##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




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Form 10-K



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|                                                           |  |                                                                                                 
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------
|(Mark One)                                                 |  |                                                                                                 
|þ                                                          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|                                                          
|For the fiscal year ended December 31,
    2003           
|                                                          
|or                                                        
|                                                          
|o                                                          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|                                                          
|For the transition period
    from           to          .

Commission file number 33-13646

Westcorp

(Exact name of registrant as specified in its
Charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|California                                                         |  | 51-0308535                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)
|                                                                  
|23 Pasteur, Irvine, California                                     |  | 92618-3816                              
|(Address of principal executive offices)                           |  | (Zip Code)                              

Registrants telephone number, including
area code (949) 727-1002

Securities registered pursuant to
Section 12(b) of the Act:

|                           |  |                                          
|-------------------------- |  | -----------------------------------------
|Title of each class        |  | Name of each exchange on which registered
|                           |  |                                          
|Common Stock, $1 par value |  | New York Stock Exchange                  

Securities registered pursuant to
Section 12(g) of the Act:

None


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
last
90 days.     Yes þ          No o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this
Form 10-K.     o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Securities Exchange Act of
1934.)     Yes þ          No o

The aggregate market value of the voting stock
held by non-affiliates of the registrant as of June 30,
2003:

Common Stock, $1.00 Par Value 
$331,502,920

The number of shares outstanding of the
issuers class of common stock as of February 27, 2004:

Common Stock, $1.00 Par Value 
51,759,286

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for
the Annual Meeting of Shareholders to be held April 26,
2004 are incorporated by reference into Part III.



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WESTCORP AND SUBSIDIARIES

TABLE OF CONTENTS

|                                                            |  |                                                                                           |   |      |    | 
|----------------------------------------------------------- |  | ----------------------------------------------------------------------------------------- | - | ---- | -- | 
|                                                            |  |                                                                                           |   | Page
|                                                            |  |                                                                                           |   |     
|Forwarding-Looking
    Statements and Available Information |  |                                                                                           | 1 |     
|PART I                                                     
|                                                           
|Item 1.                                                     |  | Business                                                                                  |   |      | 2  | 
|Item 2.                                                     |  | Properties                                                                                |   |      | 23 | 
|Item 3.                                                     |  | Legal Proceedings                                                                         |   |      | 23 | 
|Item 4.                                                     |  | Submission of Matters to a
    Vote of Security Holders                                   |   |      | 23 | 
|PART II                                                    
|                                                           
|Item 5.                                                     |  | Market for Registrants
    Common Equity and Related Stockholder Matters                 |   |      | 24 | 
|Item 6.                                                     |  | Selected Financial Data                                                                   |   |      | 25 | 
|Item 7.                                                     |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations |   |      | 27 | 
|Item 7A.                                                    |  | Quantitative and Qualitative
    Disclosure About Market Risk                             |   |      | 57 | 
|Item 8.                                                     |  | Financial Statements and
    Supplementary Data                                           |   |      | 66 | 
|Item 9.                                                     |  | Changes in and Disagreements
    With Accountants on Accounting and Financial Disclosure  |   |      | 66 | 
|Item 9A.                                                    |  | Controls and Procedures                                                                   |   |      | 66 | 
|PART III                                                   
|                                                           
|Item 10.                                                    |  | Directors and Executive
    Officers of the Registrant                                    |   |      | 67 | 
|Item 11.                                                    |  | Executive Compensation                                                                    |   |      | 67 | 
|Item 12.                                                    |  | Security Ownership of
    Certain Beneficial Owners and Management                        |   |      | 67 | 
|Item 13.                                                    |  | Certain Relationships and
    Related Transactions                                        |   |      | 67 | 
|Item 14.                                                    |  | Principal Accounting Fees
    and Services                                                |   |      | 67 | 
|PART IV                                                    
|                                                           
|Item 15.                                                    |  | Financial Statement
    Schedules, Exhibits and Reports on Form 8-K                       |   |      | 68 | 
|EXHIBIT 3.1.1                                              
|EXHIBIT 10.10.6                                            
|EXHIBIT 10.10.7                                            
|EXHIBIT 21.1                                               
|EXHIBIT 23.1                                               
|EXHIBIT 31.1                                               
|EXHIBIT 31.2                                               
|EXHIBIT 32.1                                               
|EXHIBIT 32.2                                               





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Forward-Looking Statements

This Form 10-K includes and incorporates by
reference 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, as amended.
Forward-looking statements relate to analyses and other
information that are based on forecasts of future results and
estimates of amounts not yet determinable. These statements also
relate to our future prospects, developments and business
strategies. These statements are subject to uncertainties and
factors relating to our operations and business environment, all
of which are difficult to predict and many of which are beyond
our control, that could cause actual results to differ
materially from those expressed in or implied by these
forward-looking statements.

These forward-looking statements are identified
by their use of terms and phrases such as
anticipate, believe, could,
estimate, expect, intend,
may, plan, predict,
project, will, and similar terms and
phrases, including references to assumptions. These statements
are contained in sections entitled Business,
Managements Discussion and Analysis of Financial
Condition and Results of Operations, and other sections of
this Form 10-K and in the documents incorporated by
reference.

The following factors are among those that may
cause actual results to differ materially from the
forward-looking statements:



| |   |                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------
| |  | changes in general economic and business
    conditions;                                               
|
| |  | interest rate fluctuations, including hedging
    activities;                                          
|
| |  | our financial condition and liquidity, as well as
    future cash flows and earnings;                  
|
| |  | competition;                                                                                           
|
| |  | our level of operating expenses;                                                                       
|
| |  | the effect, interpretation or application of new
    or existing laws, regulations and court decisions;
|
| |  | the availability of sources of funding;                                                                
|
| |  | the level of chargeoffs on the automobile
    contracts that we originate; and                         
|
| |  | significant litigation.                                                                                

If one or more of these risks or uncertainties
materialize, or if underlying assumptions prove incorrect, our
actual results may vary materially from those expected,
estimated or projected.

We do not undertake to update our forward-looking
statements to reflect future events or circumstances.

INDUSTRY DATA

In this Form 10-K, we rely on and refer to
information regarding the automobile lending industry from
market research reports, analyst reports and other publicly
available information. Although we believe that this information
is reliable, we cannot guarantee the accuracy and completeness
of this information, and we have not independently verified any
of it.

Available Information

We provide access to all of our filings with the
Securities and Exchange Commission on our Web site at
http://www.westcorpinc.com free of charge on the same day that
these reports are electronically filed with the Commission. The
information contained in our Web site does not constitute part
of this filing.

1



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##### Table of Contents






PART I



Item 1. Business

General

We are a financial services holding company that
provides automobile lending services through our second-tier
subsidiary, WFS Financial Inc, also known as WFS, and retail and
commercial banking services through our wholly owned subsidiary,
Western Financial Bank, which we refer to as the Bank. The Bank
currently owns 84% of the capital stock of WFS. We primarily
earn income by originating assets, including automobile
contracts, that generate a yield in excess of the cost of the
liabilities, including deposits, that fund these assets.

We have grown substantially over the past three
years. As of December 31, 2003, we had $14.6 billion
in total assets, $10.6 billion in automobile contracts and
$1.3 billion in total equity excluding other accumulated
comprehensive loss and including minority interest, representing
a three-year compounded annual growth rate of 22.9%, 15.8% and
33.2%, respectively. For the year ended December 31, 2003,
we originated $6.0 billion of automobile contracts and
generated $124 million of net income and earnings per
diluted share of $2.85.

Automobile Lending Operations

We are one of the nations largest
independent automobile finance companies with 31 years of
experience in the automobile finance industry. We believe that
the automobile finance industry is the second largest consumer
finance industry in the United States with over
$684 billion of loan originations during 2003. We originate
new and pre-owned automobile installment contracts, otherwise
known as contracts, through our relationships with approximately
8,000 franchised and independent automobile dealers nationwide.
We originated $6.0 billion of contracts during 2003 and
owned a portfolio of $10.6 billion contracts at
December 31, 2003.

For the year ended December 31, 2003,
approximately 32% of our contract originations were for the
purchase of new automobiles and approximately 68% of our
contract originations were for the purchase of pre-owned
automobiles. Approximately 83% of our contract originations were
what we refer to as prime contracts, and approximately 17% of
our contract originations were what we refer to as non-prime
contracts. Our determination of whether a contract is
categorized as prime, non-prime or other is based on a number of
factors including the borrowers credit history and our
expectation of credit loss. All references made throughout this
document regarding prime, non-prime or subprime automobile
contracts are based on our determination.

We underwrite contracts through a credit approval
process that is supported and controlled by a centralized,
automated front-end system. This system incorporates proprietary
credit scoring models and industry credit scoring models and
tools, which enhance our credit analysts ability to tailor
each contracts pricing and structure to maximize
risk-adjusted returns. We believe that as a result of our
sophisticated credit and underwriting systems, we are able to
earn attractive risk-adjusted returns on our contracts. For the
year ended December 31, 2003, the average net interest
spread on our automobile contract originations was 7.63% and the
net interest spread on our managed automobile portfolio was
7.10% while net credit losses averaged 2.60% for the same period.

We structure our business to minimize operating
costs while providing high quality service to our dealers. Those
aspects of our business that require a local market presence are
performed on a decentralized basis in our 39 offices. All other
operations are centralized. We fund our purchases of contracts,
on an interim basis, with deposits raised through our banking
operations, which are insured by the Federal Deposit Insurance
Corporation, also known as the FDIC, and other borrowings. For
long-term financing, we issue automobile contract asset-backed
securities. Since 1985, we have sold or securitized over
$36.0 billion of contracts in 62 public offerings of
asset-backed securities, making us the fourth largest issuer of
such securities in the nation. We have employed a range of
securitization structures and our most recent $1.5 billion
issuance of asset-backed securities was structured as a senior/
subordinated transaction with a weighted average interest rate
of 2.36%.

2



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The following table presents a summary of our
contracts purchased:

|                    |              |                                 |           |           |  |      |           |           |  |   |           |           | 
|------------------- | ------------ | ------------------------------- | --------- | --------- |  | ---- | --------- | --------- |  | - | --------- | --------- | 
|                    |              |                                
|                    |              | For the Year Ended December 31,
|                    |              |                                
|                    |              | 2003                            |           | 2002      |  | 2001
|                    |              |                                 |           |           |  |     
|                    |              |                                
|                    |              | (Dollars in thousands)         
|New vehicles        |              | $                               | 1,928,268 |           |  | $    | 1,548,372 |           |  | $ | 1,208,753 |          
|Pre-owned vehicles  |              |                                 | 4,050,308 |           |  |      | 3,867,362 |           |  |   | 3,654,526 |          
|                    |              |                                 |           |           |  |      |           |           |  |   |           |          
|                    | Total volume |                                 | $         | 5,978,576 |  |      | $         | 5,415,734 |  |   | $         | 4,863,279 | 
|                    |              |                                 |           |           |  |      |           |           |  |   |           |          
|Prime contracts     |              | $                               | 4,942,654 |           |  | $    | 4,346,212 |           |  | $ | 3,675,351 |          
|Non-prime contracts |              |                                 | 1,035,922 |           |  |      | 1,069,522 |           |  |   | 1,187,928 |          
|                    |              |                                 |           |           |  |      |           |           |  |   |           |          
|                    | Total volume |                                 | $         | 5,978,576 |  |      | $         | 5,415,734 |  |   | $         | 4,863,279 | 
|                    |              |                                 |           |           |  |      |           |           |  |   |           |          

Bank Operations

The primary focus of our banking operations is to
generate diverse, low-cost funds to provide the liquidity needed
to fund our acquisition of contracts. The Bank has the ability
to raise significant amounts of liquidity by attracting both
short-term and long-term deposits from the general public,
commercial enterprises and institutions by offering a variety of
accounts and rates. These funds are generated through the
Banks retail and commercial banking divisions. The Bank
also may raise funds by obtaining advances from the Federal Home
Loan Bank, or FHLB, selling securities under agreements to
repurchase and utilizing other borrowings. The Banks
retail banking division serves the needs of individuals and
small businesses by offering a broad range of products through
20 retail branches located throughout Southern California. The
Banks commercial banking division focuses on medium-sized
businesses in Southern California. At December 31, 2003,
the total deposits gathered by both the retail and commercial
banking divisions were $2.0 billion. Approximately 89% of
these accounts were demand deposits, money market accounts and
certificate of deposit accounts under $100,000 in principal,
which we believe represents a stable and attractive source of
funding.

The Bank also invests deposits generated by its
retail and commercial banking divisions in mortgage-backed
securities, also known as MBS. Our investment in MBS, together
with the cash balances that we maintain, create a significant
liquidity portfolio that provides us with additional funding
security. Net interest income from Bank operations totaled
$32.2 million, $57.0 million and $45.7 million
for the years ended December 31, 2003, 2002 and 2001,
respectively. Net interest income from Bank operations
represented 5%, 9% and 10% of our total net interest income on a
consolidated basis for the same respective periods.

