<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-Q

(Mark One)

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


               For the Quarterly Period Ended September 30, 1996
                                              ------------------


                                       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            (I.R.S. Employer Identification No.)
  incorporation or organization)
 
7979 Ivanhoe Ave., Suite 150, La Jolla, California            92037
-----------------------------------------------------     --------------
     (Address of Principal Executive Offices)               (Zip Code)
 
(818) 551-0600
--------------
(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          No  
                                                  -----           -----        


Number of shares of common stock of the registrant: 7,820,500 outstanding as of
October 31, 1996.
<PAGE>
 
                     IMPERIAL THRIFT AND LOAN ASSOCIATION
            (A WHOLLY-OWNED SUBSIDIARY OF ITLA CAPITAL CORPORATION)
                                BALANCE SHEETS
<TABLE> 
<CAPTION> 
                                                                                          September 30,       December 31,  
                                                                                          -------------       ------------  
                                                                                              1996                1995      
                                                                                          -------------       ------------  
                                                                                           (Unaudited)                      
                                                                                                   (In thousands)
<S>                                                                                       <C>                 <C> 
                             ASSETS
Cash and cash equivalents                                                                 $      28,234       $     22,106   
Investment securities available for sale, at market value                                        37,810                  -  
Investment securities held to maturity, at amortized cost (market value                                                     
   $289 and $18,052 for 1996 and 1995, respectively)                                                289             18,049  
Stock in Federal Home Loan Bank                                                                   8,218             12,362  
Mortgage-backed securities held to maturity, at amortized cost                             
   (market value $34,601 and $42,039 for 1996 and 1995 respectively)                             35,437             42,275  
Loans receivable:                                                                                                           
   Loans held for investment at cost, net                                                       613,230            447,985  
   Conditional sales contracts held for sale, net                                                 2,229             55,812  
                                                                                          -------------       ------------  
                                                                                                615,459            503,797  
   Less allowance for credit losses                                                              10,074              8,105  
                                                                                          -------------       ------------  
                                                                                                                            
        Net loans receivable                                                                    605,385            495,692  
                                                                                                                            
Interest receivable                                                                               4,246              3,865  
Other real estate owned, net                                                                      6,455              6,103  
Income taxes receivable                                                                           2,279              2,223  
Furniture and equipment, net                                                                      2,659              3,008  
Deferred income taxes                                                                             3,145              3,309  
Other assets                                                                                      1,387              1,681  
                                                                                          -------------       ------------  
                                                                                                                            
                                                                                          $     735,544       $    610,673  
                                                                                          =============       ============  
                                                                                                                            
             LIABILITIES AND SHAREHOLDERS' EQUITY                                                                           
                                                                                                                            
Liabilities:                                                                                                                
   Deposit accounts                                                                       $     588,282       $    494,793  
   FHLB advances                                                                                 54,000             54,000  
   Accounts payable and other liabilities                                                         6,762              5,188  
                                                                                          -------------       ------------  
                                                                                                                            
        Total liabilities                                                                       649,044            553,981  
                                                                                          -------------       ------------  
                                                                                                                            
Commitments and Contingencies                                                                         -                  -  
                                                                                                                            
                                                                                                                            
Shareholders' Equity:                                                                   
   Preferred stock, 5,000,000 shares authorized, none issued                                          -                  -  
   Contributed capital - common stock, no par value; 20,000,000 shares                                                      
     authorized, 7,820,500 and 5,980,000 issued and outstanding in 1996                                                     
     and 1995, respectively                                                                      53,309             30,743  
   Retained earnings                                                                             33,153             25,949         
   Unrealized gain on investment securities available for sale, net                                  38                  -         
                                                                                         --------------       ------------         
                                                                                                                                   
        Total shareholders' equity                                                               86,500             56,692         
                                                                                         --------------       ------------         
                                                                                                                                   
                                                                                         $      735,544       $    610,673 
                                                                                         ==============       ============ 
</TABLE> 

                     See Notes to the Unaudited Financial Statements 

                                       2
<PAGE>

                     Imperial Thrift and Loan Association 
           (a wholly-owned subsidiary of ITLA Capital Corporation) 
                           Statements of Operations 
                                 (Unaudited) 
                   (In thousands except per share amounts) 

