----

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**FORM      10-Q**

| R | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) |
|---|-----------------------------------------------------------------|

| £ | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) |
|--------|------------------------------------------------------------------|

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

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

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

| Indicate                by check mark whether the registrant (1) has filed all reports required                to                be filed by Section 13 or 15(d) of the Securities Exchange Act of                1934                during the preceding 12 months (or for such shorter period that the                registrant was required to file such reports), and (2) has been subject                to                such filing requirements for the past 90 days. Yes R                No                £. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  Indicate                by check mark whether the registrant is a large accelerated filer,                an                accelerated filer, or a non-accelerated filer. See definition of                “accelerated filer” in Rule 12b-2 of the Exchange Act. Large Accelerated                Filer £                Accelerated Filer R                Non-Accelerated Filer £                                                                                                               |
| Indicate                by check mark whether the Registrant is a shell company (as                defined in Rule 12b-2 of the Exchange Act). Yes £                No                R.                                                                                                                                                                                                                                                                                                                                   |
| Number                of shares of common stock of the registrant: 5,495,876 outstanding                as of                May 3, 2007.                                                                                                                                                                                                                                                                                                                                                                                       |

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Table          of Contents

**ITLA      CAPITAL CORPORATION **

**FORM      10-Q**

**FOR      THE THREE MONTHS ENDED MARCH 31, 2007**

**TABLE      OF CONTENTS**

| **PART                I - FINANCIAL                INFORMATION** |                                                                                                                         |
|------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------|
| Item                1.                                           | Financial                Statements                                                                                          | 3 |
|                                                             | Consolidated                Balance Sheets - March 31, 2007 (Unaudited)                and December 31, 2006                 | 3 |
|                                                             | Consolidated                Statements of Income - Three Months Ended                March 31, 2007 and 2006 (Unaudited)     | 4 |
|                                                             | Consolidated                Statements of Cash Flows - Three Months                Ended March 31, 2007 and 2006 (Unaudited) | 5 |
|                                                             | Notes                to the Unaudited Consolidated Financial                Statements                                       | 6 |
| Item                2.                                           | Management’s                Discussion and Analysis of Financial Condition                and Results of Operations    | 12 |
| Item                3.                                           | Quantitative                and Qualitative Disclosures about Market                Risk                                     | 20 |
| Item                4.                                           | Controls                and Procedures                                                                                       | 21 |
|                                                             |                                                                                                                         |   |
| **PART                II - OTHER INFORMATION**                   |                                                                                                                         |
| Item                1.                                           | Legal                Proceedings                                                                                             | 22 |
| Item                1A.                                          | Risk                Factors                                                                                                  | 22 |
| Item                2.                                           | Unregistered                Sales of Equity Securities and Use of                Proceeds                                    | 22 |
| Item                3.                                           | Defaults                Upon Senior Securities                                                                               | 22 |
| Item                4.                                           | Submission                of Matters to a Vote of Security                Holders                                            | 22 |
| Item                5.                                           | Other                Information                                                                                             | 22 |
| Item                6.                                           | Exhibits                                                                                                                     | 22 |
|                                                             | Signatures                                                                                                                   | 23 |
|                                                             | Certifications                                                                                                               | 25 |

