<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
                       THE SECURITIES EXCHANGE ACT OF 1934

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 [FEE REQUIRED]

                   For the fiscal year ended December 31, 1997
                                             -----------------
                                       OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

        For the transition period from _______________ to _______________

                         Commission file number _______


                        PACIFICAMERICA MONEY CENTER, INC.
             (Exact name of Registrant as specified in its charter)

<TABLE>
<S>                                <C>                             <C>
           Delaware                             6162                     95-3302338
(State or other jurisdiction of    (Primary Standard Industrial       (I.R.S. Employer
 incorporation or organization)     Classification Code Number)    Identification Number)
</TABLE>

                             21031 Ventura Boulevard
                        Woodland Hills, California 91364
                                 (818) 992-8999
          (Address, including zip code, and telephone number, including
             area code, of registrant's principal executive offices)

                               ------------------

        Securities registered pursuant to Section 12(b) of the Act: None
    Securities registered pursuant to Section 12(g) of the Act: Common Stock

        Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  YES [X]     NO [ ].

        Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  YES [X]     NO [ ].

        The number of shares of common stock of the Registrant outstanding as of
March 25, 1998: 5,017,583 shares.

        The aggregate market value of the outstanding common stock of the
Registrant held by non-affiliates of the Registrant, based on the market price
at March 25, 1998 was approximately $89,670,856.

                       Documents Incorporated by Reference
                       -----------------------------------
        Certain portions of the following documents are incorporated by
reference into Part III of this Form 10-K: The Registrant's Proxy Statement for
the 1998 Annual Meeting of Shareholders.


<PAGE>   2
                        PACIFICAMERICA MONEY CENTER, INC.

                                     PART I

        Except for historical information contained herein, statements in this
report are forward-looking statements that involve certain risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. Such risks include, among others, reliance on
continuing securitization of loans; risk of loss on the interest-only strip
receivables resulting from differences between actual and assumed prepayments or
loss experience; risk of further changes in accounting methods for gains on sale
of loans for securitization; loan delinquencies and defaults; possible decline
of collateral values for loans; fluctuations in interest rates; increased
competition in the lending industry resulting in lower lending rates and/or
reduced loan originations; and possible regulatory enforcement actions and
legislative action. See "Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Risk Factors" below for a more
complete description of these factors.


ITEM 1.  BUSINESS

GENERAL

        PacificAmerica Money Center, Inc. (the "Company") is a mortgage banking
company primarily engaged, through its subsidiaries, in the business of
originating, purchasing, selling, holding and servicing home equity mortgage
loans secured by single family residences. The Company has, since its formation
in 1981, specialized in home equity loans for borrowers whose credit histories
or other factors limit their access to credit from traditional mortgage lenders.
The Company currently originates fixed and adjustable rate residential mortgage
loans to borrowers of all credit grades. Borrowers generally obtain loans from
the Company for the purpose of financing a purchase of the related property,
refinancing an existing mortgage loan on more favorable terms, consolidating
debt or obtaining cash proceeds for personal use by the borrowers.

        The Company originates loans through its Wholesale and Retail Divisions.
The Wholesale Division currently consists of approximately 100 employee loan
representatives and over 3,100 independent mortgage loan brokers. The Retail
Division is currently comprised of 50 offices throughout the United States and
approximately 110 employee loan representatives. The Company's business plan is
to continue to expand its loan origination volume primarily by opening new
retail branches throughout the United States and increasing its direct marketing
efforts, and secondarily by continuing to add representatives and independent
mortgage loan brokers to its Wholesale Division.

        The Company sells substantially all of its new loans for securitization.
Until the fourth quarter of 1996, the Company sold substantially all of its
loans for a cash premium, and did not retain any residual interest in the loans
sold. Since the fourth quarter of 1996, the Company has retained a residual
interest in each of the securitization pools sponsored by Aames Capital
Corporation ("Aames") and Advanta Mortgage Corp. USA Conduit, Inc. ("Advanta"),
in which its loans have been sold. In the fourth quarter of 1997, the Company
completed its first direct securitization with the sale of $100 million of home
equity loans to the PacificAmerica Home Equity Loan Trust Series 1997-1. For the
years ended December 31, 1995, 1996 and 1997, the Company sold a total of $145
million, $338 million and $743 million of loans for securitization. The Company
completed its second direct securitization on March 25, 1998 with the sale of
$100 million and prefunding for the sale of an additional $30 million of home
equity loans to the PacificAmerica Home Equity Loan Trust Series 1998-1. The
Company has released servicing on loans sold to Aames and Advanta, and has an
agreement for Advanta to act as sub-servicer on all loans sold to the
PacificAmerica 1997-1 and 1998-1 Trusts.




                                        2

<PAGE>   3
         The Company's principal operating subsidiary is Pacific Thrift and Loan
Company, a California corporation ("Pacific Thrift") and a California licensed
thrift and loan formed in 1988. Pacific Thrift originates loans for
securitization, services the Company's loan portfolio of approximately $20.6
million (net of loan loss reserves) and issues deposits insured by the Federal
Deposit Insurance Corporation (the "FDIC"). Pacific Thrift is subject to
regulation by both the FDIC and the California Department of Financial
Institutions (the "DFI"). The Company also conducts business through
PacificAmerica Money Centers, Inc. ("PacificAmerica Centers"), a Delaware
corporation which is licensed or exempt from licensing under the mortgage
lending laws of 22 states, has license applications pending in 10 additional
states, and intends to file applications in 18 additional states.

        Until December 31, 1996, the Company also engaged in the trust deed
foreclosure services business through three subsidiaries: Consolidated
Reconveyance Company ("CRC"), Lenders Posting and Publishing Company ("LPPC")
and Consolidated Reconveyance Corporation ("CRCWA"). The Company sold
substantially all of the assets of CRC and LPPC and all of the stock of CRCWA as
part of the Company's strategy to concentrate all of its financial and human
resources on its primary business of residential lending for securitization.

         The Company's main offices are located at 21031 Ventura Boulevard,
Woodland Hills, California 91364. Its telephone number is (818) 992-8999.

1997 STOCK SPLIT EFFECTED BY MEANS OF A STOCK DIVIDEND

        On August 13, 1997, the Company paid a one-for-one stock dividend to all
stockholders of record on July 31, 1997, having the effect of a two-for-one
stock split. All share and per share data reported herein reflects the
one-for-one stock dividend.

1996 CORPORATE RESTRUCTURING

        The Company commenced its operations in 1981 as a California limited
partnership under the name Presidential Mortgage Company (the "Partnership"). On
June 27, 1996, the Company and the Partnership completed a restructuring plan
(the "Restructuring"), pursuant to which all of the assets and liabilities of
the Partnership were transferred to the Company in exchange for shares of Common
Stock of the Company. As a result of the Restructuring, 1,206,468 shares of
Common Stock were issued to partners of the Partnership for their interests in
the Partnership and $2,855,600 was paid by the Company to partners electing a
"cash out option." As part of the Restructuring, the Company also sold to the
general partner of the Partnership warrants (the "General Partner Warrants"),
each exercisable until December 27, 1997, for one share of Common Stock at an
exercise price of $7.50 per share. Concurrently with the solicitation of consent
of the partners for the Restructuring, the Company made a rights offering to the
partners of the Partnership and certain other related persons of the Partnership
(the "Rights Offering"), pursuant to which a total of 649,256 shares were
subscribed for and issued at $5.00 per share and 129,850 warrants ("Subscriber
Warrants") were issued to the subscribers, each exercisable until June 27, 1998,
for one share of Common Stock at an exercise price of $6.25 per share.




                                        3

<PAGE>   4
Concurrently with the Restructuring, the Company completed a public offering of
an additional 1,756,420 shares of Common Stock at $5.00 per share (the "Public
Offering").

        As of December 31, 1997, a total of 1,124,990 General Partner Warrants
had been exercised, and the remaining General Partner Warrants had expired. As
of March 13, 1998, a total of 76,540 Subscriber Warrants had been exercised, and
51,242 remained outstanding. Any unexercised Subscriber Warrants will expire on
June 27, 1998.

BUSINESS STRATEGY

        The Company's business strategy is to continue the expansion of loans
originated for securitization in 1998. The Company's goal is to increase loan
production to an average of $100 million per month in 1998, from a high point of
$80 million per month reached in the fourth quarter of 1997. The Company intends
to take the following actions in 1998 to further its strategy:

        o  increase the number of retail offices from 40 to 70 and increase the
           number of retail loan representatives from 95 to 200 throughout
           the country;

        o  increase the number of wholesale loan representatives from 88 to 125
           in regions throughout the country where the Company has not already
           established a strong presence;

        o  increase use of telemarketing throughout the country; and

        o  increase loan-to-value ratios to borrowers with higher credit
           scores.

        The Company has also retained Friedman, Billings, Ramsey & Co., Inc., to
assist it in locating strategic opportunities. The Company intends to actively
pursue strategic opportunities in 1998, while continuing to execute its own plan
for loan origination growth. There can be no assurance that any transactions
will be completed by the Company as a result of its engagement of Friedman,
Billings, Ramsey & Co., Inc.

MORTGAGE LOAN PRODUCTION

        GENERAL

        The Company has specialized in residential mortgage loans to borrowers
underserved by traditional financial institutions since its formation in 1981.
Until the Company began selling loans for securitization in late 1993, the
Company generally originated loans to hold and service in its own loan
portfolio. From 1994 through 1996, the Company steadily increased the volume of
loans originated for sale and securitization and decreased the volume of loans
originated for portfolio investment. In 1996, the Company determined to
discontinue the origination of portfolio loans and concentrate all of its
resources on increasing the volume of loans originated for sale and
securitization.




                                        4

<PAGE>   5
        Unlike many of its competitors, the Company directly originates all
loans sold by it for securitization. The Company believes that its control of
the underwriting process leads to higher quality loans and, ultimately, lower
loan losses and possibly slower prepayment speeds than loans purchased in bulk
from correspondent lenders.

        The Company historically has originated the substantial majority of its
loans through independent loan brokers. As the volume of lending for
securitization increased, the Company determined to expand its business through
retail loan production. Accordingly, the Company has increased retail lending as
a percentage of total loans originated for sale over the past three years. The
following table sets forth the combined loan originations by category and
purchases, sales and repayments for the past two years:

<TABLE>
<CAPTION>
                                               AT OR FOR THE     AT OR FOR THE
                                                 YEAR ENDED        YEAR ENDED
                                                DECEMBER 31,      DECEMBER 31,
                                                    1997             1996
                                                    (Dollars in Thousands)

<S>                                              <C>               <C>
Beginning Balance(1) .......................     $  51,662         $  56,485
        Loans Originated for Sale
             Wholesale .....................       584,527           292,116
             Retail ........................       183,699            43,355

        Portfolio Loans originated .........           -0-            37,978
Loans purchased ............................           -0-               -0-
                                                 ---------         ---------
        Total ..............................       819,888           429,943

Less:
  Principal repayments .....................        (1,053)          (12,388)
  Sales of loans originated for sale .......      (742,776)         (337,563)
  Sales of portfolio loans .................       (17,063)          (26,176)
  Transfers of REO net of reserves .........        (2,936)           (3,945)
  Other net changes(2) .....................          (151)            1,791
                                                 ---------         ---------
        Total loans(1) .....................     $  55,909         $  51,662
                                                 =========         =========
</TABLE>


(1)     Includes loans held for sale.

(2)     Other net changes includes changes in allowance for loan losses,
        deferred loan fees, loans in process and unamortized premiums and
        discounts.




                                        5

<PAGE>   6

        RETAIL LOAN OFFICE NETWORK

        The Company originates home equity mortgage loans through a network of
retail loan offices. Prior to 1994, the Company conducted lending operations
exclusively in California. For the last three years, the Company has steadily
expanded operations throughout the United States. At March 15, 1998, the Company
operated 50 retail loan offices in 23 states and the District of Columbia,
including 11 in California; 12 in the western states of Nebraska, New Mexico,
Colorado, Nevada, Arizona, Oregon, Utah, Washington, and Alaska; 11 in the
mid-Atlantic states of Pennsylvania, Maryland, Virginia, Delaware, New Jersey
and the District of Columbia; 7 in the northeastern states of New York,
Connecticut and New Hampshire; and 9 in the mid-western states of Ohio,
Michigan, Wisconsin, Kentucky and Indiana. The Retail Division seeks to
originate loans directly with borrowers through contacts developed from mailing
lists, using telemarketing and direct mail. The Company seeks to expand its
Retail Division to approximately 70 offices by the end of 1998, and the number
of its retail loan representatives from 95 at the end of 1997 to approximately
200 by the end of 1998. There can be no assurance that these goals will be
achieved.

        WHOLESALE LENDING NETWORK

        The Company also originates home equity mortgage loans through a
current network of 100 employee loan representatives and over 3,100 independent
mortgage loan brokers. Loan representatives have the ability to work with or
without offices within regions throughout the United States. Currently, the
Company's loan representatives are located in and originate loans in 44 states.
Loan representatives maintain contacts with the independent mortgage loan
brokers who refer loan applications to the Company. Mortgage loan brokers act as
intermediaries between property owners and the Company in arranging mortgage
loans, and provide a cost effective means of originating loans over a large
geographic area. Management has developed policies and procedures to service
these brokers which emphasize timely decision making and funding and a
competitive fee structure, which encourage brokers to continue bringing new
loans to the Company. The Company seeks to expand its Wholesale Loan Division
from 88 loan representatives at the end of 1997 to approximately 125 by the end
of 1998. There can be no assurance that this goal will be achieved.

        UNDERWRITING

        The following is a description of the current underwriting guidelines
customarily employed by the Company with respect to the origination of home
equity mortgage loans. The Company's underwriting guidelines may change from
time to time as management of the Company deems appropriate.

        The Company views its underwriting process as one that begins with the
marketing of its products and includes each function involved in the lending
activity through the ultimate loan




                                        6

<PAGE>   7

funding. As an integral part of this process, the Company trains its
telemarketing representatives, account executives, account managers, loan
processors, and underwriters to evaluate each loan request relative to the
Company's underwriting guidelines and overall lending philosophy. Such
philosophy is to evaluate the merits of each loan application on a case-by-case
basis in accordance with the Company's underwriting guidelines. On occasion,
such an evaluation leads the Company to approve a loan application that does not
completely meet the guidelines. Conversely, the Company occasionally rejects a
loan application that does meet the guidelines.

        The Company believes that its underwriting guidelines (which are revised
from time to time) are consistent with those generally used by lenders in the
business of making subprime mortgage loans. The underwriting process is intended
to assess both the prospective borrower's ability to repay and the adequacy of
the real property as collateral for the loan. The Company's guidelines require
an analysis of the value of and equity in the collateral, the property type, the
payment history of the borrower and the borrower's ability to repay debt.

















                                        7

<PAGE>   8
As presented in the following table, the Company's guidelines permit the
origination of mortgage loans with multi-tiered credit characteristics tailored
to individual credit profiles.

<TABLE>
<CAPTION>
CREDIT
CLASSIFICATION                    A                     A-                     B
--------------           -------------------------------------------------------------------
*Maximum LTV               Owner    Non-Owner    Owner     Non-Owner     Owner     Non-Owner
                         Occupied   Occupied   Occupied    Occupied    Occupied    Occupied
<S>                         <C>        <C>        <C>         <C>         <C>         <C>
Full Doc
SFR                         90%        80%        90%         80%         85%         75%
Condo/PUD                   90%        80%        90%         80%         85%         75%
2/3-4 Unit                  90%        80%        90%         80%         85%         75%
Alt Doc
SFR                         85%        75%        85%         75%         80%         70%
Condo/PUD                   85%        75%        85%         75%         80%         70%
2/3-4 Unit                  85%        75%        85%         75%         80%         70%
No Doc
(1003 Stated Income)        80%        70%        80%         70%         80%         70%
--------------------
# Maximum LTV includes 5% LTV Piggyback Second Mortgage Loan.
MAXIMUM (2) DEBT RATIO               42%                      45%                          50%
----------------------
12 MONTH MORTGAGE RATING        0x30 0x60 0x90           2x30 0x60 0x90             2x30 1x60 0x90 or
------------------------                                                            4x30 0.60 0x90 or
                                                                                    3x30 1x60(3) 0x90
CONSUMER CREDIT
General                     24 mos. excellent credit  24 mos. good credit.      24 mos. satisfactory credt
                            Minimum of 3 accounts     Minimum of 3 accounts     12 mo. "B" or better
                            open/active for 6 month   open/active for 6 month   Rental or Mtg. Rating but
                                                                                no consumer credit (less
                                                                                than 3 open/active
                                                                                accounts).

Credit Items                Less than 25% of Credit   Less than 35% of Credit   Less than 40% of Credit
(Accounts with no activity  items derogatory. No 60   items derogatory. No 90   items derogatory.
the last 24 months are not  day derogatory credit.    day derogatory credit.
considered.)

Bankruptcy                  2 yrs. since discharge/   2 yrs. since discharge/   1 yr since discharge/
                            dismissal with a minimum  dismissal with a minimum  dismissal with 3 "B" re-
                            of 3 "A" re-established   of 3 "A" re-established   established accounts
                            accounts (open/active     accounts (open/active     accounts (open/active
                            at least 6 months)        at least 6 months)        at least 6 mos.) or 18
                                                                                mos. since discharge/
                                                                                dismissal with no re-
                                                                                established credit.

Charge-offs, Collections    Collections, Charge-offs and Judgments under $500 are not to be considered.
                            All judgments that appear as a lien of record against the subject property
                            must be paid through the loan. and Judgments The date of the original
                            occurrence of the collection is to be used in all credit.
</TABLE>

<TABLE>
<CAPTION>
CREDIT
CLASSIFICATION                 A                      A-                     B
--------------        -------------------------------------------------------------------
*Maximum LTV            Owner     Non-Owner    Owner    Non-Owner     Owner     Non-Owner
                      Occupied    Occupied   Occupied   Occupied    Occupied    Occupied
<S>                      <C>         <C>        <C>        <C>         <C>         <C>
Full Doc
SFR                      80%         70%        75%#      70%#        70%#        65%#
Condo/PUD                80%         70%        75%#      70%#        70%#        65%#
2/3-4 Unit               80%         70%        75%#      70%#        70%#        65%#
Alt Doc
SFR                   75-77%(5)      70%        75%#      70%#        70%#        65%#
Condo/PUD               75%          70%        75%#      70%#        70%#        65%#
2/3-4 Unit              75%          70%        75%#      70%#        70%#        65%#
No Doc
(1003 Stated Income)  75-77%(5)      65%        65%(4)     60%(4)      65%(4)     60%(4)


--------------------
# Maximum LTV includes 5% LTV Piggyback Second Mortgage Loan.
MAXIMUM (2) DEBT RATIO               55%                           55%                             60%
----------------------
12 MONTH MORTGAGE RATING         2x60 or 1x90                      1x120                        1x150 or more
------------------------

CONSUMER CREDIT
General                     24 mos. fair credit. No        24 mos. poor credit with       24 mos. poor credit. The
                            Consumer Credit (Less          some currently                 majority of the credit is
                            3 open/active accounts).       delinquent accounts.           derogatory.

Credit Items                Less than 50% of Credit        Less than 60% of Credit          % of Credit items
(Accounts with no activity  items derogatory.              items derogatory.              derogatory not a factor.
the last 24 months are not
to be considered.)

Bankruptcy                  BK filed at least 12 mos.      BK filed within last 12        Currently in BK. Must be
                            ago & discharged prior to      months but discharged/         paid through the loan.
                            applying for loan. Open        dismissed prior to
                            BK 13 if filed at least        application for loan.
                            24 mos. ago & evidence
                            provided that plan & mtg.
                            paid as agreed. BK must
                            be paid off thru loan.

Charge-offs, Collections    Collections, Charge-offs and Judgments under $500 are not to be considered.
and Judgments               All judgments that appear as a lien of record against the subject property
                            must be paid through the loan. The date of the original occurrence of the
                            collection is to be used in all credit.
</TABLE>


--------------------
(1) Loan cannot be upgraded to receive maximum LTV.
(2) Will allow 5% increase in D/R (not to exceed 60%) for a corresponding 5%
    reduction in LTV. (3) Max LTV is 80%. (4) No DOC not available for salaried
    or other "fixed" income borrowers.
(5) Over 75% available for SFR only.
 *  For 2nd homes & vacation properties reduce maximum LTV by 5%. Maximum CLTV
    for second mortgages may not exceed 65%.



                                       -8-

<PAGE>   9

        The final grade for a loan is determined by blending the mortgage credit
grade and the consumer credit grade using a credit blending table. In addition,
a final grade of B or C (as determined by the credit blending table) is eligible
for a one credit class upgrade through the Company's upgrade matrix. The upgrade
matrix takes into account such compensating factors as property condition,
length of employment and length of property ownership.

        The Company's guidelines permit the origination of fixed or adjustable
rate loans that either fully amortize over a period not to exceed 30 years or,
in the case of a balloon mortgage loan, are amortized based on a 30-year or less
amortization schedule with a maturity date and balloon payment due prior to the
end of the amortization. Loan amounts generally range from a minimum of $20,000
to a maximum of $350,000 unless a higher amount is specifically approved by
senior management of the Company. The average loan size of loans originated
during 1997 was approximately $95,000.

        The collateral securing the loans may be either owner-occupied or
non-owner-occupied one-to-four family dwellings, which includes condominiums,
townhouses, manufactured housing, and occasionally second and vacation homes.
Substantially all of the loans secured by first mortgages are limited to a
maximum loan-to-value ratio of 90%, and substantially all of the loans secured
by second mortgages are limited to a combined maximum loan-to-value ratio of
85%.

        In order to determine the loan-to-value ratio, all home equity loans
require at least one recent written appraisal on a current Federal National
Mortgage Association ("FNMA") or Federal Home Loan Mortgage Corporation
("FHLMC") form with certain supporting information (e.g., location maps, legal
descriptions, sale and listing histories, floor plans, and photographs) from a
state licensed appraiser. Properties with higher appraised values ($650,000 in
California and Hawaii, $500,000 elsewhere) will require a second appraisal. All
appraisals are required to contain at least three recently closed sales of
comparable properties located near the subject property. The Company's appraisal
review departments review each appraisal for reasonableness, completeness,
conformity with the Company's guidelines and acceptable property condition. A
review appraisal is then performed by an independent review appraiser on every
appraisal prior to loan funding. The Company intends to continually monitor the
quality of both its internal and external appraisal reviews with follow-up
additional reviews on a percentage of loan appraisals. The Company's
underwriting guidelines require that any major deferred maintenance on any
property securing a loan be cured either by the applicant prior to loan closing
or the amount to cure will be withheld from the proceeds of the loan until such
deferred maintenance is completed.

        A credit report combining information from two separate independent
credit reporting agencies is required reflecting the applicant's complete credit
history. If the report is obtained more than 60 days prior to the loan closing,
the Company will obtain an updated credit report to determine whether or not the
reported information has changed in a materially negative way, in which case
such loan will be reunderwritten.

        The Company's underwriting guidelines provide for the origination of
loans under three general income documentation programs: (i) full documentation,
(ii) alternate documentation, and




                                       -9-

<PAGE>   10

(iii) stated income. Under the full documentation program the Company obtains
one of the following: (i) Verification of Employment signed by the employer and
the most recent paycheck stub showing year to date income; (ii) IRS Form W-2 for
the most recent two-year period and the most recent paycheck stub showing
year-to-date income; (iii) individual tax returns for the most recent two years
and the most recent paycheck stub showing year-to-date income; or (iv) personal
bank statements for the most recent 24-month period and the most recent paycheck
stub showing year-to-date income. For each of the above, the Company obtains
telephone verification of employment. If the applicant is self-employed, the two
most recent years' applicable tax returns (Form 1040, 1120, 1120S or 1065) are
required. Under the alternative documentation program, applicants are required
to submit six months of personal bank statements, a recent paycheck stub showing
year-to-date income and the Company obtains telephone verification of
employment. For self-employed borrowers, proof that the business has been in
existence for at least one year is required. Under the stated income program,
income is taken from the application as stated by the applicant and employment
or business is verified telephonically.

        Exceptions to the Company's underwriting guidelines can only be approved
by senior underwriters, managers or higher level of senior management. Where
exceptions are made on loan-to-value or debt-to-income ratios, such exceptions
are generally limited to no more than 2%.

        The Company's guidelines require title insurance coverage issued by an
approved title insurance company on each mortgage loan. The Company and its
assignees are named as the insured. Title insurance policies guarantee the lien
position of the loan and protect the insured against loss if the title or lien
position is not as indicated.

        The following table sets forth selected information relating to loan
originations for sale and securitization during the three years ended December
31, 1997 (portfolio loans which are not originated for sale and "piggyback
loans" which are held for sale are not included):




                                      -10-

<PAGE>   11

<TABLE>
<CAPTION>
                                                                Years Ended December 31,
                                                  -----------------------------------------------------
                                                       1997               1996                 1995
                                                  -------------       -------------       -------------
<S>                                               <C>                 <C>                 <C>
Principal balance of loans                        $ 768,226,000       $ 335,471,000       $ 151,538,000

Average principal balance per loan                $      93,867       $      91,993       $     102,681

Percent of first mortgage loans (based on                 95.6%               95.1%               91.5%
principal dollar amount of all loans
originated)

Weighted average interest rate                           11.08%              11.57%              11.02%

Weighted average initial loan-to value ratio             76.65%              66.92%              64.23%
</TABLE>

        QUALITY CONTROL

        The Company's quality control program monitors and improves the overall
quality of loan production in both the Wholesale and Retail Divisions. Sample
loan files are reviewed on a regular basis to assure the accuracy of all credit
information, the compliance with appraisal standards, the compliance with
employment and income verification requirements and the accuracy of legal
documents. Any inaccuracies or inadequacies are corrected, and the internal
audit department reports its findings to senior management of the Company on a
quarterly basis.

LOAN SALES AND SECURITIZATIONS

        Since 1995, the Company has originated mortgage loans primarily for sale
and securitization. Prior to the fourth quarter of 1996, the Company sold
substantially all of its loans for a cash premium, with no continuing interest
in the loans after sale. In the fourth quarter of 1996, the Company entered into
new agreements with Aames and Advanta pursuant to which the Company retained the
right to receive an interest-only strip ("excess spread") on its loans above the
specified rates paid to holders of certificates in each securitization pool in
which the Company's loans were included, less transactional, sponsor, servicing
and credit enhancement fees and expenses. Under its agreements with Aames and
Advanta, the Company received an advance of a portion of the excess spread from
the loan purchaser, and the balance, after repayment of the advance, was paid
over the life of the loans. To the extent that a loss is realized on loans sold
by the Company in each pool, losses are paid first out of excess spread that
would otherwise be paid to the Company.

        As of March 30, 1998, the Company held interest-only strips in seven
securitization trusts, including one formed by Aames in the fourth quarter of
1996, four formed by Advanta in each of the four quarters of 1997 and two
sponsored by the Company (one in the fourth quarter of 1997 and one in the first
quarter of 1998). Securities issued by each trust are credit enhanced either
through an insurance policy issued by a monoline insurer or through
over-collateralization. As of March 30, 1998, the securities issued



                                      -11-

<PAGE>   12
 by each of the trusts in which the Company holds an interest are rated "AAA" by
Standard & Poor's Ratings Group and "AAA" by Moody's Investor Service, Inc. Each
trust holds loans sold by the Company, as well as loans originated or purchased
by either Aames or Advanta. However, the Company's interest-only strip
receivable is dependent only upon the performance of the loans originated by the
Company and held by each Trust. All loans sold for securitization have been sold
on a nonrecourse basis, except for the obligation to repurchase any loan which
does not meet certain customary representations and warranties, and the
obligation to repurchase loans adversely affected by any breach of general
representations and warranties.

        On July 17, 1997, the Company entered into an engagement letter with
Merrill Lynch, Pierce, Fenner & Smith ("Merrill Lynch") under which the Company
committed to offer exclusively to Merrill Lynch the position of sole lead
manager or sole lead placement agent of each offering of mortgage-backed
securities by the Company backed by mortgage loans for which Merrill Lynch
provided warehouse financing. The Company's commitment expires on the later of:
(i) one year from the effective date of the warehouse financing agreement; or
(ii) the date that Merrill Lynch has acted as sole lead manager or sole lead
placement agent with respect to mortgage-backed securities aggregating $750
million. As of March 30, 1998, the Company has securitized $200 million of
loans through Merrill Lynch and an additional $30 million has been prefunded
for sale to a trust formed in the first quarer of 1998.

        On October 31, 1997, the Company entered into a Master Repurchase
Agreement with affiliates of Merrill Lynch (the "Warehouse Financing
Agreement"), under which Merrill Lynch may provide warehouse financing of
mortgage loans pending securitization by the Company. The Warehouse Financing
Agreement contemplates that the Company will complete securitization
transactions on a quarterly basis, and any loans not securitized by a specified
date within each quarter are ineligible for financing under the Warehouse
Financing Agreement. Financing provided by Merrill Lynch under the Warehouse
Financing Agreement bears interest at rates established at the time of each
advance by Merrill Lynch. The Company is required to meet margin call
requirements in the event the mortgage loans assigned under the Warehouse
Financing Agreement experience a decline in market value during the period of
warehouse financing.


                                      -12-

<PAGE>   13
        On December 18, 1997, the Company entered into a Master Assignment
Agreement (the "Master Assignment Agreement"), with Merrill Lynch Mortgage
Capital, Inc. ("MLMCI"), under which the Company may obtain financing secured by
interest-only strip receivables retained by the Company in securitization
transactions underwritten by Merrill Lynch. Each advance will be due one year
from the date of the advance, unless extended pursuant to the mutual agreement
of the Company and Merrill Lynch. The interest rate on each advance under the
Master Assignment Agreement will be established at the time of each advance by
Merrill Lynch. The Company is required to make mandatory prepayments under the
Master Assignment Agreement in the event that the residual interests assigned to
Merrill Lynch experience a decline in value from the levels established at the
time of the advance.

        On December 18, 1997, the PacificAmerica Home Equity Loan Trust Series
1997-1 issued $100 million in securities backed by home equity loans originated
by Pacific Thrift. On March 25, 1998, the PacificAmerica Home Equity Loan Trust
Series 1998-1 issued $130 million in securities backed by home equity loans
originated by Pacific Thrift. The Company has delivered approximately $100
million of loans to the 1998-1 Trust, and expects to deliver approximately $30
million by April 27, 1998. The loan purchase agreements under which loans have
been securitized provide, among other terms, that the sale of loans is
non-recourse except for the obligation to repurchase or replace loans upon a
breach of certain standard and customary representations and warranties. The
Company is named as master servicer for loans held by the 1997-1 and 1998-1
Trusts, and Advanta has been appointed Sub-Servicer. Advanta is expected to
provide substantially all servicing related to the loans.


        To the extent that the Company or one of its subsidiaries originates
loans for sale, it bears an interest rate risk between the loan approval date
and the date that each loan is securitized. However, loans are generally
securitized on a quarterly basis, which reduces the risk of interest rate
fluctuations. In addition, because subprime mortgage loans have a higher
interest rate spread than prime mortgage loans, fluctuations in rates which may
occur during the period prior to securitization could reduce the value of the
residual interest anticipated to be retained by the Company upon securitization,
but would not generally be sufficiently large to eliminate the excess spread
entirely. Loans which are held for sale during the period prior to sale are
accounted for at the lower of cost or market value of such loans.

PORTFOLIO LENDING

        Until Pacific Thrift began originating loans for securitization in 1994,
both the Partnership and Pacific Thrift originated loans for their own loan
portfolios, and generally held and serviced those loans until payoff or
refinancing. As of December 31, 1997, the aggregate remaining balance of all
portfolio loans held by the Company was approximately $20.6 million net of loan
loss reserves. All portfolio loans are secured primarily by one-to-four family
residential, multi-family residential




                                      -13-

<PAGE>   14

and commercial real property. In 1996, as volume levels of loans originated for
sale and securitization increased, management determined to terminate portfolio
lending in order to concentrate its resources on loans originated for sale and
securitization. The Company also determined to sell portions of its loan
portfolio to provide additional resources for use in its mortgage banking
business, and completed sales of an aggregate of approximately $17.1 million and
$26.2 million of portfolio loans in 1997 and 1996, respectively. The
characteristics of the Company's remaining loan portfolio at December 31, 1997,
are described below.

        GEOGRAPHIC CONCENTRATION. At December 31, 1997, the Company's loan
portfolio included loans geographically distributed, based on principal loan
balances, approximately 55% in Southern California (south of San Luis Obispo),
16% in Northern California and the remaining 29% in other states, primarily
Washington and Oregon. The Company's portfolio loan policy limits the total
dollar amount of loans and total number of loans made in each zip code area to
no more than 5% of its total outstanding loans.

        COLLATERAL. At each of the dates set forth below the gross loan
portfolio of the Company (net of reserves for loan losses) was collateralized by
the following types of real property:
















                                      -14-

<PAGE>   15


                                    PORTFOLIO COLLATERAL


<TABLE>
<CAPTION>
                                             Dec. 31,                     Dec. 31,                 Dec. 31,
                             Dec. 31,         1997      Dec. 31,           1996      Dec. 31,        1995
                              1997          Percentage    1996          Percentage     1995       Percentage
                              Loan           of Total     Loan           of Total      Loan        of Total
                            Balances         Portfolio  Balances         Portfolio   Balances      Portfolio
                           ----------         ------   -----------         ------   -----------     ------
<S>                       <C>                  <C>     <C>                   <C>    <C>               <C>
One-to-four family
residential property
    1st TDs               $ 2,539,000          11.39%  $ 2,629,371           7.19   $ 5,553,762       11.33%
    2nd TDs                 3,037,000          13.62    11,148,015          30.48     8,149,818       16.62
    3rd TDs                   452,000           2.03       700,997           1.92       968,926        1.98
Home Imp. Loans             1,090,000           4.89     1,321,983           3.61     1,742,976        3.55
                           ----------         ------   -----------         ------   -----------     ------
TOTAL                       7,118,000          31.93    15,800,366          43.20    16,415,482       33.48
                           ==========         ======   ===========         ======   ===========     ======
Five and Over
Multi-Family
residential property
    1st TDs                 5,425,000          24.34     8,467,515          23.15     8,534,795      17.41
    2nd TDs                   747,000           3.35       840,081           2.30     1,811,741       3.70
    3rd TDs                       -0-            -0-           -0-            -0-           -0-        -0-
                           ----------         ------   -----------         ------   -----------     ------
TOTAL                       6,172,000          27.69     9,307,596          25.45    10,346,536      21.11
                           ==========         ======   ===========         ======   ===========     ======
Commercial
Property
    1st TDs                 8,528,000          38.26     9,761,472          26.69    18,145,302      37.02
    2nd TDs                   445,000           2.00       869,128           2.38     2,172,655       4.43
    3rd TDs                    28,000            .12       101,757            .28        68,766        .14
                           ----------         ------   -----------         ------   -----------     ------
TOTAL                       9,001,000          40.38    10,732,357          29.35    20,386,723      41.59
                           ==========         ======   ===========         ======   ===========     ======
Undeveloped
Property
    1st TDs                       -0-            -0-       732,424           2.00     1,873,953       3.82
    2nd TDs                       -0-            -0-           -0-            -0-           -0-        -0-
    3rd TDs                       -0-            -0-           -0-            -0-           -0-        -0-
                           ----------         ------   -----------         ------   -----------     ------
TOTAL                             -0-            -0-       732,424           2.00     1,873,953       3.82
                           ==========         ======   ===========         ======   ===========     ======
TOTAL
PORTFOLIO
    1st TDs                16,492,000          73.99    21,590,782          59.04    34,107,812      69.58
    2nd TDs                 4,229,000          18.97    12,857,224          35.16    12,134,214      24.75
    3rd TDs                   480,000           2.15       802,754           2.19     1,037,692       2.12
Home Imp. Loans             1,090,000           4.89     1,321,983           3.61     1,742,976       3.55
                           ----------         ------   -----------         ------   -----------     ------
TOTAL                     $22,291,000         100.00   $36,572,743         100.00   $49,022,694     100.00%
                           ==========         ======   ===========         ======   ===========     ======
</TABLE>



                                      -15-

<PAGE>   16


        LOAN ORIGINATION AND UNDERWRITING. Each portfolio loan made by the
Company (other than "piggyback" loans as described below), was analyzed at
origination based on the loan applicant's credit history and repayment ability,
using the Company's then existing underwriting guidelines. Portfolio loans
generally required credit histories from independent credit reporting companies,
proof of income and independent appraisal reports of the value of the mortgaged
property.

        Since 1995, the Company has also made "piggyback loans," which are
residential loans made in tandem with loans originated for sale. Management uses
piggyback loans to enhance the loan products available from some of its loan
purchasers, and thereby increase production of loans originated for sale.
Piggyback loans meet the same credit and documentation requirements as the
companion senior loans originated for sale, except that loan-to-value ratios are
usually 5% higher than the loan-to-value ratios allowed by the purchaser of the
senior loans. To compensate for the higher loan-to-value ratios, the Company
provides higher general reserves for piggyback loans. From time to time, the
Company sells piggyback loans to third party purchasers. During 1997, the
Company sold $5.7 million of piggyback loans at par value. During 1996, the
Company sold $5.5 million of piggyback loans, of which $3.8 million were sold
for a discount of approximately 1% of par value and $1.7 million were sold at
par value. As of December 31, 1997, the Company held 1707 piggyback loans, with
an aggregate principal balance of $11.6 million. Of this amount, $8.4 million
was sold in January 1998 at a discount of approximately 24% of par value. As
this discount was fully reserved at December 31, 1997, the effect was that the
sale resulted in a nominal gain.

        MATURITIES AND RATE SENSITIVITIES OF LOAN PORTFOLIO. The following table
sets forth the contractual maturities of the loan portfolio at December 31,
1997.


