<Page>

================================================================================


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark one)

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

      For the quarterly period ended September 30, 2001

                                       OR

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

                           Commission File No. 0-23911

                          FOG CUTTER CAPITAL GROUP INC.
             (Exact name of registrant as specified in its charter)

                 MARYLAND                                    52-2081138
                 --------                                    ----------
     (State or other jurisdiction of                      (I.R.S. Employer
      incorporation or organization)                     Identification No.)

                            1410 SW JEFFERSON STREET
                               PORTLAND, OR 97201
               (Address of principal executive offices) (Zip Code)
                                 (503) 721-6500
              (Registrant's telephone number, including area code)
                             1631 SW COLUMBIA STREET
                               PORTLAND, OR 97201
                                (Former address)
         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__.

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

                    CLASS                      OUTSTANDING AT SEPTEMBER 30, 2001
  Common Stock, par value $0.0001 per share            10,507,413 shares


================================================================================


<Page>


                          FOG CUTTER CAPITAL GROUP INC.

                                    FORM 10-Q

                                    I N D E X

                                                                        PAGE NO.
                                                                        --------

PART I--FINANCIAL INFORMATION

Item 1.  Interim Financial Statements (Unaudited):

         Consolidated Statements of Financial Condition.......................3

         Consolidated Statements of Operations................................4

         Consolidated Statement of Changes in Stockholders' Equity............6

         Consolidated Statements of Cash Flows................................7

         Notes to Consolidated Financial Statements...........................8

Item 2.  Management's Discussion and Analysis of Financial Condition and
           Results of Operations.............................................11

Item 3.  Quantitative and Qualitative Disclosures about Market Risk..........18


PART II--OTHER INFORMATION

Item 1.  Legal Proceedings...................................................23

Item 2.  Changes in Securities and Use of Proceeds...........................25

Item 3.  Defaults Upon Senior Securities.....................................25

Item 4.  Submission of Matters to a Vote of Security Holders.................25

Item 5.  Other Information...................................................25

Item 6.  Exhibits and Reports on Form 8-K....................................25

Signatures ..................................................................26



                                       2
<Page>


PART I -- FINANCIAL INFORMATION

ITEM 1.  INTERIM FINANCIAL STATEMENTS

                          FOG CUTTER CAPITAL GROUP INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
<Caption>

                                                            September 30,  December 31,
                                                                 2001            2000
                                                            -------------  ------------
ASSETS                                                        (Unaudited)
<S>                                                           <C>          <C>
     Cash and cash equivalents ............................   $   1,702    $   3,394
     Securities available for sale, at fair value .........      52,880       74,731
     Loans, net ...........................................      29,848       30,404
     Investments in real estate held for sale .............      23,642       24,767
     Investments in WFSG and affiliates, net ..............       7,104        5,593
     Investment in BEP ....................................       5,432        6,719
     Accrued interest receivable ..........................         359          522
     Other assets .........................................       3,988        4,174
                                                              ---------    ---------
         Total assets .....................................   $ 124,955    $ 150,304
                                                              =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY

   Liabilities:
     Borrowings ...........................................   $  75,731    $  88,930
     Accounts payable and accrued liabilities .............       2,981        4,006
     Dividends payable ....................................         859        1,717
                                                              ---------    ---------
         Total liabilities ................................      79,571       94,653
                                                              ---------    ---------

   Commitments and Contingencies (see Note 5)

   Stockholders' Equity:
     Preferred stock, $.0001 par value; 25,000,000 shares
       authorized; no shares issued and outstanding .......          --           --
     Common stock, $.0001 par value; 200,000,000 shares
       authorized; 11,500,100 shares issued; and 10,507,413
       shares outstanding .................................     166,981      166,981
     Treasury stock; 992,687 common shares, at cost .......      (2,171)      (2,171)
     Accumulated deficit ..................................    (118,594)    (106,077)
     Recourse loans to officers to acquire stock ..........      (1,066)      (1,026)
     Accumulated other comprehensive income (loss) ........         234       (2,056)
                                                              ---------    ---------
         Total stockholders' equity .......................      45,384       55,651
                                                              ---------    ---------
         Total liabilities and stockholders' equity .......   $ 124,955    $ 150,304
                                                              =========    =========
</Table>


The accompanying notes are an integral part of these consolidated financial
statements.

                                        3
<Page>


                          FOG CUTTER CAPITAL GROUP INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
<Caption>

                                                           Quarter Ended         Nine Months Ended
                                                           September 30,           September 30,
                                                       --------------------    --------------------
                                                         2001        2000        2001        2000
                                                       --------    --------    --------    --------
<S>                                                    <C>         <C>         <C>         <C>
Net interest income:
    Loans ..........................................   $    673    $    936    $  2,199    $  3,023
    Securities .....................................      1,715       2,623       5,865       8,461
    Other investments ..............................         31         123         177         338
                                                       --------    --------    --------    --------
       Total interest income .......................      2,419       3,682       8,241      11,822
    Interest expense ...............................      1,054       1,916       3,895       5,920
                                                       --------    --------    --------    --------
       Net interest income before provision for loan
         losses ....................................      1,365       1,766       4,346       5,902
    Recovery of loan losses ........................         --          --          --         555
                                                       --------    --------    --------    --------
       Net interest income after recovery of loan
         losses ....................................      1,365       1,766       4,346       6,457
                                                       --------    --------    --------    --------

Real estate operations:
    Operating income ...............................        679       1,324       1,885       4,151
    Operating expense ..............................       (111)        (84)       (339)       (419)
    Interest expense ...............................       (343)       (760)     (1,046)     (2,349)
    Gain on sale of real estate ....................        141       1,020         141       2,114
    Depreciation ...................................       (133)       (278)       (400)       (862)
                                                       --------    --------    --------    --------
         Total real estate operations ..............        233       1,222         241       2,635
                                                       --------    --------    --------    --------

Other operating (loss) income:
    Equity in loss in BEP ..........................       (361)         --      (1,163)         --
    Gain on sale of loans and securities ...........        452          --       1,002       5,500
    Market valuation losses and impairments ........     (4,619)       (500)     (8,700)     (2,291)
    Other revenue ..................................        (31)       (122)       (147)       (175)
                                                       --------    --------    --------    --------
         Total other operating (loss) income .......     (4,559)       (622)     (9,008)      3,034
                                                       --------    --------    --------    --------

Operating expenses:
    Compensation and employee benefits .............        672         992       2,932       3,499
    Professional fees ..............................        222         342         781       1,398
    Other ..........................................        573         762       1,996       1,906
                                                       --------    --------    --------    --------
         Total operating expenses ..................      1,467       2,096       5,709       6,803
                                                       --------    --------    --------    --------

Net (loss) income before provision for income taxes
    and cumulative effect of a change in accounting
     principle .....................................     (4,428)        270     (10,130)      5,323
Provision (benefit) for income taxes ...............         --        (125)         --          --
                                                       --------    --------    --------    --------
Net (loss) income before cumulative effect of a ....     (4,428)        395     (10,130)      5,323
    change in accounting principle
Cumulative effect of a change in accounting ........         --          --      (1,021)         --
                                                       --------    --------    --------    --------
Net (loss) income ..................................   $ (4,428)   $    395    $(11,151)   $  5,323
                                                       ========    ========    ========    ========
</Table>



The accompanying notes are an integral part of these consolidated financial
statements.

                                        4
<Page>

                          FOG CUTTER CAPITAL GROUP INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
                                   (Unaudited)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
<Caption>

                                                               Quarter Ended              Nine Months Ended
                                                               September 30,                 September 30,
                                                       --------------------------    --------------------------
                                                           2001           2000           2001          2000
                                                       ------------   -----------    -----------    -----------
<S>                                                    <C>            <C>            <C>            <C>
Basic and diluted net (loss) income per share before
    cumulative effect of a change in accounting
     principle........................................ $     (0.42)   $       .04    $     (0.96)   $       .51
Cumulative effect of a change in accounting
    principle per share...............................          --             --           (.10)            --
                                                       -----------    -----------    -----------    -----------
Basic and diluted net (loss) income per share......... $     (0.42)   $       .04    $     (1.06)   $       .51
                                                       ===========    ===========    ===========    ===========

Weighted average shares outstanding...................  10,507,413     10,507,413     10,507,413     10,507,413
</Table>



The accompanying notes are an integral part of these consolidated financial
statements.