Exhibit      31.1

Exhibit      31.2

Exhibit      32

**Forward      Looking Statements**

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Table          of Contents

**PART      I - FINANCIAL INFORMATION**

| **ITLA                CAPITAL CORPORATION AND SUBSIDIARIES**                                                                                                                                                                          |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **CONSOLIDATED                BALANCE SHEETS**                                                                                                                                                                                        |   |
|                                                                                                                                                                                                                                  |   |   |   |   |   |
|                                                                                                                                                                                                                                  |   | **March                31,** |   |   |   |
|                                                                                                                                                                                                                                  |   | **2007** |   | **December                31,** |   |
|                                                                                                                                                                                                                                  |   | **(unaudited)** |   | **2006** |   |
|                                                                                                                                                                                                                                  |   | **(in                thousands, except share data)** |   |
| **Assets**                                                                                                                                                                                                                            |   |   |   |   |   |
| Cash                and cash equivalents                                                                                                                                                                                              |   | $ | 28,304 |   | $ | 30,448 |   |
| Investment                securities available-for-sale, at fair value                                                                                                                                                                |   |   | 120,000 |   |   | 99,527 |   |
| Investment                securities held-to-maturity, at amortized cost                                                                                                                                                              |   |   | 184,882 |   |   | 193,512 |   |
| Stock                in Federal Home Loan Bank                                                                                                                                                                                        |   |   | 49,701 |   |   | 48,984 |   |
| Loans,                net (net of allowance for loan losses of $47,179 and $46,049 as                of March 31, 2007 and December 31, 2006, respectively)                                                                           |   |   | 3,006,829 |   |   | 2,973,368 |   |
| Interest                receivable                                                                                                                                                                                                    |   |   | 20,982 |   |   | 20,753 |   |
| Other                real estate owned, net                                                                                                                                                                                           |   |   | 6,640 |   |   | 6,729 |   |
| Premises                and equipment, net                                                                                                                                                                                            |   |   | 8,446 |   |   | 7,851 |   |
| Deferred                income taxes                                                                                                                                                                                                  |   |   | 11,272 |   |   | 11,513 |   |
| Goodwill                                                                                                                                                                                                                              |   |   | 3,118 |   |   | 3,118 |   |
| Other                assets                                                                                                                                                                                                           |   |   | 21,327 |   |   | 19,707 |   |
| Total                assets                                                                                                                                                                                                           |   | $ | 3,461,501 |   | $ | 3,415,510 |   |
|                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |
| **Liabilities                and Shareholders’ Equity**                                                                                                                                                                         |   |   |   |   |   |   |   |
| Liabilities:                                                                                                                                                                                                                          |   |   |   |   |   |   |   |
| Deposit                accounts                                                                                                                                                                                                       |   | $ | 2,109,060 |   | $ | 2,059,405 |   |
| Federal                Home Loan Bank advances and other borrowings                                                                                                                                                                   |   |   | 1,001,503 |   |   | 1,010,000 |   |
| Accounts                payable and other liabilities                                                                                                                                                                                 |   |   | 37,488 |   |   | 38,168 |   |
| Junior                subordinated debentures                                                                                                                                                                                         |   |   | 86,600 |   |   | 86,600 |   |
| Total                liabilities                                                                                                                                                                                                      |   |   | 3,234,651 |   |   | 3,194,173 |   |
|                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |
| Commitments                and contingencies                                                                                                                                                                                          |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |
| Shareholders’                equity:                                                                                                                                                                                            |   |   |   |   |   |   |   |
| Preferred                stock, 5,000,000 shares authorized, none issued                                                                                                                                                              |   |   | — |   |   | — |   |
| Contributed                capital - common stock, $.01 par value; 20,000,000 shares authorized,                9,069,172 and 9,065,672 issued as of March 31, 2007 and December                31, 2006,                respectively |   |   | 82,300 |   |   | 82,073 |   |
| Retained                earnings                                                                                                                                                                                                      |   |   | 249,672 |   |   | 243,823 |   |
| Accumulated                other comprehensive income, net                                                                                                                                                                            |   |   | 401 |   |   | 35 |   |
|                                                                                                                                                                                                                                  |   |   | 332,373 |   |   | 325,931 |   |
| Less                treasury stock, at cost 3,820,644 and 3,803,969 shares as of March                31, 2007 and December 31, 2006, respectively                                                                                    |   |   | (105,523 | ) |   | (104,594 | ) |
|                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |
| Total                shareholders' equity                                                                                                                                                                                             |   |   | 226,850 |   |   | 221,337 |   |
|                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |
| Total                liabilities and shareholders' equity                                                                                                                                                                             |   | $ | 3,461,501 |   | $ | 3,415,510 |   |

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Table          of Contents

| **ITLA                  CAPITAL CORPORATION AND SUBSIDIARIES**        |   |
|-----------------------------------------------------------------------|--------|
| **CONSOLIDATED                  STATEMENTS OF INCOME**                |   |
| **(Unaudited)**                                                       |   |
|                                                                  |   |   |   |
|                                                                  |   | **For                  the Three Months Ended****March                  31,** |   |
|                                                                  |   |   |   |   |   |
|                                                                  |   | **2007** |   | **2006** |   |
|                                                                  |   | **(in                  thousands, except per share data)** |   |
| Interest                  income:                                     |   |   |   |   |   |
| Loans,                  including fees                                |   | $ | 58,763 |   | $ | 47,137 |   |
| Cash                  and investment securities                       |   |   | 4,569 |   |   | 4,291 |   |
|                                                                  |   |   |   |   |   |   |   |
| Total                  interest income                                |   |   | 63,332 |   |   | 51,428 |   |
|                                                                  |   |   |   |   |   |   |   |
| Interest                  expense:                                    |   |   |   |   |   |   |   |
| Deposit                  accounts                                     |   |   | 26,588 |   |   | 17,198 |   |
| Federal                  Home Loan Bank advances and other borrowings |   |   | 10,677 |   |   | 9,362 |   |
| Junior                  subordinated debentures                       |   |   | 2,078 |   |   | 1,958 |   |
|                                                                  |   |   |   |   |   |   |   |
| Total                  interest expense                               |   |   | 39,343 |   |   | 28,518 |   |
|                                                                  |   |   |   |   |   |   |   |
| Net                  interest income before provision for loan losses |   |   | 23,989 |   |   | 22,910 |   |
|                                                                  |   |   |   |   |   |   |   |
| Provision                  for loan losses                            |   |   | 750 |   |   | 750 |   |
|                                                                  |   |   |   |   |   |   |   |
| Net                  interest income after provision for loan losses  |   |   | 23,239 |   |   | 22,160 |   |
|                                                                  |   |   |   |   |   |   |   |
| Non-interest                  income:                                 |   |   |   |   |   |   |   |
| Late                  and collection fees                             |   |   | 303 |   |   | 223 |   |
| Other                                                                 |   |   | 413 |   |   | 494 |   |
|                                                                  |   |   |   |   |   |   |   |
| Total                  non-interest income                            |   |   | 716 |   |   | 717 |   |
|                                                                  |   |   |   |   |   |   |   |
| Non-interest                  expense:                                |   |   |   |   |   |   |   |
| Compensation                  and benefits                            |   |   | 6,182 |   |   | 6,020 |   |
| Occupancy                  and equipment                              |   |   | 1,943 |   |   | 1,806 |   |
| Other                                                                 |   |   | 4,296 |   |   | 4,211 |   |
|                                                                  |   |   |   |   |   |   |   |
| Total                  general and administrative                     |   |   | 12,421 |   |   | 12,037 |   |
|                                                                  |   |   |   |   |   |   |   |
| Real                  estate owned expense, net                       |   |   | 163 |   |   | 106 |   |
|                                                                  |   |   |   |   |   |   |   |
| Total                  non-interest expense                           |   |   | 12,584 |   |   | 12,143 |   |
|                                                                  |   |   |   |   |   |   |   |
| Income                  before provision for income taxes             |   |   | 11,371 |   |   | 10,734 |   |
| Provision                  for income taxes                           |   |   | 4,634 |   |   | 4,402 |   |
|                                                                  |   |   |   |   |   |   |   |
| NET                  INCOME                                           |   | $ | 6,737 |   | $ | 6,332 |   |
|                                                                  |   |   |   |   |   |   |   |
| Basic                  earnings per share                             |   | $ | 1.22 |   | $ | 1.13 |   |
|                                                                  |   |   |   |   |   |   |   |
| Diluted                  earnings per share                           |   | $ | 1.19 |   | $ | 1.10 |   |
|                                                                  |   |   |   |   |   |   |   |
| Dividends                  declared per share of common stock         |   | $ | 0.16 |   | $ | 0.15 |   |
|                                                                  |