                            PORTFOLIO LOAN MATURITIES

<TABLE>
<CAPTION>
                                                            AT DECEMBER 31, 1997
                           ---------------------------------------------------------------------------------------
                                                                      MORE         MORE
                                        MORE THAN     MORE THAN      THAN 5      THAN 10      MORE
                           ONE YEAR     1 YEAR TO      3 YEARS      YEARS TO     YEARS TO    THAN 20      TOTAL
                            OR LESS      3 YEARS      TO 5 YEARS    10 YEARS     20 YEARS     YEARS       LOANS
                           ----------   -----------   -----------   ----------   ---------   --------  -----------
                                                               (IN THOUSANDS)
<S>                        <C>          <C>           <C>           <C>          <C>         <C>       <C>
One- to four-family.....   $      717   $       534   $       560   $      656   $   2,685   $    902  $     6,054
Multi-family............          122           769            76        2,884         498      2,042        6,391
Commercial..............        1,129         1,213           630        4,271       1,202        139        8,584
Home improvement........            0             7            46        1,097         112          0        1,262
                           ----------   -----------   -----------   ----------   ---------   --------  -----------

Total amount due........    $   1,968    $    2,523     $   1,312    $   8,908   $   4,497    $ 3,083    $  22,291
                           ==========   ===========   ===========   ==========   =========   ========  ===========
</TABLE>


        The following table sets forth, as of December 31, 1997, the dollar
amounts of loans receivable (not including loans held for sale) that are
contractually due after December 31, 1998 and whether such loans have fixed or
adjustable interest rates:




                                      -16-

<PAGE>   17

                                 PORTFOLIO LOANS

<TABLE>
<CAPTION>
                                                 DUE AFTER DECEMBER 31, 1998
                                           -------------------------------------
                                            FIXED       ADJUSTABLE        TOTAL
                                           -------      ----------       -------
                                                      (IN THOUSANDS)
<S>                                        <C>            <C>            <C>
One- to four-family ...............        $ 3,200        $ 2,137        $ 5,337
Multi-family ......................            119          6,150          6,269
Commercial ........................            660          6,795          7,455
Home improvement ..................          1,262              0          1,262
                                           -------        -------        -------
       Total loans receivable .....        $ 5,241        $15,082        $20,323
                                           =======        =======        =======
</TABLE>

        The Company generally rewrites a portfolio loan at maturity if the
borrower makes a new loan application. In cases where the loan-to-value ratio
has declined on an existing loan and no longer meets the applicable
loan-to-value guidelines, the Company will generally rewrite the loan.

        A substantial portion of the Company's loan portfolio is repriced, pays
off or matures approximately every year. Of the 26% of all loans bearing fixed
rates at December 31, 1997, 11% were due in one year or less. Based upon these
facts, over 77% of the loan portfolio at December 31, 1997, consisted of either
variable rate loans or fixed rate loans which mature within one year. Management
therefore expects that within one year, approximately 77% of the loan portfolio
will be paid off or reprice at the rate in effect on the existing loan at the
time the loan is repriced or the then applicable rate for new or refinanced
loans.

        The initial interest rate on variable rate portfolio loans is set as of
the date of origination of each loan based upon the then prevailing reference
rate established by Bank of America. The rate may increase by not less than
 .125% in any three-month period, but may not increase by more than five (10 in
some cases) percentage points in the aggregate. Such increases (or decreases, as
the case may be) occur at three-month intervals as the result of changes in the
Bank of America reference rate. Although the interest rate may decrease, it
cannot decrease below the original interest rate set for each loan.

        CLASSIFIED ASSETS AND LOAN LOSSES. The Company's general policy is to
discontinue accrual of interest and make a provision for anticipated loss on a
loan when: (i) it is more than two payments contractually past due and the
current estimated loan-to-value ratio is 90% or more; or (ii) the loan exhibits
the characteristics of an in-substance foreclosure, generally including any loan
as to which the borrower does not have the ability, willingness or motivation to
repay the loan. The current estimated loan-to-value ratios of substantially all
delinquent loans are determined by new independent appraisal or broker price
opinions, unless an independent appraisal was obtained no more than twelve
months prior to the monthly review of each delinquent loan. When a loan is
reclassified from accrual to nonaccrual status, all previously accrued interest
is reversed. Interest income on nonaccrual loans is subsequently recognized when
the loan resumes payment or becomes contractually current as appropriate. Loans
which are deemed fully or partially uncollectible by management are generally
fully reserved or charged off for the amount that exceeds the estimated net
realizable value (net of selling costs) of the underlying real estate
collateral. Gains on the sale of real estate acquired in settlement of loans
("REO") are not recognized until the close of escrow.




                                      -17-

<PAGE>   18

        Unless an extension, modification or rewritten loan is obtained, or a
bankruptcy is filed, the Company's policy is to commence procedures for a
non-judicial trustee's sale within 30 to 60 days of a payment delinquency on a
loan under the power of sale provisions of the trust deed securing such loan, as
regulated by applicable law. A delinquent loan will only be rewritten or
extended if it can be determined that the borrower has the ability to repay the
loan on the modified terms. The initiation of foreclosure proceedings against a
borrower does not suggest that the recovery of the loan is dependent solely on
the underlying collateral. In fact, many borrowers bring payments current or
undertake other remedies so that a foreclosure sale is not required.

        The determination of the adequacy of the allowance for loan losses is
based on a variety of factors, including loan classifications and underlying
loan collateral values, and the level of nonaccrual loans. Therefore, changes in
the amount of nonaccrual loans will not necessarily result in increases in the
allowance for loan losses. The ratio of nonaccrual portfolio loans past due 90
days or more to total portfolio loans was 4.96% at December 31, 1997, 3.81% at
December 31, 1996 and 1.62% at December 31, 1995. The ratio of the allowance for
loan losses to nonaccrual loans past due 90 days or more was 130.14% at December
31, 1997, 176.76% at December 31, 1996, and 533.29% at December 31, 1995.

        The following table sets forth the number and remaining balances of all
loans in the Company's loan portfolio (net of specific reserves for loan losses)
that were more than 30 days delinquent at December 31, 1997, 1996 and 1995.

                                 PORTFOLIO LOAN
                                  DELINQUENCIES

<TABLE>
<CAPTION>
                       AT DECEMBER 31, 1997       AT DECEMBER 31, 1996         AT DECEMBER 31, 1995
                     ------------------------   -------------------------    ------------------------
                                       Percent                     Percent                     Percent
                                         of                          of                          of
         Loan           Loans           Total       Loans           Total       Loans           Total
    Delinquencies    Delinquent         Loans    Delinquent         Loans     Delinquent        Loans
    -------------    ----------         -----   -----------         -----    ----------         -----
<S>                  <C>               <C>      <C>                  <C>     <C>               <C>
 30 to 59 days       $  150,000           .67%  $ 1,428,000          3.91%   $  210,000          .43%
 60 to 89 days          321,000          1.44%    1,431,000          3.91%      527,000         1.08%
90 days or more       1,913,000          8.58%    3,019,000          8.25%    2,110,000         4.30%
                     ----------         -----   -----------         -----    ----------         ----
     TOTAL ....      $2,384,000         10.69%  $ 5,879,000         16.07%   $2,848,000         5.81%
                     ==========         =====   ===========         =====    ==========         ====
</TABLE>

        NONACCRUAL AND RESTRUCTURED LOANS. The following table sets forth the
aggregate amount of loans at December 31, 1997, 1996 and 1995 which were (i)
accounted for on a nonaccrual basis; (ii) accruing loans which are contractually
past due 90 days or more as to principal and interest payments; and (iii)
troubled debt restructurings, which are defined in SFAS 15 as loans modified to
reduce interest rates below market rates, to reduce amounts due at maturity, to
reduce accrued interest or to loan additional funds.



                                 PORTFOLIO LOAN
                        NON ACCRUALS AND RESTRUCTURINGS

                                      -18-

<PAGE>   19

<TABLE>
<CAPTION>
                       Accruing Loans     Nonaccruing Loans
                            Past Due      Past Due 90 Days    Troubled Debt
                       90 Days or More        or More         Restructurings      Total
                       ---------------   ------------------   --------------      ------
                                       (Dollars in Thousands)
<S>                           <C>               <C>               <C>             <C>
At December 31, 1997          $  808            $1,105                 0          $1,913
At December 31, 1996          $1,625            $1,394            $  357          $3,376
At December 31, 1995          $1,317            $  793            $  948          $3,058
</TABLE>

        The following table sets forth information concerning interest accruals
and interest on nonaccrual loans past due 90 days as of December 31, 1997, 1996
and 1995.

                             PORTFOLIO LOAN INTEREST
                             DUE ON DELINQUENT LOANS

<TABLE>
<CAPTION>
                            Interest                          Interest Not
                          Contractually                       Recognized on
                          Due on Loans    Interest Accrued     Nonaccrual
                            Past Due      on Loans Past Due  Loans Past Due
                         90 Days or More   90 Days or More   90 Days or More
                         --------------- ------------------ ----------------
                                       (Dollars in Thousands)
<S>                             <C>              <C>               <C>
At December 31, 1997            $323             $119              $204
At December 31, 1996            $886             $133              $753
At December 31, 1995            $673             $125              $548
</TABLE>

        Upon request of a borrower, the Company generally grants one to two
month extensions of payments during the term of a loan. In 1997, six loans with
an aggregate principal balance of $.4 million were extended for terms not
exceeding six months, one loan with a principal balance of $.4 million was
modified and one delinquent loan with a principal balance of $.1 million was
rewritten. The Company applies the same documentation standards on a rewritten
loan as on an original loan, and makes these accommodations only if it can be
determined that the borrower has the ability to repay the loan on the modified
terms. In general, this determination is made based upon a review of the
borrower's current income, current debt to income ratio, or anticipated sale of
the collateral.

        At December 31, 1997, the Company held REO (net of specific reserves)
of $2.0 million. In accordance with the policy for recognizing losses upon
acquisition of REO, the Company charges off or posts specific reserves for
those portions of the loans with respect to which REO has been acquired to the
extent of the difference between the loan amount and the estimated fair value of
the REO. Included in REO at December 31, 1997 were 10 single-family residences
with an aggregate net book value of $.9 million; three multi-family units with
an aggregate net book value of $.5 million; four commercial properties with an
aggregate net book value of $.5 million; and three undeveloped properties with
an aggregate net book value of $.1 million. For the year ended December 31,
1997, total expenses on operation, including valuation allowances, and losses on
sale of REO were $.7 million and gains on sale of REO and REO income were $.3
million, for a total expense of $.4 million. There can be no assurance that net
losses on the sale of REO will not be experienced in the future.




                                      -19-

<PAGE>   20



        ALLOWANCE FOR LOAN LOSSES. The following is a summary of the changes in
the consolidated allowance for loan losses of the Company for each of the years
ended December 31, 1997, 1996 and 1995:

                                 PORTFOLIO LOANS
                             RESERVE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                           -------------------------------------
                                           AT OR FOR THE YEARS ENDED DECEMBER 31,
                                           -------------------------------------
                                              1997          1996         1995
                                           -------------------------------------
                                                          (IN THOUSANDS)
                                           -------------------------------------
<S>                                         <C>           <C>           <C>
Balance at beginning of period .......      $ 2,464       $ 4,229       $ 4,307
Provision for loan losses ............        3,087         1,151         3,289
Transferred to loans held for sale ...       (1,902)          -0-           -0-
Chargeoffs:                                  (2,211)       (3,187)       (3,369)
Recoveries ...........................          -0-           271             2
                                            -------       -------       -------
Balance at end of period .............      $ 1,438       $ 2,464       $ 4,229
                                            =======       =======       =======
</TABLE>

        Pacific Thrift uses an asset classification system pursuant to which
every delinquent loan and every performing loan which exhibits certain risk
characteristics is graded monthly, and a general reserve percentage is assigned
to each classification level. Management of the Company also reviews every
delinquent loan on a monthly basis and reviews the current estimated fair market
value of the property securing that loan. To the extent that the amount of the
delinquent loan exceeds the estimated fair market value of the property, an
additional reserve provision is made for that loan.

        Pacific Thrift's current policy is to maintain an allowance for loan
losses equal to the amount determined necessary based upon Pacific Thrift's
asset classification policy, which is written to conform with generally accepted
accounting principles and FDIC requirements. PacificAmerica Center's current
policy is to maintain an allowance for loan losses determined in accordance with
generally accepted accounting principles.

        Management utilizes its best judgment in providing for possible loan
losses and establishing the allowance for loan losses. However, the allowance is
an estimate which is inherently uncertain and depends on the outcome of future
events. In addition, regulatory agencies, as an integral part of their
examination process, periodically review Pacific Thrift's allowance for loan
losses. Such agencies could require Pacific Thrift, just as any other
FDIC-insured institution, to post additions to the allowance based upon their
judgment of the information available to them at the time of their examination.

        Implicit in lending activities is the fact that losses will be
experienced and that the amount of such losses will vary from time to time,
depending upon the risk characteristics of the portfolio. The allowance for loan
losses is increased by the provision for loan losses charged to expense. The
conclusion that a loan may become uncollectible, in whole or in part, is a
matter of judgment.




                                      -20-

<PAGE>   21

INVESTMENT ACTIVITIES

        Pacific Thrift maintains an investment portfolio which is used
primarily for liquidity purposes and secondarily for investment income. Pacific
Thrift's policy is to invest cash in short-term U.S. government securities or
federal funds sold due in less than 30 days. Overnight federal funds sold are
limited to no more than 100% of total capital at any single financial
institution that is either adequately or well capitalized. If the financial
institution is neither adequately nor well capitalized, the limit is $100,000.
As of December 31, 1997, Pacific Thrift held no investments in federal funds.

SOURCES OF FUNDS

        DEPOSITS. Pacific Thrift's major source of funds is FDIC-insured
deposits, including passbook savings accounts, money market accounts and
investment certificates (similar to certificates of deposit). Pacific Thrift
attracts customers for its deposits by offering rates that are slightly higher
than rates offered by large commercial banks and savings and loans. Pacific
Thrift has no brokered deposits as of the date hereof. Management believes its
deposits are a stable and reliable funding source. At December 31, 1997, Pacific
Thrift had outstanding 2,818 deposit accounts of approximately $132.5 million.

        The following table sets forth the average balances and average rates
paid on each category of Pacific Thrift's deposits for the three years ended
December 31, 1997.

                                         DEPOSIT ANALYSIS

<TABLE>
<CAPTION>
                               Averages for 1997       Averages for 1996       Averages for 1995
                             --------------------    ---------------------   ---------------------
                            (Dollars in Thousands)   (Dollars in Thousands)  (Dollars in Thousands)

                             Average     Average       Average    Average      Average     Average
                             Balance      Rate         Balance      Rate       Balance       Rate
                             -------     -------       -------    -------      -------     -------
<S>                           <C>         <C>          <C>          <C>        <C>           <C>
Passbook/Money Market         21,516      5.11%        $31,300      5.20%      $13,322       5.39%
Investment Certificates
under $100,000                74,184      5.87%        $47,582      5.86%      $49,931       6.20%
Investment Certificates
over $100,000                    823      6.08%            -0-       -0-           100       7.02%
                              ------      ----         -------      ----       -------       ----
Total                         96,523      5.71%         78,882      5.60%      $63,353       6.03%
                              ======      ====         =======      ====       =======       ====
</TABLE>

        The following schedule sets forth the time remaining until maturity for
all certificates at December 31, 1997, 1996 and 1995.




                                      -21-

<PAGE>   22

                               DEPOSIT MATURITIES

<TABLE>
<CAPTION>
                                               At            At            At
                                          December 31,   December 31,  December 31,
                                              1997           1996          1995
                                          (Dollars in    (Dollars in   (Dollars in
                                           Thousands)     Thousands)    Thousands)
                                          -----------     ----------    ----------
<S>                                          <C>          <C>            <C>
Passbook/Money Market                       $ 18,793      $24,659        $24,275
                                            --------      -------        -------
Accounts under $100,000
  3 months or less                          $ 20,588      $14,451        $12,723
  Over 3 months through 6 months              32,649       19,745         13,439
  Over 6 months through 12 months             56,219       22,147          9,084
  Over 12 months                                  95          -0-            635
                                            --------      -------        -------
               Total                        $109,551      $56,343        $35,881
                                            --------      -------        -------
Accounts over $100,000
  3 months or less                               400          -0-            -0-
  Over 3 months through 6 months                 -0-          -0-            -0-
  Over 6 months through 12 months              3,780          -0-            -0-
  Over 12 months                                 -0-          -0-            -0-
                                            --------      -------        -------
               Total                        $  4,180      $   -0-        $   -0-
                                            --------      -------        -------
TOTAL DEPOSITS                              $132,524      $81,002        $60,156
                                            ========      =======        =======
</TABLE>

        OTHER BORROWINGS. The Partnership made use of substantial lines of
credit from major banks to fund its loan portfolio growth from 1984 through
1989. The original bank loan in 1990 was a revolving credit line of $105
million, under which the Partnership borrowed a maximum of $82 million during
1990 (the "Bank Loan"). The credit line was reduced by mutual agreement in 1991
to $48 million with an $18 million interim loan. From 1992 through December
1996, the loan agreement was amended annually to provide for a steady pay down
of the remaining loan balance. The Partnership and the Company continued making
regular paydowns of the balance owed until the Company made the last payment in
January 1997.

        On October 31, 1997, the Company entered a Warehouse Finance Agreement
with affiliates of Merrill Lynch, under which Merrill Lynch may provide
warehouse financing to mortgage loans pending securitization by the Company.
Merrill Lynch has provided warehouse financing for all loans securitized through
Merrill Lynch since the fourth quarter of 1997. The Warehouse Financing
Agreement contemplates that the Company will complete securitization
transactions on a quarterly basis, and any loans not securitized by a specified
date within each quarter are ineligible for financing under the Warehouse
Financing Agreement. Financing provided by Merrill Lynch under the Warehouse
Financing Agreement bears interest at rates established at the time of each
advance by Merrill Lynch. The Company is required to meet margin call
requirements in the event the mortgage loans assigned under the Warehouse
Financing Agreement experience a decline in market value during the period of
warehouse financing. At December 31, 1997, there were no borrowings outstanding
under the Warehouse Financing Agreement.

        On December 18, 1997, the Company entered into Master Assignment
Agreement with an affiliate of Merrill Lynch under which the Company may obtain
financing secured by interest-only strip receivables retained by the Company in
securitization transactions underwritten by Merrill Lynch. The Company obtained
$5.0 million in financing for its interest-only strip in the 1997-1
securitization, which bears interest at LIBOR plus 2.5%. The Company expects to
obtain financing for its interest-only strip in the 1998-1 securitization. Each
advance will be due one year from the date of advance, unless extended pursuant
to the mutual agreement of the Company and Merrill Lynch. The interest rate on
each advance under the Master Assignment Agreement is established at the time of
each advance by Merrill Lynch. The Company is required to make mandatory
prepayments under the Master Assignment Agreement in the event that the
interest-only strips assigned to Merrill Lynch experience a decline in value
from the levels established at the time of the advance.

        The Company obtained advances from Aames and Advanta on interest-only
strips retained by the Company in the Aames 1996-4 pool and the Advanta 1997
pools. At December 31, 1997, advances from Aames and Advanta totalled $23.6
million, and bore interest ranging from LIBOR plus 1.0% to 12.5% per annum.
Advances are repaid from cash flow allocated to the Company's interest-only
strips.

COMPETITION

        The Company faces significant competition for the origination and
selling of home equity mortgage loans from consumer finance companies, mortgage
banking companies and other subprime lenders. Many of these companies are
substantially larger and have considerably greater financial, technical and
marketing resources than the Company. In addition, many other financial services
organizations have formed national loan origination networks offering loan
products that are substantially similar to the Company's loan programs. Factors
influencing consumer decisions to choose one lender over another include
convenience, customer service, marketing and distribution channels, amount and





                                      -22-
<PAGE>   23

term of the loan, loan origination fees and interest rates. Increases in
competition may result in lower rates charged to borrowers, which could lower
gain on future loan sales and securitizations. Fluctuations interest rates and
general economic conditions may also affect competition in the consumer finance
industry. During periods of rising rates, competitors that have locked in low
borrowing costs may have a competitive advantage. During periods of declining
rates, competitors may solicit the Company's customers to refinance their loans.

        The senior executive officers of the Company each have over 20 years of
experience in home equity lending, which the Company believes has been a
significant factor in the rapid growth of its loan production. The Company has
developed an emphasis on customer service, flexibility in adopting new loan
programs to meet competition, and incentives for retaining top producing loan
representatives.

        Pacific Thrift faces competition for depositors' funds from other thrift
and loans, banks, savings and loans and credit unions. Pacific Thrift does not
offer checking accounts, travelers' checks or safe deposit boxes and thus has a
competitive disadvantage to commercial banks and savings associations in
attracting depositors seeking these services. Pacific Thrift's lower costs,
however, enable it to compensate for the lack of a full array of services by
offering slightly higher interest rates for deposits than most large banks and
savings and loans, while remaining interest rate competitive with smaller banks,
savings and loan associations and thrift and loans.

EMPLOYEES

        As of December 31, 1997 the Company and its subsidiaries had 596
full-time employees, including 183 commission-based loan representatives.

SUPERVISION AND REGULATION

        Financial and lending institutions are extensively regulated under both
federal and state law. Set forth below is a summary description of the principal
laws which relate to the regulation of Pacific Thrift and PacificAmerica
Centers. The description does not purport to be complete and is qualified in its
entirety by reference to the applicable laws and regulations.

CONSUMER PROTECTION LAWS

        Pacific Thrift and PacificAmerica Centers are subject to numerous
federal and state consumer protection laws, including the Federal
Truth-In-Lending Act, the Federal Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Federal Fair Debt Collection Practices Act and the Federal
Reserve Board's Regulations B and Z. These laws and regulations, among other
things, limit certain finance charges, fees and other charges on loans, require
certain disclosures be made to borrowers and loan applicants, regulate the





                                      -23-
<PAGE>   24
credit application and evaluation process and regulate certain servicing and
collection practices. These laws and regulations impose specific liability upon
lenders who fail to comply with their provisions, and may give rise to defense
to payment of a borrower's obligation in the event of a failure to comply with
certain applicable laws. Pacific Thrift and PacificAmerica Centers believe they
are currently in compliance in all material respects with all applicable laws,
but there can be no assurance that they or any other financial institution will
be able to maintain such compliance. The failure to comply with such laws, or a
determination by a court that their interpretation of law was erroneous, could
have a material adverse effect on Pacific Thrift or PacificAmerica Centers.

STATE LAW

        PACIFICAMERICA CENTERS

        PacificAmerica Centers is licensed or exempt as a mortgage lender in 22
states, has lender license applications pending in 10 states and intends to file
license applications in 18 additional states. The lending laws of some states
have certain interest and fee limitations, disclosure and loan document
requirements and penalties for failure to meet these requirements.
PacificAmerica Centers reviews the applicable lending laws of each state prior
to commencement of business in the state and regularly monitors changes in the
lending laws of all states in which it conducts business.

        PACIFIC THRIFT

        Pacific Thrift is subject to regulation, supervision and examination
under its California thrift and loan license by the Department of Financial
Institutions ("DFI") which regulates all banks, savings and loans, thrift and
loans, and credit unions chartered by the State of California. The California
Industrial Loan Law and the rules and regulations of the DFI regulate interest
rates, fees, collateral requirements, payment terms and maturities of the
various types of loans that are permitted to be made by California-licensed
thrift and loan companies. The majority of these limitations, however, apply to
loans under $10,000.

        A thrift and loan generally may not make any loan to, or hold an
obligation of, any of its directors, officers or any shareholder holding 10% or
more of its shares, or any director or officer or any shareholder holding 10% or
more of the shares of its holding company or affiliates, except in specified
cases and subject to regulation by the DFI. A thrift and loan may not make any
loan to, or hold an obligation of, any of its shareholders or any shareholder or
its holding company or affiliates. There are currently no outstanding loans made
by Pacific Thrift to any officers or directors of the Company or any of its
affiliates. Any person who wishes to acquire 10% or more of the capital stock of
a California thrift and loan company or 10% or more of the voting capital stock
or other securities giving control over management of its parent company must
obtain the prior written approval of the DFI.





                                      -24-
<PAGE>   25

        A thrift and loan is subject to certain leverage limitations which are
not generally applicable to commercial banks or savings and loan associations.
In particular, thrift and loans may not have outstanding at any time investment
certificates that exceed 20 times paid-up and unimpaired capital and surplus.
Under California law, thrift and loans that desire to increase their leverage
must meet specified minimum standards for liquidity reserves in cash, loan loss
reserves, minimum capital stock levels and minimum unimpaired paid-in surplus
levels. As approved by the DFI, Pacific Thrift can currently operate with a
ratio of deposits to unimpaired capital and unimpaired surplus of up to 15:1.
At December 31, 1997, Pacific Thrift's deposit ratio was 7:1.

        Thrift and loan companies are not permitted to borrow, except by the
sale of investment or thrift certificates, in an amount exceeding 300% of
tangible net worth, surplus and undivided profits, without the DFI's prior
consent. All sums borrowed in excess of 150% of tangible net worth, surplus and
undivided profits must be unsecured borrowings or, if secured, approved in
advance by the DFI, and be included as investment or thrift certificates for
purposes of computing the maximum amount of certificates a thrift and loan may
issue. However, collateralized Federal Home Loan Bank advances are excluded for
this test of secured borrowings and are not specifically limited by California
law. Pacific Thrift had no borrowed funds (other than deposits) at December
31, 1997.

        Under California law, thrift and loan companies are generally limited to
investments, other than loans, that are legal investments for commercial banks.
A thrift and loan company may acquire real property only in satisfaction of
debts previously contracted, pursuant to certain foreclosure transactions or as
may be necessary for the transaction of its business, in which case such
investment, combined with all investments in personal property, is limited to
one-third of a thrift and loan's paid-in capital stock and surplus not available
for dividends. Management believes Pacific Thrift was in compliance with these
provisions throughout 1997 and at December 31, 1997.

        Although investment authority and other activities that may be engaged
in by Pacific Thrift generally are prescribed under the California Industrial
Loan Law, certain provisions of Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") may limit Pacific Thrift's ability to engage
in certain activities that otherwise are authorized under the California
Industrial Loan Law.

FEDERAL LAW

        Pacific Thrift's deposits are insured by the FDIC to the full extent
permissible by law. As an insurer of deposits, the FDIC issues regulations,
conducts examinations, requires the filing of reports and generally supervises
the operations of institutions for which it provides deposit insurance. Among
the numerous applicable regulations are those issued under the Community
Reinvestment Act of 1977 ("CRA") to encourage insured state nonmember banks,
such as Pacific Thrift, to meet the credit needs of local communities, including
low and moderate income neighborhoods, consistent with safety and soundness,





                                      -25-
<PAGE>   26

and a rating system to measure performance. Inadequacies of performance may
result in regulatory action by the FDIC. Pacific Thrift received a satisfactory
rating with respect to its CRA compliance in its most recent FDIC compliance
examination completed in November 1995.

        Pacific Thrift is subject to the rules and regulations of the FDIC to
the same extent as all other state banks that are not members of the Federal
Reserve System. The approval of the FDIC is required prior to any merger,
consolidation or change in control, or the establishment or relocation of any
branch office of Pacific Thrift. This supervision and regulation is intended
primarily for the protection of the deposit insurance funds.

        Under provisions of the FDIC Improvement Act and regulations issued by
the FDIC, additional limitations have been imposed with respect to depository
institutions' authority to accept, renew or rollover brokered deposits. Pacific
Thrift does not have any brokered deposits as of the date hereof.

        Pacific Thrift is subject to certain capital adequacy guidelines issued
by the FDIC. See "Federal Law -- Capital Adequacy Guidelines" under this
heading.

        REGULATORY ACTIONS

        On April 1, 1996, Pacific Thrift entered into a Memorandum of
Understanding ("1996 MOU") with the FDIC. This informal agreement provided that
Pacific Thrift was required to: (i) maintain Tier I capital of 8% or more of its
total assets; (ii) maintain an adequate reserve for loan losses, which shall be
reviewed quarterly by its board of directors; (iii) eliminate assets classified
"loss" as of September 30, 1995, reduce assets classified "substandard" as of
September 30, 1995 to not more than $4,000,000 within 180 days, and reduce all
assets classified substandard, doubtful and loss to no more than 50% of capital
and reserves by September 30, 1996; (iv) obtain FDIC approval before opening
additional offices; (v) develop strategies to stabilize its net interest margin
on portfolio loans and develop procedures to implement these strategies; and
(vi) furnish written quarterly progress reports to the FDIC detailing actions
taken to comply with the 1996 MOU.

        On March 9, 1998, the 1996 MOU was replaced with a new MOU (the "1998
MOU") between Pacific Thrift and the FDIC. This informal agreement provides that
Pacific Thrift shall: (i) continue to maintain Tier 1 capital equal to 8.0% of
its total assets; (ii) by July 7, 1998, have and thereafter maintain risk-based
capital equal to 10.0% of total risk weighted assets; (iii) maintain a fully
funded loan loss reserve; (iv) by March 19, 1998, eliminate assets classified
"loss" as of June 30, 1997, and by September 5, 1998, reduce assets classified
as "substandard" as of June 30, 1997 to not more than $4 million; (v) by June 7,
1998, reduce and thereafter maintain the amount of interest-only strip
receivables, net of tax liabilities, to no more than 100% of total capital; (vi)
by June 7, 1998, obtain an independent valuation of interest-only strip
receivables, and thereafter





                                      -26-
<PAGE>   27

obtain an annual independent valuation of such receivables until they represent
50% or less of Tier 1 capital; (vii) by June 7, 1998, and thereafter quarterly,
perform valuations and cash flow analyses on the interest-only strip
receivables; (viii) by May 8, 1998, eliminate and/or correct certain
transactions between Pacific Thrift and its parent; (ix) by May 8, 1998,
develop, adopt and implement a written policy governing the relationship between
Pacific Thrift and its parent; (x) by June 7, 1998, revise, adopt and implement
a written asset/liability management policy to include risk tolerance levels for
income and annual independent audits of Pacific Thrift's interest rate risk
process; (xi) pay no cash dividends without prior written FDIC approval; (xii)
pay no executive or director bonuses without prior written FDIC approval; (xiii)
by June 7, 1998, submit a strategic plan covering the period 1998 through 2000
reflecting restricted growth of the interest-only strip receivable asset; and
(xiv) by May 15, 1998, and thereafter at the end of each quarter, furnish
written progress reports to the FDIC detailing actions taken to comply with the
1997 MOU.

     As of March 30, 1998, management of Pacific Thrift believes that it has
complied with items (i), (iii), (iv) and (v), that it is in the process of
complying with item (vi), and that it has responded to item (viii). Management
further believes that it will be able to fully comply with the MOU without any
material adverse effect on its operations.

        RESTRICTIONS ON TRANSFERS OF FUNDS TO AFFILIATES BY PACIFIC THRIFT

        There are statutory and regulatory limitations on the amount of
dividends which may be paid to the Company by Pacific Thrift. Under California
law, a thrift and loan is not permitted to declare dividends on its capital
stock unless it has at least $750,000 of unimpaired capital plus additional
capital of $50,000 for each branch office maintained. In addition, no
distribution of dividends is permitted unless: (i) such distribution would not
exceed a thrift's retained earnings; or, (ii) in the alternative, after giving
effect to the distribution, (a) the sum of a thrift's assets (net of goodwill,
capitalized research and development expenses and deferred charges) would be not
less than 125% of its liabilities (net of deferred taxes, income and other
credits), or (b) current assets would be not less than current liabilities
(except that if a thrift's average earnings before taxes for the last two years
had been less than average interest expenses, current assets must not be less
than 125% of current liabilities).

        In addition, a thrift and loan is prohibited from paying dividends from
that portion of capital which its board of directors has declared restricted for
dividend payment purposes. The amount of restricted capital maintained by a
thrift and loan provides the basis of establishing the maximum amount that a
thrift may lend to a single borrower and determines the amount of capital that
may be counted by the thrift for purposes of calculating the thrift to capital
ratio. Pacific Thrift has, in the past, restricted as much capital as necessary
to support its level of assets. The board of directors of Pacific Thrift may
unrestrict all or any portion of its equity in the future for dividends to the
Company, provided that Pacific Thrift remains adequately capitalized.

        The FDIC also has authority to prohibit Pacific Thrift, just as any
other FDIC- insured institution, from engaging in what, in the FDIC's opinion,
constitutes an unsafe or unsound practice in conducting its business. It is
possible, depending upon the financial condition of the bank in question and
other factors, that the FDIC could assert that the





                                      -27-
<PAGE>   28

payment of dividends or other payments might, under some circumstances, be such
an unsafe or unsound practice. Further, the FDIC has established guidelines with
respect to the maintenance of appropriate levels of capital by banks under their
jurisdiction. Compliance with the standards set forth in such guidelines and the
restrictions that are or may be imposed under the prompt corrective action
provisions of the FDIC Improvement Act could limit the amount of dividends which
Pacific Thrift may pay to the Company. See "Capital Standards" under this
heading for a discussion of these additional restrictions on capital
distributions.

        Pacific Thrift, just as any other FDIC-insured institution, is subject
to certain restrictions imposed by federal law on any extensions of credit to,
or the issuance of a guarantee or letter of credit on behalf of, the Company or
other affiliates, the purchase of or investments in stock or other securities
thereof, the taking of such securities as collateral for loans and the purchase
of assets of the Company or other affiliates. Such restrictions prevent the
Company and other affiliates from borrowing from Pacific Thrift unless the loans
are secured by marketable obligations of designated amounts. Further, such
secured loans and investments by Pacific Thrift to or in the Company or to or in
any other affiliate is limited to 10% of Pacific Thrift's capital and surplus
(as defined by federal regulations) and such secured loans and investments are
limited, in the aggregate, to 20% of Pacific Thrift's capital and surplus (as
defined by federal regulations). In addition, any transaction with an affiliate
of Pacific Thrift must be on terms and under circumstances that are
substantially the same as a comparable transaction with a non-affiliate.
Additional restrictions on transactions with affiliates may be imposed on
Pacific Thrift, just as any other FDIC-insured institution, under the prompt
corrective action provisions of the FDIC Improvement Act. Management believes
that Pacific Thrift is in compliance with all provisions regarding transactions
with affiliates.

        CAPITAL STANDARDS

        The Federal Reserve Board and the FDIC have adopted risk-based minimum
capital guidelines intended to provide a measure of capital that reflects the
degree of risk associated with a depository institution's operations for both
transactions reported on the balance sheet as assets and transactions, such as
letters of credit and recourse arrangements, which are recorded as off balance
sheet items. Under these guidelines, nominal dollar amounts of assets and credit
equivalent amounts of off balance sheet items are multiplied by one of several
risk adjustment percentages, which range from 0% for assets with low credit
risk, such as certain U.S. Treasury securities, to 100% for assets with
relatively high credit risk, such as business loans.

        A depository institution's risk-based capital ratios are obtained by
dividing its qualifying capital by its total risk adjusted assets. The
regulators measure risk-adjusted assets, which includes off balance sheet items,
against both total qualifying capital (the sum of Tier 1 capital and limited
amounts of Tier 2 capital) and Tier 1 capital. Tier 1 capital consists primarily
of common stock, retained earnings, noncumulative perpetual preferred





                                      -28-
<PAGE>   29

stock (cumulative perpetual preferred stock for bank holding companies) and
minority interests in certain subsidiaries, less most intangible assets. Tier 2
capital may consist of a limited amount of the allowance for possible loan and
lease losses, cumulative preferred stock, long term preferred stock, eligible
term subordinated debt and certain other instruments with some characteristics
of equity. The inclusion of elements of Tier 2 capital is subject to certain
other requirements and limitations of the federal banking agencies. The federal
banking agencies require a minimum ratio of qualifying total capital to risk-
adjusted assets of 8% and a minimum ratio of Tier 1 capital to risk-adjusted
assets of 4%. At December 31, 1997, Pacific Thrift's total risk-based capital
ratio was 8.1%.

        In addition to the risk-based guidelines, federal banking regulators
require depository institutions to maintain a minimum amount of Tier 1 capital
to total assets, referred to as the leverage ratio. For a depository institution
rated in the highest of the five categories used by regulators to rate
depository institutions, the minimum leverage ratio of Tier 1 capital to total
assets is 3%. For all depository institutions not rated in the highest category,
the minimum leverage ratio must be at least 100 to 200 basis points above the 3%
minimum, or 4% to 5%. In addition to these uniform risk-based capital guidelines
and leverage ratios that apply across the industry, the regulators have the
discretion to set individual minimum capital requirements for specific
institutions at rates significantly above the minimum guidelines and ratios. At
December 31, 1997, Pacific Thrift's leverage ratio was 12.8%.

        In January 1995, the federal banking agencies issued a final rule
relating to capital standards and the risks arising from the concentration of
credit and nontraditional activities. Institutions which have significant
amounts of their assets concentrated in high risk loans or nontraditional
banking activities and who fail to adequately manage these risks, will be
required to set aside capital in excess of the regulatory minimums. The federal
banking agencies have not imposed any quantitative assessment for determining
when these risks are significant, but have identified these issues as important
factors they will review in assessing an individual bank's capital adequacy.

        The federal banking agencies interagency policy statement on the
allowance for loan and lease losses establishes certain benchmark ratios of loan
loss reserves to classified assets. The benchmark set forth by such policy
statement is the sum of (a) assets classified loss; (b) 50 percent of assets
classified doubtful; (c) 15 percent of assets classified substandard; and (d)
estimated credit losses on other assets over the upcoming 12 months. Management
believes that Pacific Thrift is in compliance with these requirements.

        Federally supervised banks and savings associations are currently
required to report deferred tax assets in accordance with SFAS No. 109. The
federal banking agencies limit the amount of deferred tax assets that are
allowable in computing an institution's regulatory capital. Deferred tax assets
that can be realized for taxes paid in prior carryback years and from future
reversals of existing taxable temporary differences are generally not limited.
Deferred tax assets that can only be realized through future taxable earnings
are limited for





                                      -29-
<PAGE>   30

regulatory capital purposes to the lesser of (i) the amount that can be realized
within one year of the quarter-end report date, or (ii) 10% of Tier 1 Capital.
The amount of any deferred tax in excess of this limit would be excluded from
Tier 1 Capital and total assets and regulatory capital calculations. Management
believes that Pacific Thrift is in compliance with these requirements.