3



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The following table sets forth our loan
origination, purchase and sale activity over the past five years:

|                        |                                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |           |           |           | 
|----------------------- | ----------------------------------- | ------------------------------- | ---------------------- | ------- | --------- | --------- | --------- | ------- | --------- | --------- | --------- | ------- | --------- | --------- | --------- | ------- | --------- | --------- | ------- | --------- | --------- | --------- | 
|                        |                                     |                                
|                        |                                     | For the Year Ended December 31,
|                        |                                     |                                
|                        |                                     | 2003                            |                        | 2002    |           | 2001      |           | 2000    |           | 1999     
|                        |                                     |                                 |                        |         |           |           |           |         |           |          
|                        |                                     |                                
|                        |                                     | (Dollars in thousands)         
|Loans originated:       |                                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |          
|                        | Consumer loans:                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |           |          
|                        |                                     | Contracts(1)                    |                        | $       | 5,978,576 |           |           | $       | 5,415,734 |           |           | $       | 4,863,279 |           |           | $       | 4,219,227 |           |         | $         | 3,340,146 |          
|                        |                                     | Other                           |                        |         | 4,916     |           |           |         | 3,562     |           |           |         | 6,691     |           |           |         | 12,888    |           |         |           | 15,586    |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |          
|                        |                                     |                                 | Total consumer loans   |         |           | 5,983,492 |           |         |           | 5,419,296 |           |         |           | 4,869,970 |           |         |           | 4,232,115 |         |           |           | 3,355,732 | 
|                        | Mortgage loans:                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |           |          
|                        |                                     | Existing property               |                        |         | 7,675     |           |           |         | 21,100    |           |           |         | 9,714     |           |           |         | 17,382    |           |         |           | 263,019   |          
|                        |                                     | Construction                    |                        |         | 17,534    |           |           |         | 2,022     |           |           |         | 12,318    |           |           |         | 14,718    |           |         |           | 11,969    |          
|                        |                                     | Equity                          |                        |         | 413       |           |           |         | 828       |           |           |         | 969       |           |           |         | 1,024     |           |         |           | 1,948     |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |          
|                        |                                     |                                 | Total mortgage loans   |         |           | 25,622    |           |         |           | 23,950    |           |         |           | 23,001    |           |         |           | 33,124    |         |           |           | 276,936   | 
|                        | Commercial loans                    |                                 |                        | 407,387 |           |           |           | 354,439 |           |           |           | 291,944 |           |           |           | 266,342 |           |           |         | 237,316   |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |          
|                        |                                     |                                 | Total loans originated |         |           | 6,416,501 |           |         |           | 5,797,685 |           |         |           | 5,184,915 |           |         |           | 4,531,581 |         |           |           | 3,869,984 | 
|Loans purchased:        |                                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |          
|                        | Mortgage loans on existing property |                                 |                        |         |           |           |           | 46      |           |           |           | 229     |           |           |           | 488     |           |           |         | 412       |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |          
|                        |                                     |                                 | Total loans purchased  |         |           |           |           |         |           | 46        |           |         |           | 229       |           |         |           | 488       |         |           |           | 412       | 
|Loans sold:             |                                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |          
|                        | Contracts                           |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           | 660,000 |           |           |         | 2,500,000 |          
|                        | Mortgage loans                      |                                 |                        |         |           |           |           | 554     |           |           |           | 3,382   |           |           |           | 3,394   |           |           |         | 502,157   |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |          
|                        |                                     |                                 | Total loans sold       |         |           |           |           |         |           | 554       |           |         |           | 3,382     |           |         |           | 663,394   |         |           |           | 3,002,157 | 
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |          
|Principal reductions(2) |                                     |                                 | 4,721,919              |         |           |           | 3,922,542 |         |           |           | 2,572,665 |         |           |           | 1,126,520 |         |           |           | 679,224 |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |          
|Increase in total loans |                                     | $                               | 1,694,582              |         |           | $         | 1,874,635 |         |           | $         | 2,609,097 |         |           | $         | 2,742,155 |         |           | $         | 189,015 |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |           |         |           |           |           |         |           |           |         |          



---



|    |                                                                            
|--- | ---------------------------------------------------------------------------
|(1) | Includes contracts purchased from automobile
    dealers as well as leases.
|   
|(2) | Includes scheduled payments, prepayments and
    chargeoffs.               

The History of Westcorp

Western Thrift & Loan Association, a
California-licensed thrift and loan association, was founded in
1972. In 1973, Western Thrift Financial Corporation was formed
as the holding company for Western Thrift & Loan
Association. It later changed its name to Westcorp. In 1982,
Westcorp acquired Evergreen Savings and Loan Association, a
California-licensed savings and loan association, which became
its wholly owned subsidiary. The activities of Western Thrift
& Loan Association were merged into Evergreen Savings and
Loan Association in 1982. Evergreen Savings and Loan
Associations name was changed ultimately to Western
Financial Bank and the Bank ultimately became chartered as a
federal savings institution.

Western Thrift & Loan Association was
involved in automobile finance activities from its incorporation
until its merger with Evergreen Savings and Loan Association.
Since such time, the Bank continued the automobile finance
activities of Western Thrift & Loan Association. In 1988,
Westcorp Financial Services, Inc. was incorporated as a wholly
owned consumer finance subsidiary of the Bank to provide
non-prime automobile finance services, a market not serviced by
the Banks automobile finance division.

In 1995, the Bank transferred its automobile
finance division to Westcorp Financial Services, Inc., which
changed its name to WFS Financial Inc. In connection with that
restructuring, the Bank transferred to WFS

4



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all assets relating to its automobile finance
division, including the contracts held on balance sheet and all
interests in the excess spread payable from outstanding
securitization transactions. The Bank also transferred to WFS
all of the outstanding stock of WFS Financial Auto Loans, Inc.,
also known as WFAL, and WFS Financial Auto Loans 2, Inc., also
known as WFAL2, the securitization entities of the Bank, thereby
making these companies subsidiaries of WFS. In 1995, WFS sold
approximately 20% of its shares in a public offering. At
December 31, 2003, the Bank owned 84% of the common stock
of WFS.


Market and Competition

The automobile finance industry is generally
segmented according to the type of vehicle sold (new versus
pre-owned) and the credit characteristics of the borrower
(prime, non-prime or subprime). Based upon industry data, we
believe that during 2003, prime, non-prime and subprime loan
originations in the United States were $470 billion,
$135 billion and $79 billion, respectively. The United
States captive automobile finance companies, General Motors
Acceptance Corporation, Ford Motor Credit Company and Chrysler
Credit Corporation, account for approximately 32% of the
automobile finance market. We believe that the balance of the
market is highly fragmented and that no other market participant
has greater than a 5% market share. Other market participants
include the captive automobile finance companies of other
manufacturers, banks, credit unions, independent automobile
finance companies and other financial institutions.

Our dealer servicing and underwriting
capabilities and systems enable us to compete effectively in the
automobile finance market. Our ability to compete successfully
depends largely upon our strong personal relationships with
dealers and their willingness to offer us contracts that meet
our underwriting criteria. These relationships are fostered by
the promptness with which we process and fund contracts, as well
as the flexibility and scope of the programs we offer. We
purchase the full spectrum of prime and non-prime contracts
secured by both new and pre-owned vehicles.

The competition for contracts available within
the prime and non-prime credit quality contract spectrum is more
intense when the rate of automobile sales declines. Although we
have experienced consistent growth for many years, we can give
no assurance that we will continue to do so. Several of our
competitors have greater financial resources than we have and
may have a lower cost of funds. Many of our competitors also
have longstanding relationships with automobile dealers and may
offer dealers or their customers other forms of financing or
services not provided by us. The finance company that provides
floor planning for the dealers inventory is ordinarily one
of the dealers primary sources of financing for automobile
sales. We do not currently provide financing on dealers
inventories. We must also compete with dealer interest rate
subsidy programs offered by the captive automobile finance
companies. However, these programs are not generally offered on
pre-owned vehicles and are limited to certain models or loan
terms that may not be attractive to many first time automobile
purchasers.

Competition in the retail banking business comes
primarily from commercial banks, credit unions, savings and loan
associations, mutual funds and corporate and government
securities markets. Many of the nations largest savings
and loan associations and other depository institutions have
locations in Southern California. We compete for deposits
primarily on the basis of interest rates paid and the quality of
service provided to our customers. We do not rely on any
individual, group or entity for a material portion of our
deposits.

Competition in the commercial banking business
comes primarily from other commercial banks that maintain a
presence in Southern California. We have differentiated
ourselves by providing high quality service, local relationship
management, prompt credit decisions and competitive rates on
both loans and depository products.

5



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Our Business Strategy

Our business objective is to maximize long-term
profitability by efficiently purchasing and servicing prime and
non-prime contracts that generate strong and consistent
risk-adjusted returns. We achieve this objective by employing
our business strategy, which includes the following key elements:



| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | produce consistent growth through our strong
    dealer relationships;                                          
|
| |  | price contracts to maximize risk-adjusted returns
    by using advanced technology and experienced underwriters;
|
| |  | create operating efficiencies through technology
    and best practices;                                        
|
| |  | generate low cost liquidity through our funding
    sources, including positive operating cash flows; and       
|
| |  | record high quality earnings and maintain a
    conservative, well-capitalized balance sheet.                   

Produce Consistent Growth Through Our
Strong Dealer Relationships

Over the past five years, we have experienced a
compounded annual growth rate in contract purchases of 17%. We
believe we provide a high degree of personalized service to our
dealer base by marketing, underwriting and purchasing contracts
on a local level. Our focus is to provide each dealer superior
service by providing a single source of contact to meet the
dealers prime and non-prime financing needs. We believe
that the level of our service surpasses that of our competitors
by making our business development representatives available any
time a dealer is open, making prompt credit decisions,
negotiating credit decisions within available programs by
providing structural alternatives and funding promptly.

|                                            |  |                                       |            |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|------------------------------------------- |  | ------------------------------------- | ---------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | - |  | - | --------- | -
|                                            |  |                                      
|                                            |  | At or For the Year Ended December 31,
|                                            |  |                                      
|                                            |  | 2003                                  |            | 2002 |  | 2001 |           | 2000 |  | 1999
|                                            |  |                                       |            |      |  |      |           |      |  |     
|                                            |  |                                      
|                                            |  | (Dollars in thousands)               
|Total automobile contract portfolio managed |  | $                                     | 10,596,665 |      |  | $    | 9,389,974 |      |  | $    | 8,152,882 |   |  | $ | 6,818,182 |   |  | $ | 5,354,385 |  
|Percentage growth                           |  |                                       | 12.9       | %    |  |      | 15.2      | %    |  |      | 19.6      | % |  |   | 27.3      | % |  |   | 22.6      | %
|Total automobile contract originations      |  | $                                     | 5,978,576  |      |  | $    | 5,415,734 |      |  | $    | 4,863,279 |   |  | $ | 4,219,227 |   |  | $ | 3,340,146 |  
|Percentage growth                           |  |                                       | 10.4       | %    |  |      | 11.4      | %    |  |      | 15.3      | % |  |   | 26.3      | % |  |   | 25.1      | %

Growth of originations is primarily through
increased dealer penetration. We intend to increase contract
purchases from our current dealer base as well as develop new
dealer relationships. Prior to 1995, we originated contracts in
seven, primarily western, states. Subsequently, we increased our
geographic penetration nationwide. Although our presence is
well-established throughout the country, we believe that we
still have opportunities to build market share, especially in
those states that we entered since 1994. In addition, we have
improved our dealer education and delivery systems in order to
increase the ratio of contracts purchased to the number of
applications received from a dealer, thereby improving the
efficiency of our dealer relationships. We are also seeking to
increase contract purchases through new dealer programs
targeting high volume, multiple location dealers. These programs
focus on creating relationships with dealers to achieve higher
contract originations and improving efficiencies. On a limited
basis, we also originate loans directly from consumers and
purchase loans from other automobile finance companies.
Additionally, we continue to explore other distribution
channels, including the Internet. In December 2001, we acquired
an interest in DealerTrack Holdings, Inc., also known as
DealerTrack, an Internet business-to-business portal that brings
together finance companies and dealers. DealerTrack has signed
up 40 finance companies and 23,800 dealers. As of
December 31, 2003, we owned approximately 6.4% of
DealerTrack. Currently, approximately 70% of our applications
are processed through DealerTrack.

We are the largest originator of pre-owned
automobile contracts in California by a two to one margin to our
nearest competitor. Our leading market share in California
provides us with economies of scale, thereby enabling us to earn
a higher risk adjusted margin in this market. We are seeking to
expand our market share in other states to achieve similar
economies of scale.

6



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##### Table of Contents





| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | Price Contracts to Maximize Risk-Adjusted
    Returns by Using Advanced Technology and Experienced
    Underwriters

Quality underwriting and servicing are essential
to effectively assess and price for risk and to maximize
risk-adjusted returns. We rely on a combination of credit
scoring models, system-controlled underwriting policies and the
judgment of our trained credit analysts to make risk-based
credit and pricing decisions. We use credit scoring to
differentiate applicants and to rank order credit risk in terms
of expected default probability. Based upon this statistical
assessment of credit risk, the underwriter is able to
appropriately tailor contract pricing and structure.

To achieve the return anticipated at origination,
we have developed a disciplined behavioral servicing process for
the early identification and cure of delinquent contracts and
for loss mitigation. In addition, we provide incentives to our
associates based on credit performance and profitability
measurements on both an individual and company level.

The following table shows the risk-adjusted
margins on automobile contracts originated over the past five
years:

|                           |  |                                 |       |      |  |      |       |      |  |      |       |   |  |  |       |   |  |  |       |  
|-------------------------- |  | ------------------------------- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | - |  |  | ----- | -
|                           |  |                                
|                           |  | For the Year Ended December 31,
|                           |  |                                
|                           |  | 2003                            |       | 2002 |  | 2001 |       | 2000 |  | 1999
|                           |  |                                 |       |      |  |      |       |      |  |     
|Weighted average coupon(1) |  |                                 | 10.03 | %    |  |      | 11.35 | %    |  |      | 12.74 | % |  |  | 13.95 | % |  |  | 13.57 | %
|Interest on borrowings(1)  |  |                                 | 2.70  |      |  |      | 3.74  |      |  |      | 5.37  |   |  |  | 6.74  |   |  |  | 6.08  |  
|                           |  |                                 |       |      |  |      |       |      |  |      |       |   |  |  |       |   |  |  |       |  
|Net interest margins       |  |                                 | 7.33  |      |  |      | 7.61  |      |  |      | 7.37  |   |  |  | 7.21  |   |  |  | 7.49  |  
|Credit losses(2)           |  |                                 | 2.60  |      |  |      | 2.77  |      |  |      | 2.27  |   |  |  | 1.91  |   |  |  | 2.13  |  
|                           |  |                                 |       |      |  |      |       |      |  |      |       |   |  |  |       |   |  |  |       |  
|Risk-adjusted margins      |  |                                 | 4.73  | %    |  |      | 4.84  | %    |  |      | 5.10  | % |  |  | 5.30  | % |  |  | 5.36  | %
|                           |  |                                 |       |      |  |      |       |      |  |      |       |   |  |  |       |   |  |  |       |  



---



|    |                                                                              
|--- | -----------------------------------------------------------------------------
|(1) | Represents the rate on contracts originated
    during the periods indicated.
|   
|(2) | Represents the rate on managed contracts during
    the periods indicated.   