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Table          of Contents

| **ITLA                CAPITAL CORPORATION AND                SUBSIDIARIES**                                       |   |
|-------------------------------------------------------------------------------------------------------------------|--------|
| **CONSOLIDATED                STATEMENTS OF CASH FLOWS**                                                          |   |
| **(Unaudited)**                                                                                                   |   |
|                                                                                                              |   |
|                                                                                                              |   | **For                the Three Months Ended****March                31,** |   |
|                                                                                                              |   | **2007** |   | **2006** |   |
|                                                                                                              |   | **(in                thousands)** |   |
| Cash                Flows From Operating Activities:                                                              |   |   |   |   |   |
| Net                Income                                                                                         |   | $ | 6,737 |   | $ | 6,332 |   |
| Adjustments                to reconcile net income to net cash provided by operating                activities:   |   |   |   |   |   |   |   |
| Depreciation                and amortization of premises and equipment                                            |   |   | 742 |   |   | 657 |   |
| Amortization                of premium on purchased loans                                                         |   |   | 1,311 |   |   | 975 |   |
| Accretion                of deferred loan origination fees, net of costs                                          |   |   | (1,214 | ) |   | (851 | ) |
| Provision                for loan losses                                                                          |   |   | 750 |   |   | 750 |   |
| Other,                net                                                                                         |   |   | (801 | ) |   | (448 | ) |
| Increase                in interest receivable                                                                    |   |   | (229 | ) |   | (723 | ) |
| Increase                in other assets                                                                           |   |   | (1,620 | ) |   | (500 | ) |
| Decrease                in accounts payable and other liabilities                                                 |   |   | (1,529 | ) |   | (2,909 | ) |
|                                                                                                              |   |   |   |   |   |   |   |
| Net                cash provided by operating activities                                                          |   |   | 4,147 |   |   | 3,283 |   |
|                                                                                                              |   |   |   |   |   |   |   |
| Cash                Flows From Investing Activities:                                                              |   |   |   |   |   |   |   |
| Purchases                of investment securities available-for-sale                                              |   |   | (32,371 | ) |   | (11,095 | ) |
| Proceeds                from maturity and calls of investment securities                available-for-sale        |   |   | 12,702 |   |   | 9,783 |   |
| Proceeds                from the maturity and redemption of investment securities                held-to-maturity |   |   | 8,625 |   |   | 10,870 |   |
| Purchase                of stock in Federal Home Loan Bank                                                        |   |   | — |   |   | (991 | ) |
| Purchase                of loans                                                                                  |   |   | (17,664 | ) |   | (103,558 | ) |
| Other                (increases) decreases in loans, net                                                          |   |   | (16,644 | ) |   | 8,549 |   |
| Cash                paid for capital expenditures                                                                 |   |   | (1,337 | ) |   | (1,193 | ) |
|                                                                                                              |   |   |   |   |   |   |   |
| Net                cash used in investing activities                                                              |   |   | (46,689 | ) |   | (87,635 | ) |
|                                                                                                              |   |   |   |   |   |   |   |
| Cash                Flows From Financing Activities:                                                              |   |   |   |   |   |   |   |
| Proceeds                and excess tax benefits from exercise of employee stock                options            |   |   | 169 |   |   | 150 |   |
| Cash                paid to acquire treasury stock                                                                |   |   | (929 | ) |   | (6,208 | ) |
| Increase                in deposit accounts                                                                       |   |   | 49,655 |   |   | 74,099 |   |
| Net                repayments of short-term borrowings                                                            |   |   | (70,498 | ) |   | (37,226 | ) |
| Proceeds                from long-term borrowings                                                                 |   |   | 100,000 |   |   | 89,869 |   |
| Repayments                of long-term borrowings                                                                 |   |   | (37,999 | ) |   | (20,650 | ) |
|                                                                                                              |   |   |   |   |   |   |   |
| Net                cash provided by financing activities                                                          |   |   | 40,398 |   |   | 100,034 |   |
|                                                                                                              |   |   |   |   |   |   |   |
| Net                (decrease) increase in cash and cash equivalents                                               |   |   | (2,144 | ) |   | 15,682 |   |
| Cash                and cash equivalents at beginning of period                                                   |   |   | 30,448 |   |   | 93,747 |   |
|                                                                                                              |   |   |   |   |   |   |   |
| Cash                and cash equivalents at end of period                                                         |   | $ | 28,304 |   | $ | 109,429 |   |
|                                                                                                              |   |   |   |   |   |   |   |
| Supplemental                Cash Flow Information:                                                                |   |   |   |   |   |   |   |
| Cash                paid during the period for interest                                                           |   | $ | 39,878 |   | $ | 32,041 |   |
| Cash                paid during the period for income taxes                                                       |   | $ | 837 |   | $ | 2,156 |   |
| Non-Cash                Investing and Financing Transactions:                                                     |   |   |   |   |   |   |   |
| Loans                transferred to other real estate owned                                                       |   | $ | — |   | $ | 2,280 |   |
| Cash                dividends declared but not yet paid                                                           |   | $ | 849 |   | $ | 832 |   |
|                                                                                                              |   |   |   |   |   |   |   |