                                        5
<Page>


                          FOG CUTTER CAPITAL GROUP INC.
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                   (Unaudited)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
<Caption>

                                                                                               Recourse
                                                                                               Loans to    Accumulated
                                     Common Stock        Treasury Stock                      Officers to      Other
                              ------------------------ ---------------------    Accumulated    Acquire    Comprehensive
                               Shares (1)     Amount    Shares      Amount       Deficit         Stock     Income(Loss)     Total
                              -----------   ---------- --------   ----------   ------------  -----------   ------------  ----------
<S>                            <C>          <C>         <C>       <C>          <C>           <C>           <C>           <C>
Balance at January 1, 2001 ..  10,507,413   $  166,981  992,687   $   (2,171)  $ (106,077)   $   (1,026)   $   (2,056)   $   55,651
Comprehensive loss:
  Net loss ..................          --           --       --           --      (11,151)           --            --       (11,151)
  Other comprehensive loss:
   Foreign currency .........          --           --       --           --           --            --           (78)          (78)
   Unrealized holding losses
    on securities available
    for sale ................          --           --       --           --           --            --        (5,936)       (5,936)
   Reclassification
    adjustment for net losses
    on securities included in
    net loss ................          --           --       --           --           --            --         8,304         8,304
                                                                                                                         ----------
Total comprehensive loss ....                                                                                                (8,861)
Loans to officers, net ......          --           --       --           --           --           (40)           --           (40)
Dividends declared ..........          --           --       --           --       (1,366)           --            --        (1,366)
                               ----------   ----------  -------   ----------   ----------    ----------    ----------    ----------
Balance at September 30, 2001  10,507,413   $  166,981  992,687   $   (2,171)  $ (118,594)   $   (1,066)   $      234    $   45,384
                               ==========   ==========  =======   ==========   ==========    ==========    ==========    ==========
</Table>


----------
(1) Issued and outstanding.


The accompanying notes are an integral part of these consolidated financial
statements.

                                        6
<Page>


                          FOG CUTTER CAPITAL GROUP INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (DOLLARS IN THOUSANDS)

<Table>
<Caption>

                                                              Quarter Ended     Nine Months Ended
                                                              September 30,        September 30,
                                                        ---------------------   --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:                      2001        2000       2001        2000
                                                        ---------   ---------   ---------   --------
<S>                                                     <C>         <C>         <C>         <C>
  Net (loss) income                                     $ (4,428)   $    395    $(11,151)   $  5,323
  Adjustments to reconcile net income to net
    cash provided by (used in)
    operating activities:
   Depreciation                                              183         336         549         963
   Amortization of premiums and accretion of
     discounts, net                                           --          --          --        (145)
   Recovery of loan losses                                    --          --          --        (555)
   Market valuation losses and impairments                 4,619         500       8,700       2,291
   Loss on foreign currency translation                       --          16         116          69
   Gain on sale of securities available for sale            (452)         --        (452)     (5,342)
   Gain on sale of real estate                              (141)     (1,020)       (141)     (2,114)
   Gain on sale of loans                                      --          --        (550)       (158)
   Loss on sale of other assets                               31          --          31          --
   Equity in losses in BEP                                   361          --       1,163          --
   Cumulative effect in a change in accounting
     principle                                                --          --       1,021          --
   Change in:
    Investments in WFSG and affiliates, net                   --       2,292          --       2,956
    Accrued interest receivable                             (135)          7          94         278
    Other assets                                            (298)        230         (17)        (68)
    Accounts payable and accrued liabilities                (293)       (309)     (1,024)        297
                                                        --------    --------    --------    --------
  Net cash (used in) provided by operating activities       (553)      2,447      (1,661)      3,795
                                                        --------    --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Repayments of securities available for sale                160       1,854       1,006       3,005
  Purchase of securities available for sale                   --          --        (695)    (19,481)
  Proceeds from sale of loans                                 --          --       7,304         396
  Proceeds from sale of securities available for
    sale                                                   5,017          --       7,361      44,368
  Purchase of loans and discounted loans                    (100)        (87)     (1,293)       (188)
  Principal repayments on loans and discounted
     loans                                                    11          14          38       1,939
  Proceeds from sale of real estate                        1,441       3,036       1,539      11,810
  Other                                                      (21)       (799)        (69)       (799)
                                                        --------    --------    --------    --------
  Net cash provided by investing activities                6,508       4,018      15,191      41,050
                                                        --------    --------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings                                 1,028          --       1,488      11,069
  Repayments on borrowings                                (7,496)     (7,159)    (14,472)    (54,346)
  Payment of dividends                                        --          --      (1,366)         --
  Other                                                       --      (1,308)       (858)     (1,333)
                                                        --------    --------    --------    --------
  Net cash used in financing activities                   (6,468)     (8,467)    (15,208)    (44,610)
                                                        --------    --------    --------    --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                        1          83         (14)          4
                                                        --------    --------    --------    --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS        (512)     (1,919)     (1,692)        239
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD           2,214       8,020       3,394       5,862
                                                        --------    --------    --------    --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD              $  1,702    $  6,101    $  1,702    $  6,101
                                                        ========    ========    ========    ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid for interest                                $  1,455    $  2,791    $  5,050    $  8,847
  Cash paid for taxes                                   $     --    $     --    $     --    $     --
</Table>



The accompanying notes are an integral part of these consolidated financial
statements.

                                        7

<Page>


                          FOG CUTTER CAPITAL GROUP INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

         The accompanying interim consolidated financial statements of Fog
Cutter Capital Group Inc. and Subsidiaries ("FCCG" or the "Company") (formerly
known as Wilshire Real Estate Investment Inc.) are unaudited and have been
prepared in conformity with the requirements of Regulation S-X promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
particularly Rule 10-01 thereof, which governs the presentation of interim
financial statements. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles ("GAAP") for
complete financial statements. The accompanying interim consolidated financial
statements should be read in conjunction with the Company's 2000 Annual Report
on Form 10-K. A summary of the Company's significant accounting policies is set
forth in Note 2 to the consolidated financial statements in the 2000 Annual
Report on Form 10-K.

         In the Company's opinion, all adjustments, comprised of normal
recurring accruals necessary for the fair presentation of the interim financial
statements, have been included in the accompanying consolidated financial
statements. Operating results for the nine months ended September 30, 2001 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2001.

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures 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.

         Certain items in the previously reported consolidated financial
statements were reclassified to conform to the September 30, 2001 presentation,
none of which affect previously reported results of operations.

NOTE 2 - ORGANIZATION

         Effective January 25, 2001, the Company changed its name to Fog Cutter
Capital Group Inc. to better reflect the opportunistic nature of its business
and investments.

NOTE 3 - SIGNIFICANT TRANSACTIONS

         In February 2001, the Company (through a 26% owned Jersey, Channel
Islands company known as BEP Acquisitions) purchased all of the outstanding
capital stock of Bourne End Properties PLC ("Bourne End") for 42 million British
pounds. Bourne End is a specialist investor in retail property, currently owning
fifteen town shopping centers located in England and Scotland. The centers range
in size from 80,000 square feet to 340,000 square feet.

         BEP Acquisitions was incorporated in Jersey, Channel Islands for the
purpose of acquiring Bourne End. BEP Acquisitions is a wholly-owned subsidiary
of BEP Property Holdings Limited ("BEP"), which is 26% owned by the Company, 71%
owned by Merrill Lynch (Jersey) Holdings Limited (a subsidiary of Merrill Lynch
& Co., Inc.) and 3% owned by Greenbau Estuary Limited. A related company of
Merrill Lynch (Jersey) Holdings Limited also provided mezzanine financing.