Create Operating Efficiencies Through
Technology and Best Practices

We evaluate all aspects of our operations in
order to streamline processes and employ best practices
throughout the organization. Our key technology systems
implemented through this process include:



| |   |                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | automated front-end loan origination system that
    calculates borrower ratios, maintains lending parameters and
    approval limits, accepts electronic applications and directs
    applications to the appropriate credit analyst, all of which
    have reduced the cost of receiving, underwriting and funding
    contracts;
|
| |  | custom designed proprietary scoring models that
    rank order the risk of loss occurring on a particular contract;                                                                                                                                                                                                                
|
| |  | behavioral delinquency management system, which
    improves our ability to queue accounts according to the level of
    risk, monitor collector performance and track delinquent
    automobile accounts;                                                                                                                         
|
| |  | centralized and upgraded borrower services
    department, which includes remittance processing, interactive
    voice response technology and direct debit services;                                                                                                                                                              
|
| |  | centralized imaging system that provides for the
    electronic retention and retrieval of account records; and                                                                                                                                                                                                                    
|
| |  | data warehouse that provides analytical tools
    necessary to evaluate performance of our portfolio by multiple
    dimensions.                                                                                                                                                                                                   

As a result of these efforts, we have reduced our
operating costs as a percent of managed contracts to 2.4% for
2003 from a high of 4.5% during the first quarter of 1999. We
will continue to evaluate new technology and best practices to
further improve our operating efficiencies.

7



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Generate Low Cost Liquidity Through Our
Funding Sources, Including Positive Operating Cash
Flows

Cash flows from our automobile operations provide
a significant source of liquidity for us. In addition, we are
able to raise additional liquidity through the asset-backed
securities market. Over the last year we held an average of
approximately $572 million of unencumbered automobile
contracts on our balance sheet, which provides another source of
liquidity. The Bank provides liquidity through its retail and
commercial banking divisions in the form of deposits. At
December 31, 2003, the Bank also had a $2.7 billion
mortgage-backed securities portfolio that it can use to obtain
advances from the FHLB and securities repurchase agreements.
These sources of funds provide us with additional funding
security.

Record High Quality Earnings and Maintain a
Conservative, Well-Capitalized Balance Sheet

Presenting high quality earnings and maintaining
a conservative, well capitalized balance sheet have been our
focus since our founding in 1972. We believe this strategy
ensures success over the long term, rather than providing
extraordinary short-term results. Components of this strategy
include accounting for our automobile securitizations as secured
financings rather than sales, maintaining appropriate allowances
for credit losses and holding a strong equity position.

Since March 2000, we have structured our
automobile contract securitizations as secured financings. By
accounting for these securitizations as secured financings, the
contracts and asset-backed notes issued remain on our balance
sheet with the earnings of the contracts in the trust and the
related financing costs reflected over the life of the
underlying pool of contracts as net interest income on our
Consolidated Statements of Income. Additionally, no retained
interest in securitized assets, also known as RISA, is recorded
on the balance sheet with a corresponding non-cash gain on sale.
The RISA must be written off over the life of a securitization.
This asset is subject to impairment if assumptions made about
the performance of a securitization are not realized. At
December 31, 2002, the RISA created from asset-backed
securities issued prior to April 2000 had been fully amortized.
This compares with a high of $181 million or 30% of equity,
net of tax, in 1997.

Our allowance for credit losses was
$302 million at December 31, 2003, compared with
$269 million at December 31, 2002. The increase in the
allowance for credit losses was the result of a higher level of
automobile contracts held on balance sheet. The allowance for
credit losses as a percentage of owned loans outstanding was
2.7% at December 31, 2003, compared with 2.9% at
December 31, 2002. Based on the analysis we performed
related to the allowance for credit losses as described under
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Critical
Accounting Policies, we believe that our allowance for
credit losses is currently adequate to cover probable losses in
our loan portfolio that can be reasonably estimated.

Total shareholders equity, excluding
accumulated other comprehensive loss and including minority
interest, was $1.3 billion or 9.0% of total assets at
December 31, 2003. This compares with total
shareholders equity of $816 million or 6.5% of total
assets at December 31, 2002.

Operations

Automobile Lending

Locations

We currently originate contracts nationwide
through our 39 offices. Each regional business center manager is
accountable for the performance of contracts originated in that
office throughout the life of the contracts, including
acquisition, underwriting, funding and collection. We have two
national service centers located in California and Texas with
functions including data verification, records management,
remittance processing, customer service call centers, automated
dialers and asset recovery. We also maintain three regional
bankruptcy and remarketing centers. Our corporate offices are
located in Irvine, California.

8



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##### Table of Contents



Business Development

Our business development representatives are
responsible for improving our relationship with existing dealers
and enrolling and educating new dealers to increase the number
of contracts originated. Business development managers within
each regional business center provide direct management
oversight to each business development representative. In
addition, the director of sales and marketing provides oversight
management to ensure that all business development managers and
representatives are following overall corporate guidelines.

Business development representatives target
selected dealers within their territory based upon volume,
potential for business, financing needs of the dealers, and
competitors that are doing business with such dealers. Before we
decide to do business with a new dealer, we perform a review
process of the dealer and its business. If we then determine to
proceed, we enter into a non-exclusive dealership agreement with
the dealer. This agreement contains certain representations
regarding the contracts the dealer will sell to us. Due to the
non-exclusive nature of our relationship with dealers, the
dealers retain discretion to determine whether to sell contracts
to us or another financial institution. The business development
representative is responsible for educating the dealers
finance managers about the types of contracts that meet our
underwriting standards. We believe this education process helps
to minimize the number of applications we receive that are
outside of our underwriting guidelines, thereby increasing our
efficiency and lowering our overall cost to originate contracts.

After the dealer relationship is established, the
business development representative continues to actively
monitor the relationship with the objective of maximizing the
overall profitability of each dealer relationship within his or
her territory. This includes monitoring the number of approved
applications received from each dealer that are converted into
contracts, verifying that the contracts meet our underwriting
standards, monitoring the risk-based pricing of contracts
acquired and reviewing the actual performance of the contracts
purchased. To the extent that a dealer does not meet minimum
conversion ratios, lending volume standards or overall
profitability targets, the dealer may be precluded from sending
us applications in the future. During the year our dealer base
increased from approximately 7,800 to 8,000, primarily as a
result of us expanding our nationwide presence. Our increase in
volume is the result of this increase in our dealer base, in
addition to funding more contracts from our existing dealers.

Underwriting and Purchasing of
Contracts

The underwriting process begins when an
application is sent to us via the Internet or faxed to our data
entry service provider. During 2002, we outsourced our data
entry process to a third-party provider to maximize efficiencies
and reduce our costs due to the decreased volume of applications
received via fax. Internet applications are automatically loaded
into our front-end underwriting computer system. Our data entry
service providers enter the applicant information from faxed
applications into our front-end system. Once an application is
in the front-end system, the system automatically obtains the
applicants credit bureau information and calculates our
proprietary credit score.

We use credit scoring to differentiate credit
applicants and to rank order credit risk in terms of expected
default probabilities. This enables us to tailor contract
pricing and structure according to our statistical assessment of
credit risk. For example, a consumer with a lower score would
indicate a higher probability of default; therefore, we would
structure and price the transaction to compensate for this
higher default risk. Multiple scorecards are used to accommodate
the full spectrum of contracts we purchase. In addition to a
credit score, the system highlights certain aspects of the
credit application that have historically impacted the credit
worthiness of the borrower.

Our credit analysts are responsible for properly
structuring and pricing deals to meet our risk-based criteria.
They review the applicants information and the structure
and price of an application and determine whether to approve,
decline or make a counteroffer to the dealer. Each credit
analysts lending levels and approval authorities are
established based on the individual analysts credit
experience and portfolio performance, credit manager audit
results and quality control review results. Higher levels of
approvals are required for higher credit risk and are controlled
by system driven parameters and limits. System driven

9



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##### Table of Contents



controls include limits on minimum contract buy
rates, contract terms, contract advances, payment to income
ratios, debt to income ratios, collateral values and low side
overrides.


Once a credit decision has been made, the
computer system automatically sends a response to the dealer
through the Internet or via fax specifying approval, denial or
conditional approval. Conditional approval is based upon
modification to the structure, such as an increase in the down
payment, reduction of the term, or the addition of a co-signer.
As part of the approval process, the credit analyst may require
that some of the information be verified, such as the
applicants income, employment, residence or credit
history. The system increases efficiency by automatically
denying approval in certain circumstances without additional
underwriting being performed. These automated notices are
controlled by parameters, set by us, consistent with our credit
policy.

If the dealer accepts the terms of the approval,
the dealer is required to deliver the necessary documentation
for each contract to us. Our funding group audits such documents
for completeness and consistency with the application and
provides final approval and funding of the contract. A direct
deposit is made or a check is prepared and promptly sent to the
dealer for payment. The dealers proceeds may include
dealer participation for consideration of the acquisition of the
contract. The completed contract file is then forwarded to our
records center for imaging.

Under the direction of the Credit and Pricing
Committee, the Chief Credit Officer oversees credit risk
management, sets underwriting policy, monitors contract pricing,
tracks compliance to underwriting policies and re-underwrites
select contracts. If re-underwriting statistics are
unacceptable, a portion of quarterly incentives are forfeited by
the office that originated the contracts. Our internal quality
control group reviews contracts on a statistical sampling basis
to ensure adherence to established lending guidelines and proper
documentation requirements. Credit managers within each regional
business center provide direct management oversight to each
credit analyst. In addition, the Chief Credit Officer provides
oversight management to ensure that all credit managers and
analysts are following overall corporate guidelines.

10



---



##### Table of Contents



The following table sets forth information for
contracts originated, contracts managed and number of dealers in
the states in which we operate our business:

|               |       |                                 |           |                      |  |      |           |                   |  |                      |           |           |  |   |           |            |  |  |       |        | 
|-------------- | ----- | ------------------------------- | --------- | -------------------- |  | ---- | --------- | ----------------- |  | -------------------- | --------- | --------- |  | - | --------- | ---------- |  |  | ----- | ------ | 
|               |       |                                 |           |                      |  |     
|               |       | Contracts Originated            |           |                     
|               |       | For the Year Ended December 31, |           | At December 31, 2003
|               |       |                                 |           |                     
|State          |       | 2003                            |           | 2002                 |  | 2001 |           | Managed Portfolio |  | Number of Dealers(1)
|               |       |                                 |           |                      |  |      |           |                   |  |                     
|               |       |                                
|               |       | (Dollars in thousands)         
|California     |       | $                               | 2,228,877 |                      |  | $    | 2,091,347 |                   |  | $                    | 1,928,371 |           |  | $ | 3,992,899 |            |  |  | 3,025 |       
|Washington     |       |                                 | 373,111   |                      |  |      | 310,189   |                   |  |                      | 216,003   |           |  |   | 570,259   |            |  |  | 543   |       
|Arizona        |       |                                 | 299,918   |                      |  |      | 283,528   |                   |  |                      | 324,299   |           |  |   | 567,224   |            |  |  | 468   |       
|Colorado       |       |                                 | 248,667   |                      |  |      | 200,153   |                   |  |                      | 123,788   |           |  |   | 376,790   |            |  |  | 332   |       
|Oregon         |       |                                 | 206,875   |                      |  |      | 214,683   |                   |  |                      | 196,292   |           |  |   | 356,905   |            |  |  | 501   |       
|Texas          |       |                                 | 204,065   |                      |  |      | 171,761   |                   |  |                      | 181,651   |           |  |   | 371,503   |            |  |  | 823   |       
|Virginia       |       |                                 | 162,148   |                      |  |      | 123,403   |                   |  |                      | 99,056    |           |  |   | 273,485   |            |  |  | 445   |       
|Ohio           |       |                                 | 161,846   |                      |  |      | 171,109   |                   |  |                      | 174,040   |           |  |   | 351,102   |            |  |  | 788   |       
|North Carolina |       |                                 | 148,786   |                      |  |      | 144,859   |                   |  |                      | 138,956   |           |  |   | 288,587   |            |  |  | 505   |       
|Illinois       |       |                                 | 147,635   |                      |  |      | 104,576   |                   |  |                      | 93,709    |           |  |   | 233,714   |            |  |  | 534   |       
|Nevada         |       |                                 | 142,957   |                      |  |      | 131,094   |                   |  |                      | 105,747   |           |  |   | 252,167   |            |  |  | 166   |       
|Florida        |       |                                 | 132,238   |                      |  |      | 147,931   |                   |  |                      | 184,289   |           |  |   | 300,689   |            |  |  | 698   |       
|Idaho          |       |                                 | 129,838   |                      |  |      | 102,475   |                   |  |                      | 77,184    |           |  |   | 199,956   |            |  |  | 198   |       
|New York       |       |                                 | 117,377   |                      |  |      | 63,519    |                   |  |                      | 29,801    |           |  |   | 157,774   |            |  |  | 299   |       
|Michigan       |       |                                 | 109,323   |                      |  |      | 82,542    |                   |  |                      | 67,905    |           |  |   | 178,164   |            |  |  | 369   |       
|Maryland       |       |                                 | 100,620   |                      |  |      | 62,145    |                   |  |                      | 41,286    |           |  |   | 149,878   |            |  |  | 246   |       
|Georgia        |       |                                 | 98,224    |                      |  |      | 77,294    |                   |  |                      | 82,352    |           |  |   | 181,685   |            |  |  | 431   |       
|Tennessee      |       |                                 | 90,156    |                      |  |      | 86,228    |                   |  |                      | 83,892    |           |  |   | 176,717   |            |  |  | 310   |       
|South Carolina |       |                                 | 88,511    |                      |  |      | 145,892   |                   |  |                      | 129,963   |           |  |   | 231,142   |            |  |  | 283   |       
|Missouri       |       |                                 | 77,273    |                      |  |      | 70,070    |                   |  |                      | 57,883    |           |  |   | 139,082   |            |  |  | 350   |       
|Utah           |       |                                 | 74,993    |                      |  |      | 84,897    |                   |  |                      | 77,321    |           |  |   | 138,880   |            |  |  | 284   |       
|Massachusetts  |       |                                 | 69,343    |                      |  |      | 39,086    |                   |  |                      | 27,778    |           |  |   | 96,091    |            |  |  | 185   |       
|New Jersey     |       |                                 | 60,255    |                      |  |      | 42,210    |                   |  |                      | 28,280    |           |  |   | 96,137    |            |  |  | 200   |       
|Wisconsin      |       |                                 | 52,304    |                      |  |      | 44,318    |                   |  |                      | 40,826    |           |  |   | 87,105    |            |  |  | 221   |       
|Pennsylvania   |       |                                 | 47,813    |                      |  |      | 50,699    |                   |  |                      | 46,122    |           |  |   | 95,851    |            |  |  | 376   |       
|Indiana        |       |                                 | 46,530    |                      |  |      | 37,904    |                   |  |                      | 36,739    |           |  |   | 83,556    |            |  |  | 231   |       
|Minnesota      |       |                                 | 46,398    |                      |  |      | 29,708    |                   |  |                      | 18,240    |           |  |   | 63,698    |            |  |  | 115   |       
|Alabama        |       |                                 | 43,343    |                      |  |      | 36,570    |                   |  |                      | 31,967    |           |  |   | 82,560    |            |  |  | 213   |       
|Connecticut    |       |                                 | 35,183    |                      |  |      | 22,928    |                   |  |                      | 11,508    |           |  |   | 53,316    |            |  |  | 98    |       
|New Mexico     |       |                                 | 34,010    |                      |  |      | 23,930    |                   |  |                      | 24,146    |           |  |   | 52,238    |            |  |  | 110   |       
|Delaware       |       |                                 | 32,750    |                      |  |      | 26,697    |                   |  |                      | 26,173    |           |  |   | 61,660    |            |  |  | 64    |       
|New Hampshire  |       |                                 | 32,619    |                      |  |      | 24,275    |                   |  |                      | 10,563    |           |  |   | 46,790    |            |  |  | 89    |       
|Kansas         |       |                                 | 26,398    |                      |  |      | 19,448    |                   |  |                      | 21,533    |           |  |   | 45,050    |            |  |  | 126   |       
|Kentucky       |       |                                 | 23,112    |                      |  |      | 41,754    |                   |  |                      | 41,526    |           |  |   | 66,130    |            |  |  | 193   |       
|Iowa           |       |                                 | 20,712    |                      |  |      | 20,552    |                   |  |                      | 9,228     |           |  |   | 34,533    |            |  |  | 94    |       
|Oklahoma       |       |                                 | 12,874    |                      |  |      | 27,390    |                   |  |                      | 25,065    |           |  |   | 35,949    |            |  |  | 85    |       
|Mississippi    |       |                                 | 10,245    |                      |  |      | 18,051    |                   |  |                      | 19,691    |           |  |   | 33,315    |            |  |  | 91    |       
|Nebraska       |       |                                 | 8,165     |                      |  |      | 9,824     |                   |  |                      | 5,248     |           |  |   | 15,055    |            |  |  | 52    |       
|Wyoming        |       |                                 | 8,105     |                      |  |      | 12,507    |                   |  |                      | 6,918     |           |  |   | 15,985    |            |  |  | 36    |       
|West Virginia  |       |                                 | 7,111     |                      |  |      | 9,447     |                   |  |                      | 11,930    |           |  |   | 19,435    |            |  |  | 84    |       
|Rhode Island   |       |                                 | 5,170     |                      |  |      | 4,385     |                   |  |                      | 2,947     |           |  |   | 8,584     |            |  |  | 29    |       
|South Dakota   |       |                                 | 4,971     |                      |  |      | 3,843     |                   |  |                      | 2,078     |           |  |   | 6,831     |            |  |  | 14    |       
|Maine          |       |                                 | 3,782     |                      |  |      | 492       |                   |  |                      | 985       |           |  |   | 4,227     |            |  |  | 18    |       
|Montana        |       |                                 | 3,590     |                      |  |      |           |                   |  |                      |           |           |  |   | 3,303     |            |  |  | 2     |       
|Vermont        |       |                                 | 355       |                      |  |      | 21        |                   |  |                      |           |           |  |   | 349       |            |  |  | 5     |       
|Hawaii         |       |                                 |           |                      |  |      |           |                   |  |                      |           |           |  |   | 315       |            |  |  | 26    |       
|               |       |                                 |           |                      |  |      |           |                   |  |                      |           |           |  |   |           |            |  |  |       |       
|               | Total |                                 | $         | 5,978,576            |  |      | $         | 5,415,734         |  |                      | $         | 4,863,279 |  |   | $         | 10,596,665 |  |  |       | 14,355 | 
|               |       |                                 |           |                      |  |      |           |                   |  |                      |           |           |  |   |           |            |  |  |       |       



---



|    |                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents number of dealers from which contracts
    were originated that remain outstanding in our servicing
    portfolio at December 31, 2003.

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Servicing of Contracts

We service all of the contracts we purchase, both
those held by us and those sold in automobile securitizations.
The servicing process includes collecting and processing
payments, responding to borrower inquiries, maintaining the
security interest in the vehicle, maintaining physical damage
insurance coverage and repossessing and selling collateral when
necessary. During the second quarter of 2000, we implemented a
new decision support system that incorporates behavioral scoring
models. Additionally, in the second quarter of 2001, we began
purchasing credit bureau information on all borrowers, which is
updated each quarter. We believe these processes are the most
efficient and effective collection methods.

We use monthly billing statements to serve as a
reminder to borrowers as well as an early warning mechanism in
the event a borrower has failed to notify us of an address
change. Payments received in the mail or through our offices are
processed by our centralized remittance processing center. To
expedite the collection process, we accept payments from
borrowers through automated payment programs including Internet
banking, direct debits and third party payment processing
services. Our customer service center uses interactive voice
response technology to answer routine account questions and
route calls to the appropriate service counselor.

Our fully integrated servicing, decision and
collections system automatically forwards accounts to our
automated dialer or regional collection centers based on the
assessed risk of default or loss. Account assessment poses
several courses of action, including delaying collection
activity based on the likelihood of self curing, directing an
account to the automated dialer for a predetermined number of
days before forwarding it to a regional collections office, or
directly forwarding to a loan service counselor in the regional
office for accelerated collection efforts as early as when the
loan is seven days past due. This process balances the
efficiency of centralized collection efforts with the
effectiveness of decentralized personal collection efforts. Our
systems track delinquencies and chargeoffs, monitor the
performance of our collection associates and assist in
delinquency forecasting. To assist in the collection process, we
can access original documents through our imaging system, which
stores all the documents related to each contract. We limit
deferments to a maximum of three over the life of the contract
and rarely rewrite contracts.

If an account is delinquent and satisfactory
payment arrangements are not made, the automobile is generally
repossessed within 60 to 90 days of the date of
delinquency, subject to compliance with applicable law. We use
independent contractors to perform repossessions. The automobile
remains in our custody for 10 days, or longer if required
by applicable law, to provide the obligor the opportunity to
redeem the automobile. If after the redemption period the
delinquency is not cured, we write down the vehicle to fair
value and reclassify the contract as a repossessed asset. After
the redemption period expires, we prepare the automobile for
sale. We sell substantially all repossessed automobiles through
wholesale automobile auctions, subject to applicable law. We do
not provide the financing on repossessions sold. We use regional
remarketing departments to sell our repossessed vehicles. Once
the vehicles are sold, we charge off any remaining deficiency
balances. At December 31, 2003, repossessed automobiles
outstanding managed by us were $10.3 million or 0.10% of
the total managed contract portfolio, compared with
$16.4 million or 0.18%, of the total managed contract
portfolio at December 31, 2002.

It is our policy to charge off an account when it
becomes contractually delinquent by 120 days, except for
accounts that are in Chapter 13 bankruptcy, even if we have
not yet repossessed the vehicle. At the time that a contract is
charged off, all accrued interest is reversed. After chargeoff,
we collect deficiency balances through our centralized asset
recovery center. These efforts include contacting the borrower
directly, seeking a deficiency judgment through a small claims
court or instituting other judicial action where necessary. In
some cases, particularly where recovery is believed to be less
likely, the account may be assigned to a collection agency for
final resolution. For those accounts that are in Chapter 13
bankruptcy and contractually past due 120 days, we reverse
all accrued interest and recognize income on a cash basis.
Additionally, we write down such contracts to fair value.

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Retail Banking

Our retail banking operations are conducted
through 20 branch offices located throughout Southern
California. The total deposits gathered by the retail banking
division were $1.3 billion at December 31, 2003
compared to $1.4 billion at December 31, 2002. Due to
our limited number of branch offices, we have historically
focused on certificate of deposit accounts as the primary
product offered by the retail banking division. More recently,
we have focused on raising low cost demand deposits and money
market accounts in order to lower our overall cost of deposits.

Demand deposits and money market accounts
obtained through our retail banking operations totaled
$608 million at December 31, 2003 compared with
$490 million at December 31, 2002. At
December 31, 2003, demand deposits and money market
accounts represented 48% of our total retail banking deposits
compared with 36% at December 31, 2002. In addition, demand
deposits, money market accounts and certificate of deposit
accounts under $100,000 in principal represented approximately
89% of our total deposit accounts.

Commercial Banking

We focus our commercial banking operations in
Southern California, operating through our Irvine headquarters.
We target commercial clients with sales between $10 million
and $100 million. We offer our commercial clients a full
array of deposit and loan products that are priced competitively
and designed specifically for them. The commercial banking
divisions strategy is to generate deposits in excess of
the loans it funds to provide another source of liquidity for
us. Deposit products include money market, business checking and
certificate of deposit accounts delivered either through direct
contact or cash management services. Loan products include term
loans, lines of credit, asset-based loans, construction loans
and real estate loans. We also offer consumer deposit and money
market accounts as well as consumer loans and lines of credit to
the company owners, management and their associates. Loan
products are generally priced on a floating rate basis, based on
the prime rate or the London Interbank Offered Rate, also known
as LIBOR. Fixed rate loans are generally limited to a one-year
term or less.

Credit quality is managed by having each loan
reviewed for approval by the Commercial Bank President, Chairman
of the Board, Board members or other executive officers. In
addition, account officers are assigned to specific accounts to
maintain close contact with the customer. Such contact allows
for greater opportunity to cross sell products, as well as to
observe and continually evaluate customers for potential credit
problems.

At December 31, 2003, the commercial banking
division had $638 million in deposits compared with
$517 million at December 31, 2002. Commercial loans
outstanding totaled $124 million and $97.2 million at
December 31, 2003 and 2002, respectively.

The following table presents information
regarding total loans and deposits of our commercial banking
operations:

|                                          |  |                                 |         |      |  |      |         |   |  |   |         |  
|----------------------------------------- |  | ------------------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                          |  |                                
|                                          |  | For the Year Ended December 31,
|                                          |  |                                
|                                          |  | 2003                            |         | 2002 |  | 2001
|                                          |  |                                 |         |      |  |     
|                                          |  |                                
|                                          |  | (Dollars in thousands)         
|Average balance  loans                   |  | $                               | 377,848 |      |  | $    | 427,035 |   |  | $ | 551,922 |  
|Average balance  deposits                |  |                                 | 734,147 |      |  |      | 487,102 |   |  |   | 404,435 |  
|Interest income                           |  |                                 | 19,957  |      |  |      | 28,516  |   |  |   | 42,928  |  
|Interest expense                          |  |                                 | 5,478   |      |  |      | 6,615   |   |  |   | 16,072  |  
|Average interest rate earned on loans     |  |                                 | 5.28    | %    |  |      | 6.68    | % |  |   | 7.78    | %
|Average interest rate paid on deposits(1) |  |                                 | 0.75    | %    |  |      | 1.36    | % |  |   | 3.97    | %



---



|    |                                       
|--- | --------------------------------------
|(1) | Excludes effect of hedging activities.

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Mortgage Portfolios

We have from time to time originated mortgage
products that were held on our balance sheet rather than selling
such products into the secondary markets. Other than mortgage
loans originated on a limited basis through the commercial
banking division, we do not expect to add mortgage loans to our
balance sheet.

Transactions with Related Parties

We believe that the transactions with affiliates
described below are on terms no less favorable to us than could
be obtained from unaffiliated parties. These transactions were
approved by our Board of Directors and the Boards of Directors
of the Bank and WFS, including their respective independent
directors. For accounting purposes, each of the transactions
described below eliminates upon consolidation.

Intercompany Borrowings

WFS has various borrowing arrangements with the
Bank, including long-term, unsecured debt and lines of credit
designed to provide financing for WFS and its subsidiaries.
These borrowings are the only source of liquidity WFS currently
utilizes outside of the asset-backed securities market. These
borrowing arrangements, on an unconsolidated basis, provide the
Bank with what it believes to be a market rate of return.

WFS borrowed $125 million from the Bank
under the terms of a $125 million note executed in 1995.
The $125 million note provided for principal payments of
$25 million per year, commencing on April 30, 1999 and
continuing through its final maturity, April 30, 2003.
Interest payments on the $125 million note were due
quarterly, in arrears, calculated at the rate of 7.25% per
annum. The $125 million note was paid off in the third
quarter of 2001. There was no outstanding balance on the
$125 million note at December 31, 2003. Interest
expense on this note totaled $0.5 million for the year
ended December 31, 2001.