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**ITLA      CAPITAL CORPORATION AND SUBSIDIARIES **

**NOTES      TO THE UNAUDITED CONSOLIDATED FINANCIAL      STATEMENTS**

**NOTE      1 - BASIS OF PRESENTATION**

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

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Table          of Contents

|                                       |   | **Weighted-Average                Assumptions****for                Option Grants** |                      |
|--------------------------------------------|--------|-------------------------------------------------------------------------------------|---------------------------|
|                                       |   | **2007**                                                                            |                      | **2006*****(1)*** |   |
|                                       |   |                                                                                |                      |   |   |
| Dividend                Yield              |   |                                                                                | 1.18%                     |   |   | — |   |
| Expected                Volatility         |   |                                                                                | 23.83%                    |   |   | — |   |
| Risk-Free                Interest Rates    |   |                                                                                | 4.72%                     |   |   | — |   |
| Expected                Lives              |   |                                                                                | Five                Years |   |   | — |   |
| Weighted-Average                Fair Value |   |                                                                                | $14.49                    |   |   | — |   |

*(1)      The Company did not grant any stock options during the three months ended March      31, 2006.*

**NOTE      3 - EARNINGS PER SHARE**

|                                                    |   |                                                     |    |
|---------------------------------------------------------|--------|----------------------------------------------------------|---------|
|                                                    |   |   **Net                Income**                |    | **Weighted-****Average                Shares****Outstanding** |   | **Per****Share****Amount** |   |
|                                                    |   | **(in                thousands, except per share data)** |    |
| **For                the Three Months Ended March 31,** |   |                                                     |    |   |   |   |   |
| **2007**                                                |   |                                                     |    |   |   |   |   |
| Basic                EPS                                |   | $                                                        | 6,737   |   |   | 5,528 |   | $ | 1.22 |   |
| Effect                of dilutive stock options         |   |                                                     | — |   |   | 154 |   |   | (0.03 | ) |
| Diluted                EPS                              |   | $                                                        | 6,737   |   |   | 5,682 |   | $ | 1.19 |   |
|                                                    |   |                                                     |    |   |   |   |   |   |   |   |
| **2006**                                                |   |                                                     |    |   |   |   |   |   |   |   |
| Basic                EPS                                |   | $                                                        | 6,332   |   |   | 5,625 |   | $ | 1.13 |   |
| Effect                of dilutive stock options         |   |                                                     | — |   |   | 139 |   |   | (0.03 | ) |
| Diluted                EPS                              |   | $                                                        | 6,332   |   |   | 5,764 |   | $ | 1.10 |   |

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**NOTE      4 - COMPREHENSIVE INCOME**

|                                                                                                                                                                                                                                                      |   | **Three                Months Ended** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                                                                                                                                                                                                      |   | **March                31,**          |   |
|                                                                                                                                                                                                                                                      |   | **2007**                              |   | **2006** |   |
|                                                                                                                                                                                                                                                      |   | **(in                thousands)**     |   |
| Net                Income                                                                                                                                                                                                                                 |   | $                                     | 6,737  |   | $ | 6,332 |   |
| Other                comprehensive income:                                                                                                                                                                                                                |   |                                  |   |   |   |   |   |
| Change                in net unrealized gain on investment securities available-for-sale,                net of                tax expense of $242 and $4 for the three months ended March 31, 2007                and                2006, respectively. |   |                                  | 366    |   |   | 6 |   |
|                                                                                                                                                                                                                                                      |   |                                  |   |   |   |   |   |
| Comprehensive                Income                                                                                                                                                                                                                       |   | $                                     | 7,103  |   | $ | 6,338 |   |

**NOTE      5 - IMPAIRED LOANS RECEIVABLE **

**NOTE      6 - RESIDUAL INTEREST IN SECURITIZATION**

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|                                                                                             |   | **March                31,****2007**      |      | **December                31, 2006** |   |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------------------|-----------|--------------------------------------|--------|
|                                                                                             |   | **(dollars                in thousands)** |      |
|                                                                                             |   |                                      |      |
| **Fair                value of retained interest**                                               |   | **$**                                     | **1,718** |                                 | **$**  | **2,039** |   |
| **Weighted                average remaining life (in years) - securities**                       |   |                                      | **0.55**  |                                 |   | **0.55** |   |
| **Weighted                average remaining life (in years) - residual                interest** |   |                                      | **2.76**  |                                 |   | **2.74** |   |
| **Weighted                average annual prepayment speed**                                      |   |                                      | **40.0**  | **%**                                |   | **40.0** | **%** |
| Impact                of 10% adverse change                                                      |   | $                                         | (3        | )                                    | $      | (6 | ) |
| Impact                of 25% adverse change                                                      |   | $                                         | (5        | )                                    | $      | (10 | ) |
| **Weighted                average annual discount rate**                                         |   |                                      | **13.0**  | **%**                                |   | **13.0** | **%** |
| Impact                of 10% adverse change                                                      |   | $                                         | (52       | )                                    | $      | (65 | ) |
| Impact                of 25% adverse change                                                      |   | $                                         | (130      | )                                    | $      | (156 | ) |
| **Weighted                average lifetime credit losses**                                       |   |                                      | **20.2**  | **%**                                |   | **20.2** | **%** |
| Impact                of 10% adverse change                                                      |   | $                                         | (77       | )                                    | $      | (86 | ) |
| Impact                of 25% adverse change                                                      |   | $                                         | (195      | )                                    | $      | (224 | ) |