         In March 2001, the Company converted its investment in two
mortgage-backed securities into ownership of the underlying loans and real
estate which had served as collateral supporting these securities. The
securities, which had a carrying value of $6.6 million, were converted into
loans with a carrying value of $5.5 million and real estate with a carrying
value of $1.1 million.



                                       8
<Page>

         During the quarter ended March 31, 2001, the Company sold loans with a
carrying value of $2.7 million at a gain of $0.3 million. The total proceeds
from the sale were approximately $3.0 million of which $0.7 million was used to
repay borrowings.

         During the quarter ended June 30, 2001, the Company sold loans with a
carrying value of $4.1 million at a gain of $0.2 million. The total proceeds
from the sale were approximately $4.3 million. No borrowings were repaid as a
result of this transaction.

         On May 3, 2001, the Company paid a cash dividend of $0.13 per share to
shareholders of record as of April 30, 2001.

         During July 2001, the Company sold a mortgage-backed security with a
carrying value of $5.0 million. The total proceeds from the sale were $5.1
million, of which $4.9 million was used to repay borrowings.

NOTE 4 - MARKET VALUATION LOSSES AND IMPAIRMENTS

         On an ongoing basis, the Company evaluates the carrying value of its
securities portfolio, which is accounted for as available-for-sale. To the
extent differences between the book basis of the securities and their current
market values are deemed to be temporary in nature, such unrealized gains or
losses are reflected directly in equity as "other comprehensive income or loss."
In calculating the extent to which declines in the value of available-for-sale
securities are other than temporary, the Company analyzes actual performance of
the securities and underlying collateral, including prepayment and default
statistics, as well as expectations for such performance in the future. To the
extent reasonable expectations for future performance are not likely to offset
declines in current market valuations, a write-down is recorded in "Market
Valuation Losses and Impairments" in the consolidated statement of operations.

         During the nine months ended September 30, 2001 and 2000, market
valuation losses and impairments of $8.7 million and $2.3 million, respectively,
were recorded. During the 2001 period, $8.2 million of these market valuation
losses and impairments related to the portfolio of mortgage-backed securities,
primarily reflecting higher than anticipated delinquencies, losses in loans
underlying certain securities and rising prepayment speeds. The remaining $0.5
million related to a market yield adjustment on a loan held for sale. During the
2000 period, the market valuation losses and impairments related to the
portfolio of mortgage-backed securities.

NOTE 5 - COMMITMENTS, CONTINGENCIES & OFF-BALANCE SHEET RISK

         The Company and two of its senior officers have been named, among
other defendants, in a series of lawsuits related to the receivership of
Capital Consultants, L.L.C. ("CCL"), an unaffiliated investment company. In
their claims, multiple plaintiffs allege several theories of liability,
including knowing participation in fiduciary breach and prohibited
transactions under the Employee Retirement Income Security Act of 1974. The
plaintiffs have not described with any specificity the proportion or share of
losses and related amounts which they claim are attributable to the Company
or its executives. Management has directed that the Company participate in
good faith along with the other parties in confidential mediation in an
effort to determine whether a mediated settlement may be achievable. In the
event a mediated settlement is not achieved, management has directed that
these cases be defended against vigorously. Because the cases are still in
early stages of the pleadings and because the amount of discovery has been
limited, the financial loss to the Company, if any, cannot be reasonably
estimated at this time. Under their employment arrangements with the Company,
the Company's senior officers may be entitled to indemnification by the
Company. Messrs. Wiederhorn and Mendelsohn have notified the Company that
they are reserving their rights to seek such indemnity. In addition, other
former employees of the Company or of firms that were previously affiliated
with the Company have been named as parties or have been requested to respond
to discovery requests and/or government investigations regarding the collapse
of CCL. Several of the individuals have requested indemnity from the Company
for the costs of their defense. The Company has not agreed to any such
indemnity requests.

         In addition to the civil litigation, the CCL failure has led to
governmental investigations, including a criminal investigation. Messrs.
Wiederhorn and Mendelsohn have received letters from the United States


                                       9
<Page>

Attorney's office in Portland, Oregon advising them that they are the subjects
of a grand jury investigation into the failure of CCL. At this stage, it is not
possible to predict the outcome of this investigation.

         The Company also is involved in various legal proceedings occurring in
the ordinary course of business which the Company believes will not have a
material adverse effect on its consolidated financial condition or operations.

         The Company is authorized to utilize a wide variety of off-balance
sheet financial techniques to assist in the management of interest rate risk. In
hedging the interest rate and/or exchange rate exposure of a foreign currency
denominated asset or liability, the Company may enter into hedge transactions to
counter movements in the different currencies, as well as interest rates in
those currencies. These hedges may be in the form of currency and interest rate
swaps, options, and forwards, or combinations thereof. During the quarter ended
and at September 30, 2001, the Company had no outstanding positions in these
instruments.

NOTE 6 - RECENTLY ISSUED ACCOUNTING STANDARDS

         In July 2000, the Emerging Issues Task Force ("EITF") finalized the
provisions of EITF Issue No. 99-20, "Recognition of Interest Income and
Impairment of Purchased and Retained Beneficial Interests in Securitized
Financial Assets", ("EITF 99-20"). EITF 99-20 sets forth rules for recognizing
interest income and determining when securities must be written down to fair
value because of other than temporary impairments. EITF 99-20 requires the
prospective method of adjusting the recognition of interest income when the
anticipated cash flows have either increased or decreased. Anticipated cash
flows can change as the result of factors such as credit losses and prepayment
rates. Pursuant to EITF 99-20, declines in fair value are to be considered other
than temporary when: (i) the carrying value of the beneficial interests exceeds
the fair value of such beneficial interests using current assumptions, and (ii)
the timing and/or extent of cash flows expected to be received on the beneficial
interests has adversely changed (as defined) from the previous valuation date.

         The effective date for adoption of EITF 99-20 was April 1, 2001. As a
result of the implementation of EITF 99-20 the Company recorded a "cumulative
effect of a change in accounting principle" adjustment of $1.0 million relating
to other than temporary impairment of mortgage-backed securities.

NOTE 7 - SUBSEQUENT EVENTS

         During October 2001, a $25 million loan owned by the Company was repaid
in full. The total proceeds from the repayment were $25.1 million, of which
$18.8 million was used to repay borrowings.

         During October 2001, the Company redeemed the stock purchase rights
(the "Rights") attached to its common stock under the Shareholder Rights Plan
(the "Plan") adopted on December 23, 1999. Under the Plan, each shareholder
owned one Right per share of common stock. The Plan allowed for the redemption
of the Rights, at the direction of the Company's Board of Directors, at a price
of $0.001 per Right. The redemption payment was made on October 16, 2001 to
shareholders of record as of October 10, 2001.

         On October 31, 2001, the Company paid the final $0.10 per share
installment (plus interest) of the $0.40 per share dividend declared in
September 1998 for shareholders of record as of September 30, 1998. The Company
also declared a new $0.13 per share dividend which was paid on November 1, 2001
to shareholders of record as of October 26, 2001.



                                       10
<Page>

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

         THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS OF FOG CUTTER CAPITAL GROUP
INC. AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS FILING. REFERENCES IN THIS
FILING TO "FOG CUTTER CAPITAL GROUP INC.," "WE," "OUR," AND "US" REFER TO FOG
CUTTER CAPITAL GROUP INC. AND ITS SUBSIDIARIES UNLESS THE CONTEXT INDICATES
OTHERWISE.

GENERAL

         Fog Cutter Capital Group Inc. ("FCCG" or the "Company") is a
Nasdaq-listed corporation which focuses on the acquisition of assets where its
expertise in intensive asset management, mortgage and real estate credit
analysis and financial structuring can create value. The Company invests
primarily in the following types of assets:

         o        mortgage-backed securities,
         o        mortgage loans,
         o        debt and equity of real estate companies, and
         o        other real estate-related investments.