WFS borrowed $150 million from the Bank
under the terms of a $150 million note, as amended. This
note matures on August 1, 2007, although the Bank has the
option to require payment in part or in full at any time prior
to that date. Interest payments on the $150 million note
are due quarterly in arrears, calculated at the rate of 8.875%
per annum. Pursuant to the terms of this note, WFS may not incur
any other indebtedness that is senior to the obligations
evidenced by this note except for (i) indebtedness under
the $125 million note, (ii) indebtedness
collateralized or secured under the $1.8 billion line of
credit discussed below and (iii) indebtedness for similar
types of warehouse lines of credit. WFS made principal payments
on this note totaling $7.2 million and $42.0 million
during the years ended December 31, 2003 and 2002,
respectively. There was $101 million outstanding on this
note at December 31, 2003 compared with $108 million
at December 31, 2002. Interest expense on this note totaled
$9.1 million, $12.4 million and $10.1 million for
the years ended December 31, 2003, 2002 and 2001,
respectively.

Additionally, WFS borrowed $300 million from
the Bank under the terms of a $300 million note in May
2002. This note matures on May 15, 2012. Interest payments
on the $300 million note are due semi-annually, in arrears,
calculated at the rate of 10.25% per annum. Pursuant to the
terms of this note, WFS may not incur any other indebtedness
that is senior to the obligations evidenced by this note except
for (i) indebtedness under the $150 million note,
(ii) indebtedness collateralized or secured under the
$1.8 billion line of credit and (iii) indebtedness for
similar types of warehouse lines of credit. There was
$300 million outstanding on this note at December 31,
2003 and 2002. Interest expense on this note totaled
$30.8 million and $20.3 million for the years ended
December 31, 2003 and 2002, respectively.

WFS has a line of credit extended by the Bank
permitting it to draw up to $1.8 billion as needed to be
used in its operations. WFS does not pay a commitment fee for
this line of credit. The line of credit terminates on
December 31, 2004, although WFS may extend the term for
additional periods of up to 60 months. There was no amount
outstanding at December 31, 2003 and 2002. The average
amount outstanding on the line was $14.7 million for 2003
and $50.5 million for 2002. The $1.8 billion line of
credit carries an interest rate based on the one-month LIBOR and
an interest spread of 125 basis points when unsecured and 90
basis points when secured. The Bank has the right under this
line of credit to refuse to permit additional amounts to be
drawn if,

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in the Banks discretion, the amount sought
to be drawn will not be used to finance the purchase of
contracts or other working capital requirements.


Various subsidiaries of WFS have entered into
lines of credit with the Bank. These lines permit these
subsidiaries to draw up to a total of $330 million to fund
activities related to securitizations. Of the total
$330 million, $10 million terminates on
December 1, 2006 and $320 million terminates on
January 1, 2010, although the terms may be extended by
these subsidiaries for additional periods of up to
60 months. At December 31, 2003, the amount
outstanding on these lines of credit totaled $21.8 million
compared with $62.0 million at December 31, 2002.
These lines of credit carry an interest rate based on one-month
LIBOR and an interest spread of 112.5 basis points when
unsecured and 62.5 basis points when secured.

Interest on the amounts outstanding under the
lines of credit is paid monthly, in arrears, and is calculated
on the daily average amount outstanding that month. Interest
expense for these lines of credit totaled $1.0 million,
$3.0 million and $8.9 million for the years ended
December 31, 2003, 2002 and 2001, respectively. For the
years ended December 31, 2003, 2002 and 2001, the weighted
average interest rates for the lines of credit were 2.28%, 2.74%
and 4.43%, respectively. At December 31, 2003, 2002 and
2001, the weighted average interest rates for the lines of
credit were 2.28%, 2.55% and 3.08%, respectively.

Short-Term Investment

WFS invests its excess cash at the Bank under an
investment agreement. Prior to January 1, 2002, the Bank
paid WFS an interest rate on this excess cash equal to the
federal composite commercial paper rate. On January 1,
2002, the agreement was amended to revise the interest rate to
one-month LIBOR. The weighted average interest rate was 1.23%,
1.77% and 3.80% for the years ended December 31, 2003, 2002
and 2001, respectively. WFS held $764 million and
$688 million excess cash with the Bank under the investment
agreement at December 31, 2003 and 2002, respectively. The
average investment during 2003 was $660 million compared
with $561 million during 2002. Interest income earned by
WFS under this agreement totaled $8.2 million,
$10.2 million and $4.9 million for the years ended
December 31, 2003, 2002 and 2001, respectively. The
interest rate was 1.17% at December 31, 2003 compared with
1.44% at December 31, 2002.

Reinvestment Contracts

Pursuant to a series of agreements to which WFS,
the Bank and WFAL2, among others, are parties, WFS has access to
the cash flows of certain outstanding securitizations, including
the cash held in the spread accounts for these securitizations.
WFS is permitted to use that cash as it determines, including to
originate contracts.

In certain securitizations, the Bank and WFAL2
have entered into a reinvestment contract that is deemed to be
an eligible investment under the relevant securitization
agreements. The securitization agreements require that all cash
flows of the relevant trust and the associated spread accounts
be invested in the applicable reinvestment contract. A limited
portion of the invested funds may be used by WFAL2 and the
balance may be used by the Bank. The Bank makes its portion
available to WFS pursuant to the terms of the WFS Reinvestment
Contract. Under the WFS Reinvestment Contract, WFS receives
access to all of the cash available to the Bank under each trust
reinvestment contract and is obligated to repay to the Bank an
amount equal to the cash so used when needed by the Bank to meet
its obligations under the individual trust reinvestment
contracts. With the portion of the cash available to it under
the individual trust reinvestment contracts, WFAL2 purchases
contracts from WFS pursuant to the terms of a sale and servicing
agreement.

In accordance with these agreements, the Bank and
WFAL2 pledge property owned by each of them for the benefit of
the trustee of each trust and the surety. WFS paid the Bank a
fee equal to 12.5 basis points of the amount of collateral
pledged by the Bank as consideration for the pledge of
collateral and for WFS access to cash under the WFS
Reinvestment Contract in 2003. Effective January 1, 2004,
this fee was increased to 55 basis points. WFS paid the Bank
$1.2 million, $1.2 million and $1.1 million for
the years ended December 31, 2003, 2002 and 2001,
respectively, for this purpose. As WFAL2 directly utilizes the
cash made available to it to purchase contracts for its own
account from WFS, no additional consideration from WFS is
required to support WFAL2s pledge of its property under
the agreement with Financial Security Assurance Inc., also

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known as FSA. While WFS is under no obligation to
repurchase contracts from WFAL2, to the extent WFAL2 needs to
sell any such contracts to fund its repayment obligations under
the trust reinvestment contracts, it is anticipated that WFS
would prefer to purchase those contracts than for WFAL2 to sell
those contracts to a third party. The WFS Reinvestment Contract,
by its terms, is to remain in effect so long as any of the trust
reinvestment contracts are an eligible investment for its
related securitization. There was $789 million and
$944 million outstanding on the trust reinvestment
contracts at December 31, 2003 and 2002, respectively.


Whole Loan Sales

We purchased $1.7 billion and
$1.4 billion of contracts from WFS in whole loan sales for
the years ended December 31, 2003 and 2001, respectively.
We purchased no contracts from WFS for the year ended
December 31, 2002. In these transactions, WFS received cash
for the amount of the principal outstanding on the contracts
plus a premium of $49.6 million and $44.3 million for
the years ended December 31, 2003 and 2001, respectively.
These premiums were recorded by WFS as a cash gain on sale, net
of the write-off of outstanding dealer participation balances
and the effect of hedging activities. These contracts were
subsequently securitized by us and continue to be managed by WFS
under the terms of the transactions. These whole loan sale
transactions are eliminated upon consolidation for accounting
purposes.

On February 27, 2004, we purchased
$1.5 billion of contracts from WFS in a whole loan sale. In
this transaction, WFS received cash for the amount of the
principal outstanding on the contracts plus a premium of
$48.5 million. These contracts were subsequently
securitized by us and continue to be managed by WFS under the
terms of the securitization.

Tax Sharing Agreement

We and our subsidiaries are parties to an amended
tax sharing agreement pursuant to which a consolidated federal
tax return is filed for all of the parties to the agreement.
Under this agreement, the tax due by the group is allocated to
each member based upon the relative percentage of each
members taxable income to that of all members. Each member
pays us its estimated share of tax liability when otherwise due,
but in no event may the amount paid exceed the amount of tax
that would have been due if a member were to file a separate
return. A similar process is used with respect to state income
taxes for those states that permit the filing of a consolidated
or combined return. Tax liabilities to states that require the
filing of separate tax returns for each company are paid by each
company. The term of the amended tax sharing agreement commenced
on the first day of the consolidated return year beginning
January 1, 2002 and continues in effect until the parties
to the tax sharing agreement agree in writing to terminate it.
See Consolidated Financial Statements 
Note 23  Income Taxes.

Management Agreements

We have entered into certain management
agreements with WFS and the Bank pursuant to which we pay an
allocated portion of certain costs and expenses incurred by WFS
and the Bank with respect to services or facilities of WFS and
the Bank used by us or our subsidiaries, including our principal
office facilities, our field offices, and overhead and associate
benefits pertaining to Bank and WFS associates who also provide
services to us or our subsidiaries. Additionally, as part of
these management agreements, WFS and the Bank have agreed to
reimburse us for similar costs incurred. The management
agreements may be terminated by any party upon five days prior
written notice without cause, or immediately in the event of the
other partys breach of any covenant, obligation, or duty
contained in the applicable management agreement or for
violation of law, ordinance, statute, rule or regulation
governing either party to the applicable management agreement.

Supervision and Regulation

General

The following discussion describes federal and
state laws and regulations that have a material effect on our
business. These laws and regulations generally are intended to
protect consumers, depositors, federal

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deposit insurance funds and the banking system as
a whole, rather than stockholders and creditors. To the extent
that this section refers to statutory or regulatory provisions,
it is qualified in its entirety by reference to these
provisions. Further, these statutes and regulations are subject
to change by Congress and federal or state regulators. A change
in the laws, regulations or regulatory policies applicable to us
could have a material effect on our business.


Bank Operations

The Bank and its subsidiaries are subject to
examination and comprehensive regulation and reporting
requirements by the Office of Thrift Supervision, also known as
the OTS, the Banks primary federal regulator, as well as
by the FDIC. The OTS is required to conduct a full scope,
on-site examination of the Bank every twelve months. In
addition, the Bank is subject to regulation by the Board of
Governors of the Federal Reserve System, which governs reserves
required to be maintained against deposits and other matters.
The Bank also is a member of the FHLB of San Francisco, one of
twelve regional banks for federally insured savings and loan
associations and banks comprising the FHLB System. The FHLB
System is under the supervision of the Federal Housing Finance
Board. In addition, various other laws and regulations, such as
the Gramm-Leach-Bliley Act, Federal Home Loan Bank Act,
Community Reinvestment Act, Sarbanes-Oxley Act of 2002, and USA
Patriot Act, directly or indirectly affect our business.

Since WFS is owned by the Bank, which is a
federal savings association, it is subject to regulation and
examination primarily by the OTS as well as by the FDIC. Our
service corporation subsidiaries also are subject to regulation
by the OTS and other applicable federal and state agencies. WFS
and certain of our other subsidiaries are further regulated by
various departments or commissions of the states in which they
do business. This includes our insurance subsidiaries which are
subject to regulation by applicable state insurance regulatory
agencies.

Automobile Lending Operations

We purchase automobile installment contracts in
45 states and are subject to both state and federal regulation
of our automobile lending operations. We must comply with each
states consumer finance, automobile finance, licensing and
titling laws and regulations to the extent those laws and
regulations are not pre-empted by OTS regulations or federal law.

The contracts we originate and service are
subject to numerous federal and state consumer protection laws,
including the Federal Truth-in-Lending Act, the Federal Trade
Commission Act, the Fair Credit Billing Act, the Fair Credit
Reporting Act, the Equal Credit Opportunity Act, the Fair and
Accurate Credit Transactions Act, the California Rees-Levering
Act, other retail installment sales laws and similar state laws.
Most state consumer protection laws also govern the process by
which we may repossess and sell an automobile pledged as
security on a defaulted contract. We must follow those laws
carefully in order to maximize the amount of money we can
recover on a defaulted contract.

Affiliate Transaction
Restrictions

The Home Owners Loan Act, also known as
HOLA, limits the type of activities and investments in which the
Bank or its subsidiaries may participate if the investment or
activity involves an affiliate of the Bank. In addition,
transactions between the Bank or its subsidiaries and an
affiliate must be on terms that are at least as favorable to the
Bank or its subsidiaries as are the terms of the transactions
with unaffiliated companies. This permits the OTS to, as
necessary, limit transactions between us, the Bank, our
subsidiaries or affiliates and the subsidiaries or affiliates of
the Bank, and limit any of our activities that might create a
serious risk that our liabilities and the liabilities of our
affiliates may be imposed on the Bank.

Investment Restrictions

HOLA regulations limit certain activities of the
Bank and its operating subsidiaries to a percentage of the
Banks total consolidated assets, excluding for these
purposes, assets held by its service corporations. The Bank

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is precluded from holding consumer loans,
including automobile contracts, on its consolidated balance
sheet, in an aggregate principal balance in excess of 30% of its
total consolidated assets. The limitation is increased to 35% of
consolidated assets if all of the consumer loans in excess of
the 30% limit are obtained by the Bank and its operating
subsidiaries directly from consumers. Our securitization
activities are structured to enable the Bank to remove
securitized automobile contracts from the HOLA consumer loan
limitation calculation. As a result, securitized automobile
contracts are not included in the calculation of the percentage
of the Banks consolidated assets subject to either the 30%
or 35% limitation on consumer loans. The Bank is precluded from
holding commercial loans, including loans to our service
corporations, on its consolidated balance sheet, in an aggregate
principal balance in excess of 10% of its total consolidated
assets. Commercial loans secured by real estate and small
business loans with $2.0 million or less in outstanding
principal are not included in the calculation of the percentage
of commercial loans. The Bank is precluded from investing more
than 2% of its consolidated assets in service corporations,
although it may invest an additional 1% in service corporations
devoted to community service activities as specified in the
regulations. Retained earnings or losses from the operations of
our service corporations are not included in the calculation of
our investment in service corporations.