<TABLE> 
<CAPTION>
                                                               For the Three Months Ended    For the Nine Months Ended   
                                                               --------------------------    -------------------------
                                                                      September 30,                September 30,     
                                                               --------------------------    -------------------------
                                                                  1996            1995           1996           1995 
                                                                --------        -------        -------        -------    
<S>                                                             <C>             <C>            <C>            <C>  
Interest Income:                                                                                                         
      Loans receivable, including fees                           $15,690        $15,236        $45,402        $43,834        
      Investment securities                                          898            495          3,198          1,586       
      Mortgage-backed securities                                     529              -          1,721              -      
                                                                 -------        -------        -------        -------
          Total Interest Income                                   17,117         15,731         50,321         45,420       
                                                                 -------        -------        -------        -------    
Interest Expense:                                                                                                        
      Deposit accounts                                             7,669          7,498         22,512         21,704       
      FHLB advances                                                  745              5          2,229            211
                                                                 -------        -------        -------        -------    
          Total Interest Expense                                   8,414          7,503         24,741         21,915       
                                                                 -------        -------        -------        -------    
      Net Interest Income                                          8,703          8,228         25,580         23,505       

Provision for estimated credit losses                                950          3,280          3,771         11,024     
Provision for valuation allowance on loans held for sale               -              -              -          4,774     
                                                                 -------        -------        -------        -------    
          Net Interest Income After Provisions for Valuation                                                                 
            Allowance and Estimated Credit Losses                  7,753          4,948         21,809          7,707       
                                                                 -------        -------        -------        -------    
Noninterest Income:                                                                                                      
      Late and collection fees                                       246            259            705            849       
      Other                                                            8             41            114            145       
                                                                 -------        -------        -------        -------    
          Total Noninterest Income                                   254            300            819            994       
                                                                 -------        -------        -------        -------    
Noninterest Expense:                                                                                                     
      Compensation and benefits                                    1,508          1,570          4,228          5,143       
      Occupancy and equipment                                        457            526          1,459          1,680       
      FDIC assessment                                                  -             98            244            693       
      Other                                                        1,656          1,428          3,926          3,968       
                                                                 -------        -------        -------        -------    
          Total General and Administrative                         3,621          3,622          9,857         11,484       
                                                                 -------        -------        -------        -------    
                                                                                                                         
      Real estate operations, net                                    175            373            502          1,017       
      Provision for estimated losses on other real estate owned        -          1,257            888          3,805       
      Gain on sale of other real estate owned, net                  (113)          (130)          (364)          (186)     
                                                                 -------        -------        -------        -------    
          Total Real Estate Operations, net                           62          1,500          1,026          4,636     
                                                                 -------        -------        -------        -------    
          Total Noninterest Expense                                3,683          5,122         10,883         16,120
                                                                 -------        -------        -------        -------    
                                                                                                                         
Income (Loss) Before Provision for Income Taxes                    4,324            126         11,745         (7,419)   

      Provision (Benefit) for Income taxes                         1,729             52          4,541         (3,072)     
                                                                 -------        -------        -------        -------    
NET INCOME (LOSS)                                                $ 2,595        $    74        $ 7,204        $(4,347)   
                                                                 =======        =======        =======        =======
EARNINGS (LOSS) PER SHARE                                        $  0.33        $  0.01        $  1.00        $ (1.01) 
                                                                 =======        =======        =======        =======
</TABLE>
                See Notes to the Unaudited Financial Statements
                                                              
