, 2002 as compared to $195.7
million for the same period last year, due to loan prepayments and principal
amortization.

The average yield earned on real estate loans decreased 119 basis points
to 8.40% for the nine months ended September 30, 2002 as compared to 9.59% in
the same period last year. The decrease in the yield on real estate loans was
primarily due to the repricing of variable rate loans at lower interest rates
resulting from the general decline in market interest rates. Our commercial
real estate loan portfolio is primarily comprised of adjustable rate mortgages
indexed to the six month LIBOR.

Total interest expense decreased by $22.4 million to $28.4 million for the
nine months ended September 30, 2002, compared to $50.8 million for the same
period last year. This decrease was primarily attributable to lower interest
rates paid on all interest bearing liabilities and lower average balances on
our deposit accounts and CMOs partially
offset by higher average balances on FHLB advances.

Our average cost of funds decreased to 3.20% during the nine months ended
September 30, 2002, compared to 5.69% for the same period last year. This
decrease in funding costs was due primarily to lower rates being paid on our
CMOs and deposit accounts as compared to the same period last year due to the
general decline in market interest rates. The average rate paid on deposit
accounts was 3.28% during the nine months ended September 30, 2002 compared to
5.84% for the same period last year.

15



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The average rate paid on the CMOs was 2.65% during the nine months ended
September 30, 2002 compared to 5.11% for the same period last year. The average
balance of deposit accounts decreased $59.4 million to $905.2 million for the
nine months ended September 30, 2002, compared to $964.6 million for the same
period last year. The average balance of our CMOs was $93.5 million during the
nine months ended September 30, 2002, compared to $141.3 million for the same
period last year. FHLB advances averaged $186.3 million for the nine months
ended September 30, 2002, compared to $87.1 million for the same period last
year, while the rate paid on advances was 3.09% during the nine
months ended September 30, 2002 compared to 4.94% for the same
period last year. We have used our borrowing capacity under our FHLB
credit line to take advantage of the current favorable short-term
rate environment through effective liability management, which has
lowered our cost of funds and enhanced our net interest income.

Net interest margin increased to 5.25% for the nine months ended September
30, 2002 as compared to 4.17% for the same period last year primarily due to
the 249 basis point decrease in cost of funds partially offset by the
108 basis
point decrease in the yield on interest-earning assets.

Provision for Loan Losses

The consolidated provision for loan losses totaled $6.1 million for the
nine months ended September 30, 2002, compared to $2.5 million for the same period last
year. The current period provision for loan losses was recorded to provide for
reserves based on growth in the loan portfolio, an analysis of the factors referred to previously and the
valuation of certain nonperforming loans and other loans of concern.

Non-interest Income

Non-interest income totaled $173,000 for the nine months ended September
30, 2002, compared to $804,000 for the same period last year. The decrease was
primarily related to $500,000 of net valuation provisions for the
Companys residual interest relating to the securitization of
our residential loan portfolio. During the quarter
ended March 31, 2002 we securitized $86.3 million and sold $17.6 million of our
residential loan portfolio for a net gain of $32,000. See
also  Note 6  Residual Interest
in Securitization.

Non-interest Expense

Non-interest expense totaled $20.1 million for the nine months ended
September 30, 2002, compared to $16.9 million for the same period last year.
Compensation and benefits expense totaled $9.8 million during the nine months
ended September 30, 2002, compared to $8.9 million for the same period last
year. The increase was primarily attributable to additions made to the Banks
retail and wholesale loan origination sales and operations staff and certain
infrastructure costs relating to its charter conversion activities including
core processing system conversion costs and additions to the information
technology and savings operations staff. In addition, full time equivalent
associates totaled 160 at September 30, 2002, compared to 131 at September 30,
2001.

For the nine months ended September 30, 2002, our ratio of consolidated
general and administrative expense to average assets, on an annualized basis,
increased to 1.86% compared to 1.61% for the same period last year. Our
efficiency ratio (excluding real estate operations) which is defined as general
and administrative expenses as a percentage of net interest income and
non-interest income was 36.16% for the nine months ended September 30, 2002
compared to 38.25% for the same period last year.

Minority Interest in Income of Subsidiary

Minority interest in income of subsidiary was $2.4 million during the nine
month period ended September 30, 2002 compared to $2.2 million for the same
period last year consisting of accrued distributions payable on our Trust
Preferred securities. See Note 5 to the unaudited Consolidated Financial
Statements for further information.