Capital Requirements

As a federally chartered savings bank, the Bank
is subject to certain minimum capital requirements imposed by
the Financial Institutions Reform, Recovery and Enforcement Act,
also known as FIRREA, and the Federal Deposit Insurance
Corporation Improvement Act, also known as FDICIA. FDICIA
separates all financial institutions into one of five capital
categories: well capitalized, adequately
capitalized, undercapitalized,
significantly undercapitalized, and critically
undercapitalized. To be considered well
capitalized, an institution must have a ratio of total
risk-based capital to risk-weighted assets of 10.0% or greater,
a Tier 1 risk-based capital ratio to risk-weighted assets of
6.0% or greater, a leverage ratio of 5.0% or greater and not be
subject to any OTS order. To be adequately
capitalized, an institution must have a total risk-based
capital ratio of not less than 8.0%, a Tier 1 risk-based capital
ratio of not less than 4.0% and a leverage ratio of not less
than 4.0%. Any institution that is neither well-capitalized nor
adequately capitalized will be considered undercapitalized. In
addition, HOLA and the OTS regulations require savings
associations to maintain tangible capital in an
amount not less than 1.5% of adjusted total assets and
core capital in an amount not less than 3% of
adjusted total assets.

HOLA mandates that the OTS promulgate capital
regulations that include capital standards no less stringent
than the capital standards applicable to national banks. The OTS
in its regulations has defined total risk-based capital as core
capital plus supplementary capital less direct equity
investments not permissible to national banks (subject to a
phase-in schedule) and reciprocal holdings that other depository
institutions may count in their regulatory capital.
Supplementary capital is limited to 100% of core capital.
Supplementary capital is comprised of permanent capital
instruments not included in core capital, general valuation loan
and lease loss allowance, and maturing capital instruments such
as subordinated debentures. At December 31, 2003, there
were two debenture issuances remaining, one with an outstanding
balance excluding discounts and issuance costs of
$101 million and an interest rate of 8.875% due in 2007 and
a second with an outstanding balance excluding discounts and
issuance costs of $300 million and an interest rate of
9.625% due in 2012. Pursuant to the approval from the OTS to
treat those debentures as supplementary capital, the total
amount of debentures issued by the Bank that may be included as
supplementary capital may not exceed the total amount of the
Banks core capital. The amount of the 8.875% debentures
that may be included as supplementary capital began to decrease
at the rate of 20% of the amount originally outstanding per
year, net of redemptions, on August 1, 2002. The 9.625%
debentures will not begin to be phased out as supplementary
capital until May 15, 2007.

The Bank currently meets all capital requirements
to which it is subject and satisfies the requirements of a
well capitalized institution. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Capital
Resources and Liquidity  Capital Requirements
for an analysis of the Banks actual capital and required
capital. Because the Bank is well capitalized, it
may accept brokered deposits without restriction. See
Managements Discussion and Analysis of Financial
Condition and Results

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of Operations  Capital Resources and
Liquidity  Principal Sources of Cash 
Deposits. Federal regulators must take prompt corrective
action to resolve the problems of insured depository
institutions that fall below certain capital ratios.


Distributions

The OTS has adopted regulations for determining
if capital distributions of a savings association are permitted.
Capital distributions are permissible unless the Bank would be
undercapitalized, the proposal raises safety and soundness
concerns, or violates a prohibition in any statute, regulation
or agreement between the Bank and the OTS. See Note 19 to
the Consolidated Statements of Financial Condition 
Dividends for a more detailed description of limits
on dividends the Bank is allowed to pay.

The Bank also is subject to certain limitations
on the payment of dividends by the terms of the indentures for
its debentures. Those limitations are more severe than the OTS
capital distribution regulations. Under the most restrictive of
those limitations arising in connection with the Banks
sale of debentures, the greatest capital distribution that the
Bank could currently make is $218 million.

Insurance of Accounts

The FDIC administers the Savings Association
Insurance Fund, also known as SAIF. Deposits with the Bank are
insured through the SAIF to the maximum amount permitted by law,
which is currently $100,000. The FDIC may terminate the deposit
insurance of any insured depository institution, including the
Bank, if it determines after a hearing that the institution has
either engaged or is engaging in unsafe or unsound practices, is
in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, order or any condition
imposed by an agreement with the FDIC.

Subprime Lending Programs

The OTS, along with other federal banking
regulatory agencies, has adopted guidance pertaining to subprime
lending programs. Pursuant to the guidance, lending programs
that provide credit to borrowers whose credit histories reflect
specified negative characteristics, such as recent bankruptcies
or payment delinquencies, are deemed to be subprime lending
programs. Many of the loans that we originate possess one or
more of the factors identified in the guidance as indicative of
a subprime loan. Pursuant to the guidance, examiners may require
that an institution with a subprime lending program hold
additional capital that ranges from one and one-half to three
times the normal capital required for similar loans made to
borrowers who are not subprime borrowers. Because many of the
loans we originate possess one or more of the factors identified
in the guidance as indicative of a subprime loan, the Bank
maintains its capital levels higher than those otherwise
required by the OTS. The maintenance of higher capital levels by
the Bank may slow our growth, require us to raise additional
capital or sell assets, all of which would negatively impact our
earnings. We cannot predict whether the Bank will be required by
the OTS to hold additional capital with respect to those
automobile contracts we hold as to which the borrowers are
deemed by the OTS to be subprime borrowers.

Taxation

Federal Income Taxes

We file a calendar year consolidated federal
income tax return with our subsidiaries. All entities included
in the consolidated financial statements are included in the
consolidated tax return.

The Bank is a savings and loan association for
federal income tax purposes. Prior to 1996, savings and loan
associations satisfying certain conditions were permitted under
the Internal Revenue Code to establish reserves for bad debts
and to make annual additions to these reserves, which qualified
as deductions from income. However, in 1996 new legislation was
enacted which eliminated the reserve method of accounting for
bad debts for tax purposes for savings and loan associations and
required the reserve balance to be recaptured. During 2003, the
remaining $1.7 million of reserves were recaptured.

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We will be subject to the alternative minimum tax
if that tax is larger than the regular federal tax otherwise
payable. Generally, alternative minimum taxable income is a
taxpayers regular taxable income, increased by the
taxpayers tax preference items for the year and adjusted
by computing certain deductions in a special manner which
negates the acceleration of such deductions under the regular
federal tax. This amount is then reduced by an exemption amount
and is subject to tax at a 20% rate. In the past, we have not
generally paid alternative minimum tax and do not expect that we
will in the current year.

During 2003, the Internal Revenue Service
completed their examination of our returns for the tax years
ended December 31, 1997 through 1999. All additional tax
and interest related to the examination have been paid, which
amount was not material to our Consolidated Statements of
Income. There were no penalties assessed as a result of this
examination.

California Franchise Tax and Other State
Provisions

At the end of 2003, we had a tax presence in
approximately 38 states. However, we expect that approximately
50% of the activity of the group and the resulting income will
be taxed as California source income, with the remaining amounts
apportioned or allocated outside California.

The California franchise tax applicable to the
Bank is higher than the rate of tax applicable to non-financial
corporations because it includes an amount in lieu
of local personal property and business license taxes paid by
non-financial corporations, but not generally paid by financial
institutions such as the Bank. For taxable years ending on or
after December 31, 1995, the tax rate for a financial
corporation is equal to the tax rate on a regular corporation
plus 2%. For income years beginning after January 1, 1997,
the California regular corporate tax rate is 8.84% and the
financial corporation tax rate is 10.84%.

We compute our taxable income for California
purposes on a unitary basis, or as if we were one business unit,
and file one combined California franchise tax return, excluding
Westhrift Life Insurance Company, also known as Westhrift. We
are under examination by the California Franchise Tax Board and
various other state taxing authorities for tax years 1998
through 2001. We do not anticipate any significant changes based
upon these examinations.

Subsidiaries

The following subsidiaries are included in our
Consolidated Financial Statements.

WFS Receivables Corporation 2

WFS Receivables Corporation 2, also known as
WFSRC2, is a wholly owned, Nevada based, limited purpose
corporation. WFSRC2 was organized for the purpose of purchasing
contracts from WFS and securitizing them in the asset-backed
securities market. Securitizations originated by WFSRC2 are
guaranteed under a financial guaranty insurance policy issued by
FSA. Securitization transactions in which contracts are sold
through WFSRC2 are treated as secured financings for accounting
purposes. At December 31, 2003, WFSRC2 had
$2.1 billion in notes payable on automobile secured
financing outstanding.

WFS Receivables Corporation 4

WFS Receivables Corporation 4, also known as
WFSRC4, is a wholly owned, Nevada based, limited purpose
corporation. WFSRC4 was organized for the purpose of purchasing
contracts from WFS and securitizing them in the asset-backed
securities market. Securitizations originated by WFSRC4 include
senior notes which are credit enhanced through the issuance of
subordinated notes. Securitization transactions in which
contracts are sold through WFSRC4 are treated as secured
financings for accounting purposes. At December 31, 2003,
WFSRC4 had no notes payable on automobile secured financing
outstanding.

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Westran Services Corp.

Westran Services Corp., also known as Westran, is
our wholly owned, California based subsidiary, which provides
travel-related services for us and our subsidiaries. Westran
does not provide a significant source of revenues or expenses.

Western Consumer Products

Western Consumer Products is our wholly owned,
California based subsidiary, which was created in 2001 to market
non-lending related products such as automobile warranties,
maintenance agreements and vehicle security systems.

Western Financial Bank

The Bank is our wholly owned, federally chartered
and federally insured savings bank. The Bank provides
diversified financial services through its community banking
operations, which include a retail banking division and a
commercial banking division. Substantially all of our operations
are conducted through the Bank and its subsidiary, WFS. The
Banks subsidiaries are WFS, which in turn owns all of the
stock of WFAL, WFAL2, WFS Investments, Inc., also known as
WFSII, WFS Funding, Inc., also known as WFSFI, WFS Receivables
Corporation, also known as WFSRC, WFS Receivables Corporation 3,
also known as WFSRC3 and WFS Web Investments, also known as
WFSWEB. Other subsidiaries of the Bank include Western Auto
Investments, Inc., also known as WAI, Westfin Insurance Agency,
also known as WFIA, Westhrift, WestFin Securities Corporation,
also known as WestFin, Western Reconveyance Company, Inc., also
known as RECON, Western Consumer Services, Inc., also known as
WCS, and The Hammond Company, The Mortgage Bankers, also known
as THCMB. Each of these entities are described in further detail
below.

WFS Financial Inc

WFS is an 84% owned operating subsidiary of the
Bank that is in the business of financing contracts purchased
from automobile dealers. The remaining interest is traded on the
Nasdaq National Market® under the ticker symbol WFSI. Each
of its offices is licensed to the extent required by law to
conduct business in each respective state. The contracts that
WFS originates are generally securitized by its subsidiaries,
WFAL, WFSFI, WFSRC or WFSRC3 or are sold to WFSRC2 or WFSRC4 for
securitization by those entities. See General 
Automobile Lending Operations. During 2003, WFS originated
$6.0 billion of contracts.

WFS Financial Auto Loans,
Inc.

WFAL is a wholly owned, Nevada based, limited
purpose operating subsidiary of WFS. WFAL was organized
primarily for the purpose of purchasing contracts from WFS and
securitizing them in the asset-backed securities market. All
sales to securitization trusts directly from WFAL were treated
as sales for accounting purposes. WFAL has not purchased any
automobile contracts since March 2000. In January 2003, we
regained control over the assets of the outstanding
securitization trusts accounted for as sales for accounting
purposes and consolidated all remaining contracts and related
notes payable on automobile secured financing outstanding under
these trusts. At December 31, 2003, WFAL had
$129 million in notes payable on automobile secured
financing outstanding.

WFS Financial Auto Loans 2,
Inc.

WFAL2 is a wholly owned, Nevada based, limited
purpose operating subsidiary of WFS. WFAL2 purchases contracts
that are then used as collateral for its reinvestment contract
activities. See Transactions with Related
Parties  Reinvestment Contracts.

WFS Funding, Inc.

WFSFI is a wholly owned, Nevada based, limited
purpose service corporation subsidiary of WFS. WFSFI was
incorporated for the purpose of providing conduit financings.
WFSFI completed a $775 million

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and a $650 million conduit financing
transaction during January 2002 and December 2001, respectively.
Both of these conduit financing transactions were paid off as of
December 31, 2002.


WFS Investments, Inc.

WFSII is a wholly owned, California based,
limited purpose operating subsidiary of WFS. WFSII was
incorporated for the purpose of purchasing limited ownership
interests in owner trusts in connection with securitization
transactions. WFSII is limited by its Articles of Incorporation
from engaging in any business activities not incidental or
necessary to its stated purpose.

WFS Receivables Corporation

WFSRC is a wholly owned, Nevada based, limited
purpose service corporation subsidiary of WFS. WFSRC was
incorporated for the purpose of purchasing contracts from WFS
and securitizing them in the asset-backed securities market.
Securitizations originated by WFSRC are guaranteed under a
financial guaranty insurance policy issued by FSA.
Securitization transactions in which contracts are sold through
WFSRC are treated as secured financings for accounting purposes.
At December 31, 2003, WFSRC had $3.7 billion in notes
payable on automobile secured financing outstanding.

WFS Receivables Corporation 3

WFSRC3 is a wholly owned, Nevada based, limited
purpose service corporation subsidiary of WFS. WFSRC3 was
organized for the purpose of purchasing contracts from WFS and
securitizing them in the asset-backed securities market.
Securitizations originated by WFSRC3 include senior notes that
are credit enhanced through the issuance of subordinated notes.
Securitization transactions in which contracts are sold through
WFSRC3 are treated as secured financings for accounting
purposes. At December 31, 2003, WFSRC3 had
$4.3 billion in notes payable on automobile secured
financing outstanding.