                                       3

<PAGE>
 
                     IMPERIAL THRIFT AND LOAN ASSOCIATION
            (A WHOLLY-OWNED SUBSIDIARY OF ITLA CAPITAL CORPORATION)
                           STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                                                 FOR THE NINE MONTHS ENDED
                                                                                       SEPTEMBER 30,
                                                                                ---------------------------
                                                                                    1996           1995
                                                                                ------------   ------------
                                                                                      (IN THOUSANDS)
<S>                                                                             <C>            <C>
Cash Flows From Operating Activities:
  Net income (loss)                                                             $      7,204   $     (4,347)
  Adjustments to reconcile net income (loss) to net cash provided by
   operating activities:
    Depreciation and amortization                                                        714            589
    Provision for valuation allowance on loans held for sale                               -          4,774
    Provision for estimated credit losses                                              3,771         11,024
    Provision for estimated losses on other real estate owned                            888          3,805
    Gain on sale of other real estate owned, net                                        (364)          (186)
    (Increase) decrease in interest receivable                                          (381)           424
    Increase in income taxes receivable                                                  (56)        (2,505)
    Decrease in deferred income taxes                                                    164          1,237
    Decrease (increase) in other assets                                                  260           (214)
    Increase in accounts payable and other liabilities                                 1,574            512
                                                                                ------------   ------------
      Net Cash Provided by Operating Activities                                       13,774         15,113
                                                                                ------------   ------------
Cash Flows From Investing Activities:
  Increase in loans receivable, net                                                 (169,559)       (50,079)
  Purchases of investment securities available for sale                             (167,395)             0
  Proceeds from the maturity of investment securities available for sale             129,623              0
  Purchases of investment securities held to maturity                               (364,029)      (149,535)
  Proceeds from the maturity of investment securities held to maturity               381,789        148,055
  Decrease in stock in Federal Home Loan Bank                                          4,144            943
  Repayment of principal on mortgage-backed securities                                 6,704              0
  Proceeds from sale of other real estate owned                                        5,170          8,908
  Proceeds from sale of conditional sales contracts                                   50,050         17,799
  Other, net                                                                            (198)            38
                                                                                ------------   ------------
      Net Cash Used in Investing Activities                                         (123,701)       (23,871)
                                                                                ------------   ------------
Cash Flows From Financing Activities:                                           
  Common stock issued                                                                 22,566              -
  Net increase in deposit accounts                                                    93,489         38,386
  Repayment of federal funds purchased                                                   -          (10,000)
  Repayment of FHLB advances                                                             -          (11,700)
                                                                                ------------   ------------
      Net Cash Provided by Financing Activities                                      116,055         16,686
                                                                                ------------   ------------
        Net Increase in Cash and Equivalents                                           6,128          7,928

        Cash and Cash Equivalents at Beginning of Period                              22,106         13,361
                                                                                ------------   ------------
        Cash and Cash Equivalents at End of Period                              $     28,234   $     21,289
                                                                                ============   ============
Supplemental of Cash Flow Information:                                         
  Cash paid during the period for interest                                      $     22,077   $     21,214
  Cash paid during the period for income taxes                                  $      4,432   $         38
Noncash Investing Transactions:
  Loans transferred to other real estate owned                                  $      6,045   $      9,666
  Loans to facilitate the sale of other real estate owned                       $      2,312   $      4,630
</TABLE>

                See Notes to the Unaudited Financial Statements

                                       4

<PAGE>
 
                      IMPERIAL THRIFT AND LOAN ASSOCIATION
            (A WHOLLY-OWNED SUBSIDIARY OF ITLA CAPITAL CORPORATION)
                    NOTES TO UNAUDITED FINANCIAL STATEMENTS

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996


NOTE A - BASIS OF PRESENTATION

     The unaudited financial statements of Imperial Thrift and Loan Association
(the "Association") included herein reflect all normal recurring adjustments,
which are in the opinion of management, necessary to present a fair statement of
the results for the interim periods indicated.  Certain reclassifications have
been made to the financial statements for 1995 to conform to the 1996
presentation.  Certain information and disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles 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, 1996, are not necessarily
indicative of the results of operations to be expected for the remainder of the
year.

     These unaudited financial statements should be read in conjunction with the
financial statements and notes thereto included in the Association's annual
report on Form 10-K for the year ended December 31, 1995.


NOTE B - EARNINGS PER SHARE

     Earnings per share is calculated on the basis of weighted average number of
shares of common stock and common stock equivalents outstanding during the
period, which was 7,923,440 and 7,175,215 for the three and nine month periods
ending September 30, 1996, respectively.  Fully diluted earnings per share has
not been reported in these interim financial statements as the dilutive effect
of common stock equivalents for outstanding options is less than three percent.

NOTE C - COMPLETION OF STOCK OFFERING

     In April, 1996 the Association completed a public offering of 1,840,000
shares of its common stock.  The proceeds of this offering, which included the
exercise of the entire underwriters' overallotment option totaled $22.6 million
after the underwriting discount and estimated expenses.