16



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##### Table of Contents



FINANCIAL CONDITION

Total assets decreased $20.0 million to $1.49 billion at September 30,
2002 as compared to $1.51 billion at December 31, 2001. At September 30, 2002,
real estate loans, net totaled $1.1 billion, including approximately $60.3
million of franchise loans. During the nine months ended September 30, 2002,
the Banks loan portfolio increased $20.5 million, primarily due to $124.4
million of net growth in the commercial real estate loan portfolio partially
offset by the sale of substantially the entire residential loan portfolio
through the securitization and whole loan sale of $86.3 million and $17.6
million, respectively, of single-family mortgages, in March 2002. Real estate loans held in trust decreased by $29.8 million during the
current nine month period. This decrease was partially offset by a $24.2
million increase in investment securities available for sale and a $3.9 million
increase in other assets. The increase in investment securities available for
sale was due primarily to the $5.6 million residual interest recorded in
connection with our residential loan securitization described below. The
increase in other assets was primarily due to the addition of $2.2 million of
goodwill related to the acquisition of Asahi Bank of California. Total deposit
accounts, which are concentrated in time certificates, decreased to $893.5
million at September 30, 2002 as compared to $953.7 million at December 31,
2001. FHLB advances increased $59.8 million to $329.1 million at September 30,
2002, compared to $269.3 million at December 31, 2001. Management believes
that a significant portion of deposits will remain with us upon maturity based
on our historical experience regarding retention of deposits. CMOs decreased
$30.2 million to $79.4 million at September 30, 2002 compared to $109.6 million
at December 31, 2001.

Residual Interest

In the first quarter of 2002, the Company formed a limited liability
company to issue the $86.3 million of asset-backed notes in a securitization of
its performing residential loan portfolio. These notes were rated AAA by
Standard & Poors, Aaa by Moodys, and are insured by Financial Security
Assurance. In the securitization, residential loans were sold to the limited
liability company for a cash purchase price and an interest in the loans
securitized in the form of the excess spread. The cash purchase price was
raised through an offering of the asset-backed notes issued by the limited
liability company. Noteholders are entitled to receive the principal collected
on the loans and the stated interest rate on the notes. We are entitled to
receive the excess spread. The excess spread generally represents, over the
estimated life of the loans, the excess of the weighted average coupon on the
loans sold over the sum of the note interest rate less other expenses including
a trustee fee and an insurance fee. Valuation of the excess spread includes an
estimate of annual future credit losses related to the loans securitized. These
reported cash flows are discounted when computing the value of the residual
interest.

We recognized a gain on the sale of these loans, although cash
(representing the excess spread and servicing fees) will be received by us over
the lives of the loans. Concurrent with recognizing such gain on sale, we
recorded the excess spread as a residual interest of $5.6 million, which is
included in Investment securities available for sale on our consolidated
balance sheet. The value of the residual interest is subject to substantial
credit, prepayment and interest rate risk on the sold residential loans.

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At September 30, 2002, key assumptions used to estimate the fair value of
the residual interest based on projected cash flows, and the sensitivity of the
value to immediate adverse changes in those assumptions is as follows:

|                                         |  |                    |       |  
|---------------------------------------- |  | ------------------ | ----- | -
|                                         |  | September 30, 2002
|                                         |  |                   
|Dollars in thousands, except percentages |  |                    |       |  
|Fair value of retained interest          |  | $                  | 5,619 |  
|Weighted average life (in years)         |  |                    | 1.71  |  
|Weighted average annual prepayment speed |  |                    | 35.0  | %
|Impact of 10% adverse change             |  | $                  | (135  | )
|Impact of 25% adverse change             |  | $                  | (302  | )
|Weighted average annual discount rate    |  |                    | 15.0  | %
|Impact of 10% adverse change             |  | $                  | (281  | )
|Impact of 25% adverse change             |  | $                  | (668  | )
|Weighted average lifetime credit losses  |  |                    | 3.3   | %
|Impact of 10% adverse change             |  | $                  | (151  | )
|Impact of 25% adverse change             |  | $                  | (375  | )

These sensitivities are hypothetical and should be used with caution. As
the figures indicate, changes in the fair value of our residual based on a
variation in assumptions generally cannot be extrapolated because the
relationship of the change in assumption to the change in fair value may not be
linear. Also, in the above table, the effect of a variation in a particular
assumption on the fair value of the residual interest is calculated without
changing any other assumption; in reality, changes in one factor may result in
changes in another (for example, increases in market interest rates may result
in lower prepayments but increased credit losses), which might magnify or
counteract the sensitivities, and depending on the severity of such changes,
the results of operations may be materially effected.