        Future changes in regulations or practices could further reduce the
amount of capital recognized for purposes of capital adequacy. Such a change
could affect the ability of Pacific Thrift, just as any other FDIC-insured
institution, to grow and could restrict the amount of profits, if any, available
for the payment of dividends.

        The following table presents the capital ratios for Pacific Thrift, as
of December 31, 1997, compared to the regulatory capital requirements for
adequately capitalized and well capitalized institutions.

<TABLE>
<CAPTION>
                                                          December 31, 1997
                                              ------------------------------------------
                                                                                 Well
                                              Actual          Adequately     Capitalized
                                              Ratio           Capitalized    Requirement
                                              ------          -----------    -----------
<S>                                            <C>                <C>           <C> <C>
Leverage ratio.....................            12.8%              4.0%          5.0%(1)
Tier 1 risk-based ratio............             7.1%              4.0%          6.0%
Total risk-based ratio.............             8.1%              8.0%         10.0%(1)
</TABLE>

(1)     Pursuant to the 1998 MOU, Pacific Thrift is required to maintain a
        minimum 8.0% leverage ratio and by July 8, 1998, to reach and thereafter
        maintain, a 10.0% total risk-based capital ratio.

        PROMPT CORRECTIVE ACTION AND OTHER ENFORCEMENT MECHANISMS

        Federal law requires each federal banking agency to take prompt
corrective action to resolve the problems of insured depository institutions,
including but not limited to those that fall below one or more prescribed
minimum capital ratios. The law required each federal banking agency to
promulgate regulations defining the following five categories in which an
insured depository institution will be placed, based on the level of its capital
ratios: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized.

        In September 1992, the federal banking agencies issued uniform final
regulations implementing the prompt corrective action provisions of federal law.
An insured depository institution generally will be classified in the following
categories based on capital measures indicated below:

<TABLE>
<CAPTION>
        "Well capitalized"                     "Adequately capitalized"
        -----------------                      -------------------------
        <S>                                    <C>
        Total risk-based capital of 10%;       Total risk-based capital of 8%;
        Tier 1 risk-based capital of 6%; and   Tier 1 risk-based capital of 4%; and
        Leverage ratio of 5%.                  Leverage ratio of 4% (3% if the institution receives the
                                               highest rating from its primary regulator)

        "Undercapitalized"                     "Significantly undercapitalized"
        ------------------                     --------------------------------
</TABLE>




                                      -30-

<PAGE>   31

<TABLE>
        <S>                                          <C>
        Total risk-based capital less than 8         Total risk-based capital less than 6%;
        Tier 1 risk-based capital less than 4%; or   Tier 1 risk-based capital less than 3%; or
        Leverage ratio less than 4% (3% if the       Leverage ratio less than 3%.
        institution receives the highest rating
        from its primary regulator)

        "Critically undercapitalized"
        -----------------------------
        Tangible equity to total assets less than 2%.
</TABLE>

        An institution that, based upon its capital levels, is classified as
"well capitalized," "adequately capitalized" or "undercapitalized" may be
treated as though it were in the next lower capital category if the appropriate
federal banking agency, after notice and opportunity for hearing, determines
that an unsafe or unsound condition or an unsafe or unsound practice warrants
such treatment. At each successive lower capital category, an insured depository
institution is subject to more restrictions. The federal banking agencies,
however, may not treat an institution as "critically undercapitalized" unless
its capital ratio actually warrants such treatment.

        The law prohibits insured depository institutions from paying management
fees to any controlling persons or, with certain limited exceptions, making
capital distributions if after such transaction the institution would be
undercapitalized. If an insured depository institution is undercapitalized, it
will be closely monitored by the appropriate federal banking agency, subject to
asset growth restrictions and required to obtain prior regulatory approval for
acquisitions, branching and engaging in new lines of business. Any
undercapitalized depository institution must submit an acceptable capital
restoration plan to the appropriate federal banking agency 45 days after
becoming undercapitalized. The appropriate federal banking agency cannot accept
a capital plan unless, among other things, it determines that the plan (i)
specifies the steps the institution will take to become adequately capitalized,
(ii) is based on realistic assumptions and (iii) is likely to succeed in
restoring the depository institution's capital. In addition, each company
controlling an undercapitalized depository institution must guarantee that the
institution will comply with the capital plan until the depository institution
has been adequately capitalized on an average basis during each of four
consecutive calendar quarters and must otherwise provide adequate assurances of
performance. The aggregate liability of such guarantee is limited to the lesser
of (a) an amount equal to 5% of the depository institution's total assets at the
time the institution became undercapitalized or (b) the amount which is
necessary to bring the institution into compliance with all capital standards
applicable to such institution as of the time the institution fails to comply
with its capital restoration plan. Finally, the appropriate federal banking
agency may impose any of the additional restrictions or sanctions that it may
impose on significantly undercapitalized institutions if it determines that such
action will further the purpose of the prompt correction action provisions.

        An insured depository institution that is significantly
undercapitalized, or is undercapitalized and fails to submit, or in a material
respect to implement, an acceptable capital restoration plan, is subject to
additional restrictions and sanctions. These include, among other things: (i) a
forced sale of voting shares to raise capital or, if grounds exist





                                      -31-
<PAGE>   32

for appointment of a receiver or conservator, a forced merger; (ii) restrictions
on transactions with affiliates; (iii) further limitations on interest rates
paid on deposits; (iv) further restrictions on growth or required shrinkage; (v)
modification or termination of specified activities; (vi) replacement of
directors and/or senior executive officers; (vii) prohibitions on the receipt of
deposits from correspondent institutions; (viii) restrictions on capital
distributions by the holding companies of such institutions; (ix) required
divestiture of subsidiaries by the institution; or (x) other restrictions as
determined by the appropriate federal banking agency. Although the appropriate
federal banking agency has discretion to determine which of the foregoing
restrictions or sanctions it will seek to impose, it is required to force a sale
of voting shares or merger, impose restrictions on affiliate transactions and
impose restrictions on rates paid on deposits unless it determines that such
actions would not further the purpose of the prompt corrective action
provisions. In addition, without the prior written approval of the appropriate
federal banking agency, a significantly undercapitalized institution may not pay
any bonus to its senior executive officers or provide compensation to any of
them at a rate that exceeds such officer's average rate of base compensation
during the 12 calendar months preceding the month in which the institution
became undercapitalized.

        Further restrictions and sanctions are required to be imposed on insured
depository institutions that are critically undercapitalized. For example, a
critically undercapitalized institution generally would be prohibited from
engaging in any material transaction other than in the ordinary course of
business without prior regulatory approval and could not, with certain
exceptions, make any payment of principal or interest on its subordinated debt
beginning 60 days after becoming critically undercapitalized. Most importantly,
however, except under limited circumstances, the appropriate federal banking
agency, not later than 90 days after an insured depository institution becomes
critically undercapitalized, is required to appoint a conservator or receiver
for the institution. The board of directors of an insured depository institution
would not be liable to the institution's shareholders or creditors for
consenting in good faith to the appointment of a receiver or conservator or to
an acquisition or merger as required by the regulator.

        In addition to measures taken under the prompt corrective action
provisions, commercial depository institutions may be subject to potential
enforcement actions by the federal regulators for unsafe or unsound practices in
conducting their businesses or for violations of any law, rule, regulation or
any condition imposed in writing by the agency or any written agreement with the
agency. Enforcement actions may include the imposition of a conservator or
receiver, the issuance of a cease and desist order that can be judicially
enforced, the termination of insurance of deposits (in the case of a depository
institution), the imposition of civil money penalties, the issuance of
directives to increase capital, the issuance of formal and informal agreements,
the issuance of removal and prohibition orders against institution-affiliated
parties and the enforcement of such actions through injunctions or restraining
orders based upon a judicial determination that the agency would be harmed if
such equitable relief was not granted.






                                      -32-
<PAGE>   33

        SAFETY AND SOUNDNESS STANDARDS

        In July 1995, the federal banking agencies adopted final guidelines
establishing standards for safety and soundness, as required by the FDICIA. The
guidelines set forth operational and managerial standards relating to internal
controls, information systems and internal audit systems, loan documentation,
credit underwriting, interest rate exposure, asset growth and compensation, fees
and benefits. Guidelines for asset quality and earnings standards will be
adopted in the future. The guidelines establish the safety and soundness
standards that the agencies will use to identify and address problems at insured
depository institutions before capital becomes impaired. If an institution fails
to comply with a safety and soundness standard, the appropriate federal banking
agency may require the institution to submit a compliance plan. Failure to
submit a compliance plan or to implement an accepted plan may result in
enforcement action.

        The regulations of the federal banking agencies prescribe uniform
guidelines for real estate lending. The regulations require insured depository
institutions to adopt written policies establishing standards, consistent with
such guidelines, for extensions of credit secured by real estate. The policies
must address loan portfolio management, underwriting standards and loan to value
limits that do not exceed the supervisory limits prescribed by the regulations.

        Appraisals for "real estate related financial transactions" must be
conducted by either state certified or state licensed appraisers for
transactions in excess of certain amounts. State certified appraisers are
required for all transactions with a transaction value of $1,000,000 or more;
for all nonresidential transactions valued at $250,000 or more; and for
"complex" 1-4 family residential properties of $250,000 or more. A state
licensed appraiser is required for all other appraisals. However, appraisals
performed in connection with "federally related transactions" must now comply
with the agencies' appraisal standards. Federally related transactions include
the sale, lease, purchase, investment in, or exchange of, real property or
interests in real property, the financing or refinancing of real property, and
the use of real property or interests in real property as security for a loan or
investment, including mortgage-backed securities.

        PREMIUMS FOR DEPOSIT INSURANCE

        Pacific Thrift's deposit accounts are insured by the FDIC generally up
to a maximum of $100,000 per separately insured depositor, and Pacific Thrift,
like all FDIC- insured institutions, is subject to FDIC deposit insurance
assessments. Pursuant to FDICIA, the FDIC adopted a risk-based system for
determining deposit insurance assessments under which all insured institutions
were placed into one of nine categories and assessed annual insurance premiums,
ranging from $2,000 to 0.27% of insured deposits, based upon their level of
capital and supervisory evaluation. Because the FDIC sets the assessment rates
based upon the level of assets in the insurance fund, premium rates rise and
fall as the number and size of bank failures increases and decreases,
respectively.





                                      -33-
<PAGE>   34

Under the system, institutions are assigned to one of three capital groups which
is based solely on the level of an institution's capital - "well capitalized,"
"adequately capitalized" and "undercapitalized" - which are defined in the same
manner as the regulations establishing the prompt corrective action system under
Section 38 of FDIA, as discussed in "-- Capital Standards." These three groups
are then divided into three subgroups which reflect varying levels of
supervisory concern, from those which are considered to be of minimal
supervisory concern to those which are considered to be of substantial
supervisory concern.

        INTERSTATE BANKING AND BRANCHING

        In September 1994, the Riegel-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") became law. Under the Interstate
Act, beginning one year after the date of enactment, a bank holding company that
is adequately capitalized and managed may obtain approval under the BHCA to
acquire an existing bank located in another state without regard to state law. A
bank holding company would not be permitted to make such an acquisition if, upon
consummation, it would control (a) more than 10% of the total amount of deposits
of insured depository institutions in the United States or (b) 30% or more of
the deposits in the state in which the bank is located. A state may limit the
percentage of total deposits that may be held in that state by any one bank or
bank holding company if application of such limitation does not discriminate
against out-of-state banks. An out-of-state bank holding company may not acquire
a state bank in existence for less than a minimum length of time that may be
prescribed by state law except that a state may not impose more than a five year
existence requirement.

        The Interstate Act also permits, as of June 1, 1997, mergers of insured
banks located in different states and conversion of the branches of the acquired
bank into branches of the resulting bank. Each state was permitted to allow such
combinations earlier than June 1, 1997, and was permitted adopt legislation to
prohibit interstate mergers after that date in that state or in other states by
that state's banks. The same concentration limits discussed in the preceding
paragraph apply. The Interstate Act also permits a national or state bank to
establish branches in a state other than its home state if permitted by the laws
of that state, subject to the same requirements and conditions as for a merger
transaction.

        In October 1995, California adopted "opt in" legislation under the
Interstate Act that permits out-of-state banks to acquire California banks that
satisfy a five-year minimum age requirement (subject to exceptions for
supervisory transactions) by means of merger or purchases of assets, although
entry through acquisition of individual branches of California institutions and
de novo branching into California are not permitted. The Interstate Act and the
California branching statute will likely increase competition from out-of-state
banks in the markets in which Pacific Thrift operates, although it is difficult
to assess the impact that such increased competition may have on Pacific
Thrift's operations.





                                      -34-
<PAGE>   35

        COMMUNITY REINVESTMENT ACT AND FAIR LENDING DEVELOPMENTS

        Pacific Thrift, just as all other mortgage lenders, is subject to
certain fair lending requirements and reporting obligations involving home
mortgage lending operations and Community Reinvestment Act ("CRA") activities.
The CRA generally requires the federal banking agencies to evaluate the record
of a financial institution in meeting the credit needs of their local
communities, including low and moderate income neighborhoods. In addition to
substantial penalties and corrective measures that may be required for a
violation of certain fair lending laws, the federal banking agencies may take
compliance with such laws and CRA into account when regulating and supervising
other activities. The FDIC has rated Pacific Thrift "satisfactory" in complying
with its CRA obligations.

        In May 1995, the federal banking agencies issued final regulations which
change the manner in which they measure a depository institution's compliance
with its CRA obligations. The final regulations adopt a performance-based
evaluation system which bases CRA ratings on an institution's actual lending
service and investment performance rather than the extent to which the
institution conducts needs assessments, documents community outreach or complies
with other procedural requirements. In March 1994, the Federal Interagency Task
Force on Fair Lending issued a policy statement on discrimination in lending.
The policy statement describes the three methods that federal agencies will use
to prove discrimination: (i) overt evidence of discrimination; (ii) evidence of
disparate treatment and (iii) evidence of disparate impact.

        POTENTIAL ENFORCEMENT ACTIONS.

        Insured depository institutions, such as Pacific Thrift, and their
institution-affiliated parties, which include the Company, may be subject to
potential enforcement actions by the FDIC and the DOC for unsafe or unsound
practices in conducting their businesses or for violations of any law, rule,
regulation or any condition imposed in writing by the agency or any written
agreement with the agency. Enforcement actions may include the imposition of a
conservator or receiver, the issuance of a cease-and-desist order that can be
judicially enforced, the termination of insurance of deposits and with respect
to Pacific Thrift and the Company, could also include the imposition of civil
money penalties, the issuance of directives to increase capital, the issuance of
formal and informal agreements, the issuance of removal and prohibition orders
against institution-affiliated parties and the imposition of restrictions and
sanctions under the PCA provisions of the FDIC Improvement Act. Management knows
of no pending or threatened enforcement actions against Pacific Thrift.





                                      -35-
<PAGE>   36

ITEM 2.  PROPERTIES

        The Company's corporate headquarters are located at 21031 Ventura
Boulevard, Woodland Hills, California 91364, where the Company leases
approximately 20,000 square feet of office space. The lease expires on July 31,
2003. The Company also leases approximately 22,000 square feet of office space
in Walnut Creek, California, where its Wholesale Division is headquartered,
under leases which expire between July 1998 and November 2000, with the largest
lease, for 14,000 square feet, expiring November 14, 2000. In addition, the
Company leases approximately 11,000 square feet of office space in Irvine,
California, where its Retail Division is currently headquartered, under a lease
which expires on December 31, 2001. On January 13, 1998, the Company entered a
new lease for 28,000 square feet of office space in Irvine, California, which
the Company intends to use as the new headquarters of the Retail Division. The
existing 11,000 square foot Irvine space is expected to be used for loan
processing. The Company also leases offices for its 50 retail branch offices in
23 states. The average size of these retail branch offices is approximately 750
square feet, with an annual average base rent of approximately $16,800,
generally with terms of 18 months or less. The Company believes its facilities
are both suitable and adequate for the current business activities conducted at
all of its offices.

ITEM 3.  LEGAL PROCEEDINGS

        The Company and its subsidiaries are parties to certain legal
proceedings including primarily actions incidental to its lending business. Some
of these actions seek unspecified damages or substantial monetary damages in the
form of punitive damages. The ultimate outcome of such litigation cannot
presently be determined. Management, after review and consultation with counsel,
and based upon historical experience with prior actions, has determined that it
is unlikely that the outcome of any proceedings currently pending against the
Company would have a material adverse impact on the Company's business,
financial condition, results of operations or cash flows.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matter was submitted to a vote of stockholders during the fourth
quarter of 1997.

EXECUTIVE OFFICERS

        The following table sets forth certain information concerning the
Company's executive officers.






                                      -36-
<PAGE>   37

<TABLE>
<CAPTION>
                                                    PRINCIPAL OCCUPATION OR EMPLOYMENT AND
             NAME                 AGE                 OCCUPATION FOR THE PAST FIVE YEARS
             ----                 ---               --------------------------------------
<S>                               <C>    <C>
Joel R. Schultz                   61     Chairman of the Board, President, Chief Executive Officer and Chief
                                         Operating Officer of the Company; Chief Managing Officer of the Partnership from
                                         1981 to June 1996; Chairman of the Board and Chief Executive Officer of Pacific
                                         Thrift since 1988; President of Pacific Thrift from 1988 to December 1993;
                                         Chairman of the Board, President and Chief Executive Officer of
                                         PacificAmerica Centers; California licensed attorney-at-law; Certified
                                         Public Accountant; California licensed real estate broker.

Richard D. Young                  58     Director and Senior Executive Vice President of the Company; Senior
                                         Executive Vice President and Chief Operating Officer and a director of
                                         PacificAmerica Centers; President and Chief Operating Officer of Pacific
                                         Thrift from November 1993 to present; director of Pacific Thrift from
                                         November 1993 to present; Chief Operating Officer of the Partnership
                                         from May 1994 until June 1996; President and Chief Executive Officer
                                         of Topa Thrift and Loan from 1983 to 1993; President of Thrift Guaranty
                                         Corporation from 1984 to 1988; director of Thrift Guaranty Corporation
                                         from 1983 to 1988 and from 1989 to 1995, when the Thrift Guaranty
                                         Corporation was liquidated; member, Mortgage Bankers Association
                                         Secondary and Capital Markets Committee; member, California
                                         Association of Thrift and Loan Companies ("CATL") Regulatory
                                         Committee; member and former chairman, CATL Executive Committee;
                                         former chairman, CATL Legislative Committee; Vice President of
                                         CATL (1995-present).

Charles J. Siegel                 48     Chief Financial and Administrative Officer and Assistant Secretary of the
                                         Company; Chief Financial and Administrative Officer and Assistant
                                         Secretary of Pacific Thrift from December 1993 to present; Chief
                                         Financial Officer of PacificAmerica Centers from June 1996 to present;
                                         Chief Financial Officer of the Partnership from May 1994 to June 1996;
                                         Chief Financial Officer of Topa Thrift and Loan from 1983 to 1993;
                                         Certified Public Accountant.

Frank Landini                     46     Executive Vice President in charge of the Wholesale Division of Pacific
                                         Thrift since December 1994; Senior Vice President of Pacific Thrift from
                                         October 1993 to December 1994; Senior Vice President of Topa Thrift
                                         and Loan from 1983 to 1993.

Norman A. Markiewicz              51     Executive Vice President of the Company; Chief Operating Officer of the
                                         Partnership from 1981 to May 1994; Chief Operating Officer of Pacific
                                         Thrift from 1988 to September 1993; Executive Vice President of Pacific
                                         Thrift from 1993 to present; director of Pacific Thrift from 1988 to
                                         present; Executive Vice President and director of PacificAmerica Centers.

Richard B. Fremed                 55     Executive Vice President and Secretary of the Company; Chief Financial Officer
                                         of the Partnership from 1981 to April 1994; Chief Financial Officer of Pacific
                                         Thrift from 1988 to December 1993; Secretary of Pacific Thrift from December
                                         1988 to present; Treasurer of Pacific Thrift from December 1993 to present;
                                         director of Pacific Thrift from 1988 to present; Secretaty and director of
                                         PacificAmerica Centers; Certified Management Accountant and  California
                                         licensed real estate sales person.

 </TABLE>




                                      -37-
<PAGE>   38

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        In June 1996, the Company's Common Stock began trading under the symbol
PAMM on the Nasdaq National Market. The following table sets forth the range of
high and low sale prices. All share prices have been adjusted to reflect the
two-for-one stock split in the form of a stock dividend effected on August 13,
1997.

<TABLE>
<CAPTION>
                                                   High                 Low
                                                   ----                 ---
               1996
               ----
               <S>                                 <C>                  <C>
               Third Quarter                       11.125               6.50

               Fourth Quarter                      16.00                10.875

               1997
               ----
               First Quarter                       17.00                14.00

               Second Quarter                      16.375               12.00

               Third Quarter                       27.25                15.50

               Fourth Quarter                      29.50                15.00
</TABLE>

        On March 20, 1998, the closing sale price for the Common Stock reported
on the Nasdaq National Market was $23.25 per share.

        As of March 13, 1998, there were approximately 1,670 shareholders of the
Common Stock, including the beneficial holders whose shares are held of record
by brokerage firms and clearing agencies.

DIVIDEND POLICY

        The Company, which was recently organized, has never paid a cash
dividend on its Common Stock. The Company's ability to pay dividends is subject
to restrictions set forth in the Delaware General Corporation law. The Delaware
Corporation Law provides that a Delaware corporation may pay dividends either
(i) out of the corporation's surplus (as defined in Delaware law), or (ii) if
there is no surplus, out of the corporation's net profits for the fiscal year in
which the dividend is declared and/or the preceding fiscal year. However,
pursuant to Section 2115 of the California General Corporation Law, under
certain circumstances, certain provisions of the California General Corporation
Law may be applied to foreign corporations qualified to do business in
California, which may reduce the amount of dividends payable by the Company.





                                      -38-
<PAGE>   39

        Since the Company derives a substantial amount of its revenues from
Pacific Thrift, a California corporation, California law and FDIC regulations
with respect to dividends will have a substantial effect on the Company's
ability to pay dividends. Under California law, a corporation is prohibited from
paying dividends unless (i) the retained earnings of the corporation immediately
prior to the distribution exceeds the amount of the distribution; (ii) the
assets of the corporation exceed 1-1/4 times its liabilities; or (iii) the
current assets of the corporation exceed its current liabilities, but if the
average pretax net earnings of the corporation before interest expense for the
two years preceding the distribution was less than the average interest expense
of the corporation for those years, the current assets of the corporation must
exceed 1-1/4 times its current liabilities.

        On August 13, 1997, the Company paid a one-for-one stock dividend to
all stockholders of record on July 31, 1997, having the effect of a two-for-one
stock split.

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

                    SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

        The following tables present selected consolidated financial and other
data of the Company (or the Partnership for periods prior to June 27, 1996) as
of and for each of the years in the five years ended December 31, 1997. The
information below should be read in conjunction with, and is qualified in its
entirety by, the more detailed information included elsewhere in this Report,
including the Consolidated Financial Statements of the Company and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere herein.

<TABLE>
<CAPTION>
                                                               AS OF AND FOR THE YEARS ENDED
                                                                          DECEMBER 31,
                                                  1997            1996        1995         1994        1993
                                                                         (DOLLARS IN THOUSANDS)
                                                -------------------------------------------------------------
<S>                                               <C>           <C>           <C>         <C>          <C>
STATEMENT OF OPERATIONS DATA:
Total interest income ....................       $11,730        $11,502       $9,577      $11,404      $14,212
Total interest expense....................         6,540          4,966        5,199        4,927        5,718
  Net interest income.....................         5,190          6,536        4,378        6,477        8,494
Total noninterest income..................        82,055         29,994        9,440        2,071          998
Provision for loan losses.................         3,087          1,151        3,289        6,096        4,655
Other real estate owned expense...........           444            681        1,212          732        3,307
General and administrative expense........        54,151         28,227       13,099       12,140        8,794
Provision (benefit) for income taxes......        12,468          1,658       (1,223)           1            1
                                                --------        -------      -------      -------      -------
Income from continuing operations.........        17,095          4,813       (2,559)     (10,421)      (7,265)
Income from discontinued operations.......           -0-            387          861          907        1,396
Loss on disposal of discontinued operations          -0-         (1,038)         -0-          -0-          -0-
Income (loss).............................      $178,095        $ 4,162      $(1,698)     $(9,514)     $(5,869)
                                                ========        =======     ========     ========     ========
Distributions paid........................           -0-            -0-          -0-          -0-        1,943
BASIC EARNINGS PER SHARE(1)
   Continuing operations..................          4.18           1.53        (1.82)         n/a          n/a
   Discontinued operations................           -0-          (0.32)        0.41          n/a          n/a
   Net income.............................          4.18           1.21        (1.41)         n/a          n/a

DILUTED EARNINGS PER SHARE(1)
   Continuing operations                            3.48           1.27        (1.82)         n/a          n/a
   Discontinued operations                           -0-          (0.26)        0.41          n/a          n/a
   Net income                                       3.48           1.01        (1.41)         n/a          n/a

STATEMENT OF FINANCIAL CONDITION DATA:
Total assets..............................      $227,826       $110,235      $82,994     $103,747     $114,324
</TABLE>





                                      -39-
<PAGE>   40

<TABLE>
<CAPTION>
                                                               AS OF AND FOR THE YEARS ENDED
                                                                          DECEMBER 31,
                                                  1997            1996        1995         1994        1993
                                                                         (DOLLARS IN THOUSANDS)
                                                --------------------------------------------------------------
<S>                                               <C>           <C>           <C>         <C>          <C>
Interest-only strip receivable............        94,424         11,698          -0-          -0-          -0-
Loan held for sale........................        35,280         18,418       12,577       12,011          572
Portfolio Loans(2)........................        20,629         33,515       43,908       53,045       84,183
Total deposits............................       132,524         81,002       60,156       69,501       62,421
Notes payable.............................        28,318          3,290        6,771       14,778       23,200
Equity....................................        48,386         21,966        8,727       10,425       19,939


SELECTED RATIOS (%)
Return on average assets..................         9.97%          4.21%      (1.82)%      (8.73)%      (5.00)%
Return on average equity..................        48.60%         27.12%     (17.73)%     (62.67)%     (24.07)%
Net interest margin(3)....................         5.24%          7.46%        5.79%        6.82%        8.65%
Noninterest expense to average assets.....        31.85%         29.21%       15.33%       11.81%       10.32%
Efficiency ratio(4).......................        62.58%         79.13%      103.57%      150.58%      127.49%
Efficiency ratio excluding REO expense(4).        62.07%         77.27%       94.80%      142.02%       92.65%
General and administrative expense to
  average assets..........................        31.59%         28.52%       14.03%       11.13%        7.50%
Average equity to average assets..........        20.52%         15.51%       10.26%       13.92%       20.79%
Loan originations.........................      $768,226       $373,457     $170,961      $76,838      $48,612

ASSET QUALITY DATA:
Nonaccrual loans..........................         1,105         $1,394         $793       $3,146       $5,316
REO (net of senior liens).................         2,028          2,728        2,545        5,308        4,225
Total nonperforming assets................         3,133          4,122        3,338        8,454        9,541
Troubled debt restructurings..............           -0-            357          948          -0-          -0-
Allowance for credit losses on
  portfolio loans.........................         1,438          2,464        4,229        4,307        3,122
Net portfolio loan charge offs............         2,211         $2,916        3,367        4,912        4,178

ASSET QUALITY RATIOS:
Nonperforming assets to total assets......         1.37%          3.59%        4.02%        8.15%        8.35%
Allowance for credit losses to net
  portfolio loans.........................         6.97%          7.35%        9.63%        8.12%        4.96%
Allowance for credit losses to
  nonaccrual portfolio loans..............       130.14%        176.76%      533.29%      136.94%       58.74%
Net portfolio loan charge offs to
  average portfolio loans.................         8.17%          7.53%        6.95%        7.16%        5.30%
</TABLE>
================================================================================

(1)     Earnings per common share for the years ended December 31, 1996 and 1995
        assumes the Restructuring took place at the beginning of the
        period and the Company was taxed for federal and state income tax
        purposes as a taxable corporation at a 42% effective tax rate.
(2)     Net of allowances for loan loss and deferred loan fees and costs.
(3)     Net interest margin represents net interest income divided by total
        average earning assets.
(4)     Efficiency ratio represents noninterest expense divided by noninterest
        income and net interest income.





                                      -40-
<PAGE>   41

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

GENERAL

        The following discussion should be read in conjunction with the
preceding Selected Financial Data and the Company's Financial Statements and the
Notes thereto and the other financial data included elsewhere in this Report.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements which always involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth below under the heading "Forward
Looking Statements."

        On June 27, 1996, the Company completed the Restructuring with the
Partnership, which was accounted for as a change in legal organization but not
in the enterprise of the Partnership. Therefore, the financial statements of the
Company give effect to the Restructuring as a recapitalization of the
Partnership into the Corporation. References to the Company in this Report refer
to the financial condition and results of operations of the Partnership on a
consolidated basis for all periods prior to June 27, 1996.

         The Company, through its subsidiaries Pacific Thrift and PacificAmerica
Centers, is engaged in the business of originating, purchasing and selling
mortgage loans secured primarily by one-to-four family residences. The Company's
primary source of revenue is the recognition of gains upon sale of loans. Most
loans sold by the Company until the fourth quarter of 1996 were sold for a cash
premium received on the date of sale. Beginning in the fourth quarter of 1996,
the Company began selling loans under agreements providing that it would retain
an interest in the purchasers' residual interest in excess spread in each
securitization pool in which the Company's loans were placed by the purchaser.
The Company recognizes gain from the sale of these loans as the present value of
the interest-only strips, if any, and/or excess spread in which it retains
interests under its agreements with the purchasers of the loans. See "Certain
Accounting Considerations," below.





                                      -41-
<PAGE>   42
        The Company has increased its loan origination volume from $171.0
million for 1995 to $769 million during 1997, representing a growth rate of 450%
over this three year period. This increase in loan origination volume was
primarily due to the expansion of the Company's lending operations from one
state (California) in 1994 to 50 states by December 31, 1997.

        Until the sale of the assets of CRC and LPPC and the stock of CRCWA as
of December 31, 1996, the Company operated two business segments: the subprime
residential mortgage lending business and the trust deed foreclosure services
business. See Note 15 in the Notes to Consolidated Financial Statements. The
Company's primary business has always been subprime residential mortgage
lending, and in November 1996, the Company sold CRC, LPPC and CRCWA in order to
devote all of its financial and human resources to its primary lending business.
Since January 1, 1997, the Company has operated only its mortgage lending
business.

CERTAIN ACCOUNTING CONSIDERATIONS

        In 1995, the Company began originating a substantial portion of its
loans for sale in securitization transactions. In 1996, the Company determined
to concentrate exclusively on this business. In 1995 and the first three
quarters of 1996, the Company sold its loans for a cash premium with no residual
interest in loans sold. The Company determined that it would yield higher profit
margins if it retained an interest-only strip in loans sold for securitization,
and in the fourth quarter of 1996, it revised its primary loan sale agreements
to provide for an interest-only strip in lieu of a cash premium. In accordance
with these agreements, in 1997, a substantial majority of the Company's loans
were sold in securitization transactions in which the Company retains an
interest-only strip.

        The interest-only strip receivable is recorded as a result of the
Company's sale and securitization of real estate loans. Interest-only strip
receivables are recorded at their estimated fair value. The fair value is based
on the present value of the expected future cash flows. The Company estimates
future cash flows from this interest-only strip receivable utilizing
assumptions that it believes are consistent with those that would be utilized
by an unaffiliated third party purchaser. To the Company's knowledge, there is
no active market for the sale of this interest-only strip receivable.

        The fair value of the interest-only strip receivable is determined by
computing the present value of the excess cash flows based on the weighted
average coupon and estimated prepayment penalties received on the loans sold
over the sum of: (i) the coupon on the senior interests, (ii) the contracted
servicing fee, (iii) expected losses to be incurred on the portfolio of loans
sold over the lives of the loans, (iv) overcollateralization; and (v) fees
payable to the trustee and the monoline insurer. The cash flow model uses
prepayment and default assumptions that market participants would be expected
to use for similar financial instruments that are subject to use for similar
financial instruments that are subject to prepayment, credit and interest rate
risk.

        The cash flows are then discounted at an interest rate that the Company
believes an unaffiliated third-party purchaser would require as a rate of
return on such a financial instrument. To the extent that actual future excess
cash flows are different from estimated excess cash flows, the fair value of
the Company's interest-only strip will be adjusted quarterly with corresponding
adjustments made to earnings in that period.

        The Company builds overcollateralization from the excess cash flows.
The current amount of such overcollateralization built through cash flows is
part of the interest-only strip receivable and earns a market rate of interest.




                                      -42-
<PAGE>   43
        As of December 31, 1997, the Company adjusted the fair value of its
interest-only strip receivable by approximately $2.3 million, which reflected
the use of the "cash out" method of estimating future cash flows from the
various mortgage trusts. The Company believes the "cash out" method is a
preferred methodology for estimating ultimate residual cash flows used to
determine the fair value of its interest-only strip receivables at each
reporting period in accordance with the requirements of SFAS No. 115. The "cash
out" method assumes that the cash flows placed by the mortgage pool trustee in
an overcollateralization account are not considered available until they are
received by the Company. The impact of this change in estimate adjustment on
the December 31, 1997 fair value relates primarily to loans sold and/or
securitized in the fourth quarter of 1997. During 1997, the Company utilized a
modified "cash in" method of modeling the cash flows which included some
accelerated amortization of the interest only strip receivable asset on loans
sold and securitized prior to the fourth quarter of 1997. In March, 1998, the
Company obtained and independent valuation and report of the interest-only
strip receivable as of December 31, 1997, which, using the "cash out" method of
modeling cash flows, determined fair values of the interest-only strip
receivable. The fair value of the interest-only strip receivable reflected on
the Statement of Financial Condition at December 31, 1997 is consistent with
the results of that report.

        The fair value at December 31, 1997 can be calculated with a constant
prepayment rate assumption on the Aames 1996-4 pool of 36%, and constant
prepayment rate assumptions on the Advanta 1997-1, 1997-2, 1997-3 and 1997-4
and PacificAmerica 1997-1 pools of 26% to 27%; a 50 basis point annual loss
rate on each of its pools (after the first six months) with a three month ramp
up period; and an 11% discount rate on estimated cash flows from each of its
pools. Other combinations of these assumptions could produce similar results.

        It is possible that these assumptions could change in the near future,
due to changes required by future accounting pronouncements, the general
economy, adverse changes in the securitization market, and actual prepayment
and default experience which vary from the assumed rates, which would require
adjustments in the reported fair value of the interest-only strip receivable.
As a result, the actual cash flows received by the Company could differ
significantly from the modeled cash flows using current assumptions. The
estimated fair value of the Company's interest-only strip receivable is
reviewed quarterly with required adjustments, if necessary, made to earnings in
that period. The Company intends to obtain an annual third party valuation of
its interest-only strip receivables as further assurance regarding the
Company's valuation methodology.




                                      -43-
<PAGE>   44

        The following table compares the actual loan losses through February 28,
1998 for each of the Company's securitization pools with the loan loss reserve
for each pool used by the Company to value its interest-only strip receivables
in those pools.

                     COMPARISON OF ACTUAL CUMULATIVE LOSSES
                             WITH LOAN LOSS RESERVES

<TABLE>
<CAPTION>
                                                         Actual
               Pool                 Securitization       Cumulative     Loan Loss
               Description          Date                 Losses         Reserve
               -----------          --------------       ----------     ---------
               <S>                  <C>                   <C>            <C>
               Aames 96-4           Nov 96                .09%           1.57%
               Advanta 97-1         Feb 97                .00%           1.94%
               Advanta 97-2         May 97                .00%           1.93%
               Advanta 97-3         Aug 97                .00%           2.04%
               Advanta 97-4         Nov 97     (not available due to recent age of loans)
               PAMM 97-1            Dec 97     (not available due to recent age of loans)
</TABLE>

        The interest only strip receivables retained by the Company are
accounted for under SFAS 115 "Accounting for Investments in Certain Debt and
Equity Marketable Securities." As an interest-only strip receivable is subject
to significant prepayment risk, and therefore has an undetermined maturity date,
it cannot be classified as held to maturity. The Company has chosen to classify
its interest-only strip receivables as trading securities. Based on this
classification, the Company is required to mark these securities to fair value
with the accompanying increases or decreases in fair value being recorded as a
component of





                                      -44-
<PAGE>   45

gain on sale of loans. The determination of fair value is based on the
previously mentioned valuation methodology, and the Company assesses fair
value quarterly.

        As the gain recognized in the year of sale includes the present value
of the estimated future cash flows from the interest only strip receivables, the
amount of cash actually received over the lives of the loans normally exceeds
the gain previously recognized at the time the loans were sold, and, therefore,
residual interest income is recognized over the life of the loans securitized.

        There can be no assurance that future performance of the above
identified securitization pools will remain positive relative to the Company's
initial assumptions, particularly since the loans in these pools were only
originated in September 1996 or more recently.

FINANCIAL CONDITION

AT DECEMBER 31, 1997 COMPARED WITH DECEMBER 31, 1996

        Total consolidated assets of the Company increased $117.7 million
(106.8%) to $227.9 million at December 31, 1997 from $110.2 million at December
31, 1996. The increase resulted primarily from the increase in interest-only
strip receivables, cash and cash equivalents and loans held for sale, partially
offset by decreases in receivable for mortgage loans shipped, loans receivable,
and REO. Interest-only strip receivable increased $82.7 million (706.8%), to
$94.4 million at December 31, 1997, from $11.7 million at December 31, 1996,
reflecting a substantially higher volume of loans sold for securitization in
1997 and a full year of securitization transactions in which the Company
retained residual interests. See "Business -- Lending Activities - Loan Sales
and Securitizations." Cash and cash equivalents increased $57.5 million (668.6%)
to $66.1 million at December 31, 1997, from $8.6 million at December 31, 1996,
due to timing of payments for loan sales in December of each year. Loans held
for sale increased $17.2 million (95.0%), to $35.3 million at December 31, 1997,
from $18.1 million at December 31, 1996. A receivable for mortgage loan sales of
$24.3 million was held at December 31, 1996 for a pool of loans sold to Advanta,
which was paid in January 1997; no similar item was held at the end of 1997.
Loans receivable decreased $12.9 million (38.5%) to 20.6 million from $33.5
million, due to the Company's strategic decision to cease portfolio lending in
1996 and sell portfolio loans to raise additional funds for its mortgage banking
business. REO decreased $2.3 million (53.5%) to $2.0 million at December 31,
1997, from $4.3 million at December 31, 1996, due to the reduction in the
Company's loan portfolio and sales of REO held during 1997.