                                       5
<PAGE>
 
                      IMPERIAL THRIFT AND LOAN ASSOCIATION
            (A WHOLLY-OWNED SUBSIDIARY OF ITLA CAPITAL CORPORATION)
              NOTES TO UNAUDITED FINANCIAL STATEMENTS - CONTINUED

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996


NOTE D - IMPAIRED LOANS RECEIVABLE

     As of September 30, 1996, the recorded investment in loans receivable that
were considered impaired under Statement of Financial Accounting Standards No.
114 was $5.1 million.  The average recorded investment in these loans during the
three and nine month periods ended September 30, 1996 was $4.9 million and $5.9
million, respectively.  Interest income recognized on impaired loans on the cash
basis during the three and nine month periods ended September 30, 1996 was $.1
million and $.3 million, respectively.

NOTE E - SUBSEQUENT EVENT

     On October 1, 1996, the Association completed the formation of its new
holding company, ITLA Capital Corporation.  Each outstanding share of common
stock of Imperial Thrift and Loan Association was converted into and
automatically became one share of common stock of ITLA Capital Corporation.  As
a result of the holding company formation, Imperial Thrift and Loan Association
became a wholly-owned subsidiary of ITLA Capital Corporation.  This transaction
was exempt from Federal and state income taxes.

                                       6
<PAGE>
 
                     IMPERIAL THRIFT AND LOAN ASSOCIATION
            (A WHOLLY-OWNED SUBSIDIARY OF ITLA CAPITAL CORPORATION)

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


         On October 1, 1996, ITLA Capital Corporation (the "Company") became the
holding company for Imperial Thrift and Loan Association ("Imperial" or the
"Association"). Currently, all results of operations for the three and nine
months ended September 30, 1996 of the Company are those of its wholly-owned
subsidiary, Imperial. As a result, the following discussion and analysis reviews
the financial condition and results of operations of Imperial.

        The following discussion and analysis is intended to identify the major
factors that influenced the financial condition and results of operations of the
Company as of and for the three and nine month periods ended September 30, 1996.

RESULTS OF OPERATIONS

   THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED
   SEPTEMBER 30, 1995

NET INCOME

        Net income totaled $2.6 million for the three months ended September 30,
1996 compared to $0.1 million for the third quarter of 1995. The increase in net
earnings was primarily due to increased net interest income, reductions in
noninterest expense and significant reductions in the provision for estimated
credit losses and in the valuation allowance for loans held for sale. For the
third quarter of 1996, earnings per share was $.33 compared to $.01 per share
for the same period in 1995.

NET INTEREST INCOME

        The table on the following page 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 (volume) and changes in
average interest rates (rate). 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 in each.

                                       7
<PAGE>
 
<TABLE>
<CAPTION>
 
                                 FOR THE THREE MONTHS ENDED SEPTEMBER 30
                                 ----------------------------------------
                                              1996 VERSUS 1995
                                             -------------------
                                  VOLUME            RATE           TOTAL
                                 ---------   -------------------   ------
                                              (IN THOUSANDS)
<S>                              <C>         <C>                   <C>
INCREASE (DECREASE)
 IN INTEREST INCOME:
 Loans receivable, net              $2,669              $(2,215)   $  454
 Investment securities                 405                   (2)      403
 Mortgage-backed securities            529                    -       529
                                    ------              -------    ------
  Total increase (decrease)          3,603               (2,217)    1,386
                                    ------              -------    ------
INCREASE (DECREASE)
 IN INTEREST EXPENSE:
 Deposit accounts                      737                 (566)      171
 FHLB advances                         610                  130       740
                                    ------              -------    ------
  Total increase (decrease)          1,347                 (436)      911
                                    ------              -------    ------
   Increase (decrease)
    in net interest income          $2,256              $(1,781)   $  475
                                    ======              =======    ======
</TABLE>
          Total interest income increased by $1.4 million in the 1996 third
quarter compared to the same period in 1995 due to increases in the average
balances of loans, investments and mortgage-backed securities, offset by lower
overall yields on loans receivable.  The average balance of loans receivable
increased $86.7 million due to growth in the real estate loan portfolio. The
weighted average yield on loans receivable declined to 10.83 percent for the
1996 third quarter compared to 12.34 percent for the same period in 1995
primarily as a result of the sale of higher yielding automobile loans in the
first quarter of 1996. This sale and the origination of lower yielding real
estate loans is expected to result in the Company achieving lower average yields
in future operating periods.