**NOTE      7 - NEW ACCOUNTING PRONOUNCEMENTS**

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Table          of Contents

**NOTE      8 - BUSINESS SEGMENT INFORMATION**

|                                                    |   | **Lending**                       |   |                         |   |             |   |
|---------------------------------------------------------|--------|-----------------------------------|--------|------------------------------|--------|------------------|--------|
|                                                    |   | **Operations**                    |   | **All                Other** |   | **Consolidated** |   |
|                                                    |   | **(in                thousands)** |   |
| **For                the three months ended March 31,** |   |                              |   |                         |   |             |   |
| **2007**                                                |   |                              |   |                         |   |             |   |
| Revenues                from external customers         |   | $                                 | 63,698 |                         | $      | 350              |   | $ | 64,048 |   |
| Total                interest income                    |   |                              | 63,067 |                         |   | 265              |   |   | 63,332 |   |
| Total                interest expense                   |   |                              | 37,265 |                         |   | 2,078            |   |   | 39,343 |   |
| Net                income                               |   |                              | 8,567  |                         |   | (1,830           | )      |   | 6,737 |   |
|                                                    |   |                              |   |                         |   |             |   |   |   |   |
| **2006**                                                |   |                              |   |                         |   |             |   |   |   |   |
| Revenues                from external customers         |   | $                                 | 51,928 |                         | $      | 217              |   | $ | 52,145 |   |
| Total                interest income                    |   |                              | 51,262 |                         |   | 166              |   |   | 51,428 |   |
| Total                interest expense                   |   |                              | 26,560 |                         |   | 1,958            |   |   | 28,518 |   |
| Net                income                               |   |                              | 7,798  |                         |   | (1,466           | )      |   | 6,332 |   |
|                                                    |   |                              |   |                         |   |             |   |   |   |   |
|                                                    |   |                              |   |                         |   |             |   |   |   |   |

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

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

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Table          of Contents

**RESULTS      OF OPERATIONS**

**Three      Months Ended March 31, 2007 Compared to Three Months Ended March 31,      2006**

**Executive      Summary**

**Net      Interest Income and Margin**

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Table          of Contents

|                                                                               |   | **For                the Three Months Ended March 31,** |      |
|------------------------------------------------------------------------------------|--------|---------------------------------------------------------|-----------|
|                                                                               |   | **2007**                                                |      | **2006** |   |
|                                                                               |   | **Average                Balance**                      |      | **Income/****Expense** |   | **Yield/****Rate** |   | **Average                Balance** |   | **Income/****Expense** |   | **Yield/****Rate** |   |
|                                                                               |   | **(dollars                in thousands)**               |      |
| **Assets**                                                                         |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |
| Cash                and investment securities                                      |   | $                                                       | 373,205   |   | $ | 4,569 |   |   | 4.97 | % | $ | 407,871 |   | $ | 4,291 |   |   | 4.27 | % |
| Loans                receivable:                                                   |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                loans                                                         |   |                                                    | 3,004,189 |   |   | 58,763 |   |   | 7.93 | % |   | 2,546,029 |   |   | 47,137 |   |   | 7.51 | % |
|                                                                               |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest earning assets                                       |   |                                                    | 3,377,394 |   | $ | 63,332 |   |   | 7.60 | % |   | 2,953,900 |   | $ | 51,428 |   |   | 7.06 | % |
| Non-interest                earning assets                                         |   |                                                    | 74,905    |   |   |   |   |   |   |   |   | 65,495 |   |   |   |   |   |   |   |
| Allowance                for loan losses                                           |   |                                                    | (46,579   | ) |   |   |   |   |   |   |   | (44,684 | ) |   |   |   |   |   |   |
| Total                assets                                                        |   | $                                                       | 3,405,720 |   |   |   |   |   |   |   | $ | 2,974,711 |   |   |   |   |   |   |   |
|                                                                               |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                and Shareholders’ Equity**                      |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                bearing deposit accounts:                                  |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                bearing demand                                             |   | $                                                       | 24,400    |   | $ | 188 |   |   | 3.12 | % | $ | 36,146 |   | $ | 247 |   |   | 2.77 | % |
| Money                market and passbook                                           |   |                                                    | 222,793   |   |   | 2,718 |   |   | 4.95 | % |   | 200,345 |   |   | 1,912 |   |   | 3.87 | % |
| Time                certificates                                                   |   |                                                    | 1,821,519 |   |   | 23,682 |   |   | 5.27 | % |   | 1,465,748 |   |   | 15,039 |   |   | 4.16 | % |
| Total                interest bearing deposit accounts                             |   |                                                    | 2,068,712 |   |   | 26,588 |   |   | 5.21 | % |   | 1,702,239 |   |   | 17,198 |   |   | 4.10 | % |
| FHLB                advances and other borrowings                                  |   |                                                    | 977,608   |   |   | 10,677 |   |   | 4.43 | % |   | 934,677 |   |   | 9,362 |   |   | 4.06 | % |
| Junior                subordinated debentures                                      |   |                                                    | 86,600    |   |   | 2,078 |   |   | 9.73 | % |   | 86,600 |   |   | 1,958 |   |   | 9.17 | % |
| Total                interest bearing liabilities                                  |   |                                                    | 3,132,920 |   | $ | 39,343 |   |   | 5.09 | % |   | 2,723,516 |   | $ | 28,518 |   |   | 4.25 | % |
| Non-interest                bearing demand accounts                                |   |                                                    | 11,641    |   |   |   |   |   |   |   |   | 14,508 |   |   |   |   |   |   |   |
| Other                non-interest bearing liabilities                              |   |                                                    | 37,212    |   |   |   |   |   |   |   |   | 31,607 |   |   |   |   |   |   |   |
| Shareholders’                equity                                          |   |                                                    | 223,947   |   |   |   |   |   |   |   |   | 205,080 |   |   |   |   |   |   |   |
| Total                liabilities and shareholders’                equity     |   | $                                                       | 3,405,720 |   |   |   |   |   |   |   | $ | 2,974,711 |   |   |   |   |   |   |   |
| Net                interest spread *(1)*                                           |   |                                                    |      |   |   |   |   |   | 2.51 | % |   |   |   |   |   |   |   | 2.81 | % |
|                                                                               |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income before provision for                loan losses |   |                                                    |      |   | $ | 23,989 |   |   |   |   |   |   |   | $ | 22,910 |   |   |   |   |
| Net                interest margin *(2)*                                           |   |                                                    |      |   |   |   |   |   | 2.88 | % |   |   |   |   |   |   |   | 3.15 | % |
|                                                                               |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