RESULTS OF OPERATIONS -- NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 2000

         NET (LOSS) INCOME. Our net loss for the nine months ended September 30,
2001 was $11.2 million, or $1.06 per share, compared with net income of $5.3
million, or $0.51 per share, for the nine months ended September 30, 2000. The
net loss for the 2001 period is attributable to net interest income of $4.3
million, gain on sale of loans and securities of $1.0 million and income from
real estate operations of $0.2 million, offset by market valuation losses and
impairments of $8.7 million, equity in the losses of BEP of $1.2 million, the
cumulative effect of a change in accounting principle of $1.0 million and
operating expenses of $5.7 million. The net income for the 2000 period is
attributable to net interest income of $5.9 million, gain on sale of securities
of $5.3 million, recovery of loan losses of $0.6 million and income from real
estate operations of $2.6 million, partially offset by market valuation losses
and impairments on our portfolio of mortgage-backed securities of $2.3 million
and other operating expenses of $6.8 million.



                                       11
<Page>


         NET INTEREST INCOME. Our net interest income for the nine months ended
September 30, 2001 was $4.3 million, compared with $5.9 million for the nine
months ended September 30, 2000. The decrease is primarily attributable to a
reduction of assets (reflecting our sales of mortgage-backed securities and
loans and paydowns of the related debt facilities), resulting in decreases in
interest income on securities, loans and other investments of $2.6 million, $0.8
million and $0.2 million, respectively, partially offset by a decrease in
interest expense of $2.0 million. The following tables set forth information
regarding the total amount of income from interest-earning assets and expense
from interest-bearing liabilities and the resulting average yields and rates:

<Table>
<Caption>

                                                        For the Nine Months Ended September 30, 2001
                                                     ----------------------------------------------------
                                                        Average            Interest         Annualized
                                                        Balance        Income (Expense)     Yield/Rate
                                                     --------------   -----------------  --------------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                                   <C>             <C>                        <C>
Interest-Earning Assets:

     Loan portfolios................................. $      30,589   $        2,199              9.6%
     Mortgage-backed securities available for sale...        62,515            5,865             12.5%
     Other investments...............................         2,968              177              8.0%
                                                      --------------  -------------------  -----------
         Total interest-earning assets............... $      96,072   $        8,241             11.4%
                                                      --------------  -------------------  -----------

Interest-Bearing Liabilities:

     Borrowings (1).................................. $      68,398   $       (3,895)             7.6%
                                                      --------------  -------------------  -----------
         Total interest-bearing liabilities.......... $      68,398   $       (3,895)             7.6%
                                                      --------------  -------------------  -----------

     Net interest income before provision for loan
      losses/spread  (2).............................                 $        4,346              3.8%
                                                                      ===================  ===========
     Net interest margin  (3)........................                                             6.0%
</Table>


----------
(1)  Excludes borrowings related to investments in real estate.
(2)  Net interest spread represents the difference between the average rate on
     interest-earning assets and the average cost of interest-bearing
     liabilities.
(3)  Net interest margin represents net interest income divided by average
     interest-earning assets.



                                       12
<Page>

<Table>
<Caption>

                                                           For the Nine Months Ended September 30, 2001
                                                     -------------------------------------------------------
                                                        Average               Interest          Annualized
                                                        Balance           Income (Expense)      Yield/Rate
                                                     --------------      -----------------    --------------
                                                                      (DOLLARS IN THOUSANDS)
<S>                                                   <C>                  <C>                        <C>
Interest-Earning Assets:

     Loan portfolios................................. $      34,165        $       3,023              11.8%
     Mortgage-backed securities available for
     sale............................................        83,879                8,461              13.4%
     Other investments...............................         7,754                  338               5.8%
                                                      ---------------      -----------------    -------------
         Total interest-earning assets............... $     125,798        $      11,822              12.5%
                                                      ---------------      -----------------    -------------

Interest-Bearing Liabilities:

     Borrowings (1).................................. $      91,013        $      (5,920)              8.7%
                                                      ---------------      -----------------    -------------
         Total interest-bearing liabilities.......... $      91,013        $      (5,920)              8.7%
                                                      ---------------      -----------------    -------------

     Net interest income before provision for
       loan losses/spread  (2).......................                      $       5,902               3.8%
                                                                           =================    =============
     Net interest margin  (3)........................                                                  6.3%
                                                                                                =============
</Table>


----------
(1)  Excludes borrowings related to investments in real estate.
(2)  Net interest spread represents the difference between the average rate on
     interest-earning assets and the average cost of interest-bearing
     liabilities.
(3)  Net interest margin represents net interest income divided by average
     interest-earning assets.

         RECOVERY OF LOAN LOSSES. At September 30, 2001, we had $29.8 million of
loans, net, that are performing according to their terms with no required loan
loss allowance. Subsequent to September 30, 2001, a $25 million loan receivable
was repaid in full. During the nine months ended September 30, 2000, we reviewed
the adequacy of loan loss reserves and recaptured the remaining reserve balance
of $0.6 million.

         REAL ESTATE OPERATIONS. Our real estate operations represent activity
from our investment in various office buildings, retail stores, and other
commercial property located in Oregon, California and the United Kingdom. During
the nine months ended September 30, 2001, we realized income from real estate
operations of approximately $0.2 million (net of depreciation of $0.4 million),
compared with net income of $2.6 million for the nine months ended September 30,
2000. This decrease was primarily attributable to a gain of $2.1 million on the
sale of office properties located in Portland, Oregon and the United Kingdom
during the prior period.

RESULTS OF OPERATIONS -- QUARTER ENDED SEPTEMBER 30, 2001 COMPARED TO QUARTER
ENDED SEPTEMBER 30, 2000

         NET (LOSS) INCOME. Our net loss for the quarter ended September 30,
2001 was $4.4 million, or $0.42 per share, compared with a net income of $0.4
million, or $0.04 per share, for the quarter ended September 30, 2000. The net
loss for the 2001 period is attributable to net interest income of $1.4 million,
income from real estate operations of $0.2 million and gain on sale of loans and
securities of $0.4 million, offset by market valuation losses and impairments of
$4.6 million, equity in losses of BEP of $0.3 million and operating expenses of
$1.5 million. The net income for the 2000 period is attributable to net interest
income of $1.8 million and income from real estate operations of $1.2 million,
partially offset by market valuation losses and impairments of $0.5 million and
other operating expenses of $2.1 million.

         NET INTEREST INCOME. Our net interest income for the quarter ended
September 30, 2001 was $1.4 million, compared with $1.8 million for the
quarter ended September 30, 2000. The decrease is primarily attributable to a
reduction of assets (reflecting our sales of mortgage-backed securities and
loans and paydowns of the related debt facilities), resulting in decreases in
interest income on securities, loans

                                       13
<Page>


and other investments of $0.9 million, $0.3 million and $0.1 million,
respectively, partially offset by a decrease in interest expense of $0.9
million. The following tables set forth information regarding the total
amount of income from interest-earning assets and expense from
interest-bearing liabilities and the resulting average yields and rates:

<Table>
<Caption>

                                                         For the Quarter Ended September 30, 2001
                                                    ---------------------------------------------------
                                                       Average            Interest         Annualized
                                                       Balance        Income (Expense)     Yield/Rate
                                                    ---------------  -------------------  -------------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                                  <C>              <C>                       <C>
Interest-Earning Assets:

     Loan portfolios................................ $      30,165    $         673              8.9%
     Mortgage-backed securities available for
     sale                                                   54,942            1,715             12.5%
     Other investments..............................         1,588               31              7.8%
                                                     --------------   ------------------  -------------
         Total interest-earning assets.............. $      86,695    $       2,419             11.2%
                                                     --------------   ------------------  -------------

Interest-Bearing Liabilities:

     Borrowings (1)................................. $      70,401    $      (1,054)             6.0%
                                                     --------------   ------------------  -------------
         Total interest-bearing liabilities......... $      70,401    $      (1,054)             6.0%
                                                     --------------   ------------------  -------------

     Net interest income before provision for
       loan

      losses/spread  (2)............................                  $       1,365              5.2%
                                                                      ==================  =============
     Net interest margin  (3).......................                                             6.3%
                                                                                          =============
</Table>


----------
(1)  Excludes borrowings related to investments in real estate.
(2)  Net interest spread represents the difference between the average rate on
     interest-earning assets and the average cost of interest-bearing
     liabilities.
(3)  Net interest margin represents net interest income divided by average
     interest-earning assets.