WFS Web Investments

WFSWEB is a wholly owned, California based,
limited purpose service corporation subsidiary of WFS. WFSWEB
was incorporated for the purpose of investing in an Internet
service company called DealerTrack. Our investment in
DealerTrack provides us with the opportunity to be involved with
a company that provides a business-to-business Internet portal
specifically designed for the indirect automobile lending market.

Western Auto Investments,
Inc.

WAI is a wholly owned, Nevada based, limited
purpose operating subsidiary of the Bank. WAI was incorporated
for the purpose of purchasing limited ownership interests in
contract securitization transactions. WAI is limited by its
articles of incorporation from engaging in any business
activities not incidental or necessary to its stated purpose.
WAI does not provide a significant source of revenues or
expenses.

Westfin Insurance Agency

WFIA is a wholly owned, California based,
insurance agency and operating subsidiary of the Bank. WFIA acts
as an agent for independent insurers in providing property and
casualty insurance, collateral protection insurance and other
non-credit related life and disability coverage on contracts
made by WFS. WFIA is also a licensed broker-dealer, which sells
fixed annuities to the general public. WFIAs revenues
consist primarily of commissions received on policies sold to
customers.

Westhrift Life Insurance
Company

Westhrift is a wholly owned, Arizona based,
operating subsidiary of the Bank. Westhrift has a Certificate of
Authority from the California Insurance Commissioner authorizing
it to conduct insurance business in California. We are in the
process of dissolving Westhrift.

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WestFin Securities
Corporation

WestFin is a wholly owned operating subsidiary of
the Bank. WestFin was a National Association of Securities
Dealers licensed securities broker-dealer of the Bank. Westfin
discontinued its operations as of December 31, 2002.

Western Reconveyance Company,
Inc.

RECON is a wholly owned, California based,
operating subsidiary of the Bank. RECON acts primarily as the
trustee under trust deed loans made by the Bank. RECON does not
provide a significant source of revenues or expenses.

Western Consumer Services,
Inc.

WCS is a wholly owned, California based,
operating subsidiary of the Bank. WCS historically conducted
real estate development activities through two California
limited liability companies, also known as LLCs. The purpose of
the LLCs was to acquire, develop and ultimately sell single
family residences. WCS has also held properties that were
prohibited to be held by the Bank due to regulatory guidelines.
The Bank is required to hold dollar for dollar risk-based
capital for its investment in WCS. WCS does not currently hold
any real estate investments or conduct any real estate
development activities.

The Hammond Company, The Mortgage
Bankers

THCMB is a wholly owned, California based,
operating subsidiary of the Bank. THCMB was acquired in 1995 for
the purposes of providing retail mortgage banking services. In
1996, THCMB activities were moved into the Bank. THCMB does not
currently conduct any business.

Associates

At December 31, 2003, we had 2,203 full-time
and 117 part-time associates. None of our associates are
represented by a collective bargaining unit or union. We believe
we have good relations with our associates.




Item 2. Properties

At December 31, 2003, we owned eight
properties in California and one property in Texas and leased 55
properties at various locations in various states.

Our executive offices are located at 23 Pasteur,
Irvine, California. The remaining owned and leased properties
are used as retail branch offices, automobile lending regional
business centers and other operational centers. At
December 31, 2003, the net book value of property and
leasehold improvements was approximately $55.1 million. We
lease space at one location from a company controlled by the
Chairman of the Board of our company and our majority
shareholder.




Item 3. Legal
Proceedings

We or our subsidiaries are involved as parties to
certain legal proceedings incidental to our business, including
Lee, et al. v. WFS Financial Inc, United States District
Court, Middle District of Tennessee at Nashville,
No. 3-02-0570 filed June 17, 2002 (a putative class
action raising claims under the Equal Credit Opportunity Act)
and other similar cases. We are vigorously defending these
actions and do not believe that the outcome of these proceedings
will have a material effect upon our financial condition,
results of operations and cash flows.




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

None.

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##### Table of Contents






PART II





|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
    and Related Stockholder Matters

Price Range by Quarter

Our common stock has been publicly traded since
1986 and is currently traded on the New York Stock Exchange,
also known as the NYSE, identified by the symbol, WES. The
following table illustrates the high and low prices by quarter
in 2003 and 2002, as reported by the NYSE, which prices are
believed to represent actual transactions:

|               |  |      |       |      |  |      |       |     |  |   |       |  |  |   |       | 
|-------------- |  | ---- | ----- | ---- |  | ---- | ----- | --- |  | - | ----- |  |  | - | ----- | 
|               |  |      |       |     
|               |  | 2003 |       | 2002
|               |  |      |       |     
|               |  | High |       | Low  |  | High |       | Low
|               |  |      |       |      |  |      |       |    
|First Quarter  |  | $    | 23.25 |      |  | $    | 18.30 |     |  | $ | 22.55 |  |  | $ | 15.70 | 
|Second Quarter |  |      | 29.80 |      |  |      | 18.60 |     |  |   | 31.95 |  |  |   | 22.50 | 
|Third Quarter  |  |      | 36.86 |      |  |      | 27.30 |     |  |   | 31.41 |  |  |   | 18.10 | 
|Fourth Quarter |  |      | 39.25 |      |  |      | 34.13 |     |  |   | 21.63 |  |  |   | 16.92 | 

We had 6,521 shareholders of our common stock at
February 27, 2004. The number of shareholders was
determined by the number of record holders, including the number
of individual participants, in security position listings.

Dividends

We paid cash dividends of $0.51, $0.47 and $0.43
per share for the years ended December 31, 2003, 2002 and
2001, respectively. On February 25, 2004, we declared a
quarterly cash dividend of $0.14 per share for shareholders of
record as of May 4, 2004. This dividend is payable on
May 18, 2004. There are no restrictions on the payment of
dividends by Westcorp.

The Bank is restricted by regulation and by the
indentures relating to the subordinated debentures as to the
amount of funds that can be transferred to us in the form of
dividends or other capital distributions. See Note 19 to
the Consolidated Statements of Financial Condition 
Dividends. Under the most restrictive of these
terms, on December 31, 2003, the Banks restricted
shareholders equity totaled $467 million with a
maximum dividend of $218 million. The Bank must notify the
OTS of its intent to declare cash dividends 30 days before
declaration and may not pay a dividend or make a loan to us for
any purpose to the extent we engage in any activities not
permitted for a bank holding company.

Recent Sales of Unregistered
Securities

On July 7, 2003 Westcorp sold
700,000 shares of its common stock directly to affiliates
of Westcorps chairman and controlling shareholder, Ernest
Rady and 130,000 shares directly to the Westcorp Employee
Stock Ownership Plan, also known as the ESOP in an unregistered
private placement. The shares were sold at a price of $28.00 per
share. Westcorp did not pay any underwriting discounts or
commissions in connection with these sales, resulting in
proceeds to Westcorp of $19,600,000 and $3,640,000,
respectively. The price paid by the affiliates of Mr. Rady
and the ESOP was identical to the price to public paid in
connection with the registered underwritten offering of
5,274,000 shares of Westcorps common stock which
closed on July 8, 2003. Westcorp paid underwriting
discounts and commissions of $1.40 per share in connection with
that public offering. The sales of its common stock to
affiliates of Mr. Rady and to the ESOP were exempt from
registration pursuant to Section 4(2) of the Securities Act
of 1933, as amended, as the sales were made directly from
Westcorp to the purchasers without any public offering.

24



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##### Table of Contents








|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

The following table presents summary audited
financial data for the years ended December 31, 2003, 2002,
2001, 2000 and 1999. Since this table is only a summary and does
not provide all of the information contained in our financial
statements, including the related notes, you should read our
Consolidated Financial Statements contained elsewhere herein.
Certain amounts from the prior years Consolidated
Financial Statements have been reclassified to conform to the
current year presentation.

|                                                                             |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |           |           |           | 
|---------------------------------------------------------------------------- | --------------------------------------------------------- | ------------------------------------------------ | ------------------------------------------ | ---------- | ---------- | ---------- | ---------- | --------- | --------- | ---------- | ---------- | --------- | --------- | ---------- | ---------- | --------- | --------- | --------- | ---------- | --------- | --------- | --------- | 
|                                                                             |                                                           |                                                 
|                                                                             |                                                           | At or For the Year Ended December 31,           
|                                                                             |                                                           |                                                 
|                                                                             |                                                           | 2003                                             |                                            | 2002       |            | 2001       |            | 2000      |           | 1999      
|                                                                             |                                                           |                                                  |                                            |            |            |            |            |           |           |           
|                                                                             |                                                           |                                                 
|                                                                             |                                                           | (Dollars in thousands, except per share amounts)
|Consolidated Statements of
    Operations:                                   |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|Interest income                                                              |                                                           | $                                                | 1,245,017                                  |            |            | $          | 1,142,940  |           |           | $          | 962,627    |           |           | $          | 583,821    |           |           | $         | 297,616    |          
|Interest expense                                                             |                                                           |                                                  | 531,436                                    |            |            |            | 530,916    |           |           |            | 491,944    |           |           |            | 313,872    |           |           |           | 152,788    |          
|                                                                             |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|                                                                             | Net interest income                                       |                                                  |                                            | 713,581    |            |            |            | 612,024   |           |            |            | 470,683   |           |            |            | 269,949   |           |           |            | 144,828   |          
|Provision for credit losses                                                  |                                                           |                                                  | 294,006                                    |            |            |            | 306,233    |           |           |            | 196,977    |           |           |            | 82,133     |           |           |           | 38,400     |          
|                                                                             |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|                                                                             | Net interest income after provision for credit
    losses |                                                  |                                            | 419,575    |            |            |            | 305,791   |           |            |            | 273,706   |           |            |            | 187,816   |           |           |            | 106,428   |          
|Noninterest income                                                           |                                                           |                                                  | 110,157                                    |            |            |            | 90,653     |           |           |            | 78,899     |           |           |            | 177,884    |           |           |           | 212,138    |          
|Noninterest expense                                                          |                                                           |                                                  | 281,788                                    |            |            |            | 251,306    |           |           |            | 244,871    |           |           |            | 220,973    |           |           |           | 217,958    |          
|                                                                             |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|Income before income tax                                                     |                                                           |                                                  | 247,944                                    |            |            |            | 145,138    |           |           |            | 107,734    |           |           |            | 144,727    |           |           |           | 100,608    |          
|Income tax                                                                   |                                                           |                                                  | 98,275                                     |            |            |            | 52,267     |           |           |            | 41,675     |           |           |            | 58,132     |           |           |           | 41,460     |          
|                                                                             |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|Income before minority interest                                              |                                                           |                                                  | 149,669                                    |            |            |            | 92,871     |           |           |            | 66,059     |           |           |            | 86,595     |           |           |           | 59,148     |          
|Minority interest in earnings of subsidiaries                                |                                                           |                                                  | 26,064                                     |            |            |            | 13,153     |           |           |            | 10,369     |           |           |            | 11,852     |           |           |           | 6,522      |          
|                                                                             |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|Net income                                                                   |                                                           | $                                                | 123,605                                    |            |            | $          | 79,718     |           |           | $          | 55,690     |           |           | $          | 74,743     |           |           | $         | 52,626     |          
|                                                                             |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|Weighted average number of shares and common
    share equivalents  diluted |                                                           |                                                  | 43,397,211                                 |            |            |            | 38,922,611 |           |           |            | 34,485,127 |           |           |            | 29,525,677 |           |           |           | 26,505,128 |          
|Earnings per common share  diluted                                          |                                                           | $                                                | 2.85                                       |            |            | $          | 2.05       |           |           | $          | 1.61       |           |           | $          | 2.53       |           |           | $         | 1.99       |          
|Dividends declared per common share                                          |                                                           |                                                  | 0.52                                       |            |            |            | 0.48       |           |           |            | 0.44       |           |           |            | 0.30       |           |           |           | 0.20       |          
|Dividend payout ratio                                                        |                                                           |                                                  | 18.2                                       | %          |            |            | 23.4       | %         |           |            | 27.3       | %         |           |            | 11.9       | %         |           |           | 10.1       | %        
|                                                                            
|Consolidated Statements of Financial
    Condition:                          |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|Assets:                                                                      |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|                                                                             | Cash and due from banks                                   |                                                  | $                                          | 382,082    |            |            | $          | 84,215    |           |            | $          | 104,327   |           |            | $          | 128,763   |           |           | $          | 171,365   |          
|                                                                             | Loans:                                                    |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |           |          
|                                                                             |                                                           | Consumer(1)                                      |                                            |            | 10,777,829 |            |            |           | 9,063,755 |            |            |           | 7,092,959 |            |            |           | 4,309,317 |           |            |           | 1,516,669 |          
|                                                                             |                                                           | Mortgage(2)                                      |                                            |            | 236,223    |            |            |           | 282,930   |            |            |           | 373,455   |            |            |           | 507,431   |           |            |           | 598,302   |          
|                                                                             |                                                           | Commercial                                       |                                            |            | 124,431    |            |            |           | 97,216    |            |            |           | 85,312    |            |            |           | 107,586   |           |            |           | 66,927    |          
|                                                                             | Mortgage-backed securities                                |                                                  |                                            | 2,701,797  |            |            |            | 2,649,657 |           |            |            | 2,092,225 |           |            |            | 2,230,448 |           |           |            | 1,431,376 |          
|                                                                             | Investments and time deposits                             |                                                  |                                            | 363,148    |            |            |            | 128,529   |           |            |            | 74,957    |           |            |            | 35,101    |           |           |            | 33,423    |          
|                                                                             | Other assets                                              |                                                  |                                            | 332,012    |            |            |            | 445,689   |           |            |            | 427,380   |           |            |            | 653,270   |           |           |            | 744,929   |          
|                                                                             | Less: Allowance for credit losses                         |                                                  |                                            | 301,602    |            |            |            | 269,352   |           |            |            | 178,218   |           |            |            | 104,006   |           |           |            | 64,217    |          
|                                                                             |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|                                                                             |                                                           |                                                  | Total assets                               |            | $          | 14,615,920 |            |           | $         | 12,482,639 |            |           | $         | 10,072,397 |            |           | $         | 7,867,910 |            |           | $         | 4,498,774 | 
|                                                                             |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|Liabilities:                                                                 |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|                                                                             | Deposits                                                  |                                                  | $                                          | 1,972,856  |            |            | $          | 1,974,984 |           |            | $          | 2,329,326 |           |            | $          | 2,478,487 |           |           | $          | 2,212,309 |          
|                                                                             | Notes payable on automobile secured financing             |                                                  |                                            | 10,254,641 |            |            |            | 8,494,678 |           |            |            | 5,886,227 |           |            |            | 3,473,377 |           |           |            | 461,104   |          
|                                                                             | FHLB advances and other borrowings                        |                                                  |                                            | 560,179    |            |            |            | 618,766   |           |            |            | 723,675   |           |            |            | 616,193   |           |           |            | 498,901   |          
|                                                                             | Subordinated debt                                         |                                                  |                                            | 394,854    |            |            |            | 400,561   |           |            |            | 147,714   |           |            |            | 189,962   |           |           |            | 199,298   |          
|                                                                             | Amounts held on behalf of trustee                         |                                                  |                                            |            |            |            |            | 177,642   |           |            |            | 280,496   |           |            |            | 494,858   |           |           |            | 687,274   |          
|                                                                             | Other liabilities                                         |                                                  |                                            | 179,471    |            |            |            | 101,145   |           |            |            | 85,994    |           |            |            | 71,221    |           |           |            | 59,140    |          
|                                                                             |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|                                                                             |                                                           |                                                  | Total liabilities                          |            |            | 13,362,001 |            |           |           | 11,767,776 |            |           |           | 9,453,432  |            |           |           | 7,324,098 |            |           |           | 4,118,026 | 
|                                                                             | Minority interest in equity of subsidiaries               |                                                  |                                            | 131,434    |            |            |            | 101,666   |           |            |            | 78,261    |           |            |            | 56,644    |           |           |            | 28,030    |          
|                                                                             | Shareholders equity                                      |                                                  |                                            | 1,122,485  |            |            |            | 613,197   |           |            |            | 540,704   |           |            |            | 487,168   |           |           |            | 352,718   |          
|                                                                             |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          
|                                                                             |                                                           |                                                  | Total liabilities and shareholders equity |            | $          | 14,615,920 |            |           | $         | 12,482,639 |            |           | $         | 10,072,397 |            |           | $         | 7,867,910 |            |           | $         | 4,498,774 | 
|                                                                             |                                                           |                                                  |                                            |            |            |            |            |           |           |            |            |           |           |            |            |           |           |           |            |          