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

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

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|                                                      |   | **For                the Three Months Ended****March                31, 2007 and 2006** |   |
|-----------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|
|                                                      |   | **Increase                (Decrease) Due to:**                                          |   |
|                                                      |   | **Rate**                                                                                |   | **Volume** |   | **Total** |   |
|                                                      |   | **(in                thousands)**                                                       |   |
| Interest                and fees earned from:             |   |                                                                                    |   |   |   |   |   |
| Cash                and investment securities             |   | $                                                                                       | 664    |   | $ | (386 | ) | $ | 278 |   |
| Loans                                                     |   |                                                                                    | 2,757  |   |   | 8,869 |   |   | 11,626 |   |
|                                                      |   |                                                                                    |   |   |   |   |   |   |   |   |
| Total                increase in interest income          |   |                                                                                    | 3,421  |   |   | 8,483 |   |   | 11,904 |   |
|                                                      |   |                                                                                    |   |   |   |   |   |   |   |   |
| Interest                paid on:                          |   |                                                                                    |   |   |   |   |   |   |   |   |
| Deposit                accounts                           |   |                                                                                    | 5,231  |   |   | 4,159 |   |   | 9,390 |   |
| FHLB                advances and other borrowings         |   |                                                                                    | 874    |   |   | 441 |   |   | 1,315 |   |
| Junior                subordinated debentures             |   |                                                                                    | 120    |   |   | — |   |   | 120 |   |
|                                                      |   |                                                                                    |   |   |   |   |   |   |   |   |
| Total                increase in interest expense         |   |                                                                                    | 6,225  |   |   | 4,600 |   |   | 10,825 |   |
|                                                      |   |                                                                                    |   |   |   |   |   |   |   |   |
| (Decrease)                increase in net interest income |   | $                                                                                       | (2,804 | ) | $ | 3,883 |   | $ | 1,079 |   |

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**Provision      for Loan Losses**

| ·   | the                risk characteristics of various classifications of                loans; |
|--------------------|---------------------------------------------------------------------------------------------|

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

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

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

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

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

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

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**Non-Interest      Income**

**Non-Interest      Expense**

**FINANCIAL      CONDITION**

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**CREDIT      RISK**

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

|                                                                                                 |   | **March                31,****2007**      |    | **December                31, 2006** |   |
|------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|---------|--------------------------------------|--------|
|                                                                                                 |   | **(dollars                in thousands)** |    |
| Nonaccrual                loans:                                                                     |   |                                      |    |                                 |   |
| Real                estate                                                                           |   | $                                         | 18,718  |                                 | $      | 14,091 |   |
| Franchise                                                                                            |   |                                      | — |                                 |   | 4,549 |   |
| Entertainment                finance                                                                 |   |                                      | 7,609   |                                 |   | 7,614 |   |
| Total                nonaccrual loans                                                                |   |                                      | 26,327  |                                 |   | 26,254 |   |
| Other                real estate owned, net                                                          |   |                                      | 6,640   |                                 |   | 6,729 |   |
| Total                nonperforming assets                                                            |   |                                      | 32,967  |                                 |   | 32,983 |   |
| Performing                troubled debt restructurings                                               |   |                                      | 7,959   |                                 |   | 7,994 |   |
| Total                nonperforming assets and performing troubled debt                restructurings |   | $                                         | 40,926  |                                 | $      | 40,977 |   |
|                                                                                                 |   |                                      |    |                                 |   |   |   |
| Nonaccrual                loans to total loans                                                       |   |                                      | 0.87    | %                                    |   | 0.88 | % |
| Allowance                for loan losses to nonaccrual loans                                         |   |                                      | 179.20  | %                                    |   | 175.40 | % |
| Nonperforming                assets to total assets                                                  |   |                                      | 0.95    | %                                    |   | 0.97 | % |