                                       14
<Page>

<Table>
<Caption>

                                                             For the Quarter Ended September 30, 2000
                                                      --------------------------------------------------------
                                                          Average              Interest           Annualized
                                                          Balance          Income (Expense)       Yield/Rate
                                                      ----------------     ------------------    -------------
                                                                      (DOLLARS IN THOUSANDS)
<S>                                                    <C>                  <C>                        <C>
Interest-Earning Assets:

     Loan portfolios.................................  $      32,550        $         936              11.5%
     Mortgage-backed securities available for
       sale..........................................         77,982                2,623              13.5%
     Other investments...............................          8,235                  123               6.0%
                                                       ---------------      -----------------    -------------
         Total interest-earning assets...............  $     118,767        $       3,682              12.4%
                                                       ---------------      -----------------    -------------

Interest-Bearing Liabilities:

     Borrowings (1)..................................  $      83,683        $      (1,916)              9.2%
                                                       ---------------      -----------------    -------------
         Total interest-bearing liabilities..........  $      83,683        $      (1,916)              9.2%
                                                       ---------------      -----------------    -------------

     Net interest income before provision for
       loan losses/spread  (2).......................                       $       1,766               3.2%
                                                                            =================    =============
     Net interest margin  (3)........................                                                   5.9%
                                                                                                 =============
</Table>


----------
(1)  Excludes borrowings related to investments in real estate.
(2)  Net interest spread represents the difference between the average rate on
     interest-earning assets and the average cost of interest-bearing
     liabilities.
(3)  Net interest margin represents net interest income divided by average
     interest-earning assets.

         REAL ESTATE OPERATIONS. Our real estate operations represent activity
from our investment in various office buildings, retail stores, and other
commercial property located in Oregon, California and the United Kingdom. During
the quarter ended September 30, 2001, we realized income from real estate
operations of approximately $0.2 million (net of depreciation of $0.1 million),
compared with net income of $1.2 million for the quarter ended September 30,
2000. This increase was primarily attributable to gains on sale of real estate
of $1.0 million in the quarter ended September 30, 2000.

CHANGES IN FINANCIAL CONDITION

         GENERAL. Total assets decreased from approximately $150.3 million at
December 31, 2000 to approximately $124.9 million at September 30, 2001. Total
liabilities decreased from approximately $94.7 million at December 31, 2000 to
approximately $79.6 million at September 30, 2001. Stockholders' equity
decreased by approximately $10.3 million resulting primarily from the net loss
of $11.2 million for the nine months ended September 30, 2001.

         SECURITIES AVAILABLE FOR SALE. The balance of mortgage-backed
securities available for sale decreased from $74.7 million at December 31, 2000
to $52.9 million at September 30, 2001. The decrease in the balance of
mortgage-backed securities was primarily due to the reclassification of $6.6
million of securities to loans and real estate, the sale of securities with a
carrying value of $7.8 million and a reduction in market value of $8.1 million.
These decreases were partially offset by the acquisition of $0.7 million of
mortgage-backed securities.

         We mark our securities portfolio to fair value at the end of each month
based upon broker/dealer valuations (if available), subject to an internal
review process. For those securities that do not have an available market
quotation, we determine the fair value of the securities by modeling the
anticipated cash flows using certain estimates (e.g. prepayment speeds, default
rates, severity of losses, and discount rate). Because our subordinated
securities may not be readily marketable, as trading activity may be infrequent,
the market value is typically available from only a small group of
broker/dealers, and in many cases, only


                                       15
<Page>

one broker/dealer. As of each reporting period, we evaluate whether and to what
extent any unrealized decline in value is to be recognized as other than
temporary.

         At September 30, 2001, securities available for sale were as follows:

<Table>
<Caption>

                                                                                  Gross
                                         Amortized             Gross           Unrealized
                                          Cost (1)        Unrealized Gain         Losses         Fair Value
                                       --------------     ---------------    ---------------    -------------
                                                               (DOLLARS IN THOUSANDS)
<S>                                     <C>                <C>                <C>                <C>
Mortgage-backed securities              $     53,830       $          -       $       (950)      $     52,880
                                        =============      ==============     ==============     ============
</Table>


----------
(1)      The amortized cost of the securities reflects the market valuation
         losses and impairments discussed above and excludes accrued interest of
         $0.1 million.

         LOANS, NET. During the nine months ended September 30, 2001, our loans,
net decreased by approximately $0.6 million due primarily to the $0.5 million
market yield adjustment to the carrying value of a loan held for sale.

         INVESTMENTS IN WFSG AND AFFILIATES, NET. During the nine months ended
September 30, 2001, our investments in WFSG and affiliates, net, increased $1.5
million, primarily as the result of an increase in the market price per share of
WFSG stock as measured by the closing price at the end of the period. The
Company owns 2.9 million shares of WFSG stock. The average daily trading volume
of the stock is significantly less than the amount of our holdings, therefore,
there can be no assurance that the Company could dispose of its investment in
WFSG at the market price in a timely manner.

         BORROWINGS. Borrowings decreased by approximately $13.2 million during
the nine months ended September 30, 2001. Of this amount, $5.6 million related
to the repayment of borrowings when assets were sold, $8.8 million was due to
scheduled principal payments and $0.2 million was due to currency adjustments
for foreign denominated debt. These decreases were partially offset by new
borrowings of $1.5 million.

         STOCKHOLDERS' EQUITY. Stockholders' equity decreased by approximately
$10.3 million during the nine months ended September 30, 2001 primarily due to
our net loss of $11.2 million and the dividend declared of $1.4 million,
partially offset by decreases in other comprehensive loss of $2.3 million.

LIQUIDITY AND CAPITAL RESOURCES

         Liquidity is a measurement of our ability to meet potential cash
requirements, including ongoing commitments to repay borrowings, fund
investments, engage in loan acquisition and lending activities, meet collateral
calls and for other general business purposes. The primary sources of funds for
liquidity during the nine months ended September 30, 2001 consisted of net cash
provided by investing activities, including the cash proceeds related to the
sale of mortgage-backed securities, loans and real estate.

         Our borrowings and the availability of further borrowings are
substantially affected by, among other things, changes in interest rates,
changes in market spreads whereby the market value of the collateral securing
such borrowings may decline substantially, or decreases in credit quality of
underlying assets. In the event of declines in market value or credit quality,
we may be required to provide additional collateral for, or repay a portion of
outstanding balances of, our short-term borrowing facilities. As of September
30, 2001, we had no outstanding collateral calls. For additional information
with respect to our monthly mark-to-market of our securities available for sale
portfolio, see "CHANGES IN FINANCIAL CONDITION-SECURITIES AVAILABLE FOR SALE."

         Fluctuations in interest rates will continue to impact our net interest
income to the extent our fixed-rate assets are funded by variable-rate debt or
our variable-rate assets reprice on a different schedule or in relation to a
different index than any floating-rate debt which in turn could impact potential
returns to


                                       16
<Page>

shareholders. See "Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK."

         At September 30, 2001, we had total consolidated secured indebtedness
of $75.7 million, as well as $3.8 million of other liabilities. The consolidated
secured indebtedness consisted of (i) $27.5 million of repurchase agreements
secured by $19.4 million of mortgage-backed securities and $29.8 million of
loans and (ii) $48.2 million outstanding of other borrowings maturing between
2001 and 2020 which are secured by real estate and mortgage-backed securities.
Approximately $27.5 million of this indebtedness had terms which allowed the
lender to request additional collateral if the value of the underlying
collateral declined (including financing facilities for both mortgage-backed
securities and loans). Subsequent to September 30, 2001, a $25 million loan
receivable was repaid in full, of which $18.8 million was used to repay the
related secured indebtedness.