          Total interest expense increased by $0.9 million in the 1996 third
quarter compared to the same period in 1995 due to increases in the average
balance of deposit accounts and the addition of $54.0 million of Federal Home
Loan Bank ("FHLB") advances, offset primarily by lower overall average rates on
deposit accounts.  The advances from the FHLB, executed in the fourth quarter of
1995, were primarily used to fund the acquisition of the mortgage-backed
securities portfolio.  The average balance of deposit accounts increased $49.5
million during the third quarter of 1996 as compared to the 1995 third quarter.
The average rate paid on these accounts declined to 5.61 percent in the 1996
third quarter from 6.02 percent during the same period in 1995.

PROVISION FOR ESTIMATED CREDIT LOSSES

          Management periodically assesses the adequacy of the allowance for
credit losses by reference to many factors which may be weighted differently at
times depending on prevailing conditions.  These factors include, among other
elements, general portfolio trends relative to asset and portfolio size, asset
categories, potential credit concentrations, nonaccrual loan levels, historical
loss experience and risks associated with changes in economic and business
conditions.  Accordingly, the calculation of the adequacy of the allowance for
credit losses is not based solely on the level of nonperforming assets.
Management believes that the Company's allowance for credit losses as of
September 30, 1996 was adequate to absorb the known and 

                                       8
<PAGE>
 
inherent risks 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 assurances 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 the
Company's financial condition and results of operations. In addition, the
determination of the amount of the allowance for credit losses is subject to
review by the Association'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 provision for estimated credit losses declined to $0.9 million in
the 1996 third quarter from $3.3 million in the same period in 1995 due
primarily to the significant reduction in nonperforming assets, which is an
important measurement of the credit quality of the real estate loan portfolio.
The level of nonperforming assets improved through Imperial's asset resolution
efforts and bulk sales of nonperforming assets.  Nonperforming assets to total
assets declined to 1.5 percent as of September 30, 1996 from 2.1 percent and 2.7
percent as of December 31, 1995 and September 30, 1995, respectively.  The
aggregate amount of nonperforming assets declined to $11.3 million as of
September 30, 1996 from $13.1 million and $14.2 million at December 31, 1995 and
September 30, 1995, respectively.  At September 30, 1996, the total allowance
for credit losses was $10.1 million or 1.6 percent of total loans receivable.
See also "Financial Condition - Nonperforming Assets and Allowance for Credit
Losses."

NONINTEREST EXPENSE

          There was no significant change in general and administrative expense
in the 1996 third quarter versus the same period in 1995.  As a percent of
average total assets, general and administrative expense declined to 2.1 percent
in the third quarter of 1996 from 2.7 percent for the same period in 1995,
resulting primarily from an increase in average total assets.

          Expenses from real estate operations decreased to $62,000 in the 1996
third quarter from $1.5 million in the same period of 1995 due primarily to a
reduction in the provision for estimated losses on other real estate owned.
Other real estate owned, net of allowances for losses, decreased to $6.5 million
at September 30, 1996 from $7.7 million at September 30, 1995.

   NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED
   SEPTEMBER 30, 1995

NET INCOME

          Net income totaled $7.2 million for the nine months ended September
30, 1996 compared to a net loss of $4.3 million for the same period in 1995. The
increase in net income was primarily due to increased net interest income,
reductions in noninterest expense and significant reductions in the provisions
for estimated credit losses and in the valuation allowance for loans held for
sale. For the first nine months of 1996, earnings per share was $1.00 compared
to a net loss of $1.01 per share for the same period in 1995.

                                       9
<PAGE>
 
NET INTEREST INCOME

          The table below 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 (volume) and changes in average interest
rates (rate). 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 in each.
<TABLE>
<CAPTION>
 
 
                                                   FOR THE NINE MONTHS ENDED SEPTEMBER 30
                                                   ---------------------------------------
                                                              1996 VERSUS 1995
                                                   ---------------------------------------
                                                     VOLUME          RATE         TOTAL
                                                   -----------   ------------   ----------
                                                               (IN THOUSANDS)
<S>                                                <C>           <C>            <C>
         INCREASE (DECREASE)
             IN INTEREST INCOME:
             Loans receivable, net                      $3,912       $(2,344)       $1,568
             Investment securities                       1,919          (307)        1,612
             Mortgage-backed securities                  1,721             -         1,721
                                                        ------       -------        ------
                Total increase (decrease)                7,552        (2,651)        4,901
                                                        ------       -------        ------
         INCREASE (DECREASE)
             IN INTEREST EXPENSE:
             Deposit accounts                            1,819        (1,011)          808
             FHLB advances                               2,545          (527)        2,018
                                                        ------       -------        ------
                Total increase (decrease)                4,364        (1,538)        2,826
                                                        ------       -------        ------
                    Increase (decrease)
                       in net interest income           $3,188       $ 1,113        $2,075
                                                        ======       =======        ======
</TABLE>