        Total liabilities increased $91.2 million (103.3%) to $179.5 million at
December 31, 1997, from $88.3 million at December 31, 1996. The increase
resulted from an increase in total thrift certificates payable, notes payable
and deferred income tax liability. Total thrift certificates payable increased
$51.5 million (63.6%), to $132.5 million from $81.0 million, reflecting





                                      -45-
<PAGE>   46



increased issuance of thrift certificates to fund Pacific Thrift's lending
operations. Notes payable increased $25.0 million (757.6%) to $28.3 million at
December 31, 1997 from $3.3 million at December 31, 1996, reflecting advances
received by the Company on interest-only strip receivables under arrangements
with Advanta and Merrill Lynch. See "Business -- Lending Activities - Loan Sales
and Securitizations." The deferred income tax liability increased by $12.4
million to $12.1 million at December 31, 1997, primarily from the deferred tax
liability primarily related to the interest only strip offset by deferred tax
assets primarily related to the net operating loss carryforwards. Accounts
payable and accrued expenses increased $3.9 million (177.3%), to $6.1 million
from $2.2 million, due primarily to the accrual of executive bonuses of $2.5
million, the Supplemental Employee Retirement Plan accrual of $.6 million and
accrued interest on the residual financing note payable of $.7 million.

        Total stockholders' equity increased $26.4 million, to $48.4 million at
December 31, 1997 from $22.0 million at December 31, 1996, due to consolidated
net income of $17.1 million in 1997 and net proceeds from exercise of General
Partner and Subscriber Warrants of $9.3 million.

        AT DECEMBER 31, 1996 COMPARED WITH DECEMBER 31, 1995.

        Total consolidated assets of the Company increased $27.3 million (32.9%)
to $110.2 million at December 31, 1996 from $82.9 million at December 31, 1995.
The increase resulted primarily from increases in a receivable for mortgage loan
sales and interest-only strip receivable, partially offset by decreases in
loans receivable, cash and cash equivalents, and goodwill. A receivable for
mortgage loan sales of $24.3 million was held at December 31, 1996 for a pool of
loans sold to Advanta, which was paid in January 1997; no similar item was held
in 1995. Interest only strip receivable increased $9.0 million, to $11.7 million
from $2.7 million, due to the Company's retention of an interest in excess
spread on loans sold for securitization under agreements with Aames and Advanta.
See "BUSINESS -- Lending Activities - Loan Sales and Securitizations." Loans
receivable decreased $10.4 million (23.7%) to $33.5 million from $43.9 million,
due to the Company's strategic decision to cease portfolio lending in 1996 and
sell portfolio loans to raise additional funds for its mortgage banking
business. Cash and cash equivalents decreased by $1.9 million (18.1%) to $8.6
million from $10.5 million, due to timing of payments for loan sales in
December. Goodwill decreased $1.8 million (100%) due to the sale of CRC, LPPC
and CRCWA.

        Total liabilities increased $14.1 million (19.0%) to $83.3 million at
December 31, 1996 from $74.2 million at December 31, 1995. The increase resulted
from an increase in total thrift certificates payable, partially offset by
declines in note payable, accounts payable and partnership withdrawals payable.
Total thrift certificates payable increased $20.8 million (34.5%), to $81.0
million from 60.2 million, reflecting increased issuance of thrift certificates
to fund Pacific Thrift's lending operations. Note payable decreased





                                      -46-
<PAGE>   47

$3.5 million (51.5%) to $3.3 million from $6.8 million, due to pay downs of the
bank loan in 1996 offset by an advance on excess yield of $2.6 million from
Aames, which will be repaid from excess spread payments on loans sold by the
Company to Aames for securitization. The remaining balance of $745,000 on the
bank loan was completely paid off in January 1997. Accounts payable and accrued
expenses decreased $1.8 million (45.0%), to $2.2 million from $4.0 million, due
to the sale of CRC. Partnership withdrawals payable of $1.1 million were paid
off in 1996 immediately following the Restructuring.

        Total stockholders' equity increased $13.3 million, due to consolidated
net income of $4.2 million in 1996 and the net proceeds of the Company's Rights
Offering and Public Offering in 1996.

RESULTS OF OPERATIONS

        YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

        GENERAL

        The Company reported net income of $17.1 million for 1997, an increase
of $12.9 million (307.1%) from $4.2 million in 1996, compared with a net loss of
$1.7 million for 1995. The increase in net income is due primarily to a
substantial increase in gain on sale of loans in 1997, resulting from a
substantial increase in loan originations in 1997.

        INTEREST INCOME AND EXPENSE

        Net interest income before provision for loan losses decreased $1.3
million (20.0%), to $5.2 million for 1997 from $6.5 million for 1996. Total
interest income increased $.2 million (1.7%), to $11.7 million for 1997 from
$11.5 million for 1996. Interest expense increased $1.5 million (30.0%), to $6.5
million for 1997 from $5.0 for 1996, due to increases in total outstanding
thrift certificates and notes payable.

        PROVISION FOR LOAN LOSSES

        The provision for loan losses increased $1.9 million (158.3%), to $3.1
million for 1997 from $1.2 million for 1996. The increase in the provision was
made to reflect an increase in the reserve for $8.4 million of piggyback loans
reclassified as held for sale in December 1997 and sold in January 1998 at a
discount of approximately 24%. As this discount was fully reserved at December
31, 1997, the effect was that the sale resulted in a nominal gain.

        The calculation of the adequacy of the allowance for loan losses is
based on a variety of factors, including loan classifications and underlying
loan collateral values, and is not directly proportional to the level of
nonperforming loans. See "BUSINESS -- Classified Assets and Loan Losses."





                                      -47-
<PAGE>   48

        NONINTEREST INCOME AND EXPENSE

        Total noninterest income increased $52.1 million (173.7%), to $82.1
million for 1997 from $30.0 million for 1996, reflecting an increase in gain on
sale of loans. Gain on sale of loans increased $52.5 million (179.8%) to $81.7
million for 1997 from $29.2 million for 1996. Total noninterest expense
increased $25.7 million (88.9%) to $54.6 million for 1997 from $28.9 million for
1996, due to expansion of the Company's mortgage banking business, which
required the addition of more employees and office space. Salary and related
benefits increased $14.9 million (102.1%) to $29.5 million in 1997 from $14.6
million in 1996, and general and administrative expenses increased $12.1 million
(100.8%), to $24.1 million in 1997 from $12.0 million in 1996, because of
expanded mortgage banking activities.

        INCOME TAXES

        Income tax expense from continuing operations was $12.5 million for
1997, compared to $1.7 million for 1996, as a result of the $23.1 million
increase in income before income taxes, to $29.6 million for 1997 from $6.5
million for 1996.

        YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

        GENERAL

        The Company reported net income of $4.2 million for the year ended
December 31, 1996, compared with a net loss of $1.7 million for the year ended
December 31, 1995. The increase in net income is due primarily to a $20.3
million increase in gain on sale of loans in 1996, which has resulted from
steady increases in the Company's loans originations over the past year. Net
interest income also increased $2.1 million for the year ended December 31,
1996, primarily due to an increase in total interest income resulting from the
Company's retention of interest income on loans originated for sale prior to the
date of their securitization.

        INTEREST INCOME AND EXPENSE

        Net interest income before provision for loan losses increased $2.1
million (47.7%), to $6.5 million for the year ended December 31, 1996 from $4.4
million for the year ended December 31, 1995. Total interest income increased
$1.9 million (19.8%), to 11.5 million for the year ended December 31, 1996 from
$9.6 million for the year ended December 31, 1995 as a result of interest
accrued on loans originated and sold. Interest expense decreased $.2 million
(3.8%), to $5.0 million for the year ended December 31, 1996 from $5.2 million
for the year ended December 31, 1995, due to declines in interest rates paid on
thrift certificates, partially offset by an increase in total outstanding thrift
certificates.

        PROVISION FOR LOAN LOSSES





                                      -48-
<PAGE>   49

        The provision for loan losses decreased $2.1 million (63.6%), to $1.2
million for the year ended December 31, 1996 from $3.3 million for the year
ended December 31, 1995, reflecting a $10.4 million decrease in the total amount
of portfolio loans held during 1996.

        The calculation of the adequacy of the allowance for loan losses is
based on a variety of factors, including loan classifications and underlying
loan collateral values, and is not directly proportional to the level of
nonperforming loans. See "BUSINESS -- Classified Assets and Loan Losses."

        NONINTEREST INCOME AND EXPENSE

        Total noninterest income (not including income of CRC, LPPC and CRCWA,
which are reflected as discontinued operations due to their sale in 1996)
increased $20.6 million (219.1%), to $30.0 million for the year ended December
31, 1996 from $9.4 million for the year ended December 31, 1995. Income from
discontinued operations was $.4 million in 1996 compared to $.9 million in 1995.
In addition, the Company incurred a $1.0 million loss on the sale of CRC, LPPC
and CRCWA, primarily from a write-off of related goodwill. The primary source of
the increase was the $20.3 million increase in gain on sale of loans, to $29.2
from $8.9 million. Total noninterest expense (not including expenses of CRC,
LPPC and CRCWA, which are reflected as discontinued operations due to their sale
in 1996) increased $14.6 million (102.1%) to $28.9 million for the year ended
December 31, 1996 from $14.3 million for the year ended December 31, 1995, due
to expansion of the Company's mortgage banking business which required the
addition of more employees and office space. Salary and related benefits
increased $8.6 million (143.3%) to $14.6 million from $6.0 million, and general
and administrative expenses increased $6.8 million (130.8%), to $12.0 million
from $5.2 million, because of expanded mortgage banking activities. Expense on
operation of REO decreased $.5 million (41.7%), to $.7 million from $1.2
million.

        INCOME TAXES (BENEFIT)

        Income tax expense from continuing operations was $1.7 million in 1996,
compared to an income tax benefit of $1.2 million in 1995. During 1996, the
Company reversed valuation allowances for deferred tax assets totaling $1.7
million, based upon events and earnings in 1996 which management believes
indicate it is more likely than not that sufficient revenue will be generated in
the future to use these deferred tax assets. See Note 8 to the Consolidated
Financial Statements for additional information.

NET INTEREST INCOME ANALYSIS

        The following table sets forth certain information concerning average
interest-earning assets and interest bearing liabilities and the yields and
rates thereon. Average balances are calculated on a quarterly basis and
nonaccrual loans have been included in interest earning assets for the
computations. Fee income on loans included in interest income and in the
calculation of average yields was $.2 million, $.3 million and $.7 million
for the years ended December 31, 1997, 1996 and 1995, respectively.





                                      -49-
<PAGE>   50

 YIELDS AND RATES ON INTEREST-EARNING ASSETS AND INTEREST-BEARING LIABILITIES

<TABLE>
<CAPTION>
                                              Year Ended                              Year Ended
                                          December 31, 1997                       December 31, 1996
                                          -----------------                       -----------------
                                  Average                    Yield/       Average                    Yield/
                                  Balance     Interest        Rate        Balance      Interest       Rate
                                -----------  -----------  ------------ ------------- ------------ -------------
                                                                                        (Dollars in Thousands)
<S>                                  <C>          <C>              <C>        <C>          <C>           <C>
             Assets

Interest-earning assets:
  Loans                             $90,958      $11,332           12.46%    $81,492      $11,174        13.71%
  Interest-bearing deposits in
  other financial institutions
  and securities purchased under
  agreements to sell                  8,026          398            4.96%      6,155          328         5.33%
                                    -------      -------            ----     -------      -------       ------
    Total interest-earning assets    98,984       11,730           11.85%     87,647       11,502        13.12%
                                    =======       ======           =====      ======       ======        ======
Noninterest-earning assets:
  Cash and due from banks             7,864                                    6,212
  Premises & equipment, net           7,868                                    1,875
  Real estate acquired in settlement
  of loans                            3,173                                    3,445
  Other Assets                       62,714                                    6,668
                                     ------                                  -------
    Total noninterest-earning assets 81,619                                   18,200
                                     ------                                   ------
Less allowance for loan losses        2,001          -0-                       3,712
                                      -----    ---------                     -------
                                    182,604       11,730                     102,135       11,502
                                    =======       ======                     =======       ======
   Liabilities & Stockholders'
   Equity/Partners' Capital
   Interest-bearing liabilities:
     Notes payable                   20,495        1,033            5.04%      3,831          553        14.43%
     Savings deposits                21,516        1,099            5.11%     31,299        1,627         5.20%
     Time CDs                        75,007        4,408            5.88%     47,583        2,787         5.86%
                                     ------        -----            -----    -------      -------       ------
  Total interest-bearing
    liabilities                     117,018        6,540            5.59%     82,713        4,967         6.01%
                                    =======        =====            =====     ======        =====         =====
Noninterest-bearing liabilities:
  Accounts payable & accrued
  expenses                           14,923                                    4,308
                                     ------                                   ------
Total liabilities                                                             87,021
Stockholders' Equity/Partners'
                                     ------         -----                    -------        -----
Capital                              32,554                                   15,114

                                    164,495        6,540                    $102,135        4,967
                                    =======        =====                    ========        =====
Net interest income/spread                         5,190            6.26%                   6,535         7.12%
                                                   =====            =====                   =====         =====
Net interest margin                                                 5.24%                                 7.46%
Net Income (loss)                                 17,095                                    4,162
                                                  ======                                    =====
Average interest earning assets to
average interest bearing liabilities                                 .85%                                1.060%
</TABLE>





                                      -50-
<PAGE>   51

        Interest income and interest expense can fluctuate widely based on
changes in the level of interest rates in the economy. Pacific Thrift attempts
to minimize the effect of interest rate fluctuations on net interest margins by
matching as nearly as possible interest sensitive assets and interest sensitive
liabilities. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Asset/Liability Management."

        Net interest income can also be affected by a change in the composition
of assets and liabilities, such as when higher yielding loans replace lower
yielding loans. Net interest income is affected by changes in volume and changes
in rates. Volume changes are caused by differences in the level of earning
assets and interest-bearing liabilities. Rate changes result from differences in
yields earned on assets and rates paid on liabilities.

        The following table presents the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and
interest-bearing liabilities due to changes in volume and interest rates. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume; (i.e.,
changes in volume multiplied by new rate) and (ii) changes in rate (i.e. changes
in rate multiplied by old volume). For purposes of this table, changes
attributable to both rate and volume which cannot be segregated, have been
allocated proportionately to changes due to volume and changes due to rate.


                              Rate Volume Analysis
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                          1997 compared to 1996                  1996 compared to 1995
                                           Increase (decrease)                    Increase (decrease)
                                            due to change in                       due to change in
                                    -------------------------------      ---------------------------------
                                                Yield/          Net                     Yield/        Net
                                    Volume       Rate         Change      Volume         Rate        Change
                                    -----       ------        ------       -----         ----        -----
<S>                                 <C>         <C>             <C>        <C>           <C>         <C>
Interest-earning assets:
Loans                               1,179       (1,021)         158        2,439         (150)       2,289
Interest-bearing deposits
in other financial
institutions and securities
purchased under
agreements to sell                     93          (23)          70         (308)         (56)        (364)
                                    -----       ------        -----        -----         ----        -----
Total interest-earning
assets                              1,272       (1,044)         228        2,131         (206)       1,925
                                    =====       ======        =====        =====         ====        =====

Interest-bearing liabilities:
Notes payable                         840         (360)         480       (1,164)         338         (826)
Savings deposits                     (500)         (28)        (528)         936          (26)         909
Time CDs                            1,612            9        1,621         (148)        (168)        (315)
                                   ------       ------       ------       ------       ------       ------
Total interest-bearing
liabilities                         1,952         (379)       1,573         (376)         144         (232)
                                    =====       ======        =====        =====         ====        =====
</TABLE>





                                      -51-
<PAGE>   52
<TABLE>
<CAPTION>
                                                       Rate Volume Analysis
                                                      (Dollars in Thousands)
                                    -------------------------------------------------------
                                     1997 compared to 1996           1996 compared to 1995
                                      Increase (decrease)             Increase (decrease)
                                       due to change in                due to change in
                                    -----------------------      --------------------------
                                             Yield/     Net                Yield/    Net
                                    Volume    Rate    Change      Volume    Rate    Change
                                    -----    ------   ------       -----    ----    ------
<S>                                 <C>      <C>      <C>          <C>      <C>      <C>
Change in net interest income       (680)    (665)    (1,345)      2,507    (350)    2,157
                                    ====     ====     =====        =====    ====     =====
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

        The Company's primary operating cash requirements include the funding or
payment of: (i) loan originations; (ii) fees and expenses incurred in connection
with securitizations; (iii) income taxes; (iv) capital expenditures; and (v)
other operating and administrative expenses. The Company generates cash flow
from loans sold for securitization, advances on interest-only strip receivables,
deposits issued by Pacific Thrifty to fund its lending operations, whole loan
sales, principal payments and interest income on portfolio loans, and sale of
REO.

        The Company has obtained advances on interest-only strips from Advanta
on loans sold to it for securitization, which are payable from the cash flow
payments made on the interest-only strips. The Company has also obtained
advances on interest-only strips from Merrill Lynch on loans securitized through
it, which are payable one year from the date of the advance, unless renewed at
the option of Merrill Lynch.

        Certificates of deposit which are scheduled to mature in one year or
less from December 31, 1997 totaled $113.7 million. Based upon historical
experience, management believes that a significant portion of such deposits will
be renewed to the extent deemed desirable by management. In general, depositors
have historically tended to renew deposits when the rates paid on such deposits
remain competitive with rates offered by comparable financial institutions. From
time to time during 1994 and 1995, management of Pacific Thrift intentionally
took steps to reduce deposit renewals in order to reduce the total amount of
deposits. These steps included





                                      -52-
<PAGE>   53

reducing the interest rates offered on maturing deposits and declining to renew
certain large deposits.

        Pacific Thrift maintains minimum levels of liquid assets as required
under the liquidity policy adopted by the board of directors of Pacific Thrift.
The relationship between short-term liquid assets and total deposits at December
31, 1997 was 68.0%, which exceeded the 10% minimum established by the Board. At
December 31, 1996 and 1995, the liquidity ratio was 49.0% and 31.7%,
respectively.

        Pacific Thrift has a federal funds credit line with Wells Fargo Bank,
bearing interest at the federal funds rate as announced from time to time by the
Federal Reserve Board, in the amount of $5.0 million. The line is intended to
support short term liquidity, and is not expected to be used for more than ten
consecutive days or more than 12 times during any 30 day period. At December 31,
1997, there were no outstanding borrowings under the credit line.

        Pacific Thrift is subject to certain leverage and risk-based capital
adequacy standards applicable to FDIC-insured institutions. At December 31,
1994, Pacific Thrift was classified by the FDIC as "undercapitalized." However,
by March 31, 1995, Pacific Thrift was reclassified by the FDIC as "adequately
capitalized." As of December 31, 1996, Pacific Thrift's regulatory capital
levels have increased to levels meeting the FDIC's definition of "well
capitalized;" however, due to the existence of the MOU requiring Pacific Thrift
to maintain certain capital levels, it is still classified as "adequately
capitalized." See "SUPERVISION AND REGULATION -- Federal Law -- Capital Adequacy
Guidelines."

        The Company used $45.6 million net cash in operating activities in 1997,
compared to $23.0 million in 1996 and $4.9 million in 1995, reflecting the
funding of substantially more loans for sale and securitization in 1998. The
Company realized net cash from investing activities of $17.1 million in 1997.
The Company used net cash from investing activities of $1.8 million in 1996,
primarily due to an increase in loan receivables in 1996 before the Company
determined to discontinue portfolio. The Company realized net cash from
investing activities of $13.1 million in 1995, reflecting primarily proceeds
from sale of REO. The Company realized $85.9 million net cash from financing
activities in 1997, reflecting a net increase of $51.6 million in thrift
certificates, $26.2 million in advances on interest-only strips and $9.3 million
from the issuance of common stock upon exercise of General Partner and
Subscriber Warrants and stock options. The Company realized $22.8 million net
cash from financing activities in 1996, reflecting primarily a net increase of
$20.8 million in thrift certificates, and $10.8 million in proceeds form the
Public Offering and Rights Offering. The Company used $17.4 million net cash in
financing activities in 1995, reflecting a $9.3 million net decrease in thrift
certificates and a $8.0 million paydown of a bank loan.

        At December 31, 1997 the Company had a deferred tax asset of $22,635,000
which is primarily related to net operating loss carryforwards. The Company also
has deferred tax liabilities of $34,782,000 which are primarily related to the
interest-only strips receivable. Over the next few years, the Company expects to
generate future taxable income from the interest-only strips receivable.
Management believes that it is more likely than not the such future taxable
income will be sufficient for realization of the deferred tax assets.

ASSET/LIABILITY MANAGEMENT

        The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's "interest rate sensitivity gap". An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest rate sensitivity
gap is defined as the difference between the amount of interest-earning assets
anticipated, based upon certain assumptions, to mature or reprice within a
specific time period and the amount of interest-bearing liabilities anticipated,
based upon certain assumptions, to mature or reprice within that same time
period. A gap is considered positive when the amount of interest rate sensitive
assets exceeds the amount of interest rate sensitive liabilities. A gap is
considered negative when the amount of interest rate sensitive liabilities
exceeds the amount of interest rate sensitive assets. During a period of rising
interest rates, a negative gap would generally tend to adversely affect net
interest income while a positive gap would generally tend to result in an
increase in net interest income. During a period of declining interest rates, a
negative gap would generally tend to result in increased net interest income
while a positive gap would generally tend to adversely affect net interest
income. At December 31, 1997, total interest-bearing liabilities maturing or
repricing during each period exceeded total interest-earning assets maturing or
repricing in the same periods by $15.4 million, representing a negative
cumulative interest rate sensitivity gap ratio of 13%. However, because interest
rates for different asset and liability products offered by depository



                                      -53-
<PAGE>   54

institutions respond differently to changes in the interest rate environment,
the gap is only a general indicator of interest rate sensitivity.

        Pacific Thrift actively monitors its interest rate risk. The Board of
Directors of Pacific Thrift reviews its interest rate risk position no less than
quarterly.

        To the extent consistent with its interest rate spread objectives,
Pacific Thrift attempts to reduce its interest rate risk and has taken a number
of steps to match its interest sensitive assets and liabilities to minimize the
potential negative impact of changing interest rates. Pacific Thrift has focused
on making adjustable rate loans, virtually all of which adjust quarterly, and
focuses its investment activity on short-term obligations of banks and U.S.
government securities.

        The following table sets forth the interest rate sensitivity of Pacific
Thrift's assets and liabilities at December 31, 1997 on the basis of certain
assumptions. Except as stated below, the amounts of assets and liabilities shown
which reprice or mature during a particular period were determined in accordance
with the earlier of the repricing timing or contractual term of the asset or
liability. Pacific Thrift has assumed that its savings accounts (passbook
accounts and money market accounts), which totaled $18.8 million at December 31,
1997 reprice immediately. Certificates of deposit are included in the table
below at their dates of maturity.

        Certain shortcomings are inherent in the method of analysis presented in
the following table. For example, interest rate floors on some adjustable rate
loans can have the effect of increasing the net interest income as interest
rates decline or, conversely, limiting increases in net interest income as
interest rates rise. Also, loan prepayments and early withdrawal of certificates
of deposit could cause the interest sensitivities to vary from what appears in
the table. Finally, the ability of many borrowers to service their adjustable
rate debt may be adversely affected by an interest rate increase.










                                      -54-

<PAGE>   55

              INTEREST RATE SENSITIVITY GAP AS OF DECEMBER 31, 1997
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                             After
Assets or Liabilities Which                1 Day       3 Months  Sixs Months         1-5         5
     Mature or Reprice               to 3 Months    to 6 Months    to 1 Year       Years     Years         Total
---------------------------          -----------    -----------  -----------       -----     -----       -------
<S>                                       <C>          <C>          <C>              <C>      <C>       <C>
Cash and Investments...............       61,137             --           --          --        --        61,137
Variable Rate Loans Receivable.....       18,139             --           --          --        --        18,139
Fixed Rate Loans Receivable........          428             --           --         299      1810         2,537
Loans Held for Sale (1)............       35,280             --           --          --        --        35,280
                                         -------      ---------    ---------         ---      ----       -------
  Interest-earning assets..........      114,984             --           --         299      1810       117,093
                                         -------      ---------    ---------         ---      ----       -------
Certificates of deposit............       20,988         32,649       59,999          95        --       113,731
Savings accounts...................       18,793             --           --          --        --        18,793
                                          ------      ---------    ---------   --------- ---------        ------
  Interest-bearing liabilities.....       39,781         32,649       59,999          95        --       132,524
                                          ------         ------       ------          -- ---------       -------
Interest rate sensitivity gap......       75,203       (32,649)     (59,999)         204      1810      (15,431)
Cumulative interest rate
  sensitivity gap..................       75,203         42,554     (17,445)    (17,241)  (15,431)      (15,431)

Interest rate sensitivity ratio(2).         2.89             --          --        3.15        --           .88
Cumulative interest rate
  sensitivity gap ratio (3)........          .65            .37        (.15)       (.15)     (.13)         (.13)
</TABLE>


(1)     Includes loans sold by each month end, for which cash has not yet been
        received.

(2)     The interest rate sensitivity gap ratio represents total
        interest-earning assets divided by total interest-bearing liabilities.

(3)     The cumulative interest rate sensitivity gap ratio represents the
        cumulative interest rate sensitivity gap divided by total
        interest-earning assets.


IMPACT OF INFLATION AND CHANGING PRICES

        The financial statements and notes thereto presented herein have been
prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time due to inflation. The impact of inflation is reflected
in the increased cost of operations of the Company and its subsidiaries. Like
most mortgage companies and industrial loan companies, nearly all the assets and
liabilities of the Company and Pacific Thrift are monetary. As a result,
interest rates have a greater impact on the Company's consolidated performance
than do the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or to the same extent as the price of
goods and services.





                                      -55-
<PAGE>   56

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

        In February 1997, the Financial Accounting Standards Board ("FASB")
issued its Statement of Financial Accounting Standards No. 129 ("SFAS No.
129"), "Disclosure of Information about Capital Structure." SFAS 129 established
disclosure requirements regarding pertinent rights and privileges of outstanding
securities. Examples of disclosure items regarding securities include, though
are not limited to, items such as dividend and liquidation preferences,
participation rights, call prices and dates, conversion or exercise prices or
rates. The number of shares issued upon conversion, exercise or satisfaction of
required conditions during at least the most recent annual fiscal period and any
subsequent interim period must also be disclosed. Disclosure of liquidation
preferences of preferred stock in the equity section of the balance sheet is
also required. SFAS 129 is effective for financial periods ending after December
15, 1997. The adoption of this standard did not have an impact on the Company's
financial position or results of operations.

        In June 1997, FASB issued SFAS 130, "Reporting Comprehensive Income."
SFAS 130 established disclosure standards for reporting comprehensive income in
a full set of general purpose financial statements. SFAS 130 is effective for
fiscal years beginning after December 15, 1997. The adoption of this standard
is not expected to have an impact on the Company's financial position or
results of operations.

        In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of
an Enterprise and Related Information" which is effective for periods beginning
after December 15, 1997. SFAS 131 established standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The adoption of
this standard is not expected to have an impact on the Company's financial
position or results of operations.
















                                      -56-
<PAGE>   57


DISCLOSURE ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS

        In February 1998 the FASB issued SFAS 132, "Disclosures About Pension
and Other Postretirement Benefits." This Statement revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans.

        This Statement is effective for fiscal years beginning after
December 15, 1997. Earlier application is encouraged. Restatement of disclosures
for earlier periods provided for comparative purposes is required unless the
information is not readily available, in which case the notes to the financial
statements should include all available information and a description of the
information not available.

YEAR 2000 COMPLIANCE INFORMATION

        The Company has undertaken a full assessment of its operations to
determine all functions which will be impacted by the limitations on existing
computer programs which use only two digits to identify a year in the date
field. Substantially all of the Company's operating software systems, including
loan origination, loan servicing, financial, human resource and payroll systems,
are outsourced to third party providers. The Company distributed a written
request for Year 2000 compliance information to all systems providers in the
fourth quarter of 1997 and the first quarter of 1998 and has received responses
from most providers. The loan origination, financial, human resources and
payroll systems providers have represented that they will implement upgrades
which make their systems Year 2000 compliant. The loan servicing and thrift
deposit system provider has indicated that it is currently undergoing
restructuring and testing needed to become compliant before the end of 1998. The
Company's PC and computer network operating system providers have posted
representations that they are each compliant on their Internet web sites.
Because its operating systems are outsourced, the Company does not expect to
incur any material costs in connection with the upgrades necessary to bring
these systems into Year 2000 compliance.

        The Company has also contacted Aames and Advanta, the servicers of loan
pools in which the Company holds interest-only strip receivables, to determine
their Year 2000 compliance, and expects that they will become compliant before
2000. The Company is similarly awaiting responses from its bank, investment bank
and appraisal service providers. The Company does not expect to incur any
material cost in connection with the upgrades necessary to bring the systems of
its service providers into Year 2000 compliance.





                                      -57-
<PAGE>   58

        During 1998, the Company plans to conduct internal testing of all of its
computer hardware units to determine their compatibility with Year 2000
information. It is anticipated that testing will be completed by the end of
1998. The Company anticipates that some of the older PC units may require
replacement in order to accept four digit date information. However, the Company
does not anticipate that the cost of these replacements will be material to the
Company.

SEASONALITY

        The Company's results of operations have not been materially affected by
seasonality.

RISK FACTORS

        The discussion in this Report contains certain forward-looking
statements relating to anticipated financial performance, business prospects and
business plans. Actual future results could differ materially from those
described in the forward-looking statements as a result of factors discussed
below. The Company cautions the reader, however, that these lists of risk
factors may not be exhaustive. The Company undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements that
may be made to reflect any future events or circumstances.

        RELIANCE ON CONTINUING SECURITIZATIONS. The Company has been able to
substantially increase its lending volume as a direct result of its ability to
sell for securitization substantial amounts of its new loan production. Any
change in the market for securitized subprime residential loans could have an
adverse impact the Company's ability to continue to increase or maintain the
growth of its mortgage banking business.

        RISKS OF GAIN ON SALE ACCOUNTING. The Company follows generally accepted
accounting principles to determine the present value of future cash flows on its
interest-only strip receivables retained in each securitization transaction. The
determination of value is made using certain assumptions developed by management
regarding prepayment and loss rates. Actual prepayment and loss rates are
affected by a variety of factors which cannot be predicted with certainty.
Therefore, there is a risk that the value of interest-only strip receivables
will require adjustment to reflect future events. See "Certain Accounting
Considerations" above for a detailed discussion of the various factors which
impact valuation of interest-only strip receivables.

        NEGATIVE CASH FLOW AND CAPITAL NEEDS. Upon the closing of each
securitization transaction, the Company recognizes gain on sale of the loans
securitized, representing the present value of anticipated cash flows from a
residual interest in the loans securitized. See "Certain Accounting
Considerations." The Company incurs significant expense in connection with a
securitization and generally incurs both current and deferred tax liabilities as
a result of the gain on sale. Net cash used in operating activities for 1997,
the first year in which the Company recognized significant gain on sale income,
was $45.6 million. The Company currently intends to continue its emphasis on
securitization of loans as its primary business activity, which requires that
the Company have access to external sources of cash to fund its operations. The
Company





                                      -58-
<PAGE>   59

currently relies primarily on funds provided by the issuance of thrift
certificates to fund operations of Pacific Thrift and advances provided by
Merrill Lynch on interest-only strip receivables retained on securitizations
completed through Merrill Lynch. The Company also sells whole loans for cash
from time to time as an additional source of cash to fund operations. The
Company has both warehouse and residual financing arrangements to fund its
operations. The Company is also considering additional sources of equity and/or
debt financing. There can be no assurance that any such sources will be
available to the Company.

        RISKS OF CONTRACTED SERVICING. The Company contracts with third parties
to service all of its loans sold for securitization. Aames services all loans in
the Aames 1996-4 pool and Advanta services all loans in each of the Advanta
pools in which the Company owns interest-only strip receivables. In addition,
Advanta services all loans in the PacificAmerica 1997-1 and 1998-1 pools under a
sub-servicing agreement with the Company. The Company is subject to risks
associated with inadequate or untimely service rendered by these loan servicers.
Many of the Company's borrowers require notices and reminders to keep their
loans current and to prevent delinquencies and foreclosures. Any failure by a
servicer to provide adequate or timely service could result in higher
delinquency rates and foreclosure losses on loan pools, which could have an
adverse impact on the value of the Company's interest-only strip receivables in
those pools.

        COMPETITION IN THE LENDING INDUSTRY. The subprime residential mortgage
industry is undergoing consolidation and increased competition, which may reduce
profit margins on the Company's lending business and may also have an adverse
impact the Company's ability to continue to increase or maintain the growth of
its mortgage banking business. Competition among industry participants includes
such competitive factors as borrower convenience, customer service, marketing
and distribution channels, amount and terms of loans, loan origination fees and
interest rates. Competition may lower the rates the Company charge to borrowers,
increase the cost of loan origination, reduce the volume of loan originations
and/or increase the demand for the Company's experienced personnel and the
potential for such personnel to leave the Company to join one of its
competitors.

        GOVERNMENT REGULATION. The Company's operations are subject to extensive
regulation, supervision and licensing by federal, state and local governmental
authorities and are subject to various laws and judicial and administrative
decisions imposing requirements and restrictions on its lending business. The
Company's consumer lending activities are subject to the Federal Truth-
in-Lending Act and Regulation Z (including the Home Ownership and Equity
Protection Act of 1994), the Federal Equal Credit Opportunity Act, as amended,
the Federal Real Estate Settlement Procedures Act and Regulation X, the Home
Mortgage Disclosure Act, the Federal Debt Collection Practices Act and the
National Housing Act of 1934, as well as other federal and state statutes and
regulations affecting the Company's activities. The Company is also subject to
the rules and regulations of, and examinations by, state regulatory authorities
with respect to its lending business. Pacific Thrift is subject to additional
extensive governmental supervision, regulation and control by the FDIC and the
California DFI, as well as various other agencies of the states in which it
conducts its lending business. In addition, Pacific Thrift is a party to a 1998





                                      -59-
<PAGE>   60

MOU with the FDIC, pursuant to which it is required to take certain actions. See
"BUSINESS - Supervision and Regulation."

        CHANGES IN ECONOMIC CONDITIONS. The risks associated with the Company's
business become more acute in any economic slowdown or recession, particularly
when accompanied by declining real estate values. Any material decline in real
estate values reduces the ability of borrowers to use home equity to support
borrowings and increases the risk of loss on outstanding loans. A sustained
period of increased delinquencies and losses or increased costs could adversely
affect the Company's ability to securitize or sell loans in the secondary market
and/or decrease the profitability of the Company's loan securitization business.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Net Interest Income Analysis" and "--Certain Accounting
Considerations."

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        See Item 14(a) 1-2.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

        None.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The information required by this Item with respect to directors and
compliance with Section 16(a) of the Securities Exchange Act of 1934 is
incorporated herein by reference to the information contained in the Proxy
Statement relating to the 1998 Annual Meeting of Share holders, which will be
filed with the Securities and Exchange Commission no later than 120 days after
the close of the year ended December 31 1997. Information with respect to
executive officers is included in Part I of this Form 10-K.

ITEM 11.  EXECUTIVE COMPENSATION

        The information required by this Item is incorporated herein by
reference to the information contained in the Proxy Statement relating to the
1998 Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission no later than 120 days after the close of the year ended
December 31, 1997.





                                      -60-
<PAGE>   61

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The information required by this Item is incorporated herein by
reference to the infor mation contained in the Proxy Statement relating to the
1998 Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission no later than 120 days after the close of the year ended
December 31, 1997.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information required by this Item is incorporated herein by
reference to the infor mation contained in the Proxy Statement relating to the
1998 Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission no later than 120 days after the close of the year ended
December 31, 1997.
















                                      -61-

<PAGE>   62
                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

        (a)(1) List of Financial Statements

               Financial Statements required to be filed hereunder are indexed
               on page 64 hereof.

        (a)(2) List of Financial Statement Schedules

        None.

        (a)(3) List of Exhibits

        The exhibits required to be filed hereunder are indexed on page S-1
        hereof.

        (b) The Company filed a Report on Form 8-K to report the completion of a
        securitization transaction as of December 18, 1997.

























                                      -62-

<PAGE>   63
                                   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, in the City of Los Angeles, State of
California, on March 27, 1998.


                                PACIFICAMERICA MONEY CENTER, INC.