         Loans are financed through both short-term and long-term financing
facilities. If the value of the assets securing the loan declines as determined
by the lender, the lender may request that the amount of the loan be reduced by
cash payments from the borrower or additional collateral be provided by the
borrower (generally known as "collateral calls"). Accordingly, in an environment
where lenders consistently mark down the value of the underlying assets, a
borrower can become subject to collateral calls, which can have a significant
impact on liquidity. Similarly, if interest rates increase significantly, the
borrowing cost under the financing facility may also increase while the interest
rate on the assets securing the loan may not increase at the same time or to the
same degree. Real property acquisitions are generally financed with intermediate
or long-term mortgages with banks and other financial institutions.

         We have historically financed acquisitions of mortgage-backed
securities through committed and uncommitted thirty-day repurchase agreements
with major Wall Street investment banks. Repurchase agreements are secured
lending arrangements which involve the borrower selling an asset to a lender at
a fixed price with the borrower having an obligation to repurchase the asset
within a specified period (generally 30 days) at a higher price reflecting the
interest cost of the loan. If the lender marks the asset lower, the lender may
request that the amount of the loan be reduced by cash payments from the
borrower or additional collateral be provided by the borrower (generally known
as "collateral calls"). Mortgage-backed securities which are subject to
repurchase agreements, as well as loans which secure other indebtedness,
periodically are revalued by the lender, and a decline in the value that is
recognized by the lender (whether or not the lender recognizes the full fair
value of the security) may result in the lender requiring us to provide
additional collateral to secure the indebtedness.

         If we are unable to fund additional collateral requirements or to
repay, renew or replace maturing indebtedness on terms reasonably satisfactory
to us, we may be required to sell (potentially on short notice) a portion of our
assets, and could incur losses as a result. Furthermore, since from time to time
there is extremely limited liquidity in the market for subordinated and residual
interests in mortgage-related securities, there can be no assurance that we will
be able to dispose of such securities promptly for fair value in such
situations.

         Excluding the sale of assets from time to time, we are currently
operating with negative cash flow primarily due to our investment in assets that
do not currently generate positive cash flow. The Company has also recently made
dividend payments, which reduce liquidity. We believe that our existing sources
of funds will be adequate for purposes of meeting our short-term liquidity
needs, however, there can be no assurance that this will be the case. Material
increases in interest expense from variable-rate funding sources, collateral
calls, or material decreases in monthly cash receipts, generally would
negatively impact our liquidity and could affect our ability to pay dividends in
the future. On the other hand, material decreases in interest expense from
variable-rate funding sources or an increase in market value of our
mark-to-market financial assets generally would positively affect our liquidity.


                                       17
<Page>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Market risk is the exposure to loss resulting from changes in interest
rates, foreign currency exchange rates, commodity prices, and equity prices.
Although the Company's exposure to foreign currency fluctuations has increased
over the past year, the primary market risk to which the Company is exposed is
interest rate risk, which is highly sensitive to many factors, including
governmental, monetary and tax policies, domestic and international economic and
political considerations, and other factors beyond the control of the Company.
Changes in the general level of interest rates can affect the Company's net
interest income, which is the difference between the interest income earned on
interest-earning assets and the interest expense incurred in connection with its
interest-bearing liabilities, by affecting the spread between the Company's
interest-earning assets and interest-bearing liabilities. Changes in the level
of interest rates also can affect, among other things, the ability of the
Company to acquire loans, the value of the Company's mortgage-backed securities
and other interest-earning assets, and its ability to realize gains from the
sale of such assets.

         It is the objective of the Company to attempt to control risks
associated with interest rate movements. In general, the Company's strategy is
to limit our exposure to earnings variations and variations in the value of
assets and liabilities as interest rates change over time. Our asset and
liability management strategy is formulated and monitored regularly to review,
among other things, the sensitivity of our assets and liabilities to interest
rate changes, the book and market values of assets and liabilities, unrealized
gains and losses, including those attributable to hedging transactions, purchase
and securitization activity, and maturities of investments and borrowings.



                                       18
<Page>


         The following tables quantify the potential changes in net interest
income and net portfolio value as of September 30, 2001 should interest rates go
up or down (shocked) by 100 to 400 basis points, assuming the yield curves of
the rate shocks will be parallel to each other and instantaneous. Net portfolio
value is calculated as the sum of the value of off-balance sheet instruments and
the present value of cash in-flows generated from interest-earning assets net of
cash out-flows in respect of interest-bearing liabilities. The cash flows
associated with the loan portfolios and securities available for sale are
calculated based on prepayment and default rates that vary by asset but not by
changes in interest rates. Projected losses, as well as prepayments, are
generated based upon the actual experience with the subject pool, as well as
similar, more seasoned pools. To the extent available, loan characteristics such
as loan-to-value ratio, interest rate, credit history and product types are used
to produce the projected loss and prepayment assumptions that are included in
the cash flow projections of the securities. The following tables apply the U.S.
Treasury yield curve generally for assets and LIBOR for repurchase agreement
liabilities and assume a uniform change in both rates. The tables assume that
changes in interest rates occur instantaneously. The tables also reflect that
the Company has a significant exposure to LIBOR rates since its repurchase
agreement borrowings are generally based on LIBOR rates. Actual results could
differ significantly from those estimated in the tables.

<Table>
<Caption>

                                              Projected Percent Change in
         ----------------------------------------------------------------------------------------------
           Change in Interest Rates (1)           Net Interest Income           Net Portfolio Value
         ----------------------------------    --------------------------    --------------------------
<S>                                                      <C>                           <C>
                  -400 Basis Points                       43.7%                         15.0%
                  -300 Basis Points                       32.8%                         10.8%
                  -200 Basis Points                       21.9%                          7.0%
                  -100 Basis Points                       10.9%                          3.4%
                     0 Basis Points                        0.0%                          0.0%
                   100 Basis Points                      -10.9%                         -3.2%
                   200 Basis Points                      -21.9%                         -6.1%
                   300 Basis Points                      -32.8%                         -8.9%
                   400 Basis Points                      -43.7%                        -11.5%
</Table>

         ------------
         (1) Assumes that uniform changes occur instantaneously in both the
             yield on 10-year U.S. Treasury notes and the interest rate
             applicable to U.S.  dollar deposits in the London interbank market.

<Table>
<Caption>

                                                   Change in Monthly                 Change in
           Change in Interest Rates (1)           Net Interest Income           Net Portfolio Value
         ----------------------------------    --------------------------    --------------------------
<S>                                                 <C>                           <C>
                  -400 Basis Points                 $    134,632                  $   6,042,329
                  -300 Basis Points                 $    100,974                  $   4,375,582
                  -200 Basis Points                 $     67,316                  $   2,818,783
                  -100 Basis Points                 $     33,658                  $   1,362,960
                     0 Basis Points                            -                              -
                   100 Basis Points                 $    (33,658)                 $  (1,277,438)
                   200 Basis Points                 $    (67,316)                 $  (2,476,015)
                   300 Basis Points                 $   (100,974)                 $  (3,601,781)
                   400 Basis Points                 $   (134,632)                 $  (4,660,245)
</Table>

         ----------
         (1)  Assumes that uniform changes occur  instantaneously  in both the
              yield on 10-year U.S.  Treasury note and the interest rate
              applicable to U.S. dollar deposits in the London interbank market.


                                       19
<Page>

         The following table sets forth information as to the type of funding
used to finance the Company's assets as of September 30, 2001. As indicated in
the table, a large percentage of the Company's fixed-rate assets are financed by
floating-rate liabilities and the Company's variable-rate assets are generally
funded by variable-rate liabilities which use the same index.