      Total interest income increased by $4.9 million in the first nine months
of 1996 compared to the same period in 1995 due to increases in the average
balances of all categories of interest-earning assets, offset by lower overall
yields on loans receivable. The average balance of loans receivable increased
$43.5 million for the first nine months of 1996 as compared to the same period
in 1995 due to growth in the real estate loan portfolio. The weighted average
yield on loans receivable declined to 11.35 percent in the first nine months of
1996 compared to 11.94 percent in the same period in 1995 primarily as a result
of the sale of higher yielding automobile loans in the first quarter of 1996.
This sale and the origination of lower yielding real estate loans is expected to
result in the Company achieving lower average yields in future operating
periods.

      Total interest expense increased by $2.8 million in the first nine months
of 1996 compared to the same period in 1995 due to the addition of $54.0 million
in FHLB advances and increases in the average balances of deposit accounts,
partially offset by lower overall rates on all categories of interest bearing
liabilities. The advances from the FHLB, executed in the fourth quarter of 1995,
were primarily used to fund the acquisition of the mortgage-backed securities
portfolio. The average balance of deposit accounts increased $40.7 million in
the first nine months of 1996 versus the same period in 1995. The average rate
paid on these accounts declined to 5.67 percent in the first nine months of 1996
from 5.92 percent during the same period in 1995.

                                       10
<PAGE>
 
PROVISION FOR VALUATION ALLOWANCES ON LOANS HELD FOR SALE

      During the second quarter of 1995, management classified $23.4 million of
certain nonaccrual and other potential problem real estate loans as held for
sale. As a result, the Company recorded a valuation allowance of $4.8 million to
reduce the carrying value of these loans to their estimated market value.
Subsequently, these loans were sold in the third quarter of 1995 with no
additional losses or provisions. No such provisions were required in 1996.

PROVISION FOR ESTIMATED CREDIT LOSSES

      The provision for estimated credit losses declined to $3.8 million for the
first nine months of 1996 from $11.0 million in the same period in 1995 due
primarily to the significant reduction in nonperforming assets which is an
important measurement of the credit quality of the real estate loan portfolio.
The level of nonperforming assets improved through Imperial's asset resolution
efforts and bulk sales of nonperforming assets. Nonperforming assets to total
assets declined to 1.5 percent as of September 30, 1996 from 2.1 percent and 2.7
percent as of December 31, 1995 and September 30, 1995, respectively. The
aggregate amount of nonperforming assets declined to $11.3 million as of
September 30, 1996 from $13.1 million and $14.2 million at December 31, 1995 and
September 30, 1995, respectively. See also "Financial Condition - Nonperforming
Assets and Allowance for Credit Losses."

NONINTEREST EXPENSE

      General and administrative expense decreased by $1.6 million in the first
nine months of 1996 compared to the same period in 1995 as management continues
to focus on controlling operating costs.  As a percent of average total assets,
general and administrative expense declined to 2.0 percent in the first nine
months of 1996 from 2.8 percent for the same period in 1995.

      Expenses from real estate operations decreased to $1.0 million in the
first nine months of 1996 from $4.6 million in the same period of 1995 due
primarily to a reduction in the provision for estimated losses on other real
estate owned. Other real estate owned, net of allowances for losses, decreased
to $6.5 million at September 30, 1996 from $7.7 million at September 30, 1995.