|                                                                                                   |   | **For                the Three****Months                Ended****March                31,****2007** |   | **For                the Year****Ended****December                31,****2006** |   | **For                the Three Months Ended****March                31,****2006** |   |
|--------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|
|                                                                                                   |   | **(dollars                in thousands)**                                                           |   |
|                                                                                                   |   |                                                                                                |   |                                                                            |   |                                                                              |   |
| Balance                at beginning of period                                                          |   | $                                                                                                   | 46,049 |                                                                            | $      | 43,817                                                                            |   | $ | 43,817 |   |
| Provision                for loan losses                                                               |   |                                                                                                | 750    |                                                                            |   | 5,000                                                                             |   |   | 750 |   |
| Charge-offs                                                                                            |   |                                                                                                | (39    | )                                                                               |   | (4,134                                                                            | )      |   | — |   |
| Recoveries                                                                                             |   |                                                                                                | 419    |                                                                            |   | 1,366                                                                             |   |   | 885 |   |
| Net                recoveries (charge-offs)                                                            |   |                                                                                                | 380    |                                                                            |   | (2,768                                                                            | )      |   | 885 |   |
|                                                                                                   |   |                                                                                                |   |                                                                            |   |                                                                              |   |   |   |   |
| Balance                at end of period                                                                |   | $                                                                                                   | 47,179 |                                                                            | $      | 46,049                                                                            |   | $ | 45,452 |   |
|                                                                                                   |   |                                                                                                |   |                                                                            |   |                                                                              |   |   |   |   |
| Allowance                for loan losses as a percentage   of                loans, net |   |                                                                                                | 1.54   | %                                                                               |   | 1.53                                                                              | %      |   | 1.71 | % |

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**Liquidity**

**Capital      Resources**

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

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**Item      4. Controls and Procedures**

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**PART      II - OTHER INFORMATION**

**Item      1.** **LegalProceedings**

**Item      1A.** **RiskFactors**

**Item      2.** **UnregisteredSales      of Equity Securities and Use of Proceeds**

|     **Period**                                     |   |    **Total                Number of Shares Purchased** |    |    **Average                Price Paid per Share** |   | **Total                Number of Shares Purchased as Part of Publicly Announced Plans or                Programs** |   | **Maximum                Number of Shares that May Yet Be Purchased Under the Plans or                Programs****(1)** |    |
|------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|---------|-------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|---------|
|  January                1, 2007 toJanuary                31, 2007 |   |                                                                  | 11,500  |                                                              | $      | 55.84                                                                                                              |   |                                                                                                                    | 11,500  |   |   | 286,461 |   |
| February                1, 2007 to February                28, 2007    |   |                                                                  | — |                                                              |   | —                                                                                                            |   |                                                                                                                    | — |   |   | 286,461 |   |
| March                1, 2007 toMarch                31, 2007           |   |                                                                  | 4,475   |                                                              |   | 54.92                                                                                                              |   |                                                                                                                    | 4,475   |   |   | 281,986 |   |
|  Total                                                            |   |                                                                  | 15,975  |                                                              | $      | 55.58                                                                                                              |   |                                                                                                                    | 15,975  |   |   | 281,986 |   |

**Item      3** **.** **DefaultsUpon      Senior Securities**

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

**Item      5** **.** **OtherInformation**

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

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**S****IGNATU****RES**

|                                             | **ITLA                CAPITAL CORPORATION**                           |   |
|--------------------------------------------------|-----------------------------------------------------------------------|--------|
|                                             |                                                                  |   |
| Date:                May                10, 2007 | /s/                George W. Haligowski      |   |
|                                             | George                W. Haligowski                                   |   |
|                                             | Chairman                of the Board, President and                   |   |
|                                             | Chief                Executive Officer                                |   |

| Date:                May                10, 2007 | /s/                Timothy M. Doyle       |   |
|--------------------------------------------------|-------------------------------------------------------------------------|--------|
|                                             | Timothy                M. Doyle                                         |   |
|                                             | Executive                Managing Director and                          |   |
|                                             | Chief                Financial Officer                                  |   |