                                By: /s/ JOEL R. SCHULTZ
                                   ---------------------------------------------
                                        Joel R. Schultz, Chief Executive Officer

        Pursuant to the requirements of the Securities Exchange Act of 1934,
this Registration Statement has been signed below by the following persons on
behalf of the Company in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
      Signature                                   Capacity                           Date
      ---------                                   --------                           ----
<S>                                   <C>                                       <C>


/s/ JOEL R. SCHULTZ                   Director, Chief Executive
---------------------------------     Officer and Chairman of the Board         March 27, 1998
    Joel R. Schultz


/s/ RICHARD D. YOUNG                  Director and Senior
---------------------------------     Executive Vice President                  March 27, 1998
    Richard D. Young


/s/ CHARLES J. SIEGEL                 Chief Financial and
---------------------------------     Accounting Officer                        March 27, 1998
    Charles J. Siegel


/s/ JAMES C. NEUHAUSER                Director
---------------------------------                                               March 27, 1998
    James C. Neuhauser


/s/ PAUL D. WEISER                    Director
---------------------------------                                               March 27, 1998
    Paul D. Weiser


/s/ ALAN SIEBLER                      Director
---------------------------------                                               March 27, 1998
    Alan Siebler
</TABLE>











                                      -63-


<PAGE>   64
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                                                        CONTENTS


       PACIFICAMERICA MONEY CENTER, INC. AND SUBSIDIARIES

                  Report of Independent Certified Public Accountants

                  Consolidated Balance Sheets
                      as of December 31, 1997 and 1996

                  Consolidated  Statements of Operations
                      for the years ended December 31, 1997, 1996 and 1995

                  Consolidated Statements of Changes in Stockholders'
                      Equity/Partners' Capital for the years ended December 31,
                      1997, 1996 and 1995

                  Consolidated Statement of Cash Flows
                      for the years ended December 31, 1997, 1996 and 1995

                  Notes to Consolidated Financial Statements
                      for the years ended December 31, 1997, 1996 and 1995

                  Supplemental Material

                      Schedule I - Consolidated Schedule - Financial Position
                           -December 31, 1997
                      Schedule II - Consolidating Schedule - Operations - year
                           ended December 31, 1997
                      Schedule III - Consolidating Schedule - Financial Position
                           -December 31, 1996
                      Schedule IV - Consolidating Schedule - Operations - year
                           ended December 31, 1996
                      Schedule V - Consolidating Schedule - Operations - year
                           ended December 31, 1995



<PAGE>   65

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Stockholders
PacificAmerica Money Center, Inc.

We have audited the accompanying consolidated balance sheets of PacificAmerica
Money Center, Inc. and subsidiaries (collectively, the Company) as of December
31, 1997 and 1996 and the related consolidated statements of operations, changes
in stockholders' equity/partners' capital, and cash flows for each of the three
years ended December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of PacificAmerica Money
Center, Inc. and subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and cash flows for each of the three years ended
December 31, 1997, in conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The consolidating information in
Schedules I, II, III, IV and V is presented for the purpose of additional
analysis of the consolidated financial statements rather than to present the
financial position and results of operations of the individual companies. The
consolidating information in Schedules I, II, III, IV and V has been subjected
to the auditing procedures applied to the audit of the consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the consolidated financial statements taken as a whole.


/s/ BDO Seidman, LLP

March 27, 1998
Los Angeles, California

                                      F-1
<PAGE>   66
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                                    CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,                                                      1997               1996
-----------------------------------------------------------------------------------------
<S>                                                       <C>                <C>
ASSETS

CASH AND CASH EQUIVALENTS (Note 2C)                       $ 66,090,000       $  8,640,000

RECEIVABLES                                                  1,532,000            603,000

RECEIVABLE FOR MORTGAGE LOANS SHIPPED (Notes 2E)                    --         24,310,000

NOTE RECEIVABLES                                             1,015,000          1,716,000

ACCRUED INTEREST RECEIVABLE                                  1,274,000          1,144,000

PREMIUM RECEIVABLE FOR LOANS SOLD                                   --          1,195,000

LOANS RECEIVABLE (Notes 2D, 2E, and 3)                      20,629,000         33,515,000

LOANS HELD FOR SALE, (Notes 2F and 3)                       35,280,000         18,148,000

INTEREST-ONLY STRIPS RECEIVABLE (Notes 2G, 2J and 4)        94,424,000         11,698,000

OTHER REAL ESTATE (Notes 2K and 5)                           2,028,000          4,285,000

PROPERTY AND EQUIPMENT (Notes 2L and 6)                      3,596,000          2,360,000

DEFERRED INCOME TAXES, NET (Notes 2N and 9)                         --            296,000

REFUNDABLE INCOME TAXES                                        222,000            730,000

OTHER ASSETS                                                 1,776,000          1,565,000
-----------------------------------------------------------------------------------------
                                                          $227,866,000       $110,235,000
=========================================================================================
</TABLE>


                                      F-2
<PAGE>   67
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                                    CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
December 31,                                                           1997               1996
----------------------------------------------------------------------------------------------
<S>                                                            <C>                <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

THRIFT CERTIFICATES PAYABLE (Note 7)
     Fully-paid certificates                                   $113,731,000       $ 56,343,000
     Installment certificates                                    18,793,000         24,659,000
----------------------------------------------------------------------------------------------
Total thrift certificates payable                               132,524,000         81,002,000

ACCOUNTS PAYABLE AND ACCRUED EXPENSES                             6,121,000          2,235,000

ACCRUED INTEREST PAYABLE                                            370,000            185,000

MORTGAGE NOTES PAYABLE                                                   --          1,557,000

NOTES PAYABLE (Note 8)                                           28,318,000          3,290,000

DEFERRED INCOME TAXES, net (Notes 2N and 9)                      12,147,000                 --
----------------------------------------------------------------------------------------------
Total liabilities                                               179,480,000         88,269,000
----------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 11, 12, and 16)
----------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (Note 13)
     Preferred stock, $.01 par value, shares authorized
         2,000,000; none issued and outstanding                          --                 --
     Common stock, $0.1 par value, shares authorized
         8,000,000; issued and outstanding 5,016,391 and
         3,740,300                                                   50,000             38,000
     Additional paid-in capital                                  27,079,000         17,381,000
     General partner warrants                                            --            385,000
     Retained earnings                                           21,257,000          4,162,000
----------------------------------------------------------------------------------------------
Total stockholders' equity                                       48,386,000         21,966,000
----------------------------------------------------------------------------------------------
                                                               $227,866,000       $110,235,000
==============================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>   68
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
Years ended December 31,                                         1997              1996              1995
---------------------------------------------------------------------------------------------------------
<S>                                                       <C>               <C>               <C>
INTEREST INCOME
     Loans receivable (Notes 2D, 2F and 3)                $11,333,000       $11,174,000       $ 8,885,000
     Deposits with financial institutions                     397,000           328,000           692,000
---------------------------------------------------------------------------------------------------------
Total interest income                                      11,730,000        11,502,000         9,577,000
---------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
     Thrift certificates greater than $100,000                 50,000            23,000             7,000
     Other thrift certificates                              5,457,000         4,391,000         3,813,000
     Notes payable                                          1,033,000           552,000         1,379,000
---------------------------------------------------------------------------------------------------------
Total interest expense                                      6,540,000         4,966,000         5,199,000
---------------------------------------------------------------------------------------------------------
Net interest income                                         5,190,000         6,536,000         4,378,000
PROVISION FOR LOAN LOSSES (Notes 2E and 3)                  3,087,000         1,151,000         3,289,000
---------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses         2,103,000         5,385,000         1,089,000
---------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
     Other income                                             345,000           777,000           545,000
     Gain on sales of loans (Note 2G)                      81,710,000        29,217,000         8,895,000
---------------------------------------------------------------------------------------------------------
Total noninterest income                                   82,055,000        29,994,000         9,440,000
---------------------------------------------------------------------------------------------------------
</TABLE>


                                      F-4
<PAGE>   69
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
Years ended December 31,                                            1997               1996               1995
---------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                 <C>                 <C>
NONINTEREST EXPENSE
     Salaries and employee benefits (Notes 10
          and 12)                                             29,457,000          14,622,000          6,000,000
     General and administrative (Note 10)                     24,139,000          12,019,000          5,194,000
     Related party fees (Note 10)                                     --             872,000          1,012,000
     Operations of other real estate (Note 5)                    444,000             681,000          1,212,000
     Depreciation                                                555,000             714,000            893,000
---------------------------------------------------------------------------------------------------------------
Total noninterest expense                                     54,595,000          28,908,000         14,311,000
---------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)                   29,563,000           6,471,000         (3,782,000)
INCOME TAXES (BENEFIT) (Notes 2N and 9)                       12,468,000           1,658,000         (1,223,000)
---------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS                      17,095,000           4,813,000         (2,559,000)
INCOME FROM DISCONTINUED OPERATIONS                                   --             387,000            861,000
LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS (Note 15)                 --          (1,038,000)                --
---------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS)                                           $ 17,095,000        $  4,162,000        $(1,698,000)
===============================================================================================================
</TABLE>


                                      F-5
<PAGE>   70
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Years ended December 31,                              1997                1996             1995
-----------------------------------------------------------------------------------------------
<S>                                         <C>                 <C>
BASIC EARNINGS PER SHARE:
     Continuing operations                  $         4.18      $         1.53      $     (1.82)
     Discontinued operations                            --                (.32)             .41
-----------------------------------------------------------------------------------------------
Net income                                  $         4.18      $         1.21      $     (1.41)
-----------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE:
     Continuing operations                  $         3.48      $         1.27      $     (1.82)
     Discontinued operations                            --                (.26)             .41
-----------------------------------------------------------------------------------------------
Net income                                  $         3.48      $         1.01      $     (1.41)
-----------------------------------------------------------------------------------------------
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>   71
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF CHANGES IN
                                          STOCKHOLDERS' EQUITY/PARTNERS' CAPITAL


<TABLE>
<CAPTION>
                                                         Years Ended December 31, 1997, 1996 and 1995
                                        ------------------------------------------------------------------------------
                                                         Number                   Additional    General
                                            Partner        of          Common      Paid-In      Partner      Retained
                                           Interests     Shares         Stock      Capital     Warrants      Earnings      Total
----------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>         <C>          <C>             <C>       <C>          <C>
PARTNERS' CAPITAL, January 1, 1995       $10,425,000           --   $        --  $        --               $        --  $10,425,000

Net loss - 1995                           (1,698,00)           --            --           --                        --   (1,698,00)
----------------------------------------------------------------------------------------------------------------------------------
PARTNERS' CAPITAL, December 31, 1995       8,727,000           --            --           --       --               --    8,727,000

Partner interest converted to stock       (8,727,00)    1,780,000        18,000    8,709,000       --               --           --
Rights offering                                   --      649,256         6,000    3,240,000       --               --    3,246,000
Partners cash  out                                --     (571,120)       (6,000)  (2,849,00)       --               --    (2,856,00)
Fractional shares paid                            --       (2,412)           --      (12,000)      --               --      (12,000)
General partner warrants                          --           --            --           --     385,000            --      385,000
Public offering, net                              --    1,756,420        18,000    7,603,000       --               --    7,621,000
Warrants exercised                                --       21,916            --      162,000       --               --      162,000
Employee stock purchase plan                      --      106,240         2,000      528,000       --               --      531,000
Net income - 1996                                 --           --            --           --       --        4,162,000    4,162,000
-----------------------------------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY, December 31, 1996           --    3,740,300        38,000   17,381,000     385,000     4,162,000   21,966,000

Subscriber warrants exercised                     --       75,730         1,000      473,000          --            --      474,000
General partner warrants exercised                --    1,105,078        10,000    8,663,000    (385,000)           --    8,288,000
Stock options exercised                           --       95,283         1,000      562,000          --            --      563,000
Net income - 1997                                 --           --            --           --                17,095,000   17,095,000
-----------------------------------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY, December 31, 1997  $        --    5,016,391   $    50,000  $27,079,000    $     --   $21,257,000  $48,386,000
===================================================================================================================================
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>   72
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>
 Years ended December 31,                                  1997              1996              1995
---------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income (loss)                            $  17,095,000     $   4,162,000     $  (1,698,000)
     Adjustments to reconcile net income
       (loss) to net cash used in operating
       activities:
         Loss on disposal of discontinued
              operations                                     --         1,038,000                --
         Provision for loan losses                    3,087,000         1,151,000         3,289,000
         Changes in discontinued operations                  --         1,034,000           486,000
         Provision for losses and other
              real estate                                26,000           337,000         1,188,000
         Net gain on sale of other real estate         (181,000)         (224,000)         (469,000)
         Proceeds from sale of loans
              originated for sale                   742,776,000       337,563,000       145,266,000
         Originations of loans held for sale       (768,226,000)     (335,471,000)     (151,538,000)
         Depreciation and amortization                  663,000           834,000           919,000
         Net change in assets and liabilities:
              Receivables                              (929,000)         (282,000)        1,548,000
              Premium receivable for loans sold       1,195,000        (1,195,000)               --
              Accrued interest receivable              (130,000)         (241,000)          222,000
              Receivable for mortgage loans
                  shipped                            24,310,000       (24,310,000)               --
              Receivable from related party                  --           347,000           131,000
              Interest-only strip receivable        (82,726,000)       (8,973,000)       (1,837,000)
              Goodwill                                       --                --          (172,000)
              Refundable income taxes                   508,000
              Other assets                             (319,000)       (1,611,000)         (267,000)
              Deferred income taxes, net             12,443,000           929,000        (1,225,000)
              Payable to related party                       --          (881,000)          126,000
              Accounts payable and accrued
                  expenses                            3,886,000         2,942,000          (732,000)
              Accrued interest payable                  185,000           (88,000)         (132,000)
---------------------------------------------------------------------------------------------------
Net cash used in operating activities               (46,337,000)      (22,939,000)       (4,895,000)
---------------------------------------------------------------------------------------------------
</TABLE>


                                      F-8
<PAGE>   73
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>
Years ended December 31,                                1997             1996             1995
----------------------------------------------------------------------------------------------
<S>                                               <C>              <C>              <C>
CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from sale of portfolio loans        17,063,000       26,176,000       13,371,000
     Payments from notes receivable                  731,000
     Increase in loans receivable                 (1,915,000)     (29,697,000)     (12,325,000)
     Proceeds from sale of other real estate       3,824,000        5,652,000       14,253,000
     Proceeds from sale of discontinued
         operations, net assets                           --       (1,180,000)              --
     Mortgage assumed (repaid) in connection
         with other real estate                           --         (847,000)      (1,702,000)
     Purchase of property and equipment           (1,791,000)      (1,791,000)        (489,000)
----------------------------------------------------------------------------------------------
Net cash provided by (used in) investing
     activities                                   17,912,000       (1,687,000)      13,108,000
----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase (decrease) in thrift
         certificates                             51,522,000       20,846,000       (9,345,000)
     Borrowings under line of credit                      --        3,000,000               --
     Repayment of line of credit                          --       (3,000,000)              --
     Proceeds from note payable                   26,159,000               --               --
     Paydowns of note payable                     (1,131,000)      (6,026,000)      (8,007,000)
     Decrease in participations payable                   --       (1,120,000)              --
     Public offering, net                                 --        7,621,000               --
     Rights offering                                      --        3,246,000               --
     Partners cash out                                    --       (2,856,000)              --
     Fractional shares payout                             --          (12,000)              --
     General partner warrants                      8,288,000          385,000               --
     Subscriber warrants                             474,000          162,000               --
     Stock options                                   563,000          531,000               --
----------------------------------------------------------------------------------------------
Net cash provided by (used in) financing
     activities                                   85,875,000       22,777,000      (17,352,000)
----------------------------------------------------------------------------------------------
</TABLE>


                                      F-9
<PAGE>   74
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>
Years ended December 31,                                1997            1996            1995
--------------------------------------------------------------------------------------------
<S>                                             <C>             <C>             <C>
NET INCREASE (DECREASE) IN CASH
     AND CASH EQUIVALENTS                         57,450,000      (1,849,000)     (9,139,000)

CASH AND CASH EQUIVALENTS, at beginning            8,640,000      10,489,000      19,628,000
--------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, at end               $ 66,090,000    $  8,640,000    $ 10,489,000
--------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH
  FLOW INFORMATION
     Cash paid during the year for:
         Interest                               $  6,355,000    $  5,054,000    $  5,331,000
         Income taxes                                 27,000         668,000           2,000

SUPPLEMENTAL SCHEDULE OF NONCASH
  INVESTING AND FINANCING ACTIVITIES
     Loans transferred to other real estate        2,936,000       6,894,000      10,489,000
     Mortgage payable assumed in connection
         with other real estate                      278,000       1,793,000       1,545,000
     Loans to facilitate sales of other real
         estate                                    2,320,000         311,000         895,000
     Stock dividend                                   19,000
--------------------------------------------------------------------------------------------
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-10
<PAGE>   75
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     GENERAL                    ORGANIZATION

                                  On June 27, 1996, PacificAmerica Money Center,
                                  Inc., (the "Corporation" or "Company") a
                                  Delaware Corporation, formed in 1994 as a
                                  wholly owned subsidiary of Presidential
                                  Mortgage Company, and Presidential Mortgage
                                  Company, a California limited partnership (the
                                  "Partnership") completed a Restructuring Plan
                                  dated May 1, 1996 (the "Restructuring"),
                                  whereby all of the assets and liabilities of
                                  the Partnership were transferred to the
                                  Corporation in exchange for common stock of
                                  the Corporation (the "Common Stock"). The
                                  Common Stock was distributed to the partners
                                  of the Partnership, pro rata in accordance
                                  with their capital accounts in the
                                  Partnership. In accordance with the terms of
                                  the Restructuring Plan, the consent of a
                                  majority of limited partners to the
                                  Restructuring Plan was solicited pursuant to a
                                  Proxy Statement/Prospectus dated May 14, 1996,
                                  and the consent of approximately 75% of all
                                  limited partners was obtained by June 17,
                                  1996, the expiration of the solicitation
                                  period. Every limited partner was given the
                                  right to elect to receive cash in lieu of
                                  shares of the Corporation (the "Cash Out
                                  Option"), in an amount equal to $5.00 per
                                  share times the number of shares that would
                                  have been received by that partner based on
                                  their capital account in the Partnership.
                                  Pursuant to the Restructuring Plan, 1,206,468
                                  shares of Common Stock were issued to partners
                                  of the Partnership (other than partners
                                  accepting the cash out option) for their
                                  interests in the Partnership and $2,855,600
                                  was paid by the Corporation to partners
                                  electing the Cash Out Option.

                                  Also pursuant to the terms of the
                                  Restructuring Plan, Presidential Management
                                  Company, the general partner of the
                                  Partnership (the "General Partner") purchased
                                  1,126,666 warrants ("General Partner
                                  Warrants") for a purchase price of $385,000.
                                  The General Partner Warrants were each
                                  exercisable for one share of Common Stock at a
                                  purchase price of $7.50 per share from June
                                  27, 1996 until December 27, 1997. The General
                                  Partner Warrants were nontransferable, except
                                  to and between partners of the General
                                  Partner.


                                      F-11
<PAGE>   76
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     GENERAL (CONTINUED)        ORGANIZATION (Continued)

                                  Concurrently with the solicitation of consent
                                  pursuant to the Proxy Statement/Prospectus
                                  dated May 16, 1996, all partners of the
                                  Partnership, together with all partners of the
                                  General Partner, and all officers, directors,
                                  proposed directors and employees of the
                                  Partnership, all of its subsidiaries and the
                                  Corporation, were given the right to purchase
                                  additional shares of Common Stock (the "Rights
                                  Offering") at a purchase price of $5 per
                                  share. A total of 649,256 shares were
                                  subscribed for and issued in the Rights
                                  Offering. For every five shares subscribed for
                                  in the Rights Offering, a subscriber also
                                  received one warrant ("Subscriber Warrants").
                                  A total of 129,850 Subscriber Warrants were
                                  issued in connection with the Rights Offering,
                                  each exercisable from June 27, 1996 until June
                                  27, 1998, for one share of Common Stock at a
                                  purchase price of $6.25 per share.

                                  Pursuant to a Prospectus dated June 24, 1996,
                                  the Corporation also conducted a public
                                  offering of additional shares of Common Stock
                                  at $5 per share (the "Public Offering"). A
                                  total of 1,756,420 shares were issued in the
                                  Public Offering, including 220,098 shares in
                                  connection with the exercise of an
                                  over-allotment option by the underwriter of
                                  the Public Offering.

                                  The Corporation issued a total of 3,612,144
                                  shares of Common Stock in connection with the
                                  Restructuring Plan, the Rights Offering and
                                  the Public Offering. The shares of Common
                                  Stock were listed for trading on the Nasdaq
                                  National Market under the symbol "PAMM."
                                  Trading in the stock commenced on June 25,
                                  1996.

                                  Concurrently with the closing of the
                                  Restructuring, the Rights Offering and the
                                  Public Offering on June 27, 1996, the
                                  Partnership filed certificates of dissolution
                                  and liquidation with the California Secretary
                                  of State.


                                      F-12
<PAGE>   77
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     GENERAL (CONTINUED)        ORGANIZATION (Continued)

                                  The Restructuring has been accounted for as a
                                  change in legal organization but not in the
                                  enterprise of the Partnership. Therefore, the
                                  financial statements of the Corporation give
                                  effect to the Restructuring as a
                                  recapitalization of the Partnership into the
                                  Corporation. References to the Corporation in
                                  the financial statements refer to the
                                  financial condition and results of operations
                                  of the Partnership on a consolidated basis for
                                  all periods prior to June 27, 1996.

                                  From the date of its formation in 1981 until
                                  1988, the Partnership's sole business was the
                                  direct origination and servicing of real
                                  estate secured loans under California consumer
                                  and commercial finance lender licenses. In
                                  1988, the Partnership formed Pacific Thrift
                                  and Loan Company, a California corporation
                                  ("Pacific Thrift"), as a wholly owned
                                  subsidiary, to engage in the business of
                                  origination, purchase and sale of real estate
                                  secured loans under a California thrift and
                                  loan license. Pacific Thrift also issues
                                  deposits insured by the Federal Deposit
                                  Insurance Corporation ("FDIC"), and is
                                  therefore subject to regulation by both the
                                  FDIC and the California Department of
                                  Financial Institutions. Since 1990,
                                  substantially all new lending activity has
                                  been conducted by Pacific Thrift. In recent
                                  years, the Company has been primarily engaged
                                  in mortgage banking activities and as such
                                  originates and sells mortgage loans to
                                  investors in the secondary markets. In
                                  December 1997, the Company began to securitize
                                  loans into asset-backed securities. The
                                  Company's ability to continue to originate
                                  loans is dependent, in part, upon its ability
                                  to sell loans in the secondary market in order
                                  to generate cash proceeds for new origination.
                                  The value of and market for the Company's
                                  loans are dependent upon a number of factors,
                                  including general economic conditions,
                                  interest rates and governmental regulations.
                                  Adverse changes in such factors may affect the
                                  Company's ability to sell loans for acceptable
                                  prices within reasonable periods of time. A
                                  prolonged, substantial reduction in the size
                                  of the secondary market for loans of the types
                                  originated by the Company may adversely affect
                                  the Company's ability to sell loans with a
                                  consequent adverse impact on the Company's
                                  profitability and ability to fund future
                                  originations which could have a material
                                  adverse effect on the Company's financial
                                  position, results of operations and cash
                                  flows.


                                      F-13
<PAGE>   78
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     GENERAL (CONTINUED)        ORGANIZATION (Continued)

                                  Pacific Thrift specializes in home equity
                                  loans for borrowers whose credit histories
                                  and/or other factors limit their ability to
                                  qualify for financing from conventional
                                  sources. Such loans are generally referred to
                                  in the lending industry as "sub-prime" or
                                  "B"/"C" credit loans. Borrowers generally
                                  obtain loans from Pacific Thrift to finance
                                  the purchase of property, refinance an
                                  existing mortgage on more favorable terms,
                                  consolidate debt or obtain cash proceeds for
                                  their personal use. The majority of its loans
                                  are originated through its wholesale division,
                                  consisting of a nationwide network of more
                                  than 100 in-house loan representatives and
                                  3,100 independent mortgage brokers in
                                  approximately 40 states. Approximately 75% of
                                  the current loan production comes from this
                                  division. Pacific Thrift's retail division
                                  originates loans directly with borrowers using
                                  primarily telemarketing and direct mail. The
                                  largest volume of home equity loan
                                  originations were in California, New York, New
                                  Jersey, Washington and Florida. The Company
                                  issues thrift certificates to investors that
                                  are redeemable upon maturity at the option of
                                  the investors, although penalties for early
                                  withdrawal may be assessed. The California
                                  Industrial Loan Law maintains provisions
                                  governing the types of loans that may be made,
                                  the amount of thrift certificates that may be
                                  issued, and the amount of funds that may be
                                  borrowed.

                                  The Company also owns another subsidiary,
                                  PacificAmerica Money Centers, Inc. ("PAMC"),
                                  formed for the purpose of engaging in the
                                  lending business under a California finance
                                  lender's license and other state licenses
                                  where management deems it appropriate.
                                  Immediately after the restructuring the
                                  Company contributed net assets of $2,920,000
                                  to PAMC at book value. As of the date hereof,
                                  PAMC has not engaged in significant loan
                                  production, but it may become more active in
                                  the future, depending upon business
                                  requirements.

                                  The Company formed a wholly-owned subsidiary,
                                  PacificAmerica Securities, Inc. (PSI), which
                                  is a special purpose entity. Its purpose is to
                                  acquire loans from the Company and use them as
                                  collateral under a warehousing agreement with
                                  an outside third party.

                                  The Partnership also owned substantially all
                                  of the interests in three subsidiaries engaged
                                  in the trust deed foreclosure services and
                                  posting and publishing businesses,
                                  Consolidated Reconveyance Company ("CRC"), a


                                      F-14
<PAGE>   79
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     GENERAL (CONTINUED)        ORGANIZATION (Continued)

                                  California limited partnership, Lenders
                                  Posting and Publishing Company ("LPPC"), a
                                  California limited partnership, and
                                  Consolidated Reconveyance Corporation
                                  ("CRCWA"), a Washington corporation. The
                                  Corporation acquired all of the Partnership's
                                  interests in these entities in connection with
                                  the Restructuring. Effective December 31,
                                  1996, all of the assets and liabilities of CRC
                                  and LPPC and all of the stock of CRCWA were
                                  sold (Note 15). This is part of the Company's
                                  strategy to concentrate all of its financial
                                  and human resources on its primary business of
                                  residential lending for sale and
                                  securitization.

                                  The Partnership's general partner,
                                  Presidential Management Company, was a
                                  California limited partnership. Presidential
                                  Management Company's general partner,
                                  Presidential Services Corporation, was a
                                  California corporation owned by Joel R.
                                  Schultz, John A. DeRosa and Constance DeRosa.

                                  The Partnership's limited partners consisted
                                  of approximately 2,500 individuals and
                                  entities in classes A, B, C, D, and E. The
                                  differences between the various classes
                                  primarily related to the different offering
                                  dates and unit prices as well as profit
                                  priorities and percentages. In addition,
                                  certain partners elected to reinvest their
                                  distributions in Distribution Reinvestment
                                  Plan (DRP) Units.

2.     SUMMARY OF SIGNIFICANT     A.  CONSOLIDATION
       ACCOUNTING
       POLICIES                   The consolidated financial statements
                                  include the accounts of (CONTINUED) the






                                      F-15
<PAGE>   80
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     SUMMARY OF SIGNIFICANT     A.  CONSOLIDATION
       ACCOUNTING
       POLICIES                   The consolidated financial statements
       (CONTINUED)                include the accounts of (CONTINUED) the
                                  Corporation, PAMC, PacificAmerica Lending,
                                  CRC, LPPC, CRC Washington and PSI. All
                                  significant intercompany balances and
                                  transactions have been eliminated.
                                  Consolidating information is presented in
                                  Schedules I, II, III, IV and V. On December
                                  31, 1996 CRC, LPPC and CRC Washington were
                                  sold (Note 15).

                                  B.  EARNINGS PER SHARE

                                  On July 10, 1997, the Board of Directors of
                                  the Company declared a stock dividend
                                  accounted for as a one-for-one stock split to
                                  all stock holders or record as of July 31,
                                  1997. The stock dividend was paid on August
                                  13, 1997. These financial statements reflect
                                  the effect of the stock dividend on current
                                  and prior periods earnings per share and
                                  shares outstanding.

                                  On December 31, 1997 the Company adopted
                                  Statement of Financial Accounting Standards
                                  No. 128 (SFAS No. 128), "Earnings Per
                                  Share", which established new standards for
                                  calculating and disclosing earnings per
                                  share. All prior period earnings per share
                                  data has been restated to conform with the
                                  provisions of SFAS No. 128.

                                  Basic earnings per share is computed by
                                  dividing net earnings by the weighted average
                                  number of shares of Common Stock outstanding
                                  during each year. Diluted earnings per share
                                  is computed by dividing net earnings by the
                                  weighted average number of shares of Common
                                  Stock and potential Common Stock outstanding
                                  during each year. All share and per-share
                                  amounts have been restated to reflect the
                                  one-for-one stock dividend accounted for as a
                                  stock split,


                                      F-16
<PAGE>   81
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     SUMMARY OF SIGNIFICANT     B.  EARNINGS PER SHARE (Continued)
       ACCOUNTING
       POLICIES                   in August 1997.  The following table
       (CONTINUED)                presents the earnings per share data
                                  as required by SFAS No. 128.


<TABLE>
<CAPTION>
                                                                Historical            Proforma
                                                                ----------       -------------------

                               Year ended December 31,             1997          1996           1995
                               ----------------------------------------------------------------------
<S>                                                          <C>            <C>           <C>
                               Income (Numerator):
                               Income/(loss) before
                                  income taxes (benefit)    $29,563,000    $6,471,000    $(3,782,000)
                               Income taxes (benefit)        12,468,000     2,718,000     (1,589,000)
                               ----------------------------------------------------------------------
                               Income/(loss) from
                                  continuing operations     $17,095,000    $3,753,000    $(2,193,000)
                               ----------------------------------------------------------------------
                               Shares (Denominator):
                               Weighted average common
                                  shares outstanding for
                                  basic earnings per
                                  share                       4,093,274     2,449,454      1,206,468
                               Effect of dilutive common
                                  shares
                                    Subscriber warrants          68,025        41,681             --
                                    General partner
                                    warrants                    471,287       317,666             --
                                    Options                     281,816       146,877             --
                               ----------------------------------------------------------------------
                               Diluted common shares          4,914,402     2,955,678       1,206,468
                               ----------------------------------------------------------------------
                               Basic earnings per common share
                                  from continuing operations      $4.18         $1.53         $(1.82)
                               Diluted earnings per common share
                                  from continuing operations      $3.48         $1.27         $(1.82)
</TABLE>


                                      F-17
<PAGE>   82
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.    SUMMARY OF                    Options to purchase 11,424 shares of common
      SIGNIFICANT                   stock at a range of price from $23.00 to
      ACCOUNTING                    $28.75 per share were outstanding at
      POLICIES                      December 31, 1997 but were not included in
      (CONTINUED)                   the computation of diluted earnings per
                                    share because the options' exercise price
                                    was greater than the average market price of
                                    the common share. These options expire in
                                    the year 2007.

                                    Earnings per common share for the years
                                    ended December 31, 1996 and 1995 assumes the
                                    restructuring (Note 1) took place at the
                                    beginning of the period and the Company was
                                    taxed for federal and state income tax
                                    purposes as a taxable corporation at a 42%
                                    effective tax rate.

                                    Earning per share related to discontinued
                                    operations and net income for 1996 and 1995
                                    includes additional proforma income tax
                                    expense of $126,000 and 362,000 related to
                                    the tax effect of the income from the
                                    discontinued operations.

                                    C. CASH AND CASH EQUIVALENTS

                                    The Company considers all highly liquid debt
                                    instruments purchased with an initial
                                    maturity of three months or less to be cash
                                    equivalents. Cash and cash equivalents at
                                    December 31, 1997 includes $50,000,100 on
                                    deposit with the Federal Reserve and
                                    $15,269,601 on deposit with a major well
                                    capitalized bank in an account which is in
                                    excess of the federally insured limit of
                                    $100,000. Cash and cash equivalents at
                                    December 31, 1996 includes $5,250,000 in
                                    overnight federal funds and $3,156,976 on
                                    deposit with a major well capitalized bank
                                    in an account which is in excess of the
                                    federally insured limit of $100,000.


                                      F-18
<PAGE>   83
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2.     SUMMARY OF                   D.  LOANS RECEIVABLE
       SIGNIFICANT
       ACCOUNTING                   Loans receivable are stated at the principal
       POLICIES                     amount outstanding, less unamortized
       (CONTINUED)                  deferred fees and costs and the allowance
                                    for loan losses (ALLL). Loans receivable are
                                    primarily secured by first and second trust
                                    deeds.

                                    Interest income is accrued as earned and is
                                    based on the principal balance outstanding.
                                    The Company's policy is to cease accruing
                                    interest on loans that are more than two
                                    monthly payments past due and for which
                                    there appears to be insufficient collateral
                                    to support collectibility. In many cases,
                                    interest, late fees, and other charges
                                    continue to accrue until the time management
                                    deems that such amounts are not collectible.
                                    When a loan is placed on a nonaccrual
                                    status, the Company reverses all accrual
                                    income that is uncollected income.

                                    Nonrefundable loan fees and direct costs
                                    associated with the origination of loans are
                                    deferred and netted against outstanding loan
                                    balances. The net deferred fees and costs
                                    are recognized in interest income over the
                                    loan term as an adjustment to the yield,
                                    using a method that approximates the
                                    effective interest (level yield) method, or
                                    included in income when the loan is sold.

                                    E. ALLOWANCE FOR LOAN LOSSES

                                    Loan losses are charged to the ALLL;
                                    recoveries are credited to the ALLL. The
                                    provision for loan losses charged to expense
                                    and added to the ALLL is based upon
                                    management's judgment and evaluation of the
                                    known and inherent risks in the loan
                                    portfolio. Management's judgment takes into
                                    consideration such factors as changes in the
                                    nature and volume of the portfolio,
                                    continuing review of delinquent loans,
                                    current economic conditions, risk
                                    characteristics of the various categories of
                                    loans, and other pertinent factors that may
                                    affect the borrower's ability to repay.
                                    While management uses available information
                                    to recognize losses on loans, future
                                    additions to the allowance may be necessary
                                    based on changes in economic conditions.


                                      F-19
<PAGE>   84
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2.     SUMMARY OF SIGNIFICANT       E.  ALLOWANCE FOR LOAN LOSSES (Continued)
       ACCOUNTING
       POLICIES                     The Company follows Statement of Financial
       (CONTINUED)                  Accounting Standards (SFAS) No. 114,
                                    Accounting by Creditors for Impairment of a
                                    Loan (as amended by SFAS No. 118, Accounting
                                    by Creditors for Impairment of a Loan -
                                    Income Recognition and Disclosures). A loan
                                    is considered to be impaired when it is
                                    probable that the Company will be unable to
                                    collect all principal and interest amounts
                                    according to the contractual terms of the
                                    loan agreement. The ALLL related to loans
                                    identified as impaired is primarily based on
                                    the excess of the loan's current outstanding
                                    principal balance over the estimated fair
                                    market value of the related collateral. For
                                    a loan that is not collateral-dependent, the
                                    allowance is recorded at the amount by which
                                    the outstanding principal balance exceeds
                                    the current best estimate of the future cash
                                    flows on the loan discounted at the loan's
                                    effective interest rate.

                                    For impaired loans that are on non-accrual
                                    status, cash payments received are generally
                                    applied to reduce the outstanding principal
                                    balance. However, all or a portion of a cash
                                    payment received on a non-accrual loan may
                                    be recognized as interest income to the
                                    extent allowed by the loan contract,
                                    assuming management expects to fully collect
                                    the remaining principal balance of the loan.

                                    A restructuring of a debt is considered a
                                    troubled debt restructuring when the
                                    Company, for economic or legal reasons
                                    related to the borrower's financial
                                    difficulties, grants a concession to the
                                    borrower that it would not otherwise grant.
                                    Troubled debt restructuring may include
                                    changing repayment terms, reducing the
                                    stated interest rate and reducing the
                                    amounts of principal and/or interest due or
                                    significantly extending the maturity date.
                                    The restructuring of a loan is intended to
                                    recover as much of the Company's investment
                                    as possible and to achieve the highest yield
                                    possible.


                                      F-20
<PAGE>   85
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2.     SUMMARY OF SIGNIFICANT       F.  LOANS HELD FOR SALE
       ACCOUNTING
       POLICIES                     The Company has designated certain of its
       (CONTINUED)                  loans receivable as being held for sale. In
                                    determining the level of loans held for
                                    sale, the Company considers the extent to
                                    which loans will be required to be sold in
                                    response to liquidity needs, asset/liability
                                    management requirements, and other factors.

                                    Loans held for sale are recorded at the
                                    lower of cost or market value. Any
                                    unrealized losses are recorded as a
                                    reduction in income. Realized gains and
                                    losses from the sale of loans receivable are
                                    based on the specific identification method.

                                    G. LOAN SALES REVENUE RECOGNITION

                                    The Company principally derives its revenue
                                    from the sale of loans in which it retains
                                    an interest-only strip receivable. Gain or
                                    loss on the sale of mortgage loans to
                                    investors is recognized at the date the
                                    loans are sold to the investors, and all
                                    title and rights to such loans are legally
                                    conveyed to the investors pursuant to
                                    existing sales agreements and the Company
                                    has surrendered control of such financial
                                    assets. Loans are generally sold on a
                                    servicing-released basis.

                                    Gain on sale of loans represents the
                                    difference between the gross proceeds
                                    (including premiums) from the sale, net of
                                    related transaction costs, and the allocated
                                    carrying amount of the loans sold. The
                                    allocated carrying amount is determined by
                                    allocating the carrying amount of loan
                                    between the portion sold and any retained
                                    residual interests (interest-only strip
                                    receivable), based on their relative fair
                                    values at the date of transfer. In addition,
                                    gain on sale includes non-refundable fees on
                                    loans sold.

                                    Gain on sale of loans includes the
                                    recognition of an unrealized gain which
                                    represents the initial difference between
                                    the allocated carrying amount and the fair
                                    value of the interest-only strip at the date
                                    of sale.

                                    The fair value of the interest-only strip
                                    receivable is estimated as the present value
                                    of the anticipated cash flows from excess
                                    interest income from the loans sold over the
                                    coupon interest to the investor after giving
                                    effect to prepayments,


                                      F-21
<PAGE>   86
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2.     SUMMARY OF                   G.  LOAN SALES REVENUE RECOGNITION
       SIGNIFICANT                  (Continued)
       ACCOUNTING
       POLICIES                     losses, and other transaction costs,
       (CONTINUED)                  servicing and the coupon interest to the
                                    investor. The interest-only strip
                                    receivable, which is classified as a trading
                                    security, is carried at fair value and is
                                    analyzed quarterly by the Company. Changes
                                    in fair value are recognized as unrealized
                                    gains or losses and are included in gain on
                                    sale of loans in the consolidated statement
                                    of operations.