                             Assets and Liabilities
                            As of September 30, 2001
                             (Dollars in thousands)

<Table>
<Caption>

                                                 ASSETS            INTEREST         LIABILITIES     INTEREST
                                                 ------            --------         -----------     --------
<S>                                            <C>                <C>              <C>                <C>
INTEREST-BEARING ASSETS
Fixed-Rate Assets, Financed Floating.......    $       55,310       Fixed          $        39,955    LIBOR
Fixed-Rate Assets, No Financing............             2,418       Fixed                   -         None
Floating-Rate Assets, Financed Floating....            25,000       LIBOR                   18,741    LIBOR
Cash and Cash Equivalents..................             1,702     Fed Funds                 -         None
                                               ---------------                     ----------------
                  Subtotal.................            84,430                               58,696

OTHER ASSETS

Investments in Real Estate.................            23,642        N/A                    17,035    Fixed
Investments in WFSG and Affiliates, Net....             7,104        N/A                    -         None
Investment in BEP..........................             5,432        N/A                    -         None
Other......................................             4,347        N/A                    -         None
                                               ---------------                     ----------------
                  Subtotal.................            40,525                               17,035

LIABILITY ONLY

Dividends Payable..........................             -                                      859    Fixed
Accounts Payable and Accrued Liabilities...             -                                    2,981    None
                                               ---------------                     ----------------
                  Subtotal.................             -                                    3,840

---------------------------------------------------------------------------------------------------------------
                  Total                        $      124,955                      $        79,571
===============================================================================================================
</Table>


         Asset and liability management involves managing the timing and
magnitude of the repricing of assets and liabilities. It is the objective of the
Company to attempt to control risks associated with interest rate movements.
Asset and liability management can utilize a wide variety of off-balance sheet
financial techniques to assist it in the management of interest rate risk. For
example, in hedging the interest rate and exchange rate exposure of a foreign
currency denominated asset or liability, we may enter into hedge transactions to
counter movements in the different currencies as well as interest rates in those
currencies. These hedges may be in the form of currency and interest rate swaps,
options, and forwards, or combinations thereof. No such techniques were in use
during the nine months ended and at September 30, 2001.

         Methods for evaluating interest rate risk include an analysis of the
Company's interest rate sensitivity "gap," which is defined as the difference
between interest-earning assets and interest-bearing liabilities maturing or
repricing within a given 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 interest-rate sensitive assets.
During a period of rising interest rates, a negative gap would tend to adversely
affect net interest income, while a positive gap would tend to result in an
increase in net interest income. During a period of falling interest rates, a
negative gap would tend to result in an increase in net interest income, while a
positive gap would tend to affect net interest income adversely. Since different
types of assets and liabilities with the same or similar maturities may react
differently to changes in overall market rates or conditions, changes in
interest


                                       20
<Page>

rates may affect net interest income positively or negatively even if an
institution were perfectly matched in each maturity category.

         The following tables set forth the estimated maturity or repricing of
the Company's interest-earning assets and interest-bearing liabilities at
September 30, 2001 (dollars in thousands):

<Table>
<Caption>

                                                                    One Year
                                           Within       4 to 12         to         More than
                                          3 Months       Months      3 Years        3 Years      Total
                                         ------------  -----------  -----------  ------------ -----------
<S>                                       <C>           <C>          <C>           <C>        <C>
INTEREST-SENSITIVE ASSETS(1):
Cash and cash equivalents...............  $    1,702    $       -    $        -    $       -   $    1,702
Securities available for sale...........           -            -             -       52,880       52,880
Loans(2)................................      25,196          383           881        3,388       29,848
                                          ----------    ---------    ----------    ---------   ----------
Total rate-sensitive assets.............  $   26,898    $     383    $      881    $  56,268   $   84,430
                                          ==========    =========    ==========    =========   ==========

INTEREST-SENSITIVE LIABILITIES:

Borrowings..............................  $   57,696    $   2,040    $        -    $  15,995   $   75,731
Dividends payable.......................         859            -             -            -          859
                                          ----------    ---------    ----------    ---------   ----------
Total rate-sensitive liabilities........  $   58,555    $   2,040    $        -    $  15,995   $   76,590
                                          ==========    =========    ==========    =========   ==========

Interest rate sensitivity gap...........  $  (31,657)   $  (1,657)   $      881    $  40,273
Cumulative interest rate sensitivity
gap.....................................  $  (31,657)   $ (33,314)   $  (32,433)   $   7,840
Cumulative interest rate sensitivity
  gap as a percentage of total
  rate-sensitive assets.................          37%          39%           38%           9%
</Table>


----------
(1)  Real estate property holdings are not considered interest rate sensitive.
(2)  Amortizing fixed rate loans are assumed to prepay at a Constant Prepayment
     Rate ("CPR") of 10%.


                                       21
<Page>


FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS CONTAINED HEREIN AND CERTAIN STATEMENTS CONTAINED IN FUTURE
FILINGS BY THE COMPANY WITH THE SEC MAY NOT BE BASED ON HISTORICAL FACTS AND ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED. FORWARD-LOOKING STATEMENTS WHICH ARE BASED ON VARIOUS ASSUMPTIONS
(SOME OF WHICH ARE BEYOND THE COMPANY'S CONTROL) MAY BE IDENTIFIED BY REFERENCE
TO A FUTURE PERIOD OR PERIODS, OR BY THE USE OF FORWARD-LOOKING TERMINOLOGY,
SUCH AS "MAY," "WILL," "BELIEVE," "EXPECT," "ANTICIPATE," "CONTINUE," OR SIMILAR
TERMS OR VARIATIONS ON THOSE TERMS, OR THE NEGATIVE OF THOSE TERMS. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN FORWARD-LOOKING
STATEMENTS DUE TO A VARIETY OF FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE
RELATED TO THE ECONOMIC ENVIRONMENT, PARTICULARLY IN THE MARKET AREAS IN WHICH
THE COMPANY OPERATES, THE FINANCIAL AND SECURITIES MARKETS AND THE AVAILABILITY
OF AND COSTS ASSOCIATED WITH SOURCES OF LIQUIDITY, COMPETITIVE PRODUCTS AND
PRICING, THE REAL ESTATE MARKET, FISCAL AND MONETARY POLICIES OF THE U.S.
GOVERNMENT, CHANGES IN PREVAILING INTEREST RATES, ACQUISITIONS AND THE
INTEGRATION OF ACQUIRED BUSINESSES, CREDIT RISK MANAGEMENT, ASSET/LIABILITY
MANAGEMENT AND THE IMPACT OF ONGOING LITIGATION. EXCEPT AS MAY BE REQUIRED BY
LAW, THE COMPANY DOES NOT UNDERTAKE, AND SPECIFICALLY DISCLAIMS ANY OBLIGATION,
TO PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS WHICH MAY BE MADE TO ANY
FORWARD-LOOKING STATEMENTS TO REFLECT THE OCCURRENCE OF ANTICIPATED OR
UNANTICIPATED EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS.