                                       11
<PAGE>
 
FINANCIAL CONDITION

NONPERFORMING ASSETS AND ALLOWANCE FOR CREDIT LOSSES

     The following table sets forth the Company's nonperforming assets by
category at the dates indicated.
<TABLE>
<CAPTION>
 
                                                                                SEPTEMBER 30,       DECEMBER 31,      SEPTEMBER 30,
                                                                                     1996               1995               1995
                                                                                --------------   ------------------   --------------

                                                                                               (DOLLARS IN THOUSANDS)
<S>                                                                             <C>              <C>                  <C>
      Nonaccrual Loans:
          Loans, net                                                                  $ 4,542              $ 6,619          $ 6,516
          Sales contracts held for sale                                                   321                  366                -
                                                                                      -------              -------          -------
          Total nonaccrual loans                                                        4,863                6,985            6,516
      Real estate owned                                                                 6,455                6,103            7,682
                                                                                      -------              -------          -------
              Total nonperforming assets                                              $11,318              $13,088          $14,198
                                                                                      =======              =======          =======
 
      Troubled debt restructurings                                                    $ 5,193              $ 6,182          $ 7,648
      Nonaccrual loans to total gross loans                                              0.79%                1.34%            1.29%

      Nonperforming assets to total assets                                               1.54%                2.14%            2.66%

</TABLE> 
     The following table provides certain information regarding the Company's 
allowance for credit losses.

<TABLE> 
<CAPTION>

                                                                                  NINE MONTHS ENDED       YEAR ENDED                
                                                                                    SEPTEMBER 30,         DECEMBER 31,
                                                                                  -----------------      -------------
                                                                                        1996                  1995               
                                                                                        ----                  ----                  
                                                                                             (IN THOUSANDS)
      <S>                                                                          <C>                    <C> 
               ALLOWANCE FOR CREDIT LOSSES:                                                                                        
                Balance, beginning of period                                          $ 8,105               $11,076               
                Provision for estimated credit losses                                   3,771                13,098               
                Less net charge-offs:                                                                                         
                    Real estate loans                                                   1,802                 9,447               
                    Conditional sales contracts                                             -                 6,622               
                                                                                      -------               -------               
                    Total net charge-offs                                               1,802                16,069               
                                                                                      -------               -------               
                  Balance, end of period                                              $10,074               $ 8,105               
                                                                                      =======               =======

</TABLE>

     The significant amount of net charge-offs in 1995 was attributable
principally to the application of more aggressive strategies to resolve and
dispose of nonaccrual and other potential problem real estate loans.  Those
strategies were based in part on management's belief that the high costs of
earlier resolution of problem assets may be offset by a reduction of the direct
and opportunity costs associated with carrying nonearning assets, including
general and administrative expenses and funding and capital costs.  This
approach represented a change in 1995 from prior periods in asset management
philosophy, in terms of the time frames Imperial was willing to entertain for
the resolution and disposition of problem assets.  The accelerated resolution
strategy involved Imperial pursuing foreclosure on a greater proportion of
problem real estate loans rather than seeking workouts or restructurings.  As a
result, Imperial experienced lower fair values being assigned to real estate
properties upon foreclosure and therefore a corresponding increase in loan
charge-offs.  Additionally, net charge-offs related to 

                                       12
<PAGE>
 
Imperial's auto finance contract portfolio increased resulting in Imperial's
decision to discontinue its auto finance activities in 1995. As a result of the
above, and the identification of lower values on certain properties securing
Imperial's loans, the provision for estimated credit losses increased
significantly during 1995.

LIQUIDITY AND DEPOSIT ACCOUNTS

     Liquidity refers to the Company's 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 loan receivables.  The Company maintains a cash and investment securities
portfolio designed to satisfy operating and regulatory liquidity requirements
while preserving capital and maximizing yield.  As of September 30, 1996, the
Company held approximately $37.8 million of investment securities classified as
available for sale.  All investment securities held by the Company were fixed
income instruments which were rated "A" or better by applicable rating agencies.
As of September 30, 1996 and December 31, 1995, the Association's liquidity
ratios were 10.0 percent and 8.1 percent, respectively, exceeding the regulatory
requirement of 5.0 percent.  In addition, the Company's liquidity position is
supported by a credit facility with the FHLB of San Francisco.  As of September
30, 1996, the Company had available borrowing capacity under this credit
facility of $64.0 million.

     Total deposit accounts increased to $588.3 million at September 30, 1996,
from $494.8 million at December 31, 1995.  During the 1996 third quarter, the
Company purchased $28.0 million in deposit accounts at a premium of $.3 million.
Based on the levels of retention of deposits in the recent past, management
believes that a significant portion of deposits will remain with the Company
upon maturity.