                                    Management's estimate of the fair value of
                                    the interest-only strip receivable includes
                                    significant assumptions such as loan
                                    prepayment speeds, estimated default rates
                                    and an appropriate discount rate given the
                                    risk characteristics associated with the
                                    instrument. It is possible that the estimate
                                    could change in the near term due to
                                    competitive pressures, the overall economy,
                                    adverse changes in the securitization
                                    market, and actual prepayment and default
                                    experience rates. The amounts the Company
                                    will ultimately realize could differ
                                    significantly and could require an
                                    adjustment to the fair value of this asset.

                                    The premium earned from whole loans
                                    originated and subsequently sold at par plus
                                    an upfront premium, with no further rights
                                    to any further yield, is included under gain
                                    on sale of loans in the Statements of
                                    Operations.

                                    H. MORTGAGE SERVICING RIGHTS

                                    In 1996, the Company adopted SFAS No. 122,
                                    "Accounting for Mortgage Servicing Rights,
                                    an amendment of FASB Statement No. 65." SFAS
                                    No. 122 requires the Corporation to
                                    capitalize mortgage servicing rights on
                                    originated mortgage loans when the loans are
                                    originated to be sold or securitized and
                                    servicing is retained. When a mortgage loan
                                    is originated to be sold with servicing
                                    retained, the total cost of the loan is
                                    allocated to the mortgage servicing right
                                    and the loan based on their relative fair
                                    values. Under SFAS No. 122, capitalized
                                    servicing rights are assessed for impairment
                                    based on the fair value of those rights. In
                                    addition, capitalized mortgage servicing
                                    rights must be stratified based on one or
                                    more predominant risk characteristics of the
                                    underlying loans and impairment is
                                    recognized through a valuation allowance for
                                    each impaired stratum.


                                      F-22
<PAGE>   87
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     SUMMARY OF                   H.  MORTGAGE SERVICING RIGHTS (Continued)
       SIGNIFICANT
       ACCOUNTING                   The effect of the adoption of SFAS No. 122
       POLICIES                     was not material to the Company, primarily
       (CONTINUED)                  because the Company sells substantially all
                                    of its loans on a servicing released basis.

                                    I. IMPAIRMENT OF LONG-LIVED ASSETS

                                    In 1996, the Company adopted SFAS No. 121,
                                    "Accounting for Impairment of Long-Lived
                                    Assets and for Long-Lived Assets to be
                                    Disposed of," which addresses accounting for
                                    impairment of long-lived assets, including
                                    certain identifiable intangibles, and
                                    goodwill related to those assets. SFAS No.
                                    121 requires that assets to be held and used
                                    be reviewed for impairment whenever events
                                    or changes in circumstances indicate that
                                    the carrying amount of an asset may not be
                                    recoverable.

                                    The adoption of SFAS No. 121 did not have a
                                    material impact on the Company's financial
                                    condition or results of operations.

                                    J. TRANSFERS AND SERVICING OF FINANCIAL
                                    ASSETS AND EXTINGUISHMENT OF LIABILITIES

                                    In June 1996, the FASB issued SFAS No. 125,
                                    "Accounting for Transfers and Servicing of
                                    Financial Assets and Extinguishment of
                                    Liabilities", which superceded SFAS No.
                                    122. SFAS No. 125 provides accounting and
                                    reporting standards for transfers and
                                    servicing of financial assets and
                                    extinguishment of liabilities. Those
                                    standards are based on consistent
                                    application of a financial-components
                                    approach that focuses on control. Under
                                    that approach, after a transfer of
                                    financial assets, an entity recognizes the
                                    financial and servicing assets it controls
                                    and the liabilities it has incurred,
                                    derecognizes financial assets when control
                                    has been surrendered, and derecognizes
                                    liabilities when extinguished. SFAS No. 125
                                    provides consistent standards for
                                    distinguishing transfers of financial assets
                                    that are sales from transfers that are
                                    secured borrowings.

                                    A transfer of financial assets in which
                                    control is surrendered is accounted for as a
                                    sale to the extent that consideration other
                                    than beneficial interests in the transferred
                                    assets is received in the exchange.
                                    Liabilities and derivatives incurred or
                                    obtained by the transfer of financial assets
                                    are required to be measured at fair value,
                                    if practicable. Also, servicing assets and
                                    other retained interests in the transferred
                                    assets must be measured by allocating the
                                    previous carrying value between the assets
                                    sold and the interest retained, if any,
                                    based on their relative fair values at the
                                    date of transfer. For each servicing
                                    contract in existence before January 1,
                                    1997, previously recognized servicing rights
                                    and excess servicing receivables that did
                                    not exceed contractually specified servicing
                                    fees were  required to be combined, net of
                                    any previously recognized servicing
                                    obligations under that contract, as a
                                    servicing asset or liability. Previously
                                    recognized servicing receivables that exceed
                                    contractually specified servicing fees
                                    (formerly known as excess yield receivable)
                                    are required to be reclassified as
                                    interest-only strip receivables and the
                                    allowance for credit losses on loans sold
                                    reclassified as a reduction of these
                                    receivables.



                                      F-23
<PAGE>   88
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                    SFAS 125 also requires an assessment of
                                    interest-only strips, loans, other
                                    receivables and retained interests in
                                    securitizations. If these assets can be
                                    contractually prepaid or otherwise settled
                                    such that the holder would not recover
                                    substantially all of its recorded
                                    investment, the assets will be measured
                                    like available-for-sale securities or
                                    trading securities under SFAS 115. This
                                    assessment is required for financial assets
                                    held on or acquired after January 1, 1997.





                                      F-24
<PAGE>   89
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     SUMMARY OF                 K.  OTHER REAL ESTATE
       SIGNIFICANT
       ACCOUNTING                 Other real estate is comprised of formally
       POLICIES                   foreclosed property to which the Company does
       (CONTINUED)                not have legal title. These assets are
                                  recorded at the lower of the net investment in
                                  the loan or the fair value of the property
                                  less selling costs. At the time of
                                  foreclosure, any excess of the net investment
                                  in the loan over its fair value is charged to
                                  the allowance for loan losses. Any subsequent
                                  declines in value are charged to operations.
                                  Prior to 1995, loans were classified as
                                  in-substance foreclosures when they exhibited
                                  characteristics more closely associated with
                                  the risk of real estate ownership than with
                                  loans. Collateral that has been classified as
                                  an in-substance foreclosure was reported in
                                  the same manner as collateral that has been
                                  formally foreclosed. Effective January 1,
                                  1995, with the adoption date of SFAS No. 114,
                                  the category of loan classified as
                                  in-substance foreclosures was eliminated
                                  resulting in such loans being reflected as
                                  loan receivable rather than as foreclosed real
                                  estate.


                                      F-25
<PAGE>   90
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     SUMMARY OF SIGNIFICANT     L.  PROPERTY AND EQUIPMENT
       ACCOUNTING
       POLICIES                   Property and equipment is stated at cost, less
       (CONTINUED)                accumulated depreciation. Depreciation of
                                  property and equipment is based on the asset's
                                  estimated useful life, ranging from two to
                                  eight years, and is computed using the
                                  straight-line method. Expenditures that
                                  improve or extend the service lives of assets
                                  are capitalized. Repairs and maintenance are
                                  charged to expense as incurred.

                                  M.  GOODWILL

                                  Goodwill represented the excess of the total
                                  purchase price (consisting of the initial
                                  consideration and subsequent consideration) of
                                  CRC and LPPC over the fair value of purchased
                                  net assets. Goodwill was amortized using the
                                  straight-line method over approximately 20
                                  years. The Company sold CRC and LPPC in 1996
                                  and wrote off the remaining goodwill which is
                                  included in loss from discontinued operations
                                  in the Consolidated Statement of Operations
                                  (Note 15).


                                 N.  INCOME TAXES

                                 The Company follows the "asset and liability"
                                 method of accounting for income taxes. Under
                                 the asset and liability method, deferred income
                                 taxes are recognized for tax consequences of
                                 "temporary differences" by applying enacted
                                 statutory tax rates to differences between the
                                 financial statement carrying amount and the tax
                                 basis of existing assets and liabilities. The
                                 effect on deferred taxes of a change in tax
                                 rates is recognized in income in the period
                                 that includes the enactment date. All tax
                                 benefits are recorded and then reduced by a
                                 valuation allowance when it is more likely than
                                 not that the benefit is not fully realizable.

                                 Partnerships are generally not subject to
                                 income taxes, accordingly, the Partnership
                                 income or loss was reported in the individual
                                 partners' tax returns. However, Pacific Thrift,
                                 the Partnership's wholly owned corporate
                                 subsidiary, has always been subject to federal
                                 income and state franchise taxes. Since
                                 completion of the restructuring (Note 1) the
                                 Company is also subject to federal and state
                                 income taxes.


                                      F-26
<PAGE>   91
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     SUMMARY OF SIGNIFICANT    O.  FAIR VALUE OF FINANCIAL INSTRUMENTS
       ACCOUNTING
       POLICIES                  Statement of Financial Accounting Standards No.
       (CONTINUED)               107, Disclosures about Fair Value of Financial
                                 Instruments (SFAS 107), requires that the
                                 Company disclose estimated fair values for its
                                 financial instruments. Fair value estimates,
                                 methods, and assumptions are set forth below
                                 for the Company's financial instruments. The
                                 estimated fair values of financial instruments
                                 are disclosed as of December 31, 1997. SFAS No.
                                 107 defines fair value as the amount which the
                                 instrument could be exchanged for in a current
                                 transaction between willing parties, other than
                                 in a forced sale or liquidation. Where
                                 possible, the Company has utilized quoted
                                 market prices to estimate fair value. Since
                                 quoted market prices were not available for a
                                 significant portion of the financial
                                 instruments, the fair values were approximated
                                 using discounted cash flow techniques.

                                 Fair value estimates are made at a specific
                                 point in time, based on judgments regarding
                                 future expected loss experience, current
                                 economic conditions, risk conditions, risk
                                 characteristics of various financial
                                 instruments and other factors. These estimates
                                 do not reflect any premium


                                      F-27
<PAGE>   92
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     SUMMARY OF SIGNIFICANT       O. FAIR VALUE OF FINANCIAL INSTRUMENTS
       ACCOUNTING                   (Continued)
       POLICIES
       (CONTINUED)                  or discount that could result from offering
                                    for sale at one time the Company's entire
                                    holdings of a particular financial
                                    instrument. These estimates are subjective
                                    in nature and involve uncertainties and
                                    matters of significant judgment and
                                    therefore cannot be determined with
                                    precision. Changes in assumptions could
                                    significantly affect the estimates.

                                    Fair value estimates were based on existing
                                    financial instruments without attempting to
                                    estimate the value of anticipated future
                                    business and the value of assets and
                                    liabilities that are not considered
                                    financial instruments.

                                    The following presents the carrying value
                                    and estimated fair value of the various
                                    classes of financial instruments held by the
                                    Company at December 31, 1997. This
                                    information is presented solely for
                                    compliance with SFAS No. 107 and is subject
                                    to change over time based on a variety of
                                    factors. Because no market exists for a
                                    significant portion of the financial
                                    instruments presented below and the inherent
                                    imprecision involved in the estimation
                                    process, management does not believe the
                                    information presented reflects the amounts
                                    that would be received if the Company's
                                    assets and liabilities were sold.

<TABLE>
<CAPTION>
                                                                                December 31, 1997
                                                                      -------------------------------------
                                                                            Carrying            Estimated
                                                                              Value             Fair Value
                                   --------------------------------------------------------------------------
<S>                                                                   <C>                 <C>
                                   ASSETS
                                   Cash and cash equivalents          $     66,090,000    $     66,090,000

                                   Loans receivable                         22,067,000          21,981,000
                                   Allowance for loan losses                (1,438,000)         (1,438,000)
                                   --------------------------------------------------------------------------

                                   Total loans                              20,629,000          20,543,000
                                   --------------------------------------------------------------------------

                                   Loans held for sale                      35,280,000          37,154,000
                                   Interest-only strips receivable          94,424,000          94,424,000
</TABLE>


                                      F-28
<PAGE>   93

                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     SUMMARY OF                O.  FAIR VALUE OF FINANCIAL INSTRUMENTS
       SIGNIFICANT               (Continued)
        ACCOUNTING
        POLICIES)
        (CONTINUED)
<TABLE>
<S>                                                                <C>                 <C>
                                   LIABILITIES
                                   Fully-paid certificates         113,731,000         113,449,000
                                   Installment certificates         18,793,000          18,793,000
                                   Notes payable                    28,318,000          28,318,000
</TABLE>

                                 Cash, Short Term-Investments, Trade
                                 -----------------------------------
                                 Receivables, and Trade Payables
                                 -------------------------------

                                 The carrying amount approximates fair value
                                 because of the short maturity of these
                                 instruments.

                                 Loans
                                 -----

                                 Fair values were estimated for portfolios of
                                 loans with similar financial characteristics.
                                 Loans were segregated by type such as
                                 commercial real estate, residential mortgage,
                                 and other consumer. Each loan category was
                                 further segmented into fixed and adjustable
                                 rate interest terms and by performing and
                                 nonperforming categories.

                                 The fair value for performing fixed rate
                                 commercial real estate loans was estimated by
                                 discounting the future cash flows using the
                                 current rates at which similar loans would be
                                 made to borrowers with similar credit ratings.
                                 The fair values for performing commercial real
                                 estate loans indexed to a market lending rate
                                 with normal credit risk were assumed to
                                 approximate their carrying value. For
                                 residential mortgage loans, fair value was
                                 estimated by using quoted market prices for
                                 loans with similar credit and interest rate
                                 risk characteristics.

                                 Fair value for significant nonperforming loans
                                 was based on recent external appraisals or
                                 broker price opinions adjusted for anticipated
                                 credit loss risk, estimated time for
                                 resolution, and other related resolution costs.
                                 If appraisals or recent broker price opinions
                                 are not available, estimated cash flows are
                                 discounted using a rate commensurate with the
                                 risk associated with the estimated cash flows.
                                 Assumptions regarding credit risk, cash flows,
                                 and discount rates are judgmentally determined
                                 using available market information and specific
                                 borrower information.


                                      F-29
<PAGE>   94
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.     SUMMARY OF SIGNIFICANT    O.  FAIR VALUE OF FINANCIAL INSTRUMENTS
       ACCOUNTING                (Continued)
       POLICIES
       (CONTINUED)               Loans Held for Sale
                                 -------------------

                                 The fair values were estimated by using current
                                 institutional purchaser yield requirements.

                                 Interest-only Strips Receivable
                                 -------------------------------

                                 The fair value was determined by using
                                 estimated discounted future cash flows taking
                                 into consideration current prepayment rates and
                                 default experience. The carrying amount is
                                 considered to be a reasonable estimate of fair
                                 market value.

                                 Thrift Certificates Payable
                                 ---------------------------

                                 Under SFAS 107, the fair value of deposits with
                                 no stated maturity, such as savings and money
                                 market accounts, is equal to the amount payable
                                 on demand as of December 31, 1997. The fair
                                 value of certificates of deposit is based on
                                 the discounted value of contractual cash flows.
                                 The discount rate is estimated using the rates
                                 currently offered for deposits of similar
                                 remaining maturities.

<TABLE>
<CAPTION>
                                                                                   December 31, 1997
                                                                         --------------------------------------
                                                                                Carrying           Estimated
                                                                                 Value             Fair Value
                                   ----------------------------------------------------------------------------
<S>                                                                        <C>                 <C>
                                   Installment certificates                $     18,793,000    $     18,793,000
                                   ----------------------------------------------------------------------------
                                   Fully-paid certificates:
                                       Maturing in six months or less      $     53,637,000    $     53,518,000
                                       Maturing between six months
                                            and one year                         59,999,000          59,836,000
                                       Maturing between one and
                                            three years                              95,000              95,000
                                   ----------------------------------------------------------------------------
                                   Total fully-paid certificates           $    113,731,000    $    113,449,000
</TABLE>


                                      F-30
<PAGE>   95
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     SUMMARY OF SIGNIFICANT    O.  FAIR VALUE OF FINANCIAL INSTRUMENTS
       ACCOUNTING                (Continued)
       POLICIES
       (CONTINUED)               Notes Payable and Mortgage Notes Payable
                                 ----------------------------------------

                                 The fair values for long-term debt are based on
                                 quoted market prices where available. If quoted
                                 market prices are not available, fair values
                                 are estimated using discounted cash flow
                                 analyses based on the Company's borrowing rates
                                 at December 31, 1997 for comparable types of
                                 borrowing arrangements.

                                 The remaining assets and liabilities of the
                                 Company are not considered financial
                                 instruments and have not been valued
                                 differently than is customary under historical
                                 cost accounting. Since assets and liabilities
                                 that are not financial instruments are
                                 excluded, the difference between total
                                 financial assets and financial liabilities does
                                 not, nor is it intended to, represent the
                                 market value of the Company. Furthermore, the
                                 estimated fair value information may not be
                                 comparable between financial institutions due
                                 to the wide range of valuation techniques
                                 permitted, and assumptions necessitated, in the
                                 absence of an available trading market.

                                 P.  USE OF ESTIMATES IN THE PREPARATION OF
                                 FINANCIAL STATEMENTS

                                 The preparation of financial statements in
                                 conformity with generally accepted accounting
                                 principles requires management to make
                                 estimates and assumptions that affect the
                                 reported amounts of assets and liabilities,
                                 disclosure of contingent assets and liabilities
                                 at the date of the financial statements and the
                                 reported amounts of revenues and expenses
                                 during the reporting period. Actual results
                                 could differ from those estimates.

                                 Q.  STOCK-BASED COMPENSATION

                                 In 1996, the Company adopted for footnote
                                 disclosure purposes only, SFAS No. 123,
                                 "Accounting for Stock-Based Compensation,"
                                 which requires that companies measure the cost
                                 of stock-based employee compensation at the
                                 grant date based on the value of the award and
                                 recognize this cost over the service period.
                                 The value of the stock-based award is
                                 determined using the intrinsic value method
                                 whereby compensation cost is the excess of the
                                 quoted market prices of the stock at grant date
                                 or other measurement date over the amount an
                                 employee must pay to acquire the stock.

                                 R.  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

                                 DISCLOSURE OF CAPITAL STRUCTURE
                                 -------------------------------

                                 In February 1997, the FASB issued SFAS 129,
                                 "Disclosure of Information about Capital
                                 Structure" ("SFAS 129"). SFAS 129 established
                                 disclosure requirements regarding pertinent
                                 rights and privileges of outstanding
                                 securities. Examples of disclosure items
                                 regarding securities include, though are not
                                 limited to, items such as dividend and
                                 liquidation preferences, participation rights,
                                 call prices and dates, conversion or exercise
                                 prices or rates. The number of shares issued
                                 upon conversion, exercise or satisfaction of
                                 required conditions during at least the most
                                 recent annual fiscal period and any subsequent
                                 interim period must also be disclosed.
                                 Disclosure of liquidation preferences of
                                 preferred stock in the equity section of the
                                 balance sheet is also required. SFAS 129 is
                                 effective for financial periods ending after
                                 December 15, 1997. The adoption of this
                                 standard did not have an impact on the
                                 Company's financial position or results of
                                 operations.

                                 REPORTING COMPREHENSIVE INCOME

                                 In June 1997, FASB issued SFAS 130, "Reporting
                                 Comprehensive Income" (SFAS 130").  SFAS 130
                                 established disclosure standards for reporting
                                 comprehensive income in a full set of general
                                 purpose financial statements. SFAS 130 is
                                 effective for fiscal years beginning after
                                 December 15, 1997. The adoption of this
                                 standard is not expected to have an impact on
                                 the Company's financial position or results of
                                 operations.

                                 DISCLOSURE OF BUSINESS ENTERPRISE

                                 In June 1997, the FASB issued SFAS 131,
                                 "Disclosures about Segments of an Enterprise
                                 and Related Information" ("SFAS 131") which is
                                 effective for periods beginning after December
                                 15, 1997. SFAS 131 established standards for
                                 the way that public business enterprises report
                                 information about operating segments in annual
                                 financial statements and requires that those
                                 enterprises report selected information about
                                 operating segments in interim financial reports
                                 issued to stockholders. It also establishes
                                 standards for related disclosures about
                                 products and services, geographic areas and
                                 major customers. The adoption of this standard
                                 is not expected to have an impact on the
                                 Company's financial position or results of
                                 operations.

                                 DISCLOSURE ABOUT PENSIONS AND OTHER POST-
                                 RETIREMENT BENEFITS

                                 In February 1998 the FASB issued SFAS 132
                                 "Disclosures About Pension and Other
                                 Postretirement Benefits." This Statement
                                 revises employers' disclosures about pension
                                 and other postretirement benefit plans.

                                 This Statement is effective for fiscal years
                                 beginning after December 15, 1997. Earlier
                                 application is encouraged. Restatement of
                                 disclosures for earlier periods provided for
                                 comparative purposes is required unless the
                                 information is not readily available, in which
                                 case the notes to the financial statements
                                 should include all available information and a
                                 description of the information not available.


                                 S.  RECLASSIFICATIONS

                                 Certain reclassifications of balances from
                                 prior years have been made to conform to the
                                 current year's reporting format.

                                      F-31
<PAGE>   96
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.     LOANS                     LOANS RECEIVABLE
       RECEIVABLE AND
       ALLOWANCE FOR             Loans receivable at December 31, 1997 and 1996
       LOAN LOSSES               are summarized as follows:

<TABLE>
<CAPTION>
                                   December 31,                                        1997                1996
                                   -------------------------------------------------------------------------------
<S>                                                                        <C>                 <C>
                                   Real estate loans                       $     43,474,000    $     61,487,000
                                   Participations sold                          (21,183,000)        (24,914,000)
                                   -------------------------------------------------------------------------------
                                   Total real estate loans - net           $     22,291,000    $     36,573,000
                                   -------------------------------------------------------------------------------
                                   Loans receivable held for
                                       investment                          $     22,291,000    $     36,573,000
                                   Net deferred loan fees and
                                       costs                                       (224,000)           (594,000)
                                   Allowance for loan losses                     (1,438,000)         (2,464,000)
                                   -------------------------------------------------------------------------------
                                                                           $     20,629,000    $     33,515,000
                                   -------------------------------------------------------------------------------
</TABLE>


                                 The components of the loan portfolio at
                                 December 31, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
                                   December 31,                                        1997                1996
                                   -------------------------------------------------------------------------------
<S>                                                                        <C>                 <C>
                                   One-to-four family residential          $      6,028,000    $     14,479,000
                                   Five-or-more family residential                6,172,000           9,308,000
                                   Home improvement                               1,090,000           1,322,000
                                   Commercial                                     9,001,000          10,732,000
                                   Land and other                                      --               732,000
                                   -------------------------------------------------------------------------------
                                                                           $     22,291,000    $     36,573,000
                                   -------------------------------------------------------------------------------
</TABLE>

                                 During 1997 and 1996, the Company sold, without
                                 recourse to the Company, approximately
                                 $17,063,000 and $26,176,000 of portfolio
                                 mortgage loans.


                                      F-32
<PAGE>   97
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.     LOANS                     SIGNIFICANT CONCENTRATIONS
       RECEIVABLE AND
       ALLOWANCE FOR             The Company made portfolio mortgage loans
       LOSSES                    primarily secured by first or second trust
       (CONTINUED)               deeds on Southern California real estate. The
                                 loans are secured by single-family residential
                                 and other types of real estate and
                                 collateralized by the equity in the borrowers'
                                 real estate. Prior to the fourth quarter of
                                 1993, these borrowers generally had a credit
                                 standing such that the Company relied heavily
                                 on the value of the underlying collateral in
                                 its lending practices. In the fourth quarter of
                                 1993, however, the Company began implementing a
                                 revised policy to place more emphasis on the
                                 creditworthiness of the borrower. Loans are
                                 expected to be repaid either by cash from the
                                 borrower at maturity or by borrower
                                 refinancing. In the fourth quarter of 1996 the
                                 Company stopped portfolio lending in order to
                                 concentrate its financial and human resources
                                 on its primary business of residential lending
                                 for sale and securitization.

                                 ALLOWANCE FOR LOAN LOSSES

                                 Changes in the allowance for loan losses for
                                 the years ended December 31, 1997, 1996 and
                                 1995 are as follows:

<TABLE>
<CAPTION>
                                    Years ended December 31,                   1997          1996         1995
                                   ------------------------------------------------------------------------------
<S>                                                                   <C>            <C>            <C>
                                   Balances at beginning              $   2,464,000  $  4,229,000   $  4,307,000
                                   Provision charged to expense           3,087,000     1,151,000      3,289,000
                                   Transferred to loans held for sale    (1,902,000)         --             --
                                   Loan charge-offs, net of
                                     recoveries                          (2,211,000)   (2,916,000)    (3,367,000)
                                   ------------------------------------------------------------------------------

                                   Balance at end                     $   1,438,000  $  2,464,000   $  4,229,000
                                   ------------------------------------------------------------------------------
</TABLE>

                                 At December 31, 1997 and 1996, loans with more
                                 than two monthly payments past due and on
                                 nonaccrual status totaled $1,395,000 and
                                 $2,649,000. If interest on these loans had been
                                 accrued, interest income would have increased
                                 by approximately $175,000 and $235,000 in 1997
                                 and 1996. At December 31, 1997 and 1996, loans
                                 with more than two monthly payments past due
                                 and on accrual status totaled $1,962,000 and
                                 $1,722,000. Interest income recognized on these
                                 loans totaled approximately $402,000 and
                                 $95,000 in 1997 and 1996.


                                      F-33
<PAGE>   98
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.     LOANS                     The following information relates to the
       RECEIVABLE AND            Company's impaired loans which includes
       ALLOWANCE FOR             troubled debt restructuring that meet the
       LOAN LOSSES               definition of impaired loans as of and for the
       (CONTINUED)               years ended December 31, 1997 and 1996:



<TABLE>
<CAPTION>
                                    December 31,                                            1997           1996
                                   -------------------------------------------------------------------------------
<S>                                                                                 <C>            <C>
                                   Impaired loans with a specific allowance         $    852,000   $  1,648,000
                                   Impaired loans with no specific allowance             813,000        617,000
                                   -------------------------------------------------------------------------------
                                   Total impaired loans                             $  1,665,000   $  2,265,000

                                   Total allowance related to impaired loans        $    337,000   $    229,000
                                   Average balance of impaired loans for the
                                       period                                       $  2,191,000   $  2,951,000
                                   Interest income on impaired loans for
                                       the period recorded on a cash basis          $    104,000   $    307,000
</TABLE>


                                 LOANS HELD FOR SALE

                                 Loans held for sale at December 31, 1997 and
                                 1996 are summarized as follows:

<TABLE>
<CAPTION>
                                   December 31,                                            1997           1996
                                   -------------------------------------------------------------------------------
<S>                                                                               <C>            <C>
                                   Real estate loans                              $  35,280,000  $  18,148,000
                                   -------------------------------------------------------------------------------
</TABLE>

                                 In December 1993, management developed a loan
                                 securitization program under which the
                                 Corporation or Pacific Thrift could sell
                                 certain loans receivable to a primary buyer
                                 (the Purchaser) on a whole loan basis for a
                                 cash premium.


                                      F-34
<PAGE>   99
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.     LOANS                     LOANS HELD FOR SALE (Continued)
       RECEIVABLE AND
       ALLOWANCE FOR             During 1995 and 1996, the Company sold loans
       LOAN LOSSES               primarily to two purchasers on a whole
       (CONTINUED)               loan basis. On October 31, 1996, the Company
                                 entered into a new agreement with one of the
                                 Purchasers (Purchaser). For all loans sold
                                 after September 30, 1996, the Company receives
                                 par value; interest payments less a servicing
                                 fee and warehousing fee from the date of sale
                                 until the loans are securitized; certain
                                 premium and/or advance payments upon
                                 securitization; and an interest-only strip
                                 on the loans sold. On December 16, 1996, the
                                 Company entered into a similar agreement with a
                                 Second Purchaser of loans effective for all
                                 loans sold after November 30, 1996.

                                 To the extent that the Company or one of its
                                 subsidiaries originates loans for sale, it
                                 bears an interest rate risk between the loan
                                 approval date and the date that each loan is
                                 securitized. In addition, because subprime
                                 residential loans have a higher interest rate
                                 spread than prime residential loans,
                                 fluctuations in rates which may occur during
                                 the period prior to securitization could reduce
                                 the excess spread anticipated to be retained by
                                 the Company upon securitization, but would not
                                 generally be sufficiently large to eliminate
                                 the excess spread entirely. Loans which are
                                 held for sale during the period prior to sale
                                 are accounted for at the lower of cost or
                                 market value of such loans.

                                 During 1997 and 1996, the Company sold an
                                 aggregate of $643 million and $338 million of
                                 pre-approved securitizable loans to the
                                 Purchasers.

                                 On December 18, 1997, the Company securitized
                                 $100 million of loans into Asset-Backed
                                 Securities (ABS), which are secured primarily
                                 of fixed and adjustable rate one- to four-
                                 family, first lien home equity loans, were
                                 issued by the Company pursuant to an indenture
                                 between the Company and Bankers Trust Company
                                 of California, N.A., the Indenture Trustee.





                                      F-35
<PAGE>   100
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                 Prior to March 31, 1993, Pacific Thrift
                                 originated Title 1 home improvement loans that
                                 were 90% insured by the Federal Housing
                                 Administration, provided that the total amount
                                 of claims did not exceed 10% of the amount of
                                 all Title I loans. During 1995, Pacific Thrift
                                 sold $1,126,000 of these loans and recorded no
                                 losses. As of March 31, 1993, Pacific Thrift
                                 discontinued the origination and sale of Title
                                 I and other similar loans.







                                      F-36
<PAGE>   101
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.      INTEREST-ONLY            Interest-only strips receivable consist of
        STRIP                    assets generated from loan sales and
        RECEIVABLES              securitization as follows:

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                               1997            1996
                                                                               ----            ----
                                 <S>                                        <C>              <C>
                                 Interest-only strip, certificated          $13,417,000      $        --
                                 Interest-only strip, non-certificated       13,417,000       11,698,000
                                                                            -----------      -----------
                                                                            $94,424,000      $11,698,000
                                                                            ===========      ===========
</TABLE>

                                 The interest-only strips receivable are
                                 recorded as a result of the Company's sale and
                                 securitization of real estate loans. Interest-
                                 only strips receivables are recorded at their
                                 estimated fair value. The fair value is based
                                 on the present value of the expected future
                                 cash flows. The Company estimates future cash
                                 flows from the interest-only strip receivable
                                 and values them utilizing assumptions that it
                                 believes are consistent with those that would
                                 be utilized by an unaffiliated third party
                                 purchaser. To the Company's knowledge, there is
                                 no active market for the sale of the
                                 interest-only strips receivable.

                                 The fair value of an interest-only strip
                                 receivable is determined by computing the
                                 present value of the excess cash flows based on
                                 the weighted average coupon on the loans sold
                                 over the sum of: (1) the coupon on the senior
                                 interests, (2) the contracted servicing fee,
                                 (3) expected losses to be incurred on the
                                 portfolio of loans sold over the lives of the
                                 loans, (4) overcollateralization and (5) fees
                                 payable to the trustee and the monoline
                                 insurer. The cash flow model uses prepayment
                                 and default assumptions that market
                                 participants would be expected to use for
                                 similar financial instruments that are subject
                                 to prepayment, credit and interest rate risk.

                                 The cash flows are then discounted at an
                                 interest rate that the Company believes an
                                 unaffiliated third-party purchaser would
                                 require as a rate of return on such a financial
                                 instrument. To the extent that actual future
                                 excess cash flows are different from estimated
                                 excess cash flows, the fair value of the
                                 Company's interest-only strip will be adjusted
                                 quarterly with corresponding adjustments made
                                 to earnings in that period.

                                 The Company builds overcollateralization from
                                 the excess cash flows. The current amount of
                                 such overcollateralization built through cash
                                 flows is part of the interest-only strip
                                 receivable and earns a market rate of interest.
                                 The amount held by the Trust, as restricted
                                 cash, at December 31, 1997 was approximately
                                 $10.5 million.

                                 As of December 31, 1997, the Company adjusted
                                 the fair value of its interest-only strip
                                 receivable by approximately $2.3 million,
                                 which reflected the use of the "cash out"
                                 method of estimating future cash flows from
                                 the various mortgage trusts. The Company
                                 believes the "cash out" method is a preferred
                                 methodology for estimating ultimate residual
                                 cash flows used to determine the fair value of
                                 its interest-only strips receivable at each
                                 reporting period in accordance with the
                                 requirements of SFAS No. 115. The "cash out"
                                 method assumes that the cash flows placed by
                                 the mortgage pool trustee in an
                                 overcollateralization account are not
                                 considered available until they are received
                                 by the Company. The impact of this change in
                                 estimate on the December 31, 1997 fair value
                                 relates primarily to loans sold and/or
                                 securitized in the fourth quarter of 1997.
                                 During 1997, the Company utilized a modified
                                 "cash in" method of modeling the cash flows
                                 which included some accelerated amortization
                                 of the interest-only strip receivable asset on
                                 loans sold and securitized. In March 1998, the
                                 Company obtained an independent valuation and
                                 report of the interest-only strips receivable,
                                 as of December 31, 1997, which, using the
                                 "cash out" method of modeling cash flows,
                                 determined fair values of the interest-only
                                 strip receivable. The fair value of the
                                 interest-only strips receivable reflected on
                                 the Statement of Financial Condition at
                                 December 31, 1997 is consistent with the
                                 results of the report.

                                 The fair value at December 31, 1997 can be
                                 calculated with a constant prepayment rate
                                 assumption on the Aames 1996-4 pool of 36%,
                                 and constant prepayment rate assumptions on
                                 the Advanta 1997-1, 1997-2, 1997-3 and 1997-4
                                 and PacificAmerica 1997-1 pools of 26% to 27%;
                                 a 50 basis point annual loss rate on each of
                                 its pools (after the first six months) with a
                                 three month ramp up period; and an 11%
                                 discount rate on estimated cash flows from
                                 each of its pools.

                                 It is possible that these assumptions could
                                 change in the near future, due to changes
                                 required by future accounting pronouncements,
                                 the general economy, adverse changes in the
                                 securitization market, and actual prepayment
                                 and default experience which vary from the
                                 assumed rates, which would require adjustments
                                 in the reported fair value of the
                                 interest-only strips receivable. As a result
                                 the actual cash flows received by the Company
                                 could differ significantly from the modeled
                                 cash flows using current assumptions. The
                                 estimated fair value of the Company's
                                 interest-only strips receivable is reviewed
                                 quarterly with required adjustments, if
                                 necessary, made to earnings in that period.


5.     OTHER REAL ESTATE         Other real estate consisted of the following at
                                 December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                   December 31,                                            1997           1996
                                   -------------------------------------------------------------------------------
<S>                                                                               <C>            <C>
                                   Foreclosed real estate                         $   3,132,000  $   6,570,000
</TABLE>


                                      F-37
<PAGE>   102
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                  <C>            <C>
                                   Allowance for losses on other real estate         (1,104,000)    (2,285,000)
                                   -------------------------------------------------------------------------------
                                                                                  $   2,028,000  $   4,285,000
                                   ===============================================================================
</TABLE>

                                 Changes in the allowance for losses on other
                                 real estate for the years ended December 31,
                                 1997, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
                                   Years ended December 31,                    1997          1996          1995
                                   -------------------------------------------------------------------------------
<S>                                                                    <C>           <C>           <C>
                                   Balances at beginning               $  2,285,000  $  2,434,000  $    402,000
                                   Provision for losses                      26,000       337,000     1,188,000
                                   Net (charge offs) recoveries          (1,207,000)     (486,000)      844,000
                                   -------------------------------------------------------------------------------
                                   Balance at end                      $  1,104,000  $  2,285,000  $  2,434,000
                                   ===============================================================================
</TABLE>

                                 Operations of other real estate for the years
                                 ended December 31, 1997, 1996 and 1995
                                 consisted of the following:

<TABLE>
<CAPTION>
                                   Years ended December 31,                    1997          1996          1995
                                   -------------------------------------------------------------------------------
<S>                                                                     <C>           <C>          <C>
                                   Provision for losses                 $    26,000   $   337,000  $  1,188,000
                                   Net (gain) loss on sales                (181,000)     (224,000)     (469,000)
                                   Other expenses                           599,000       568,000       493,000
                                   -------------------------------------------------------------------------------
                                                                        $   444,000   $   681,000  $  1,212,000
                                   ===============================================================================
</TABLE>

                                 Upon foreclosure of a junior lien, the Company
                                 takes title to the real estate, subject to
                                 existing senior liens. These mortgage notes
                                 payable totaled $-0- and $1,557,000 at December
                                 31, 1997 and 1996.


                                      F-38
<PAGE>   103
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.     PROPERTY AND EQUIPMENT    Property and equipment consisted of the
                                 following at December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                   December 31,                                            1997           1996
                                   -------------------------------------------------------------------------------
<S>                                                                               <C>             <C>
                                   Computer and office equipment                  $   3,738,000   $  2,157,000
                                   Furniture and fixtures                             1,235,000        897,000
                                   Leasehold improvements                               676,000        621,000
                                   -------------------------------------------------------------------------------
                                                                                      5,649,000      3,675,000
                                   Accumulated depreciation and amortization         (2,053,000)    (1,315,000)
                                   -------------------------------------------------------------------------------
                                                                                  $   3,596,000   $  2,360,000
                                   ===============================================================================
</TABLE>

7.     THRIFT CERTIFICATES       Thrift certificates are comprised of fully-paid
       PAYABLE                   certificates and installment  certificates. The
                                 approximate weighted average interest rate of
                                 fully-paid and installment certificate accounts
                                 at December 31, 1997 was 6.11% and 5.01% and at
                                 December 31, 1996 was 5.89% and 5.06%. The
                                 interest payable on the thrift certificates
                                 totaled $370,000, $185,000 and $103,000 at
                                 December 31, 1997, 1996 and 1995.