CREDIT RISK

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

The following table sets forth our nonperforming assets by category,
accruing loans past due 90 days or more and troubled debt restructurings as of
the dates indicated.

|                                                                                |                        |                                        |        |                        |        |                   |        |        |        | 
|------------------------------------------------------------------------------- | ---------------------- | -------------------------------------- | ------ | ---------------------- | ------ | ----------------- | ------ | ------ | ------ | 
|                                                                                |                        |                                        |        | September 30, 2002     |        | December 31, 2001
|                                                                                |                        |                                        |        |                        |        |                  
|                                                                                |                        |                                        |        | (dollars in thousands)
|Nonaccrual loans:                                                               |                        |                                        |        |                        |        |                   |        |       
|                                                                                | Real estate            |                                        | $      | 4,640                  |        |                   | $      | 13,690 |       
|                                                                                | Construction           |                                        |        |                       |        |                   |        | 1,600  |       
|                                                                                |                        |                                        |        |                        |        |                   |        |       
|                                                                                | Total nonaccrual loans |                                        |        | 4,640                  |        |                   |        | 15,290 |       
|Other real estate owned, net                                                    |                        |                                        | 14,092 |                        |        |                   | 13,741 |       
|                                                                                |                        |                                        |        |                        |        |                   |        |       
|                                                                                |                        | Total nonperforming assets             |        |                        | 18,732 |                   |        |        | 29,031 | 
|                                                                                |                        | Performing troubled debt restructuring |        |                        | 5,221  |                   |        |        | 3,752  | 
|                                                                                |                        |                                        |        |                        |        |                   |        |       
|                                                                                |                        | $                                      | 23,953 |                        |        | $                 | 32,783 |       
|                                                                                |                        |                                        |        |                        |        |                   |        |       
|Nonaccrual loans to total real estate loans
and real estate loans held in trust |                        |                                        | 0.36   | %                      |        |                   | 1.17   | %     
|Allowance for loan losses to nonaccrual loans                                   |                        |                                        | 673.21 | %                      |        |                   | 174.30 | %     
|Nonperforming assets to total assets                                            |                        |                                        | 1.26   | %                      |        |                   | 1.92   | %     

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At September 30,
2002, other real estate owned consisted of five income
producing properties totaling $14.1 million.

As of September 30, 2002 and December 31, 2001, other loans of concern
totaled $26.0 million and $21.5 million, respectively. Other loans of concern
consist of loans with respect to which known information concerning possible
credit problems with the borrowers or the cash flows of the properties securing
the respective loans has caused management to be concerned about the ability of
the borrowers to comply with present loan repayment terms, which may result in
the future inclusion of such loans in the nonaccrual category. The increase in
other loans of concern for the nine months ended September 30, 2002 was
primarily due to $16.4 million of new other loans of concern, partially offset
by $5.5 million of loans migrating to nonaccrual status, $4.6 million of loans
being sold or paid-off and $1.8 million of loans being upgraded due to
improving conditions.

Our loan delinquencies (delinquent loans greater than 30 days) decreased
to $25.7 million or 1.97% of the gross loan portfolio at September 30, 2002 as
compared to $32.9 million or 2.52% of gross loan portfolio at December 31,
2001.

The following table provides certain information with respect to our
allowance for loan losses, including charge-offs, recoveries and selected
ratios for the periods indicated.