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Table          of Contents

**EXHIBIT        INDEX**

| **Regulation                    S-K Exhibit Number** |   | **Document**                                                                                                                                         |   | **Reference                    to Prior Filling or Exhibit Number Attached                    Hereto** |
|------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------|
|                                                 |   |                                                                                                                                                 |   |                                                                                                   |
| 3.1                                                  |   | Certificate                    of Incorporation                                                                                                      |   | **                                                                                                     |
| 3.2                                                  |   | Bylaws,                    as amended                                                                                                                |   | ***                                                                                                    |
| 4                                                    |   | Instruments                    Defining the Rights of Security Holders, Including                    Indentures                                      |   | **********                                                                                             |
| 10.1                                                 |   | 2005                    Re-Designated, Amended and Restated Stock Option Plan For Nonemployee                    Directors (“NEDP”)      |   | *****                                                                                                  |
| 10.2                                                 |   | 2005                    Re-Designated, Amended and Restated Employee Stock Incentive                    Plan                    (“ESIP”) |   | ********                                                                                               |
| 10.3a                                                |   | Nonqualified                    (Non-Employer Securities) Deferred Compensation Plan                                                                 |   | ********                                                                                               |
| 10.3b                                                |   | Nonqualified                    (Employer Securities Only) Deferred Compensation Plan                                                                |   | ********                                                                                               |
| 10.4                                                 |   | Supplemental                    Salary Savings Plan                                                                                                  |   | *                                                                                                      |
| 10.5a                                                |   | Amended                    and Restated Employment Agreement with George W.                    Haligowski                                            |   | ********                                                                                               |
| 10.5b                                                |   | Non-Competition                    and Non-Solicitation Agreement with George W. Haligowski                                                          |   | ********                                                                                               |
| 10.6                                                 |   | Change                    in Control Severance Agreement with Norval L. Bruce                                                                        |   | ********                                                                                               |
| 10.7                                                 |   | Change                    in Control Severance Agreement with Timothy M. Doyle                                                                       |   | ********                                                                                               |
| 10.8                                                 |   | Change                    in Control Severance Agreement with Lyle C. Lodwick                                                                        |   | ********                                                                                               |
| 10.9                                                 |   | Change                    in Control Severance Agreement with Phillip E. Lombardi                                                                    |   | ***********                                                                                            |
| 10.10                                                |   | Recognition                    and Retention Plan                                                                                                    |   | **                                                                                                     |
| 10.11                                                |   | Voluntary                    Retainer Stock and Deferred Compensation Plan for Outside                    Directors                                  |   | ****                                                                                                   |
| 10.12                                                |   | Amended                    and Restated Supplemental Executive Retirement Plan                                                                       |   | ********                                                                                               |
| 10.13                                                |   | Amended                    and Restated ITLA Capital Corporation Rabbi Trust                    Agreement                                            |   | *********                                                                                              |
| 10.14                                                |   | Amended                    and Restated Salary Continuation Plan                                                                                     |   | ********                                                                                               |
| 10.15                                                |   | Form                    of Incentive Stock Option Agreement under ESIP                                                                               |   | ******                                                                                                 |
| 10.16                                                |   | Form                    of Non-Qualified Stock Option Agreement under the ESIP                                                                       |   | ******                                                                                                 |
| 10.17                                                |   | Form                    of Non-Qualified Stock Option Agreement under the NEDP                                                                       |   | *******                                                                                                |
| 10.18                                                |   | Description                    of Named Executive Officer Salary, Bonus and Perquisite Arrangements                    for 2007                      |   | ***********                                                                                            |
| 10.19                                                |   | Description                    of Director Fee Arrangements                                                                                          |   | ***********                                                                                            |
| 11                                                   |   | Statement                    Regarding Computation of Per Share Earnings                                                                             |   | Not                    Required                                                                        |
| 13                                                   |   | Annual                    Report to Security Holders                                                                                                 |   | None                                                                                                   |
| 18                                                   |   | Letter                    Regarding Change in Accounting Principles                                                                                  |   | None                                                                                                   |
| 21                                                   |   | Subsidiaries                    of the Registrant                                                                                                    |   | Not                    Required                                                                        |
| 22                                                   |   | Published                    Report Regarding Matters Submitted to Vote of Security                    Holders                                       |   | None                                                                                                   |
| 23.1                                                 |   | Consent                    of Ernst & Young LLP                                                                                                  |   | Not                    Required                                                                        |
| 24                                                   |   | Power                    of Attorney                                                                                                                 |   | None                                                                                                   |
| 31.1                                                 |   | Rule                    13a-14(a)/15d-14(a) Certification of Chief Executive                    Officer                                              |   | 31.1                                                                                                   |
| 31.2                                                 |   | Rule                    13a-14(a)/15d-14(a) Certification of Chief Financial                    Officer                                              |   | 31.2                                                                                                   |
| 32                                                   |   | Section                    1350 Certifications of Chief Executive Officer and Chief Financial                    Officer                             |   | 32                                                                                                     |

| *                                                       |   | Filed                  as an exhibit to Imperial’s Registration Statement on Form S-1 (File No.                  33-96518) filed with the Commission on September 1, 1995, pursuant                  to                  Section 5 of the Securities Act of 1933. |
|---------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *                  *                                    |   | Filed                  as an exhibit to the Company’s Registration Statement on Form S-4 (File                  No. 333-03551) filed with the Commission on May 10, 1996, pursuant                  to                  Section 5 of the Securities Act of 1933.  |
| *                  *                  *                 |   | Filed                  as an exhibit to the Company’s Form 10-Q for the quarter ended June 30,                  2000 (File No. 0-26960).                                                                                                                          |
| *                  *                  * *               |   | Filed                  as an exhibit to Amendment No. Two to the Company’s Registration Statement                  on Form S-4 (File No. 333-03551) filed with the Commission on June                  19,                  1996.                                 |
| *                  *                  * * *             |   | Filed                  as an appendix to the Company’s definitive proxy materials filed on June                  27, 2005.                                                                                                                                        |
| *                  *                  * * * *           |   | Filed                  as an exhibit to the Company’s Current Report on Form 8-K filed on August                  9, 2005.                                                                                                                                        |
| *                  *                  * * * * *         |   | Filed                  as an exhibit to the Company’s Current Report on Form 8-K filed on                  November 4, 2005.                                                                                                                                      |
| *                  *                  * * * * * *       |   | Filed                  as an exhibit to the Company’s Current Report on Form 8-K filed on                  February 24, 2006.                                                                                                                                     |
| *                  *                  * * * * * * *     |   | Filed                  as an exhibit to the Company’s Form 10-Q for the quarter ended June 30,                  2006.                                                                                                                                             |
| *                  *                  * * * * * * * *   |   | The                  Company hereby agrees to furnish the SEC, upon request, copies                  of the                  instruments defining the rights of the holders of each issue of                  the                  Company's long-term debt.            |
| *                  *                  * * * * * * * * * |   | Filed                  as an exhibit to the Company’s Form 10-K for the year ended December 31,                  2006.                                                                                                                                            |