CAPITAL RESOURCES

     At September 30, 1996, the Association's Leverage (Core), Tier I and Total
 Risk-Based capital ratios were 11.7 percent, 14.4 percent and 15.6 percent,
 respectively.  At December 31, 1995, Leverage (Core), Tier I and Total Risk-
 Based capital ratios were 10.1 percent, 10.7 percent and 12.0 percent,
 respectively. The minimum regulatory requirement for Leverage (Core), Tier I
 and Risk-Based capital are 4.0 percent, 4.0 percent and 8.0 percent,
 respectively.  As of September 30, 1996, the Association's capital position was
 designated as "well capitalized" for regulatory purposes.

     The Company's shareholders' equity increased $29.8 million from December
 31, 1995 to September 30, 1996.  The increase in shareholders' equity at
 September 30, 1996 from December 31, 1995 was primarily due to the April 1996
 common stock offering of $22.6 million and the accumulation of $7.2 million in
 net income as retained earnings for the nine month period ended September 30,
 1996.  There were no dividends declared or paid during the first nine months of
 1996.

                                       13
<PAGE>
 
PART II - OTHER INFORMATION

ITEM 1      LEGAL PROCEEDINGS

            The Company is party to certain legal proceedings incidental to its
            business. Management believes that the outcome of such proceedings,
            in the aggregate, will not have a material effect on the Company's
            business or financial condition

ITEM 2      CHANGES IN SECURITIES

            Not applicable.

ITEM 3      DEFAULTS UPON SENIOR SECURITIES

            Not applicable.

ITEM 4      SUBMISSION OF MATTERS OF SECURITY HOLDERS

          (a) On July 25, 1996, the Association held its First Annual Meeting of
              Shareholders.

          (b) Stockholders voted on the following matters:
 
              (i)     The election of George W. Haligowski as director for a
                      term to expire in 1999:
<TABLE>
<CAPTION> 
               Votes            For           Against       Abstain
               -----            ---           -------       ------- 
               <S>              <C>           <C>           <C> 
                                6,014,190     0             95,565
</TABLE> 
               (ii)   The election of Hirotaka Oribe as director for a term to
                      expire in 1999:
<TABLE> 
<CAPTION>  
               Votes            For           Against       Abstain
               -----            ---           -------       ------- 
               <S>              <C>           <C>           <C> 
                                6,083,155     0             26,600
</TABLE> 
               (iii)  The approval of the proposed Holding Company
                      Reorganization:
<TABLE> 
<CAPTION> 
                                                                        Broker
               Votes            For           Against       Abstain    Non Votes
               -----            ---           -------       -------    ---------
               <S>              <C>           <C>           <C>        <C> 
                                4,522,887     56,160        2,080      1,528,628
</TABLE> 
 
               (iv)   The approval of the adoption of the Recognition and
                      Retention Plan:
<TABLE> 
<CAPTION>                                                               Broker
               Votes            For           Against       Abstain    Non Votes
               -----            ---           -------       -------    ---------
               <S>              <C>           <C>           <C>        <C> 
                                4,394,002     171,125       16,000     1,528,628
</TABLE> 
 

                                       14
<PAGE>
 
               (v)    The approval of the adoption of the Voluntary Retainer
                      Stock and Deferred Compensation Plan for Outside
                      Directors and the Transactions thereunder:
<TABLE> 
<CAPTION> 
                                                                        Broker
               Votes            For           Against       Abstain    Non Votes
               -----            ---           -------       -------    ---------
               <S>              <C>           <C>           <C>        <C>  
                                4,457,667     117,860       16,000     1,518,228
</TABLE> 
ITEM 5    OTHER INFORMATION

          Not applicable.

ITEM 6    EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibit 27 - Financial Data Schedule.

          (b)  A report was filed on August 6, 1996 announcing a change in the
               Company's independent auditors. There were no disagreements
               between the Company and the previous independent auditors. No
               financial statements were filed as part of that report.

                                       15
<PAGE>
 
                                  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, 1996               /s/ George W. Haligowski
       -----------------           ---------------------------------
                                   George W. Haligowski
                                   Chairman of the Board, President and
                                   Chief Executive Officer



Date:  November 14, 1996               /s/ Michael A. Sicuro
       -----------------           ---------------------------------
                                   Michael A. Sicuro
                                   Senior Vice President and Chief
                                   Financial Officer

                                       16