                                 At December 31, 1997 and 1996, fully-paid
                                 thrift certificates consisted of the following:

<TABLE>
<CAPTION>
                                   December 31,                                             1997           1996
                                   --------------------------------------------------------------------------------
<S>                                                                               <C>             <C>
                                   Certificates equal or greater than $100,000    $    4,180,000  $           -

                                   Certificates less than $100,000                   109,551,000     56,343,000
                                   --------------------------------------------------------------------------------
                                                                                  $  113,731,000  $  56,343,000
                                   ===============================================================================
</TABLE>


                                      F-39
<PAGE>   104
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.     THRIFT CERTIFICATES        At December 31, 1997, scheduled maturities
       PAYABLE                    of fully-paid thrift certificates were
       (CONTINUED)                as follows:

<TABLE>
<CAPTION>
                                   December 31,                                      1997
                                   ----------------------------------------------------------
<S>                                          <C>                          <C>
                                   Less than 3 months                     $    20,988,000
                                   3 to 6 months                               32,649,000
                                   6 to 12 months                              59,999,000
                                   1 to 5 years                                    95,000
                                   ----------------------------------------------------------
                                                                          $   113,731,000
                                   ==========================================================
</TABLE>

8.     NOTES PAYABLE             Notes payable consisted of the following at
                                 December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                   December 31,                                             1997           1996
                                   --------------------------------------------------------------------------------
<S>                                                                                <C>             <C>
                                   Bank loan, repaid January 1997 (a)              $      --       $    745,000

                                   Interest-strip only advances(b)(c)                 28,318,000      2,545,000
                                   --------------------------------------------------------------------------------
                                                                                   $  28,318,000   $  3,290,000
                                   ================================================================================
</TABLE>

                                 (a) The loan interest rate was prime plus 1.5%,
                                 which was 9.75% at December 31, 1996.

                                 (b) The interest-only strip advances received
                                 in 1997 and 1996 are from the Purchasers
                                 secured by the Company's interest-only strips
                                 receivable. Agreements provide for advances
                                 ranging from 3.00% to 4.75% of the par value
                                 of loans sold and are made by the Purchasers
                                 when the loans are securitized. The advances
                                 are reduced by any monthly payments to be made
                                 against the interest-only strips receivable
                                 until the advances are fully repaid. The
                                 advances bear an annual interest rate ranging
                                 from LIBOR plus 1.00% to LIBOR plus 2.0%.

                                 (c) In connection with the advances received
                                 under the Master Assignment Agreement, dated as
                                 of December 18, 1997 (the "Master Assignment
                                 Agreement"), with Merrill Lynch Mortgage
                                 Capital, Inc., each advance is due one year
                                 from the date of the advance, and the Company
                                 is required to make mandatory prepayments under
                                 the Master Assignment Agreement in the event
                                 that the residual interests assigned to Merrill
                                 Lynch experience a


                                      F-40
<PAGE>   105
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 decline in value from the levels established at
                                 the time of the advance.


                                      F-41
<PAGE>   106
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.     INCOME TAXES             The Partnership was not subject to income taxes.
                                However, the Partnership was still required to
                                file partnership returns in order to report its
                                income or loss in total as well as the
                                distributable share of income or loss of each of
                                the partners.  These partnership returns, as all
                                tax returns, are potentially subject to
                                examination by the taxing authorities.

                                The cumulative differences between the total
                                capital of the Partnership for financial
                                reporting purposes and the total capital
                                reported for federal income tax purposes at
                                December 31, 1995 are summarized as follows:

<TABLE>
<CAPTION>
                                    December 31,                                                           1995
                                   -------------------------------------------------------------------------------
<S>                                                                                              <C>
                                   Total partners' capital for financial reporting purposes      $    8,727,000

                                   Investment in Pacific Thrift, syndication costs, bad debt
                                       and real estate reserves, and various other
                                       differences                                                   14,083,000
                                   -------------------------------------------------------------------------------
                                   Total partners' capital for federal income tax purposes       $   22,810,000
                                   ===============================================================================
</TABLE>

                                 Subsequent to the restructuring (Note 1) the
                                 Corporation became subject to federal income
                                 and California franchise taxes. Pacific Thrift,
                                 the major operating subsidiary, was always
                                 subject to income taxes because it has been a
                                 taxable corporation from its inception.
                                 Significant components of the provision for
                                 income taxes (benefits) from continuing
                                 operations included in the consolidated
                                 statements of operations are as follows:

<TABLE>
<CAPTION>
                                   December 31,                             1997          1996            1995
                                   -------------------------------------------------------------------------------
<S>                                                               <C>             <C>            <C>
                                   Current                        $       26,000  $    727,000   $        --
                                   Deferred                           12,442,000       931,000      (1,223,000)
                                   -------------------------------------------------------------------------------
                                                                  $   12,468,000  $  1,658,000   $  (1,223,000)
                                   ===============================================================================
</TABLE>


                                      F-42
<PAGE>   107
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.      INCOME TAXES
        (CONTINUED)              The tax effects of temporary differences that
                                 give rise to the deferred tax assets and
                                 liabilities at December 31, 1997 and 1996 are
                                 as follows:

<TABLE>
<CAPTION>
                                   December 31,                                              1997           1996
                                   --------------------------------------------------------------------------------
<S>                                                                                 <C>             <C>
                                   Deferred tax assets
                                       Net operating loss carryforward              $  18,321,000   $  2,547,000
                                       State tax deduction                              2,050,000        435,000
                                       Loan loss reserves                                 805,000        488,000
                                       Bonus accrued                                      731,000           --
                                       Capital loss carryforward                          402,000        402,000
                                       Reserve for delinquent interest                    240,000        334,000
                                       Alternate minimum tax credit carryforward          196,000        214,000
                                       Deferred rent                                      117,000        137,000
                                       Reserve for other real estate owned                112,000        370,000
                                       Organization costs                                  46,000        159,000
                                       Other                                               17,000         18,000
                                       Loans held for sale                                   --          253,000
                                       Depreciation                                          --           40,000
                                   --------------------------------------------------------------------------------
                                   Total gross deferred tax assets                     23,037,000      5,397,000

                                   Valuation allowance                                   (402,000)      (402,000)
                                   --------------------------------------------------------------------------------
                                   Deferred tax liabilities
                                       Interest-only strip receivable               $ (33,628,000)  $ (4,157,000)
                                       Loans held for sale                               (726,000)          --
                                       Deferred loan costs                               (230,000)      (415,000)
                                       Depreciation                                      (198,000)      (127,000)
                                   --------------------------------------------------------------------------------
                                   Total deferred tax liabilities                   $ (34,782,000)  $ (4,699,000)
                                   -------------------------------------------------------------------------------
                                   Total deferred tax asset (liability), net          (12,147,000)  $    296,000
                                   ================================================================================
</TABLE>

                                 Included in the deferred tax asset at December
                                 31, 1997 and 1996 is a capital loss
                                 carryforward of $402,000 which is fully
                                 reserved (Note 15). During 1996 the beginning
                                 of year valuation allowance of $857,000 was
                                 reversed. On June 27, 1996 when the Company
                                 went from a non-taxable entity to a taxable
                                 entity a valuation allowance of $1,207,000 was


                                      F-43
<PAGE>   108
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. INCOME TAXES
   (CONTINUED)                   recorded against the resulting deferred tax
                                 asset of $1,207,000 as management felt it was
                                 more likely than not the asset was not
                                 realizable at that time. In the fourth quarter
                                 of 1996, this valuation allowance of $1,207,000
                                 was reversed because of new contracts entered
                                 into with the Purchaser in October 1996 and the
                                 Second Purchaser in December 1996 (Note 3). As
                                 a result of these contracts management expects
                                 sufficient revenue will be generated in the
                                 future to use these future temporary deductible
                                 differences, therefore management believes it
                                 is more likely than not that the deferred tax
                                 asset will be realized.

                                 At December 31, 1997, the Company has net
                                 operating loss carryforwards for federal income
                                 tax purposes of approximately $48,061,000 that
                                 are available to offset future federal taxable
                                 income. These federal net operating losses
                                 expire in the years 2010 through 2012. Net
                                 operating loss carryforwards for California
                                 franchise tax purposes are approximately
                                 $21,272,000. These California carryforwards
                                 expire in the years 2001 and 2002. Should there
                                 occur a 50% ownership change of the Company as
                                 defined under Section 382 of the Internal
                                 Revenue Code of 1986, the Company's ability to
                                 use the net operating losses would be
                                 restricted to a prescribed annual amount.

                                 The following summarizes the difference between
                                 the 1997, 1996 and 1995 provision for income
                                 taxes (benefit) from continuing operations and
                                 the federal statutory tax rate:

<TABLE>
<CAPTION>
                                                                                   1997       1996       1995
                                   --------------------------------------------------------------------------------
<S>                                                                                <C>        <C>        <C>
                                   Federal statutory tax rate                        35  %      34 %      (34 )%
                                   Utilization of net operating loss                 --         --         34
                                   Reversal of valuation allowance                   --        (19 )      (32 )
                                   Loss of benefit of former partnership
                                       losses                                        --         11         --
                                   State taxes net of federal benefit                 7.0       --         --
                                   --------------------------------------------------------------------------------
                                   Effective tax rate (benefit)                      42  %      26 %      (32 )%
                                   ================================================================================
</TABLE>


                                      F-44
<PAGE>   109
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.    RELATED PARTIES           The Partnership had various related party
        AND AFFILIATES           transactions with the following entities:

                                 -    PRESIDENTIAL MANAGEMENT COMPANY - Prior
                                      to the restructuring (Note 1) the former
                                      general partner received specified fees
                                      for serviced performed and reimbursements
                                      of certain expenses. Under the Partnership
                                      Agreement, the general partner received a
                                      base fee of up to 35% of the loan
                                      origination fees paid by borrowers to the
                                      Partnership or Pacific Thrift. The base
                                      fee was 35% of loan origination fees for
                                      the Company in 1995. The general partner
                                      also received a loan servicing fee of 3/8
                                      of 1% per annum on loans with terms over
                                      three years.

                                 Amounts charged by the former general partner
                                 for services performed and overhead-related
                                 expenses for the years ended December 31,
                                 1996 and 1995 were as follows:


<TABLE>
<CAPTION>
                                       Years ended December 31,              1996           1995
                                       ------------------------------------------------------------
<S>                                                                  <C>            <C>
                                       Base fee                      $    834,000   $    767,000
                                       Loan servicing fee                 125,000        245,000
                                       ------------------------------------------------------------
                                       Total fees                    $    959,000   $  1,012,000
                                       ============================================================
                                       Salaries and overhead
                                           reimbursements            $    100,000   $     82,000
                                       ============================================================
</TABLE>

                                    - In connection with an amendment to the
                                      loan agreement with a bank lender, in 1992
                                      the general partner loaned the Partnership
                                      $600,000 in subordinated debt, with
                                      interest at the prime rate and only
                                      repayable upon consent by the lender or at
                                      such time as the Partnership repaid all of
                                      its outstanding indebtedness to the
                                      lender. The general partner was repaid in
                                      1996.


                                      F-45
<PAGE>   110
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.    RELATED PARTIES         - PRESIDENTIAL MANAGEMENT COMPANY (Continued)
       AND AFFILIATES
       (CONTINUED)                  During 1995, Pacific Thrift paid and
                                    allocated certain salaries and overhead for
                                    the Partnership, the Corporation, PAMC, CRC,
                                    LPPC and the general partner totaling
                                    $386,000, $251,000, $8,000 and $597,000, and
                                    was reimbursed on a monthly basis.

                                    During 1996, Pacific Thrift paid and
                                    allocated certain salaries and overhead for
                                    the Partnership, Corporation, PAL, CRC, LPPC
                                    and the general partner totaling $159,000,
                                    $753,000, $212,000, $6,000 and $174,000 and
                                    was reimbursed on a monthly basis.

                                  - OTHER - Prior to the Restructuring, a
                                    managing officer of the Partnership and
                                    stockholder provided legal services in
                                    connection with the loan accounts of the
                                    Partnership and Pacific Thrift, for which he
                                    received $100 from the fees paid by each
                                    borrower for legal services related to each
                                    loan origination. Total fees of $212,000 and
                                    $175,000 were paid by the Partnership to the
                                    managing officer for the years ended
                                    December 31, 1996 and 1995.

                                    A partner with a law firm that provides
                                    legal services to the Company is a
                                    stockholder of the Company and formerly a
                                    partner of the Partnership. Total fees for
                                    the services provided to the Company by the
                                    law firm were approximately $785,000,
                                    $424,000, and $689,000 for the years ended
                                    December 31, 1997, 1996 and 1995.


                                      F-46
<PAGE>   111
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.    RELATED PARTIES            - OTHER (Continued)
       AND AFFILIATES
       (CONTINUED)                  Former officers of the Company had loans
                                    payable to the Company, secured by real
                                    estate, totaling approximately $74,000 as of
                                    December 31, 1996. These loans are included
                                    in loans receivable.

                                    Thrift certificates purchased by members of
                                    management totaled approximately and $34,000
                                    and $174,000 at December 31, 1997 and 1996,
                                    on terms slightly more favorable than the
                                    terms for unrelated parties. Interest
                                    expense on these certificates totaled
                                    approximately $2,000 and $8,000 for the
                                    years ended December 31, 1997 and 1996.



                                      F-47
<PAGE>   112
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



11.     COMMITMENTS                 In January and February 1993, the
        AND                         Partnership and Pacific Thrift foreclosed on
        CONTINGENCIES               two loans secured by real estate that
                                    contained toxic substances. The real estate
                                    was used by the former owners for
                                    metal-plating purposes. Remediation was
                                    completed on one property in 1995 and on the
                                    second property in 1996. Both properties
                                    were sold in 1996 for cash and without
                                    recourse.

                                    The Company conducts its operations from
                                    leased facilities. Rental expenses of
                                    approximately $1,724,000, $1,129,000 and
                                    $905,000 for the years ended December 31,
                                    1997, 1996 and 1995 have been charged to
                                    general and administrative expenses in the
                                    consolidated statements of operations. At
                                    December 31, 1997, the approximate minimum
                                    rental commitments under all noncancelable
                                    operating leases (which are subject to
                                    annual escalations based on the consumer
                                    price index) are as follows:


<TABLE>
<CAPTION>
                                       Year                                           Amount
                                   ------------------------------------------------------------
<S>                                                                            <C>
                                       1998                                    $   1,752,000
                                       1999                                        1,252,000
                                       2000                                        1,117,000
                                       2001                                          789,000
                                       Thereafter                                  1,108,000
                                   ------------------------------------------------------------
</TABLE>


                                      F-48
<PAGE>   113
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                                            <C>
                                                                               $   6,018,000
                                   ============================================================
</TABLE>

                                    At December 31, 1997 and 1996, the Company
                                    was servicing Title I loans for others
                                    totaling approximately $6,352,000, and
                                    $8,743,000. In addition, the Company had
                                    filed claims with the Federal Housing
                                    Administration that depleted the insurance
                                    on these loans during 1994.

                                    The Corporation entered into employment
                                    agreements with five of its officers
                                    effective as of the closing date of the
                                    Restructuring on June 27, 1996 (Note 1). One
                                    employment agreement with the President of
                                    CRC, LPPC and CRCWA was terminated effective
                                    December 31, 1996 upon the sale of those
                                    subsidiaries (Note 18). On January 1, 1997,
                                    the Corporation entered into an employment
                                    agreement with its Chief Financial Officer.


                                      F-49
<PAGE>   114
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



11.       COMMITMENTS               The agreements provide for initial terms
          AND                       ranging from one to three years and all
          CONTINGENCIES             extend automatically for additional one year
          (CONTINUED)               terms thereafter unless either party gives
                                    at least six months written notice of their
                                    intentions not to renew. The agreements
                                    provide for annual salaries adjusted
                                    annually to the cost of living index. The
                                    agreements also provide for two of the
                                    officers to receive annual bonuses based on
                                    a calculation of net pre-tax profits subject
                                    to a minimum return on equity.

                                    Effective January 1, 1996 Pacific Thrift
                                    entered into an employment agreement with an
                                    executive vice president for a term of two
                                    years and automatically renewing for
                                    additional one year terms thereafter unless
                                    either party gives at least six months
                                    written notice of his intention not to
                                    renew. The agreement provides for an annual
                                    salary adjusted annually to the cost of
                                    living index and an annual bonus based upon
                                    net profits earned from wholesale loans
                                    originated for sale.

                                    FORECLOSURE SERVICES ACTIONS

                                    On June 6, 1995, CRC and LPPC were served
                                    with a complaint by Consumer Action and two
                                    consumers suing both individually and on
                                    behalf of the general public in an unfair
                                    business practices action filed in the
                                    Superior Court of Contra Costa County,
                                    California. The complaint named CRC and
                                    LPPC, along with thirteen other foreclosure
                                    service and foreclosure publishing
                                    companies, and alleges that all named
                                    defendants charge fees in excess of the
                                    statutorily permitted amount for publication
                                    of notices of trustee sales. The complaint
                                    sought restitution of all excess charges, an
                                    injunction against the charging of excessive
                                    fees in the future and attorneys fees. In
                                    January 1996, LPPC and two other posting and
                                    publishing companies were dismissed from the
                                    action without prejudice.

                                    CRC and LPPC, along with all other
                                    defendants in the action brought by Consumer
                                    Action and two consumers alleging excessive
                                    trustee publication fees, entered into a
                                    global settlement with the plaintiffs in
                                    this action, and the action was dismissed on
                                    July 28, 1997. The settlement amount paid by
                                    the Company on behalf of CRC under the terms
                                    of the settlement agreement was immaterial
                                    to the Company as a whole.


                                      F-50
<PAGE>   115
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



11.    COMMITMENTS                  FORECLOSURE SERVICES ACTIONS (Continued)
       AND
       CONTINGENCIES                In 1996, CRC was served with a complaint by
       (CONTINUED)                  seven individuals suing both individually
                                    and on behalf of the general public in a
                                    purported class action filed on the Superior
                                    Court of Los Angeles, California. The
                                    complaint named over 50 defendants,
                                    including numerous title insurance companies
                                    and trust deed companies, generally alleging
                                    that the title insurance companies did not
                                    make certain refunds of certain trustee sale
                                    guarantee fees ("TSGs") which they were
                                    required to make under the terms of a
                                    settlement of a previous case (in which CRC
                                    was not named), and that the trust deed
                                    services companies failed to purchase less
                                    costly alternative products, to request and
                                    remit refunds in the cost of TSGs or to
                                    advise the members of the class of their
                                    right to a refund from the title insurance
                                    companies. In 1997, a global settlement of
                                    the action was reached, pursuant to which
                                    the Company paid a nominal amount to the
                                    plaintiffs on behalf of CRC.

                                    The Company and Pacific Thrift and
                                    PacificAmerica Money Centers are involved
                                    in certain lawsuits and there are claims
                                    pending against these entities which
                                    management considers incidental to normal
                                    operations. The legal responsibility and
                                    financial impact with respect to such
                                    litigation and claims cannot presently be
                                    determined. However, management considers
                                    that any ultimate liability which would
                                    likely arise from these lawsuits and claims
                                    would not materially affect the financial
                                    position, results of operations or cash
                                    flows of the Company.

                                    SALES OF LOANS AND SERVICING RIGHTS

                                    In the ordinary course of business, the
                                    Company is exposed to liability from
                                    industry standard representations and
                                    warranties made to purchasers and insurers
                                    of mortgage loans and the purchasers of
                                    servicing rights. Under certain
                                    circumstances, the Company is required to
                                    repurchase mortgage loans if there has been
                                    a breach of a representation or warranty.
                                    For loans which have been securitized, the
                                    Company includes an estimate of defaults in
                                    its assumptions to determine fair value. On
                                    a periodic basis, the Company reviews its
                                    assumptions in light of historical
                                    experience and economic trends to evaluate
                                    their reasonableness in measuring the fair
                                    value of recorded assets.


                                      F-51
<PAGE>   116
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



11.    COMMITMENTS               LOAN SERVICING
       AND
       CONTINGENCIES             As of December 31, 1997 the Company's servicing
       (CONTINUED)               portfolio (inclusive of securitized loans
                                 where the Company has ongoing risk of loss but
                                 has no remaining servicing rights or
                                 obligations) was $744 million. All of the
                                 Company's loan servicing has either been
                                 outsourced or subcontracted to Advanta.

12.    RETIREMENT                The Company implemented a retirement savings
       PLANS 1994.               plan (defined contribution plan) in All full-
                                 time employees who have completed six months of
                                 service and reached age 21 are eligible to
                                 participate in the plan. Contributions are made
                                 from employee-elected salary deferrals. The
                                 Company matches the first 6% of employee
                                 contributions to the plan at the rate of $.50
                                 on the dollar. During the years ended 1997,
                                 1996 and December 31, 1995, the Company's
                                 contributions to the plan totaled $231,000,
                                 $241,000 and $266,000.

                                 The PacificAmerica Money Center, Inc.
                                 Supplemental Executive Retirement Plan,
                                 effective from June 27, 1996 forward, is an
                                 unfunded plan to provide benefits to certain
                                 long-term executives officers of the Company.
                                 The yearly benefit that a participant will
                                 receive at normal retirement (as defined) is
                                 based on a formula which takes into account his
                                 highest average annual compensation for three
                                 consecutive years multiplied by the actual
                                 number of years of service (as defined), not to
                                 exceed 30 years. Benefits are reduced by
                                 participants' estimated social security and
                                 401(k) benefits.

                                 Net period pension cost for 1997 includes the
                                 following components:

<TABLE>
<CAPTION>
                                                                      1997           1996
                                   -------------------------------------------------------------
<S>                                                             <C>
                                   Service cost                 $    216,000        $26,000
                                   Interest cost                     218,000         42,000
                                   Prior service cost                226,000         32,000
                                   -------------------------------------------------------------
                                                                $    660,000       $100,000
                                   =============================================================
</TABLE>
                                 The net pension liability at December 31,
                                 1997 and 1996 was $760,000 and $100,000.

                                 Actuarial assumptions are a weighted average
                                 discount rate of 7% and a salary progression
                                 rate of 3%.


                                      F-52
<PAGE>   117
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.     STOCKHOLDERS'            The changes in general and limited partnership
        EQUITY/PARTNERS'         interests for 1995 are as follows:
        CAPITAL, STOCK
        OPTIONS AND
        WARRANTS

<TABLE>
<CAPTION>
                                                                          General        Limited
                                                                        Partnership    Partnership
                                                                          Interest      Interests       Total
                                    ----------------------------------------------------------------------------
<S>                                                                    <C>            <C>            <C>
                                    Capital (deficit) - January 1,
                                        1995                           $  (72,000)    $ 10,497,000   $ 10,425,000
                                    Net loss - 1995                                                    (1,698,000)
                                    ------------------------------------------------------------------------------

                                    Capital (deficit) - December
                                        31, 1995                       $  (84,000)     $ 8,811,000   $  8,727,000
                                    ==============================================================================
</TABLE>

                                  The Company has a 1995 Stock Option Plan and a
                                  1995 Stock Purchase Plan pursuant to which
                                  options to purchase shares of the Company's
                                  common stock may be granted to employees. The
                                  plans provide that the option price shall not
                                  be less than the fair market value of the
                                  shares on the date of grant. Under the 1995
                                  Stock Option Plan, the maximum number of
                                  shares of Common Stock in respect of which
                                  Options may be granted under the Plan (the
                                  "Plan Maximum") is 500,000 with an increase of
                                  two percent (2%) of the total issued and
                                  outstanding shares of the Common Stock on the
                                  first day of each subsequent calendar year, up
                                  to a maximum 660,000 shares, commencing
                                  January 1, 1997. Under the 1995 Stock Purchase
                                  Plan a total of 100,000 options may be issued.
                                  Options vest ratably over four or five year
                                  periods as provided for in each employee's
                                  option agreement. At December 31, 1997, there
                                  were 472,382 shares reserved for options to be
                                  granted under the plans. The following
                                  summarizes stock option transactions:

<TABLE>
<CAPTION>
                                                                                                        Weighted
                                                                                                         Average
                                                                                                          Price
                                                                                         Shares         Per Share
                                   -------------------------------------------------------------------------------
<S>                                                                                      <C>            <C>
                                   Outstanding at June 27, 1996                             --             --
                                       Granted                                           480,000          $5.51
                                       Exercised                                            --             --
                                       Cancelled                                         (13,200 )         5.42
                                   -------------------------------------------------------------------------------
                                   Outstanding at December 31, 1996                      466,800           5.52
                                   ===============================================================================
                                       Granted                                           119,300          17.55
                                       Exercised                                         187,838           5.18
                                       Cancelled                                         125,880           8.27
                                   -------------------------------------------------------------------------------
                                   Outstanding at December 31, 1997                      472,382          $8.45
                                   ===============================================================================



</TABLE>


                                      F-53
<PAGE>   118
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.    STOCKHOLDERS'              At December 31, 1996 the Corporation
       EQUITY/PARTNERS'           had 1,106,754 general partner warrants
       CAPITAL, STOCK             outstanding each exercisable for one share of
       OPTIONS AND                common stock at any time until December 27,
       WARRANTS                   1997 at an exercise price of $7.50 per share.
       (CONTINUED)                During the years ended December 31, 1997 and
                                  1996, 1,105,078 and 19,912 general partner
                                  warrants were exercised. As of December 31,
                                  1997, all unexercised general partner warrants
                                  were cancelled.

                                  At December 31, 1997 and 1996 the Corporation
                                  had 52,052 and 127,788 subscriber warrants
                                  outstanding each exercisable for one share of
                                  common stock at any time until June 27, 1998
                                  at an exercise price of $6.25 per share.
                                  During the years ended December 31, 1997 and
                                  1996, 75,730 and 2,004 subscriber warrants
                                  were exercised.

                                  Information relating to stock options is
                                  summarized by exercise price as follows
                                  (thousands of shares):

<TABLE>
<CAPTION>
                                                                 December 31, 1997
                                   ------------------------------------------------------------------------------------
                                                                Outstanding                         Exercisable
                                                     -----------------------------------  -----------------------------
                                   Exercise Price                  Weighted Average               Weighted Average
                                                              --------------------------  -----------------------------
                                      Per Share            Shares   Life (Year) Exercise Price   Shares  Exercise Price
                                   ------------------------------------------------------------------------------------
<S>                                                       <C>         <C>          <C>         <C>          <C>
                                     $5.00 to $5.00       313,882      8.30          $5.00       60,572       $5.00
                                    $6.25 to $14.25        55,150      8.56          $9.98        6,075        8.33
                                   $14.50 to $15.00        50,850      8.49         $14.73        3,216       14.95
                                   $15.50 to $23.75        50,100      8.95         $21.14          --          --
                                   $24.50 to $25.75         1,200      9.73         $25.31          --          --
                                   $26.00 to $26.00           100      9.62         $26.00          --          --
                                   $26.50 to $26.50           300      9.77         $26.50          --          --
                                   $26.75 to $26.75           100      9.84         $26.75          --          --
                                   $27.00 to $27.00           200      9.79         $27.00          --          --
                                   $28.75 to $28.75           500      9.81         $28.75                      --
                                   ------------------------------------------------------------------------------------
                                    $5.00 to $28.75       472,382      8.43          $8.45       69,863       $5.75
                                   ====================================================================================
</TABLE>



                                                                       F-54
<PAGE>   119
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.    STOCKHOLDERS'              All stock options issued to employees have an
       EQUITY/PARTNERS'           exercise price not less than the fair market
       CAPITAL, STOCK             value of the Company's common stock on the
       OPTIONS AND                date of grant, and in accordance with
       WARRANTS                   accounting for such options utilizing the
       (CONTINUED)                intrinsic value method there is no related
                                  compensation expense recorded in the Company's
                                  financial statements.  Had compensation cost
                                  for stock-based compensation been determined
                                  based on the fair value at the grant dates
                                  consistent with the method of SFAS 123, the
                                  Company's net income and earnings per share
                                  for the year ended December 31, 1997 and
                                  1996 would have been reduced to the pro
                                  forma amounts presented below:

<TABLE>
<CAPTION>
                                                                                             1997          1996
                                   -------------------------------------------------------------------------------
<S>                                                                                 <C>            <C>
                                   Net Income
                                       As reported                                  $  17,095,000  $  4,162,000
                                       Pro forma                                       16,794,000     4,062,000

                                   Earnings per share
                                       As reported
                                            Basic                                        $   4.10       $  1.21
                                            Diluted                                          3.48          1.01

                                       Pro forma
                                            Primary                                          4.10          1.17
                                            Fully diluted                                    3.42           .97
</TABLE>

                                  The fair value of option grants is estimated
                                  on the date of grants utilizing the
                                  Black-Scholes option-pricing model with the
                                  following weighted average assumptions for
                                  grants in 1997 and 1996: expected life of
                                  options of 5 years for both years, expected
                                  volatility of 50% and 25%, risk-free interest
                                  rates of 5.74% and 6.2%, and a 0% dividend
                                  yield for both years. The weighted average
                                  fair value at date of grant for options
                                  granted during 1997 and 1996 approximated
                                  $9.56 and $3.70 per option.


                                      F-55
<PAGE>   120
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.    QUARTERLY                  The unaudited quarterly results of operations
       RESULTS OF                 for 1997 and 1996 are as follows
       OPERATIONS                 (in $000's):
       (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                    Quarter Ended
                                                                      ------------------------------------------
                                                                        Mar.       June       Sept.       Dec.
                                                                        31,         30,        30,         31
                                                                       1997        1997       1997        1997
                                   -------------------------------------------------------------------------------
<S>                                                                   <C>        <C>         <C>       <C>
                                   Interest income                    $ 2,742    $ 2,761     $ 3,241   $  2,986
                                   Interest expense                     1,073      1,100       2,000      2,367
                                   -------------------------------------------------------------------------------
                                   Net interest income                  1,669      1,661       1,241        619
                                   Provision for loan losses              309        738         225      1,815
                                   Other income                        13,425     18,308      22,605     27,717*
                                   Other expense                        9,561     12,331      14,093     18,610
                                   Income tax benefit (expense)        (2,195)    (2,897)     (4,002)    (3,374)
                                   -------------------------------------------------------------------------------
                                   Net income                         $ 3,029    $ 4,003     $ 5,526      4,537
                                   ===============================================================================
                                   Net income per share:
                                       Basic                          $   .80    $  1.06     $  1.36   $    .96
                                       Diluted                            .64        .86        1.10        .86
</TABLE>

<TABLE>
<CAPTION>
                                                                                    Quarter Ended
                                                                      --------------------------------------------
                                                                        Mar.       June       Sept.       Dec.
                                                                        31,         30,        30,         31
                                                                       1996        1996       1996        1996
                                   -------------------------------------------------------------------------------
<S>                                                                   <C>        <C>         <C>       <C>
                                   Interest income                    $ 2,408    $ 2,512     $ 2,788   $  3,794
                                   Interest expense                     1,227      1,190       1,189      1,360
                                   --------------------------------------------------------------------------------
                                   Net interest income                  1,181      1,322       1,599      2,434
                                   Provision for loan losses              725       (469)         11        884
                                   Other income                         4,813      6,177       7,068     11,936
                                   Other expense                        4,879      7,292       7,383      9,354
                                   Income tax benefit (expense)          (348       (727)       (578)        (5)**
                                   -------------------------------------------------------------------------------
                                   Income (loss) from continuing           42        (51)        695      4,127
                                   operations
                                   Income (loss) from discontinued        237         62         103        (15)
                                   operations
                                   Loss on disposal of                      -          -           -     (1,038)
                                   discontinued operations
                                   -------------------------------------------------------------------------------
                                   Net income                         $   279    $    11     $   798   $  3,074
                                   ===============================================================================
                                   Net income per share:
                                       Basic                          $   .30    $   .33     $   .23   $    .37
                                       Diluted                            .30        .31         .18        .29
</TABLE>


                                      F-56
<PAGE>   121
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.    QUARTERLY                 *     In the quarter ended December 31, 1997 as
       RESULTS OF                      a result of a change in estimate the
       OPERATIONS                      interest-only strip receivable was
       (UNAUDITED)                     adjusted. The Company also completed its
       (CONTINUED)                     first direct securitization offering in
                                       the fourth quarter.

                                 **    In the quarter ended December 31, 1996
                                       as a result of continued improved
                                       earnings, especially in this quarter, a
                                       valuation allowance was reversed as
                                       management believed it was more likely
                                       than not that the related deferred tax
                                       asset will be realized in the near
                                       future.

15.    DISCONTINUED               Effective December 31, 1996 the Company's
       OPERATIONS                 trustee and foreclosure services were
                                  discontinued when the assets and liabilities
                                  of CRC and LPPC and all of the stock of CRCWA
                                  were sold. Accordingly, the operations have
                                  been reclassified to present the trustee and
                                  foreclosure services as discontinued
                                  operations in the Statement of Operations. The
                                  Company recorded a fourth quarter 1996 pre-tax
                                  and after-tax charge of $1,038,000 for
                                  disposition of this segment which comprises a
                                  $926,000 loss on the measurement date plus a
                                  loss from discontinued operations from the
                                  measurement date until the disposal date. The
                                  tax benefit of approximately $402,000 from the
                                  loss on disposition was fully reserved for as
                                  such loss is capital in nature and the Company
                                  is unable to quantify the portion of such
                                  capital loss benefit which may be ultimately
                                  realizable.


                                      F-57
<PAGE>   122
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.    DISCONTINUED               Net assets disposed of were $2,674,000 against
       OPERATIONS                 proceeds of $1,748,000 resulting  in a loss
       (CONTINUED)                of approximately $926,000. The $1,748,000 is
                                  included in accounts receivable at December
                                  31, 1996 and $450,000 was received by early
                                  February 1997. The remaining $1,298,000
                                  represents a secured promissory note which
                                  bears interest at 7% per annum, payable
                                  $25,000 per month from April 1, 1997 through
                                  March 31, 1999 and thereafter at $9,328.93 per
                                  month (includes principal and interest) from
                                  April 1, 1999 through March 1, 2012. The
                                  outstanding balance at December 31, 1997 of
                                  $996,675 was fully repaid in February 1998.

                                  Prior to sale of these subsidiaries, the
                                  Company operated principally in two
                                  industries, real estate secured lending
                                  (including the origination and sale of loans)
                                  and trustee and foreclosure services. A
                                  summary of selected financial information by
                                  industry segment for 1995 is as follows:


<TABLE>
<CAPTION>
                                   Years ended December 31,                                                1995
                                   -------------------------------------------------------------------------------
<S>                                                                                               <C>
                                   Revenues
                                       Interest and other income from real estate secured
                                            lending                                               $  19,016,000
                                   Fees from trustee                                                  3,826,000
                                   -------------------------------------------------------------------------------
                                   Total revenues                                                 $  22,842,000
                                   ===============================================================================
                                   Operating profit (loss)
                                       Real estate secured lending                                $  (3,148,000)
                                       Trustee and foreclosure services                                 747,000
                                       General expenses                                                (519,000)
                                   -------------------------------------------------------------------------------
                                   Loss before income taxes                                       $  (2,920,000)
                                   ===============================================================================
                                   December 31,                                                            1995
                                   -------------------------------------------------------------------------------
                                   Identifiable assets
                                       Real estate secured lending                                $  76,896,000
                                       Trustee and foreclosure services                               5,532,000
                                       General assets                                                   129,000
                                   -------------------------------------------------------------------------------
                                   Total assets                                                   $  82,557,000
                                   ===============================================================================
</TABLE>


                                      F-58
<PAGE>   123
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16.    REGULATORY MATTERS AND     MEMORANDUM OF UNDERSTANDING WITH THE FEDERAL
       CAPITAL                    DEPOSIT INSURANCE CORPORATION AND CALIFORNIA
       ADEQUACY AND               DEPARTMENT OF CORPORATIONS
       SUBSEQUENT EVENT
                                  On April 1, 1996, the Company entered into a
                                  Memorandum of Understanding (MOU) with the
                                  FDIC and DOC.  The MOU contained provisions
                                  requiring various operating restrictions and
                                  requirements.

                                  On March 9, 1998, the 1996 MOU was replaced
                                  with a new MOU between the Company and the
                                  FDIC. This informal agreement provides that
                                  the Company shall: (i) on the effective date
                                  of the MOU have, and thereafter maintain, Tier
                                  1 capital equal to 8.0% of its total assets;
                                  (ii) by June 7, 1998, have, and thereafter
                                  maintain, risk-based capital equal to 10.0% of
                                  its total assets; (iii) maintain a fully
                                  funded loan loss reserve; (iv) by March 19,
                                  1998, eliminate assets classified "loss" as of
                                  June 30, 1997, and by September 5, 1998,
                                  reduce assets classified "substandard" as of
                                  June 30, 1997 to not more than $4 million; (v)
                                  by June 7, 1998, reduce and thereafter
                                  maintain the amount of interest-only strip
                                  receivables, net of tax liabilities, to no
                                  more than 100% of total capital; (vi) by June
                                  7, 1998, obtain an independent valuation of
                                  interest-only strip receivables, and
                                  thereafter obtain an annual independent
                                  valuation of such receivables until they
                                  represent 50% or less of Tier 1 capital; (vii)
                                  by June 7, 1998, and thereafter quarterly,
                                  perform valuations and cash flow analyses on
                                  the interest-only strip receivables; (viii) by
                                  May 8, 1998, eliminate and/or correct certain
                                  transactions between the Company and its
                                  parent and develop, adopt and implement a
                                  written policy governing the relationship
                                  between the Company and its parent; (ix) by
                                  June 7, 1998, revise, adopt and implement a
                                  written asset/liability management policy to
                                  include risk tolerance levels for income and
                                  annual independent audits of the Company's
                                  interest rate risk process; (xi) pay no cash
                                  dividends without prior written FDIC approval;
                                  (xii) pay no executive or director bonuses
                                  without prior written FDIC approval; (xiii) by
                                  June 7, 1998, submit a strategic plan
                                  reflecting the restriction on interest-only
                                  strip receivables to a level consistent with
                                  prudent banking standards; and (xiv) by May
                                  15, 1998, and thereafter at the end of each
                                  quarter, furnish written progress reports to
                                  the FDIC detailing actions taken to comply
                                  with the MOU.