|                                                                                            |                    |                   |                          |        |                        |        |              |        |        |        | 
|------------------------------------------------------------------------------------------- | ------------------ | ----------------- | ------------------------ | ------ | ---------------------- | ------ | ------------ | ------ | ------ | ------ | 
|                                                                                            |                    |                   |                          |        | For Nine               |        | For the Year
|                                                                                            |                    |                   |                          |        | Months Ended           |        | Ended       
|                                                                                            |                    |                   |                          |        | September 30,          |        | December 31,
|                                                                                            |                    |                   |                          |        | 2002                   |        | 2001        
|                                                                                            |                    |                   |                          |        |                        |        |             
|                                                                                            |                    |                   |                          |        | (dollars in thousands)
|Balance at beginning of period                                                              |                    | $                 | 26,650                   |        |                        | $      | 27,186       |       
|Provision for loan losses                                                                   |                    |                   | 6,125                    |        |                        |        | 4,575        |       
|Acquired from Asahi Bank of California                                                      |                    |                   | 1,639                    |        |                        |        |             |       
|Charge-offs:                                                                                |                    |                   |                          |        |                        |        |              |       
|                                                                                            | Real estate loans  |                   |                          | (2,957 | )                      |        |              | (2,845 | )     
|                                                                                            | Construction loans |                   |                          | (236   | )                      |        |              | (2,419 | )     
|                                                                                            |                    |                   |                          |        |                        |        |              |       
|                                                                                            |                    | Total charge-offs |                          |        | (3,193                 | )      |              |        | (5,264 | )     
|                                                                                            |                    |                   |                          |        |                        |        |              |       
|Recoveries:                                                                                 |                    |                   |                          |        |                        |        |              |       
|                                                                                            | Real estate loans  |                   |                          | 16     |                        |        |              | 153    |       
|                                                                                            |                    |                   |                          |        |                        |        |              |       
|                                                                                            |                    | Total recoveries  |                          |        | 16                     |        |              |        | 153    |       
|                                                                                            |                    |                   |                          |        |                        |        |              |       
|Net charge-offs                                                                             |                    |                   | (3,177                   | )      |                        |        | (5,111       | )     
|                                                                                            |                    |                   |                          |        |                        |        |              |       
|                                                                                            |                    |                   | Balance at end of period |        | $                      | 31,237 |              |        | $      | 26,650 | 
|                                                                                            |                    |                   |                          |        |                        |        |              |       
|Allowance for loan losses as a
percentage of real estate loans and
loans held in trust, net |                    |                   | 2.39                     | %      |                        |        | 2.03         | %     

Liquidity

Liquidity refers to our ability to maintain cash flow adequate to fund
operations and meet obligations and other commitments on a timely basis,
including the payment of maturing deposits and the origination or purchase of
new real estate loans. We maintain a cash and investment securities portfolio
designed to satisfy operating liquidity requirements while preserving capital
and maximizing yield. As of September 30, 2002, we held approximately $92.8
million of cash and cash equivalents (consisting primarily of short-term
investments with original maturities of 90 days or less) and $53.6 million of
investment securities classified as available for sale.

19



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Short-term fixed income investments classified as cash equivalents
consisted of interest-bearing deposits at financial institutions, government
money market funds and short-term government agency securities, while
investment securities available for sale consisted primarily of fixed income
instruments which were rated AAA or equivalent by nationally recognized
rating agencies. As of September 30, 2002 and December 31, 2001, the Banks
liquidity ratios were 15.1% and 17.0%, respectively. In addition, our
liquidity position is supported by a credit facility with the Federal Home Loan
Bank of San Francisco. As of September 30, 2002, we had remaining available
borrowing capacity under this credit facility of $75.4 million, net of the $4.0
million of additional Federal Home Loan Bank Stock that we would be required to
purchase to support those additional borrowings, and $30.0 million of unused
federal funds credit facilities under established lines of credit with two
banks.

Capital Resources

As of September 30, 2002, the Banks Leverage (Core), Tier I and Total
Risk-Based capital ratios were 10.3%, 10.3% and 11.6%, respectively. These
ratios were 10.1%, 10.7% and 12.0%, respectively, as of December 31, 2001. The
minimum regulatory requirement for Leverage (Core), Tier I and Total Risk-Based
capital are 4.0%, 4.0% and 8.0%, respectively. As of September 30, 2002, the
Banks capital position was designated as well capitalized for regulatory
purposes.

At September 30, 2002, our consolidated shareholders equity totaled
$151.0 million or 10.15% of total assets. The Company continued to repurchase
shares of its common stock in the open market during the third quarter of 2002.
During the third quarter of 2002, the Company repurchased 14,500 shares of
common stock at an average price of $29.79 per share. For the nine months
ending September 30, 2002, the Company repurchased 93,600 shares of common
stock at an average price of $25.03 per share. Since beginning share
repurchases in April of 1997, the Company has repurchased a total of
2,166,819
shares or approximately 26% of the outstanding shares of common stock,
returning approximately $35.8 million of capital to its shareholders at an
average price of $16.53 per share. Through our stock repurchase program, 100%
of the Companys secondary public offering, which raised $22.6 million in April
of 1996 has been retired along with returning to our shareholders approximately
$13.2 million of proceeds from the Companys initial public offering completed
in October 1995. The Companys book value per share of common stock was $26.14
as of September 30, 2002, as compared to $23.54 as of December 31, 2001, and
$22.70 as of September 30, 2001.




ITEM 3: MARKET RISK

Our estimated sensitivity to interest rate risk, as measured by the
estimated interest earnings sensitivity profile and the interest sensitivity
gap analysis, has not materially changed from the information disclosed in our
annual report on Form 10-K for the year ended December 31, 2001.