                                       22
<Page>

PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         The Company, Fog Cap L.P. (a subsidiary of the Company and formerly
         known as Wilshire Real Estate Partnership L.P.) and its two top
         executives, Messrs. Wiederhorn and Mendelsohn, have been named in a
         series of lawsuits relating to the receivership of Capital Consultants,
         L.L.C. ("CCL"). The cases are TOM HAZZARD, ET AL., V. CCL, ET AL., U.S.
         District Court of Oregon, Civil No. CV 00-1338-HU; MARK EIDEM, ET AL.,
         V. TRUSTEES UNITED ASSN. UNION LOCAL 290, ET AL., U.S. District Court
         of Oregon, Civil No. CV 00-1446-HA; NANCY SCHULTZ, ET AL., V. GARY
         KIRKLAND, ET AL., U.S. District Court of Oregon, Civil No. CV
         00-1377-HA; LARRY MILLER, ET AL., V. LEE CLINTON, ET AL., U.S. District
         Court of Oregon, Civil No. CV00-1317-HA; SALVATORE J. CHILIA, ET AL.,
         V. CCL, ET AL., U.S. District Court of Oregon, Civil No. CV 00-1633 JE;
         and MADOLE V. CAPITAL CONSULTANTS ET. AL., U.S. District Court of
         Oregon, Civil No. CV 00-1600-HU. In the HAZZARD, CHILIA and MADOLE
         cases, the trustees of several Taft-Hartley trusts filed suit against
         CCL and several individuals and organizations CCL did business with
         (including the Company and Messrs. Wiederhorn and Mendelsohn). In the
         EIDEM, SCHULTZ and MILLER cases, the trustees who are plaintiffs in
         HAZZARD are in turn named as defendants in class action suits filed by
         beneficiaries of the Taft-Hartley trusts on which they serve as
         plaintiff-trustees. In the cases in which the trustees are defendants,
         they have filed third-party complaints against several parties,
         including the Company and Messrs. Wiederhorn and Mendelsohn. In
         addition, a group of investors that are not Taft-Hartley trusts have
         filed a similar complaint against the same defendants, as well as other
         individuals not named in the prior complaints, in the case of AMERICAN
         FUNERAL & CEMETERY TRUST SERVICES ET. AL. v CAPITAL CONSULTANTS ET.
         AL., U.S. District Court of Oregon, Civil No. 01-00609-HU. The
         complaints and third-party complaints are all virtually identical. They
         include claims against the Company, Messrs. Wiederhorn and Mendelsohn
         alleging breaches of fiduciary duties under the Employee Retirement
         Income Security Act of 1974 ("ERISA"); knowing participation in a
         fiduciary breach under ERISA; knowing participation in a prohibited
         transaction under ERISA; knowing transfer of trust assets under ERISA;
         negligence; common law claim for breach of fiduciary duty; tortious
         interference with contract; conversion; constructive trust, restitution
         and unjust enrichment; fraud; state securities law claims; and breach
         of contract. The suits also allege claims against Messrs. Wiederhorn
         and Mendelsohn of tortious interference with business relationships
         between the Taft-Hartley trusts and CCL, as well as violations of the
         Racketeering Influenced and Corrupt Organization provisions of the
         Organized Crime Control Act of 1970, 18 U.S.C. Section 1961-1965
         ("RICO"). The claimants also seek attorneys' fees under their ERISA and
         RICO claims.

         The above suits name multiple defendants in addition to the Company and
         its executives. In addition, the claimants have asserted but have not
         yet filed claims against a number of additional parties regarding the
         same alleged losses, including a number of professional advisors to
         named defendants. The claimants have not described with any specificity
         the proportion or share of losses which they claim are attributable to
         the Company or its executives, as compared to the other parties and
         other potential defendants. The overall remedies sought against all
         defendants include claims for broad relief under the remedial
         provisions of ERISA, such as rescission of transactions and the
         imposition of a constructive trust over any trust assets which
         plaintiffs claim were obtained in violation of ERISA. Certain of the
         claims against the Company appear to be covered by releases that were
         given by CCL to the Company and Messrs. Wiederhorn and Mendelsohn. The
         claimants' suits seek to rescind the transactions in which the releases
         were granted. The claimants also seek common law remedies such as
         damages and punitive damages. However, certain of these common law
         claims may be preempted by ERISA.

         Although these cases were filed during the period between October 2000
         and April 2001, they are still in preliminary stages of pleading and
         discovery. CCL was placed in receivership by the Department of Labor
         and the Securities and Exchange Commission in the cases of SEC V.


                                       23
<Page>

         CAPITAL CONSULTANTS, L.L.C., et. al., U.S. District Court of Oregon,
         Case No. 00-1290-KI, and HERMAN V. CAPITAL CONSULTANTS, L.L.C., et.
         al., U.S. District Court of Oregon, Case No. 001291-KI. When the
         receivership order was entered, the court stayed other proceedings
         against CCL for several weeks. Once the stay was partially lifted, the
         parties deferred discovery and delayed the filing of any answers or
         legal challenges to the sufficiency of the pleadings in order to
         facilitate a confidential global mediation process. U.S. Circuit Court
         Judge Edward Leavy of the Ninth Circuit Court of Appeals has been
         selected as the mediator. Discovery and motion practice has been stayed
         pending the outcome of the mediation, excepting only a limited amount
         of document production by all of the parties to the litigation. No
         motions challenging the sufficiency of the claimants' claims have been
         filed or heard, and the Company and other defendants have not yet filed
         their answers or any cross-claims that they may have among themselves.
         No discovery depositions have been taken.

         The plaintiffs and third-party plaintiffs in the CCL litigation claim
         total losses by the various plaintiffs against all defendants in the
         range of $400 million. Approximately $160 million of this amount arises
         from losses on investments which plaintiffs allege relate to Messrs.
         Wiederhorn and Mendelsohn and companies with which they were
         affiliated, for which plaintiffs allege the Company shares some
         unspecified portion of the liability. Additional damages are claimed
         for prejudgment interest dating from the date of each investment under
         securities law claims under which plaintiffs are seeking rescission
         remedies. The RICO claims include additional claims for triple damages
         and the tort claims include claims for punitive damages. Attorneys'
         fees are also sought under the ERISA, RICO and securities law claims.

         The mediation process has been ongoing since May, 2001. Management has
         directed that the Company participate in good faith along with the
         other parties in the confidential mediation in an effort to determine
         whether a mediated settlement may be achievable. In the event a
         mediated settlement is not achieved, management has directed that these
         cases be defended against vigorously. Because the cases are still in
         early stages of the pleadings and because the amount of discovery has
         been limited, the financial loss to the Company, if any, cannot be
         reasonably estimated at this time.

         The employment agreements between the Company and Messrs. Wiederhorn
         and Mendelsohn contain provisions under which they may be entitled to
         indemnity for litigation expenses and personal losses that are
         attributable to actions which they took on account of their positions
         as directors or officers of the Company. Messrs. Wiederhorn and
         Mendelsohn have notified the Company that they are reserving their
         rights to seek such indemnity. In addition, other former employees of
         the Company or of firms that were previously affiliated with the
         Company have been named as parties or have been requested to respond to
         discovery requests and/or government investigations regarding the
         collapse of CCL. Several of these individuals have requested indemnity
         from the Company for the costs of their defense. The Company has not
         agreed to any such indemnity requests.

         In addition to the civil litigation, the CCL failure has led to
         governmental investigations, including a criminal investigation.
         Messrs. Wiederhorn and Mendelsohn have received letters from the United
         States Attorney's office in Portland, Oregon, advising them that they
         are the subjects of a grand jury investigation into the failure of CCL.
         At this stage, it is not possible to predict the outcome of this
         investigation.

         At this time, it is not possible to determine the extent of liability,
         if any, the Company may face with regard to such indemnity claims
         because of the preliminary nature of the underlying litigation. In
         addition, certain of the litigation expenses faced by Messrs.
         Wiederhorn and Mendelsohn may be subject to reimbursement or payment
         from other sources because of employment agreements and indemnity
         rights they may have under the articles and bylaws of other defendants
         named in the litigation.



                                       24
<Page>

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         Not applicable.

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

         Not applicable.

ITEM 5.  OTHER INFORMATION.

         Not Applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a) Exhibits

                  11       Computation of Per Share Earnings

         (b)  Reports on Form 8-K:

                  A Form 8-K was filed with the Securities and Exchange
                  Commission by the Company on October 17, 2001 announcing the
                  resignation of David C. Egelhoff as a member of the Board of
                  Directors.

                  A Form 8-K was filed with the Securities and Exchange
                  Commission by the Company on October 30, 2001 announcing the
                  resignation of Pat Terrell as a member of the Board of
                  Directors and the appointment of Don H. Coleman, David
                  Dale-Johnson, and K. Kenneth Kotler as new members of the
                  Board of Directors.


                                       25
<Page>


                                   SIGNATURES

         Pursuant to the requirements of the exchange act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

               Fog Cutter Capital Group Inc.

                  By: /s/ Lawrence A. Mendelsohn
                  -------------------------------------------------
                  Lawrence A. Mendelsohn
                  President


                  By: /s/ R. Scott Stevenson
                  -------------------------------------------------
                  R. Scott Stevenson
                  Senior Vice President and Chief Financial Officer

Date:  November 13, 2001





                                       26