                                      F-59
<PAGE>   124
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16.    REGULATORY MATTERS AND     MEMORANDUM OF UNDERSTANDING WITH THE FEDERAL
       CAPITAL ADEQUACY           DEPOSIT INSURANCE CORPORATION AND CALIFORNIA
       AND                        DEPARTMENT OF CORPORATIONS (Continued)
       SUBSEQUENT EVENT
       (CONTINUED)                Management believes it has complied with (i),
                                  (iii), (iv), (v), and is in the process of
                                  complying with (vi). Management believes to
                                  the extent required that it will correct or
                                  eliminate any transactions as described in
                                  (viii). Management also believes that it will
                                  be able to fully comply with the MOU without
                                  any material adverse effect on its operations.

                                  CAPITAL ADEQUACY

                                  The Company is subject to various regulatory
                                  capital requirements administered by the FDIC.
                                  Failure to meet minimum capital requirements
                                  can initiate certain mandatory - and possibly
                                  discretionary - actions by the FDIC that, if
                                  undertaken, could have a direct material
                                  effect on the Company's financial statements.
                                  The regulations require the Company to meet
                                  specific capital adequacy guidelines that
                                  involve quantitative measures of the Company's
                                  assets, liabilities, and certain
                                  off-balance-sheet items as calculated under
                                  regulatory accounting practices. The Company's
                                  capital classification is also subject to
                                  qualitative judgments by the regulators about
                                  components, risk weightings, and other
                                  factors.

                                  Quantitative measures established by
                                  regulation to ensure capital adequacy require
                                  the Company to maintain minimum amounts and
                                  ratios of Tier 1 capital (as defined in the
                                  regulations) to average assets (as defined),
                                  and Tier 1 capital (as defined) to
                                  risk-weighted assets (as defined) and total
                                  capital (as defined) to risk weighted assets
                                  (as defined). To be considered adequately
                                  capitalized as defined under the Prompt
                                  Corrective Action (PCA) provisions of the
                                  Federal Deposit Insurance Corporation
                                  Improvement Act of 1991, Pacific Thrift must
                                  maintain the minimum Tier 1 leverage, Tier 1
                                  risk-based, and total risk-based ratios.


                                      F-60
<PAGE>   125
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16.    REGULATORY MATTERS AND     CAPITAL ADEQUACY (Continued)
       CAPITAL ADEQUACY AND
       SUBSEQUENT EVENT           The following table provides information on
       (CONTINUED)                regulatory capital as of December  31, 1997
                                  and 1996:

<TABLE>
<CAPTION>
                                                                            (Dollar Amount in Thousands)
                                                                      ------------------------------------------
                                                                                          For Required Capital
                                                                           Actual           Adequacy Purposes
                                                                      ------------------  ----------------------
                                                                       Amount      Ratio       Amount       Ratio
                                   --------------------------------------------------------------------------------
<S>                                                                   <C>          <C>       <C>            <C>
                                   AS OF DECEMBER 31, 1997

                                   Total capital (to risk weighted
                                       assets)                        $ 21,697      8.1 %    $ 21,479       8.0 %
                                   Tier 1 capital (to risk
                                       weighted assets)               $ 18,925      7.1 %    $ 10,740       4.0 %
                                   Tier 1 capital (to average         $ 18,967     12.8 %    $  5,907       4.0 %
                                       assets)

                                   AS OF DECEMBER 31, 1996

                                   Total capital (to risk weighted
                                       assets)                        $  9,833     11.9 %    $  6,638       8.0 %
                                   Tier 1 capital (to risk
                                       weighted assets)               $  8,808     10.6 %    $  3,319       4.0 %
                                   Tier 1 capital (to average         $  8,808      8.7 %    $  4,061       4.0 %
                                       assets)
                                   --------------------------------------------------------------------------------
</TABLE>


                                      F-61
<PAGE>   126
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.    BUSINESS                   During 1997, the Company's loan origination
       CONCENTRATIONS             and purchase volume was concentrated in
                                  California, Washington, New York, New Jersey
                                  and Florida. Upon securitization, an estimate
                                  of credit loss is computed based on the
                                  estimated default rate.

                                  The Company currently contracts for the
                                  servicing of all loans it originates,
                                  purchases and holds for sale with Advanta.
                                  This arrangement allows the Company to
                                  increase the volume of loans it originates and
                                  purchases without incurring the overhead
                                  investment in servicing operations. As with
                                  any external service provider, the Company is
                                  subject to risks associated with inadequate or
                                  untimely services. The Company regularly
                                  reviews the delinquency of its servicing
                                  portfolio. Many of the Company's borrowers
                                  require notices and reminders to keep their
                                  loans current and to prevent delinquencies and
                                  foreclosures. A substantial increase in the
                                  Company's delinquency rate or foreclosure rate
                                  could adversely affect its ability to
                                  profitably access the capital markets for its
                                  financing needs, including future
                                  securitizations. Although the Company
                                  periodically reviews the cost associated with
                                  establishing servicing operations to service
                                  the loans it originates and purchases, it has
                                  no plans to establish and perform servicing
                                  operations at this time.


                                      F-62
<PAGE>   127
                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                                                      SCHEDULE I
                                     CONSOLIDATING SCHEDULE - FINANCIAL POSITION
                                                               DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                  Pacific-       Pacific         Pacific-   Pacific-
                                  America        Thrift          America    America            Reclassifying and
                                   Money         and Loan         Money    Securities,        Eliminating Entries
                                 Center, Inc.     Company     Centers, Inc.    Inc.              Dr            Cr     Consolidated
---------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>            <C>            <C>             <C>              <C>      <C>         <C>
Assets

Cash and cash equivalents        $  4,020,000   $ 61,137,000   $    933,000    $  --            $--      $      --   $ 66,090,000

Receivable                            140,000      1,305,000        164,000       --             --         77,000      1,532,000

Note receivable                     1,015,000             --             --       --             --             --      1,015,000

Accrued interest receivable                --      1,174,000        100,000       --             --             --      1,274,000

Loans receivable                      542,000     19,646,000        441,000       --             --             --     20,629,000

Loans held for sale                        --     35,280,000             --       --             --             --     35,280,000

Receivable from related party         198,000      1,885,000          7,000    1,000             --      2,091,000             --

Interest-only strip receivable     60,364,000     33,292,000        768,000       --             --             --     94,424,000

Other real estate                          --      1,718,000        310,000       --             --             --      2,028,000

Property and equipment                 50,000      3,543,000          3,000       --             --             --      3,596,000

Deferred income taxes, net                 --             --             --

Refundable income taxes                    --        222,000             --       --             --             --        222,000

Other assets                          481,000      1,233,000         62,000       --             --             --      1,776,000

Investments in subsidiaries        21,378,000             --             --       --             --     21,378,000             --
---------------------------------------------------------------------------------------------------------------------------------
                                 $ 88,188,000   $160,435,000   $  2,788,000   $1,000            $--   $ 23,546,000   $227,866,000
=================================================================================================================================

</TABLE>


See independent auditors' report and notes to consolidated financial statements.


                                      F-63

<PAGE>   128

                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                                                      SCHEDULE I
                                     CONSOLIDATING SCHEDULE - FINANCIAL POSITION
                                                               DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                  Pacific-       Pacific         Pacific-   Pacific-
                                  America        Thrift          America    America            Reclassifying and
                                   Money         and Loan         Money    Securities,        Eliminating Entries
                                Center, Inc.     Company     Centers, Inc.    Inc.              Dr            Cr     Consolidated
---------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>           <C>            <C>             <C>       <C>             <C>         <C>

Liabilities and Stockholders'
Equity

Thrift certificates payable
   Fully-paid certificates         $      --   $113,731,000        $    --        $-             $-             $-   $113,731,000
   Installment certificates               --     18,793,000             --        --             --             --     18,793,000

                                          --    132,524,000             --        --             --             --    132,524,000

Accounts payable and accrued
expenses                           3,309,000      2,237,000        575,000        --             --             --      6,121,000

Accrued interest payable                  --        370,000             --        --             --             --        370,000

Payable to related party           1,728,000             --        440,000        --      2,168,000             --             --

Notes payable                     28,318,000             --             --        --             --             --     28,318,000

Deferred income taxes              6,447,000      6,379,000       (679,000        --             --             --     12,147,000
---------------------------------------------------------------------------------------------------------------------------------
Total liabilities                 39,802,000    141,510,000        336,000        --      2,168,000             --    179,480,000
---------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies

Stockholders' equity:
   Common stock                       50,000      3,000,000      2,920,000     1,000      5,921,000             --         50,000
   Additional paid-in capital     27,079,000     10,104,000             --        --     10,104,000             --     27,078,000
   Accumulated earnings           21,257,000      5,821,000       (468,000        --     10,551,000      5,198,000     21,257,000
---------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity        43,386,000     18,925,000      2,452,000     1,000     26,576,000      5,198,000     48,386,000
---------------------------------------------------------------------------------------------------------------------------------
                                $ 88,188,000   $160,435,000   $  2,788,000    $1,000   $ 28,744,000   $  5,198,000   $227,866,000
=================================================================================================================================
</TABLE>

See independent auditors' report and notes to consolidated financial statements.

                                      F-64

<PAGE>   129

                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                                                     SCHEDULE II
                                             CONSOLIDATING SCHEDULE - OPERATIONS
                                                               DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                          Pacific-       Pacific       Pacific-   Pacific-
                                          America        Thrift        America   America       Reclassifying and
                                           Money         and Loan      Money    Securities,   Eliminating Entries
                                       Center, Inc.      Company   Centers, Inc.    Inc.      Dr            Cr     Consolidated
---------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>           <C>             <C>      <C>            <C>      <C>

Interest income
   Loans receivable                   $    800,000    $ 10,165,000   $    368,000    $   --   $         --   $   --   $ 11,333,000
   Deposits with financial position             --         397,000             --        --             --       --        397,000
----------------------------------------------------------------------------------------------------------------------------------
Total interest income                      800,000      10,562,000        368,000        --             --       --     11,730,000
----------------------------------------------------------------------------------------------------------------------------------
Interest expense
   Thrift certificates greater
     than $100,000                              --          50,000             --        --             --       --         50,000
   Other thrift certificates                    --       5,457,000             --        --             --       --      5,457,000
   Notes payable                         1,023,000              --         10,000        --             --       --      1,033,000
----------------------------------------------------------------------------------------------------------------------------------
Total interest expense                   1,023,000       5,507,000         10,000        --             --       --      6,540,000
----------------------------------------------------------------------------------------------------------------------------------
Net interest expense                      (223,000)      5,055,000        358,000        --             --       --      5,190,000

Provision for loan losses                   41,000       3,429,000       (383,000)       --             --       --      3,087,000
----------------------------------------------------------------------------------------------------------------------------------
Net interest income (loss) after
   provision for loan losses              (264,000)      1,626,000        741,000        --             --       --      2,103,000
----------------------------------------------------------------------------------------------------------------------------------
Noninterest income
   Other income                              7,000         263,000         75,000        --             --       --        345,000
   Gain on sale of loans                26,958,000      53,984,000        768,000        --             --       --     81,710,000
   Loan servicing fees                          --         145,000             --        --        145,000       --             --
   Equity in income of subsidiaries     11,820,000              --             --        --     11,820,000       --             --
----------------------------------------------------------------------------------------------------------------------------------
Total noninterest income                38,785,000      54,392,000        843,000        --     11,965,000       --     82,055,000
==================================================================================================================================
</TABLE>


                                      F-65
<PAGE>   130

                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                                                     SCHEDULE II
                                             CONSOLIDATING SCHEDULE - OPERATIONS
                                                               DECEMBER 31, 1997

<TABLE>
<CAPTION>

                                      Pacific-     Pacific          Pacific-   Pacific-
                                      America      Thrift           America    America         Reclassifying and
                                      Money        and Loan          Money     Securities,     Eliminating Entries
                                    Center Inc.     Company      Centers, Inc.      Inc.             Dr           Cr   Consolidated
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>           <C>           <C>             <C>       <C>             <C>        <C>
Noninterest expense
   Salaries and employee benefits    4,022,000      24,303,000       1,132,000      --             --             --     29,457,000
   General and administrative        4,911,000      18,952,000         421,000      --             --        145,000     24,139,000
     expenses
   Operations of other real estate          --         303,000         141,000      --             --             --        444,000
   Depreciation and amortization        25,000         530,000              --      --             --             --        555,000
-----------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense            8,958,000      44,088,000       1,694,000      --             --        145,000     54,595,000
-----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes   29,563,000      11,930,000        (110,000)     --     11,965,000        145,000     29,563,000

Income taxes (benefit)              12,468,000       5,053,000         (46,000)     --         46,000      5,053,000     12,468,000
-----------------------------------------------------------------------------------------------------------------------------------
Net income                        $ 17,095,000    $  6,877,000    $    (64,000)   $ --   $ 12,011,000   $  5,198,000   $ 17,095,000

==================================================================================================================================
</TABLE>


See independent auditors' report and notes to consolidated financial statements.

                                      F-66


<PAGE>   131

                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                                                   SCHEDULE III
                                     CONSOLIDATING SCHEDULE - FINANCIAL POSITION
                                                               DECEMBER 31, 1996

<TABLE>
<CAPTION>

                                   Pacific-       Pacific                      Lenders      Consolidated    Pacific-
                                    America       Thrift       Consolidated   Posting and   Reconveyance    America
                                     Money       and Loan      Reconveyance   Publishing    Corporation,      Money
                                 Center, Inc.    Company        Company       Company          WA         Centers, Inc.
-----------------------------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>               <C>            <C>           <C>            <C>
Assets
Cash and cash equivalents           $650,000    $7,947,000        $      -       $     -       $      -       $43,000

Receivables                           40,000       482,000               -             -              -        81,000

Receivable for mortgage loan
shipped                           24,310,000             -               -             -              -             -

Notes receivable                   1,746,000             -               -             -              -             -

Accrued interest receivable                -       933,000               -             -              -       211,000

Loans receivable                     555,000    31,750,000               -             -              -     1,210,000

Loans held for sale                        -    15,687,000               -             -              -     2,461,000

Receivable from related party      1,296,000    24,887,000               -             -              -             -

Premium receivable for loans sold          -     1,195,000               -             -              -             -

Interest-only strips receivable     3,982,000     7,716,000               -             -              -             -

Other real estate                          -     1,839,000               -             -              -     2,446,000

Property and equipment                39,000     2,321,000               -             -              -             -

Deferred income taxes, net         1,014,000                             -             -              -       633,000

Refundable income taxes                    -       730,000               -             -              -             -

Other assets                         581,000       922,000               -             -              -        62,000

Investment in subsidiaries         16,564,000            -               -             -              -             -
-----------------------------------------------------------------------------------------------------------------------
                                  $50,777,000  $96,409,000        $      -       $     -       $      -    $7,147,000
=======================================================================================================================
</TABLE>

<TABLE>
<CAPTION>                              Reclassifying and
                                       Eliminating Entries
                                        Dr            Cr         Consolidated
----------------------------------------------------------------------------
Assets

<S>                                     <C>           <C>        <C>
Cash and cash equivalents               $    -        $    -     $8,640,000

Receivables                                  -             -        603,000

Receivable for mortgage loan
shipped                                      -             -     24,310,000

Notes receivable                             -             -      1,746,000

Accrued interest receivable                  -             -      1,144,000

Loans receivable                             -             -     33,515,000

Loans held for sale                          -             -     18,148,000

Receivable from related party                -     26,183,000             -

Premium receivable for loan
sales                                        -             -      1,195,000

Interest-only strip receivable               -             -     11,698,000

Other real estate                            -             -      4,285,000

Property and equipment                       -             -      2,360,000

Deferred income taxes                        -      1,351,000       296,000

Refundable income taxes                      -             -        730,000

Other assets                                 -             -      1,565,000



Investment in subsidiaries                   -     16,564,000             -
----------------------------------------------------------------------------
                                        $    -    $44,098,000   $110,235,000
============================================================================
</TABLE>


See independent auditors' report and notes to consolidated financial statements.

                                      F-67

<PAGE>   132

                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                                                    SCHEDULE III
                                     CONSOLIDATING SCHEDULE - FINANCIAL POSITION
                                                               DECEMBER 31, 1996

<TABLE>
<CAPTION>
                                     Pacific-     Pacific                      Lenders      Consolidated    Pacific-
                                     America      Thrift       Consolidated   Posting and   Reconveyance    America
                                      Money      and Loan      Reconveyance   Publishing    Corporation,     Money
                                    Center,Inc.  Company        Company       Company          WA         Centers, Inc.
------------------------------------------------------------------------------------------------------------------------
<S>                                <C>         <C>           <C>            <C>           <C>             <C>
Liabilities and Stockholders' Equity

Thrift certificates payable
   Fully-paid certificates         $        - $ 56,343,000   $           -  $          -  $           -   $         -
   Installment certificates                 -   24,659,000               -             -              -             -
---------------------------------------------------------------------------------------------------------------------
Total thrift certificates payable           -   81,002,000               -             -              -             -

Accounts payable and accrued
expenses                             1,276,000     934,000               -             -              -        31,000

Accrued interest payable                    -      185,000               -             -              -             -

Payable to related party            24,990,000           -               -             -              -     1,187,000

Mortgage notes payable                      -      189,000               -             -              -     1,368,000

Notes payable                        2,545,000           -               -             -              -       745,000

Deferred income taxes, net                  -    1,351,000               -             -              -             -
---------------------------------------------------------------------------------------------------------------------

Total liabilities                   28,811,000  83,661,000               -             -              -     3,331,000
=====================================================================================================================

Commitments and contingencies

Stockholders' equity
   Common stock                         19,000   3,000,000               -             -              -     2,920,000
   Additional paid-in capital       17,400,000   8,304,000               -             -              -             -
   General Partner Warrants            385,000           -               -             -              -             -
   Retained earnings                 4,162,000   1,444,000               -             -              -       896,000
---------------------------------------------------------------------------------------------------------------------

Total stockholders' equity          21,966,000  12,748,000              -             -              -      3,816,000
---------------------------------------------------------------------------------------------------------------------

                                  $ 50,777,000 $96,409,000  $           -  $          -  $           -    $ 7,147,000
=====================================================================================================================
</TABLE>


<TABLE>
<CAPTION>                                Reclassifying and
                                         Eliminating Entries
                                          Dr            Cr        Consolidated

------------------------------------------------------------------------------
Liabilities and Stockholders' Equity

Thrift certificates payable
<S>                                  <C>           <C>           <C>
   Fully-paid certificates           $         -   $         -   $ 56,343,000
   Installment certificates                    -             -     24,659,000
-----------------------------------------------------------------------------

Total thrift certificates payable              -             -     81,002,000

Accounts payable and accrued
expenses                                   6,000             -      2,235,000

Accrued interest payable                       -             -        185,000

Payable to related party              26,177,000            -              -

Mortgage notes payable                         -             -      1,557,000

Notes payable                                  -             -      3,290,000

Deferred income taxes, net             1,351,000             -              -
-----------------------------------------------------------------------------

Total liabilities                     27,534,000            -      88,269,000
-----------------------------------------------------------------------------

Commitments and contingencies

Stockholders' equity
   Common stock                        5,920,000             -         19,000
   Additional paid-in capital          8,304,000             -     17,400,000
   General Partner Warrants                    -             -        385,000
   Retained earnings                   2,340,000             -      4,162,000
-----------------------------------------------------------------------------

Total stockholders' equity            16,564,000            -      21,966,000
-----------------------------------------------------------------------------

                                    $ 44,098,000  $         -   $ 110,235,000
==============================================================================
</TABLE>


See independent auditors' report and notes to consolidated financial statements.

                                      F-68

<PAGE>   133

                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                                                     SCHEDULE IV
                                             CONSOLIDATING SCHEDULE - OPERATIONS
                                                    YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
                                      Pacific-     Pacific                     Lenders      Consolidated    Pacific-
                                       America      Thrift     Consolidated  Posting and   Reconveyance     America
                                        Money      and Loan    Reconveyance   Publishing    Corporation,     Money
                                    Center, Inc.    Company       Company      Company         WA          Centers, Inc.
-----------------------------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>          <C>            <C>           <C>             <C>
Interest income
   Loans receivable
   Deposits with financial          $   614,000 $ 10,256,000 $           -  $          -  $           -   $   304,000
   institutions                           4,000      324,000             -             -              -             -
-----------------------------------------------------------------------------------------------------------------------
Total interest income                   618,000   10,580,000             -             -              -       304,000
-----------------------------------------------------------------------------------------------------------------------
Interest expense
   Thrift certificates greater
   than $100,000                              -       23,000             -             -              -             -
   Other thrift certificates                  -    4,391,000             -             -              -             -
   Notes payable                        418,000          -               -             -              -       134,433
-----------------------------------------------------------------------------------------------------------------------
Total interest expense                  418,000    4,414,000             -             -              -       134,000
-----------------------------------------------------------------------------------------------------------------------
Net interest income                     200,000    6,166,000             -             -              -       170,000

Provision for loan losses               150,000    1,277,000             -             -              -      (276,000)
-----------------------------------------------------------------------------------------------------------------------
Net interest income (loss) after
   provision for loan losses             50,000    4,889,000             -             -              -       446,000

Noninterest income
   Trust and reconveyance fees                -           -      2,844,000             -         11,000             -
   Other income                          63,000      614,000             -       410,000              -       100,000
   Gain on sale of loan                 925,000   28,292,000             -             -              -             -
   Loan servicing fees                        -      199,000             -             -              -             -
   Equity in income of subsidiaries   8,226,000           -              -             -              -             -
-----------------------------------------------------------------------------------------------------------------------
Total noninterest income              9,214,000   29,105,000     2,844,000       410,000         11,000       100,000
=======================================================================================================================
</TABLE>

<TABLE>
<CAPTION>                             Reclassifying and
                                     Eliminating Entries
                                     Dr            Cr           Consolidated
-----------------------------------------------------------------------------
<S>                                  <C>           <C>           <C>
Interest income
   Loans receivable
   Deposits with financial           $         -   $         -   $ 11,174,000
   institutions                                -             -        328,000
-----------------------------------------------------------------------------
Total interest income                          -             -     11,502,000
-----------------------------------------------------------------------------
Interest expense
   Thrift certificates greater
      than $100,000                            -             -         23,000
   Other thrift certificates                   -             -      4,391,000
   Notes payable                               -             -        552,000
-----------------------------------------------------------------------------
Total interest expense                         -             -      4,966,000
-----------------------------------------------------------------------------
Net interest income                                                 6,536,000

Provision for loan losses                      -             -      1,151,000
-----------------------------------------------------------------------------
Net interest income (loss) after
   provision for loan losses                   -             -      5,385,000

Noninterest income
   Trust and reconveyance fees         2,855,000             -              -
   Other income                          410,000             -        777,000
   Gain on sale of loans                       -             -     29,217,000
   Loan servicing fees                   199,000             -              -
   Equity in income of subsidiaries    8,226,000             -              -
-----------------------------------------------------------------------------
Total noninterest income               11,690,000            -     29,994,000
=============================================================================
</TABLE>

                                      F-69

<PAGE>   134

                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                                                     SCHEDULE IV
                                             CONSOLIDATING SCHEDULE - OPERATIONS
                                                    YEAR ENDED DECEMBER 31, 1996
                                                                     (CONTINUED)

<TABLE>
<CAPTION>
                                      Pacific-    Pacific                      Lenders      Consolidated     Pacific-
                                       America     Thrift      Consolidated  Posting and    Reconveyance     America
                                        Money     and Loan     Reconveyance   Publishing    Corporation,      Money
                                    Center, Inc.  Company        Company       Company          WA         Centers, Inc.
-----------------------------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>          <C>            <C>           <C>             <C>
Noninterest expense
   Salaries and employee benefits       672,000   13,929,000     1,715,000       151,000              -        21,000
   General and administrative         3,004,000    8,867,000       947,000       142,000          1,000       148,000
   Related party fees                 1,071,000          -               -             -              -             -
   Operations of other real estate      102,000      465,000             -             -              -       114,000
   Depreciation                         339,000      375,000        29,000             -              -             -
   Loss on disposal of business
     segment                            928,000          -               -             -              -             -
-----------------------------------------------------------------------------------------------------------------------
Total noninterest expense             6,116,000   23,636,000     2,691,000       293,000          1,000       283,000
-----------------------------------------------------------------------------------------------------------------------
Income before income taxes            3,148,000   10,358,000       153,000       117,000         10,000       263,000

Income tax expense (benefit)         (1,014,000)   3,304,000         2,000         2,000              -      (633,000)
-----------------------------------------------------------------------------------------------------------------------
Income from continuing operations     4,162,000    7,054,000       151,000       115,000         10,000       896,000

Loss from discontinued operations             -          -               -             -              -             -
-----------------------------------------------------------------------------------------------------------------------
Net income                          $ 4,162,000  $ 7,054,000  $    151,000  $    115,000  $      10,000   $   896,000
=======================================================================================================================
</TABLE>

<TABLE>
<CAPTION>

                                          Reclassifying and
                                         Eliminating Entries
                                          Dr            Cr       Consolidated
-----------------------------------------------------------------------------
<S>                                  <C>           <C>           <C>
Noninterest expense
   Salaries and employee benefits             -     1,866,000     14,622,000
   General and administrative                 -     1,090,000     12,019,000
   Related party fees                         -       199,000        872,000
   Operations of other real estate            -             -        681,000
   Depreciation                               -        29,000        714,000
   Loss on disposal of business
     segment                                  -       928,000              -
-----------------------------------------------------------------------------
Total noninterest expense                     -     4,112,000     28,908,000
-----------------------------------------------------------------------------
Income before income taxes           11,690,000     4,112,000      6,471,000

Income taxes (benefit)                        -         3,000      1,658,000
-----------------------------------------------------------------------------
Income from continuing operations    11,690,000     4,115,000      4,813,000

Loss from discontinued operations,
    net                               3,917,000     3,266,000       (651,000)
-----------------------------------------------------------------------------
Net income                         $ 15,607,000   $ 7,381,000   $  4,162,000
=============================================================================
</TABLE>


See independent auditors' report and notes to consolidated financial statements.

                                      F-70

<PAGE>   135

                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                                                      SCHEDULE V
                                             CONSOLIDATING SCHEDULE - OPERATIONS
                                                               DECEMBER 31, 1995

<TABLE>
<CAPTION>
                                                                  Pacific                     Lenders     Pacific-
                                                   Presidential   Thrift    Consolidated    Posting and   America
                                                     Mortgage    and Loan   Reconveyance    Publishing     Money
                                                     Company      Company      Company       Company    Center, Inc.
----------------------------------------------------------------------------------------------------------------------
<S>                                                <C>          <C>         <C>             <C>           <C>
Interest income
   Loans receivable                                $ 1,872,000  $ 7,013,000 $            -  $         -   $         -
   Deposits with financial institutions                 10,000      682,000              -            -             -
----------------------------------------------------------------------------------------------------------------------
Total interest income                                1,882,000    7,695,000              -            -             -
----------------------------------------------------------------------------------------------------------------------
Interest expense
   Thrift certificates greater than $100,000                 -        7,000              -            -             -
   Other thrift certificates                                 -    3,813,000              -            -             -
   Notes payable                                     1,379,000           -               -            -             -
----------------------------------------------------------------------------------------------------------------------
Total interest expense                               1,379,000    3,820,000              -            -             -
----------------------------------------------------------------------------------------------------------------------
Net interest income                                    503,000    3,875,000              -            -             -

Provision for loan losses                            1,894,000    1,395,000              -            -             -
----------------------------------------------------------------------------------------------------------------------
Net interest income (expense) after provision for   (1,391,000)   2,480,000              -            -             -
   loan losses
----------------------------------------------------------------------------------------------------------------------
Noninterest income
   Trust and reconveyance fees                               -           -       3,248,000            -             -
   Other income                                        139,000      353,000              -      577,000             -
   Gain on sale of loans                                     -    8,895,000              -            -             -
   Loan servicing fees                                       -      351,000              -            -             -
   Equity in income of subsidiaries                  4,016,000           -               -            -             -
----------------------------------------------------------------------------------------------------------------------
                                                     4,155,000    9,599,000      3,248,000      577,000             -
======================================================================================================================
</TABLE>


<TABLE>
<CAPTION>

                                                     Reclassifying and
                                                    Eliminating Entries
                                                   Dr                Cr        Consolidated
--------------------------------------------------------------------------------------------
<S>                                                 <C>           <C>           <C>
Interest income
   Loans receivable                                 $         -   $         -   $  8,885,000
   Deposits with financial institutions                       -             -        692,000
--------------------------------------------------------------------------------------------
Total interest income                                         -             -      9,577,000
--------------------------------------------------------------------------------------------
Interest expense
   Thrift certificates greater than $100,000                  -             -          7,000
   Other thrift certificates                                  -             -      3,813,000
   Notes payable                                              -             -      1,379,000
--------------------------------------------------------------------------------------------
Total interest expense                                        -             -      5,199,000
--------------------------------------------------------------------------------------------
Net interest income                                           -             -      4,378,000

Provision for loan losses                                     -             -      3,289,000
--------------------------------------------------------------------------------------------
Net interest income (expense) after provision for             -             -      1,089,000
   loan losses
--------------------------------------------------------------------------------------------
Noninterest income
   Trust and reconveyance fees                        3,248,000             -              -
   Other income                                         577,000        53,000        545,000
   Gain on sale of loans                                      -             -      8,895,000
   Loan servicing fees                                  351,000             -              -
   Equity in income of subsidiaries                   4,016,000             -              -
--------------------------------------------------------------------------------------------
                                                      8,192,000        53,000      9,440,000
============================================================================================
</TABLE>


                                      F-71

<PAGE>   136

                                               PACIFICAMERICA MONEY CENTER, INC.
                                                                AND SUBSIDIARIES

                                                                      SCHEDULE V
                                             CONSOLIDATING SCHEDULE - OPERATIONS
                                                    YEAR ENDED DECEMBER 31, 1995
                                                                     (CONTINUED)

<TABLE>
<CAPTION>
                                                                   Pacific                      Lenders   Pacific-
                                                    Presidential  Thrift     Consolidated    Posting and   America
                                                    Mortgage     and Loan    Reconveyance     Publishing   Money
                                                    Company      Company      Company         Company     Center, Inc.
---------------------------------------------------------------------------------------------------------------------
<S>                                                <C>           <C>          <C>              <C>        <C>
Noninterest expense
   Salaries and employee benefits                      392,000    5,608,000     1,712,000        146,000            -
   General and administrative                        1,192,000    4,002,000       927,000        152,000            -
   Related party fees                                1,363,000            -             -              -            -
   Operations of other real estate                   1,120,000       92,000             -              -            -
   Depreciation                                        529,000      446,000        26,000              -            -
---------------------------------------------------------------------------------------------------------------------
                                                     4,596,000   10,148,000     2,665,000        298,000            -
---------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (benefit)         (1,832,000)   1,931,000       583,000        279,000            -

Income taxes (benefit)                                   1,000   (1,224,000)        1,000          1,000            -
---------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations            (1,833,000)   3,155,000       582,000        278,000            -

Income from discontinued operations                          -            -             -              -            -
---------------------------------------------------------------------------------------------------------------------
Net income (loss)                                 $ (1,833,000)  $3,155,000   $   582,000    $   278,000  $         -
=====================================================================================================================
</TABLE>


<TABLE>
<CAPTION>

                                                  Reclassifying and
                                                 Eliminating Entries
                                                 Dr               Cr       Consolidated
---------------------------------------------------------------------------------------
<S>                                           <C>              <C>        <C>
Noninterest expense
   Salaries and employee benefits                       -     1,858,000      6,000,000
   General and administrative                           -     1,079,000      5,194,000
   Related party fees                                   -       351,000      1,012,000
   Operations of other real estate                      -             -      1,212,000
   Depreciation                                         -       108,000        893,000
--------------------------------------------------------------------------------------
                                                        -     3,396,000     14,311,000
--------------------------------------------------------------------------------------
Income (loss) before income taxes (benefit)     8,192,000     3,449,000     (3,782,000)

Income taxes (benefit)                                  -         2,000     (1,223,000)
--------------------------------------------------------------------------------------
Income (loss) from continuing operations        8,192,000     3,451,000     (2,559,000)

Income from discontinued operations             2,965,000     3,826,000        861,000
--------------------------------------------------------------------------------------
Net income (loss)                             $ 11,157,000  $ 7,277,000   $ (1,698,000)
======================================================================================
</TABLE>


See independent auditors' report and notes to consolidated financial statements.

                                      F-72
<PAGE>   137

                                INDEX OF EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER      DESCRIPTION
-------     -----------
<S>         <C>
 3.1        Certificate of Incorporation of the Registrant, incorporated by
            reference to Exhibit 3.1 of the Registrant's Registration Statement
            on Form S-4, as filed with the Securities and Exchange Commission on
            December 22, 1995, as amended and declared effective on May 14, 1996
            (the "Registration Statement").

 3.2        Bylaws of the Registrant, incorporated by reference to the Exhibit
            3.2 of the Registration Statement.

 4.1        Specimen Common Stock Certificate, incorporated by reference to
            Exhibit 4.1 of the Registration Statement.

 4.2        General Partner Warrant Agreement and Warrant, incorporated by
            reference to Exhibit 4.2 of the Registration Statement.

 4.3        Subscriber Warrant and Warrant Agreement, incorporated by reference
            to Exhibit 4.3 of the Registration Statement.

10.1        Employment Agreement by and between the Registrant and Joel R.
            Schultz, incorporated by reference to Exhibit 10.1 of the
            Registration Statement; as amended by the First Amendment thereto
            dated as of April 17, 1997, and the Second Amendment thereto dated as
            of February 3, 1998.

10.2        Employment Agreement by and between the Registrant and Richard D.
            Young, incorporated by reference to Exhibit 10.2 of the Registration
            Statement; as amended by the First Amendment thereto dated as of
            February 3, 1998.

10.3        Employment Agreement by and between the Registrant and Norman A.
            Markiewicz, incorporated by reference to Exhibit 10.4 of the
            Registration Statement.

10.4        Employment Agreement by and between the Registrant and Richard B.
            Fremed, incorporated by reference to Exhibit 10.5 of the
            Registration Statement.

10.5        Employment Agreement by and between Pacific Thrift and Loan Company,
            Inc. and Frank Landini, incorporated by reference to Exhibit 10.6 of
            the Registration Statement.

10.6        Employment Agreement by and between the Registrant and Charles J.
            Siegel, incorporated by reference to Exhibit 10.7 of the
            Registrant's Annual Report on Form 10-K for the year ended December
            31, 1996 ("1996 10-K").
</TABLE>




                                       S-1

<PAGE>   138

<TABLE>
<S>         <C>
10.7        Form of Indemnification Agreement by and between the Registrant and
            each of its directors and executive officers, incorporated by
            reference to Exhibit 10.7 of the Registration Statement.

10.8        Stock Option Plan of the Registrant, dated January 1, 1996,
            incorporated by reference to Exhibit 10.8 of the Registration
            Statement.

10.9        Stock Purchase Plan of the Registrant, dated January 1, 1996,
            incorporated by reference to Exhibit 10.9 of the Registration
            Statement.

10.10       Supplemental Executive Retirement Plan of the Registrant, dated
            January 1, 1996, incorporated by reference to Exhibit 10.10 of the
            Registration Statement.

10.11       Master Loan Purchase Agreement dated as of October 31, 1996, by and
            between the Registrant and Aames Capital Corporation, incorporated
            by reference to Exhibit 10.1 of the Registrant's Report on Form 10-Q
            for the quarter ended September 30, 1996.

10.12       First and Second Amendments to Master Loan Purchase Agreement by and
            between the Registrant and Aames Capital Corporation, incorporated
            by reference to Exhibit 10.13 to 1996 10-K.

10.13       Amended and Restated Corporate Finance Agreement, dated as of
            January 27, 1997, by and among the Registrant, Advanta Mortgage
            Conduit Services, Inc. and Advanta Mortgage Corp. USA, incorporated
            by reference to Exhibit 10.14 of the 1996 10-K.

10.14       Asset and Stock Purchase and Sale and Assumption of Liabilities
            Agreement, Secured Promissory Note and Security Agreement, all dated
            as of December 15, 1996, among the Registrant, Consolidated
            Reconveyance Company, Lenders Posting and Publishing Company,
            Consolidated Reconveyance Corporation, Consolidated Reconveyance
            Company, LLC and Lenders Posting and Publishing Company, LLC,
            incorporated by reference to Exhibit 10.1 of the Registrant's Report
            on Form 8-K for December 31, 1996.

10.15       Mortgage Loan Purchase and Sale Agreement dated as of December 27,
            1996, by and between the Company and Pacific Crest Investment and
            Loan, incorporated by reference to Exhibit 10.2 of the Registrant's
            Report on Form 8-K for December 31, 1996.

10.16       Home Equity Loan Purchase Agreement, dated as of December 11, 1997,
            by and among the Company, Merrill Lynch Mortgage Investors, Inc., as
            depositor, PacificAmerica Home Equity Loan Trust Series 1997-1, as
            issuer, and Bankers Trust Company of California, N.A., as indenture
            trustee, incorporated by reference to Exhibit 10.1 of the
            Registrant's Report on Form 8-K for December 18, 1997 (the "1997
            8-K")
</TABLE>




                                      S-2


<PAGE>   139

<TABLE>
<S>         <C>
10.17       Master Assignment Agreement, dated as of December 18, 1997, by and
            between the Company and Merrill Lynch Mortgage Capital, Inc.,
            incorporated by reference to Exhibit 10.2 of the 1997 8-K.

10.18       Master Repurchase Agreement, dated as of October 31, 1997, by and
            between the Company, on the one hand, and Merrill Lynch Mortgage
            Capital, Inc. and Merrill Lynch Credit Corporation on the other,
            which Agreement includes, without limitation, the Supplemental Terms
            and Conditions attached to and incorporated into the Master
            Repurchase Agreement, incorporated by reference to Exhibit 10.3 of
            the 1997 8-K.

21.1        Subsidiaries of the Registrant
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