ITEM 4. CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures: An evaluation of the
Companys disclosure controls and procedures (as defined in Rule 13a-14(c)
under the Securities Exchange Act of 1934 (the Act)) was carried out under
the supervision and with the participation of the Companys Chief Executive
Officer, Chief Financial Officer and several other members of the Companys
senior management within the 90-day period preceding the filing date of this
quarterly report. The Companys Chief Executive Officer and Chief Financial
Officer concluded that the Companys disclosure controls and procedures as
currently in effect are effective in ensuring that the information required to
be disclosed by the Company in the reports it files or submits under the Act is
(i) accumulated and communicated to the Companys management (including the
Chief Executive Officer and Chief Financial Officer) in a timely manner, and
(ii) recorded, processed, summarized and reported within the time periods
specified in the SECs rules and forms.

(b)  Changes in Internal Controls: In the quarter ended September 30,
2002, there were no significant changes in the Companys internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation.

20



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##### Table of Contents






Part II  OTHER INFORMATION




Item 1 Legal Proceedings



| |  |  | We are party to certain legal proceedings incidental to our
business. Management believes that the outcome of such
proceedings, in the aggregate, will not have a material effect on
our financial condition or results of operations.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Item 2 Changes in Securities



| |  |  | Not applicable.
| |  |  | ---------------
|




Item 3 Defaults Upon Senior Securities

| |  |  | Not applicable.
| |  |  | ---------------




Item 4 Submission of Matters
to a Vote of Security Holders



| |  |  | (a) On July 16, 2002, the Company held its Annual Meeting of
Shareholders.
| |  |  | --------------------------------------------------------------------------
| |  |  | (b) Shareholders voted on the following matters:                          
|

| |  | (i) | The election of George W. Haligowski as director for a
term to expire in 2005:
| |  | --- | ------------------------------------------------------------------------------

|      |  |     |           |         |  |          |   |  |  |  |         | 
|----- |  | --- | --------- | ------- |  | -------- | - |  |  |  | ------- | 
|Votes |  | For |           | Against |  | Withheld
|      |  |     |           |         |  |         
|      |  |     | 4,887,027 |         |  |          | 0 |  |  |  | 422,192 | 



| |  | (ii) | The election of Hirotaka Oribe as director for a term to
expire in 2005:
| |  | ---- | ------------------------------------------------------------------------

|      |  |     |           |         |  |          |   |  |  |  |         | 
|----- |  | --- | --------- | ------- |  | -------- | - |  |  |  | ------- | 
|Votes |  | For |           | Against |  | Withheld
|      |  |     |           |         |  |         
|      |  |     | 5,161,676 |         |  |          | 0 |  |  |  | 147,543 | 



| |  | (iii) | The ratification of the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31, 2002:
| |  | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------

|      |  |     |           |         |  |          |       |  |  |  |       | 
|----- |  | --- | --------- | ------- |  | -------- | ----- |  |  |  | ----- | 
|Votes |  | For |           | Against |  | Withheld
|      |  |     |           |         |  |         
|      |  |     | 5,302,966 |         |  |          | 4,613 |  |  |  | 1,640 | 




Item 5 Other Information



| |  |  | None.
| |  |  | -----




Item 6 Exhibits and Reports on Form 8-K



| |  |  | The registrant filed a report on Form 8-K on July 16, 2002. The
filing reported material which was presented at the Companys
annual Meeting of Shareholders on July 16, 2002.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SIGNATURES

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

ITLA CAPITAL CORPORATION



|Date: November 14, 2002 | /s/ George W. Haligowski
George W. Haligowski
Chairman of the Board, President and
Chief Executive Officer
|----------------------- | ----------------------------------------------------------------------------------------------------------
|                       



|Date: November 14, 2002 | /s/ Timothy M. Doyle

Timothy M. Doyle
Senior Managing Director and
Chief Financial Officer
|----------------------- | -------------------------------------------------------------------------------------------

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##### Table of Contents



CERTIFICATIONS

I, George W. Haligowski, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ITLA Capital
Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



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

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



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

6. The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

|                                                                                  |  | 
|--------------------------------------------------------------------------------- |  | 
|/s/ George W. Haligowski                                                          |  | 
|George W. Haligowski
Chairman of the Board, President and
Chief Executive Officer |  | 

23



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##### Table of Contents





I, Timothy M. Doyle, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ITLA Capital
Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



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

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



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

6. The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

|                                                                      |  | 
|--------------------------------------------------------------------- |  | 
|/s/ Timothy M. Doyle                                                  |  | 
|Timothy M. Doyle
Senior Managing Director and
Chief Financial Officer |  | 

24