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|                                                  |                  |                                                  |            |           |           |      |           |           |           |      |           |           |           |   |           |           |           |   |           |           |           | 
|------------------------------------------------- | ---------------- | ------------------------------------------------ | ---------- | --------- | --------- | ---- | --------- | --------- | --------- | ---- | --------- | --------- | --------- | - | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                                                  |                  |                                                 
|                                                  |                  | At or For the Year Ended December 31,           
|                                                  |                  |                                                 
|                                                  |                  | 2003                                             |            | 2002      |           | 2001 |           | 2000      |           | 1999
|                                                  |                  |                                                  |            |           |           |      |           |           |           |     
|                                                  |                  |                                                 
|                                                  |                  | (Dollars in thousands, except per share amounts)
|Other Selected Financial Data:                    |                  |                                                  |            |           |           |      |           |           |           |      |           |           |           |   |           |           |           |   |           |          
|Average managed automobile contracts              |                  | $                                                | 10,051,754 |           |           | $    | 8,845,635 |           |           | $    | 7,576,681 |           |           | $ | 6,076,814 |           |           | $ | 4,840,363 |          
|Return on average managed automobile contracts(3) |                  |                                                  | 1.23       | %         |           |      | 0.90      | %         |           |      | 0.74      | %         |           |   | 1.23      | %         |           |   | 1.09      | %        
|Average shareholders equity(4)                   |                  | $                                                | 858,927    |           |           | $    | 654,109   |           |           | $    | 570,298   |           |           | $ | 450,323   |           |           | $ | 351,162   |          
|Return on average shareholders equity(4)         |                  |                                                  | 14.39      | %         |           |      | 12.19     | %         |           |      | 9.77      | %         |           |   | 16.60     | %         |           |   | 14.99     | %        
|Total equity to assets (5)                        |                  |                                                  | 9.04       | %         |           |      | 6.54      | %         |           |      | 6.75      | %         |           |   | 7.10      | %         |           |   | 8.94      | %        
|Book value per share(4)                           |                  | $                                                | 23.00      |           |           | $    | 18.23     |           |           | $    | 16.80     |           |           | $ | 15.72     |           |           | $ | 14.06     |          
|Originations:                                     |                  |                                                  |            |           |           |      |           |           |           |      |           |           |           |   |           |           |           |   |           |          
|                                                  | Consumer loans   |                                                  | $          | 5,983,492 |           |      | $         | 5,419,296 |           |      | $         | 4,869,970 |           |   | $         | 4,232,115 |           |   | $         | 3,355,732 |          
|                                                  | Mortgage loans   |                                                  |            | 25,622    |           |      |           | 23,950    |           |      |           | 23,001    |           |   |           | 33,124    |           |   |           | 276,936   |          
|                                                  | Commercial loans |                                                  |            | 407,387   |           |      |           | 354,439   |           |      |           | 291,944   |           |   |           | 266,342   |           |   |           | 237,316   |          
|                                                  |                  |                                                  |            |           |           |      |           |           |           |      |           |           |           |   |           |           |           |   |           |          
|                                                  |                  | Total loan originations                          |            | $         | 6,416,501 |      |           | $         | 5,797,685 |      |           | $         | 5,184,915 |   |           | $         | 4,531,581 |   |           | $         | 3,869,984 | 
|                                                  |                  |                                                  |            |           |           |      |           |           |           |      |           |           |           |   |           |           |           |   |           |          
|Interest rate spread                              |                  |                                                  | 4.95       | %         |           |      | 5.14      | %         |           |      | 4.85      | %         |           |   | 4.37      | %         |           |   | 3.59      | %        



---



|    |                                                                                  
|--- | ---------------------------------------------------------------------------------
|(1) | Net of unearned discounts.                                                       
|   
|(2) | Net of undisbursed loan proceeds.                                                
|   
|(3) | Net income divided by average automobile
    contracts managed.                  
|   
|(4) | Excludes accumulated other comprehensive loss.                                   
|   
|(5) | Excludes accumulated other comprehensive loss and
    includes minority interest.

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Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations

The following discussion and analysis should be
read in conjunction with our Consolidated Financial Statements
and notes thereto and other information included or incorporated
by reference herein.

Overview

Our primary sources of revenue are net interest
income and noninterest income. Net interest income is the
difference between the income earned on interest earning assets
and the interest paid on interest bearing liabilities. We
generate interest income from our loan portfolio, which consists
of consumer, mortgage and commercial loans, and from investments
in mortgage-backed securities and other short-term investments.
We fund our loan portfolio and investments with deposits,
advances from the FHLB, securities sold under agreements to
repurchase, securitizations, other borrowings and equity.

Noninterest income is primarily made up of
revenues generated from the sale and servicing of contracts and
real estate loans. The primary components of noninterest income
include late charges and other collection related fee income on
managed contracts, retained interest income or expense, gain on
sale of contracts and real estate loans, and contractual
servicing income on contracts in securitization transactions
treated as sales for accounting purposes. Since March 2000, we
have structured our securitizations as secured financings and no
longer record non-cash gain on sale at the time of each
securitization or record subsequent contractual servicing and
retained interest income, the valuation of which is based upon
subjective assumptions. Rather, the earnings of the contracts in
the trust and the related financing costs are reflected over the
life of the underlying pool of contracts as net interest income.
In addition, our provision for credit losses has increased as we
hold securitized loans on our balance sheet.

Our decision to account for our securitizations
as secured financings rather than as sales was based upon a
business philosophy that focuses on presenting high quality,
cash-based earnings and maintaining a conservative,
well-capitalized balance sheet. We believe that a presentation
in which assets and liabilities remain on the balance sheet for
securitization transactions treated as secured financings
provides a better understanding of our business and the inherent
risks associated with our securitizations. Since March 2000, in
order to account for some of our securitizations as secured
financings rather than as sales, those securitizations include a
provision that provides us with the right to repurchase
contracts at any time as defined under Statement of Financial
Accounting Standards No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities. The percentage of contracts that we may repurchase
was increased from 10% to 20% as of March 2000. Other
securitization transactions since March 2000 allow the
securitization trust to invest in and sell other financial
assets. We believe that our decision to make these accounting
changes created a transitional period during which our earnings
were adversely impacted as we built our on balance sheet
portfolio of loans. This change affected the comparability of
our financial statements from 2000 through 2003.

For more than 30 years, we believe that our
business model has been successful in a variety of environments.
Nationwide recession, high unemployment, weak wholesale auction
values, record personal bankruptcies and record low interest
rates created a challenging operating landscape in 2003. Through
it all, we kept credit losses under control, maintained strong
net interest margins and leveraged our operating platform to
produce record net income. The following are highlights for 2003:



| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| |  | We produced record earnings of $124 million
    in net income, a 55% increase over 2002.                                       
|
| |  | Earnings per share increased to a record $2.85
    per share.                                                                  
|
| |  | Net interest income rose 17% to $714 million
    while risk adjusted spreads were nearly identical to 2002.                    
|
| |  | Credit losses declined in 2003 to 2.60% of
    contracts.                                                                      
|
| |  | Operating expenses represent 34% of total
    revenues, our most efficient year ever.                                          
|
| |  | We originated $6.0 billion in automobile
    contracts through our relationships with 8,000 dealers
    throughout the country.

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| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | Our portfolio of automobile contracts of
    $10.6 billion consists of more than 80% prime credit
    quality contracts.   
|
| |  | Delinquencies at year end were 2.9% of total
    outstanding contracts, which is 0.6% lower than a year earlier.           
|
| |  | We successfully expanded our securitization
    program by offering senior/ subordinated securities on a regular
    basis.
|
| |  | We currently manage over $10 billion of
    securities outstanding under our securitization program.                       

Business Risks

Our operating results and financial condition
could be adversely affected by any of the following business
risks. In addition to the risks described below, we may
encounter risks that are not currently known to us or that we
currently deem immaterial, which may also impair our business
operations.

Regulatory Requirements May Restrict Our
Ability to Do Business

The Bank and its subsidiaries are subject to
inspection and regulation by the OTS pursuant to HOLA. The OTS
is the primary federal banking agency responsible for its
supervision and regulation. The OTS has the power to enforce
HOLA and its regulations by a variety of actions ranging from a
memorandum of understanding to cease and desist proceedings
under the Federal Deposit Insurance Act. The OTS can take such
action based solely upon its determination that we have violated
one or more of the laws or regulations to which we are subject
or that any aspect of our business is being conducted in an
unsafe or unsound manner. As such, the OTS has broad powers to,
among other things, require us to change our business practices,
hold additional capital and change management. Such action could
have a material adverse impact on our business and may impact
our securities prices, including our common stock, and access to
the capital markets.

HOLA limits the amount of our consumer loans,
commercial loans and investment in service corporations. See
Business  Supervision and Regulation -
Investment Restrictions. Our securitization activities are
structured to enable the Bank to remove securitized automobile
contracts from the HOLA consumer loan limitation calculation.
Changes in the OTSs interpretation of HOLA as it affects
our securitization activities could cause us to change the
manner in which we securitize automobile contracts or to limit
our acquisition of such contracts, thereby negatively impacting
the price of our common stock. Furthermore, if we are unable to
continue to securitize the automobile contracts we purchase,
this regulatory limitation may force us to limit our acquisition
of new automobile contracts, thereby adversely affecting our
ability to remain a preferred source of financing for the
dealers from whom we purchase automobile contracts, or cause us
to fail the regulatory limitations. Any such limitations may
also have a material adverse effect on our financial position,
liquidity and results of operations. In addition, other
regulatory actions taken by the OTS could have a negative impact
on the price of our common stock.

OTS Guidance Regarding Subprime Lending May
Affect the Banks Capital Requirements

The OTS, along with other federal banking
regulatory agencies, has adopted guidance pertaining to subprime
lending programs. Pursuant to the guidance, lending programs
which provide credit to borrowers whose credit histories reflect
specified negative characteristics, such as recent bankruptcies
or payment delinquencies, are deemed to be subprime lending
programs for regulatory purposes. Many of the contracts that we
originate possess one or more of the factors identified in the
guidance as indicative of a subprime loan for this purpose.
Pursuant to the guidance, examiners may require that an
institution with a lending program deemed to be subprime hold
additional capital that ranges from one and one-half to three
times the normal capital required for similar loans made to
borrowers who are not deemed to be subprime borrowers.

Because many of the automobile contracts we
originate possess one or more of the factors identified in the
guidance as indicative of a subprime loan, the Bank maintains
its capital levels higher than would otherwise be required by
regulations. Maintenance of higher capital levels by the Bank
may slow our growth, require us to raise additional capital or
sell assets, all of which could negatively impact our earnings.
We

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cannot predict to what extent the Bank may be
required to hold additional capital with respect to those
automobile contracts we hold as to which the borrowers are
deemed by the OTS to be subprime borrowers.


Other Regulatory Requirements May Affect
Our Ability to Do Business

Our operations are subject to regulation,
supervision and licensing under various federal, state and local
statutes, ordinances and regulations. In most states in which we
operate, a consumer credit regulatory agency regulates and
enforces laws relating to consumer lenders and sales finance
agencies such as WFS. These rules and regulations generally
provide for licensing of sales finance agencies, limitations on
the amount, duration and charges, including interest rates, for
various categories of loans, requirements as to the form and
content of finance contracts and other documentation, and
restrictions on collection practices and creditors rights.
So long as WFS is an operating subsidiary of the Bank, licensing
and certain other of these requirements are not applicable to
WFS due to federal preemption.

We are also subject to extensive federal
regulation, including the Truth in Lending Act, the Equal Credit
Opportunity Act and the Fair Credit Reporting Act. These laws
require us to provide certain disclosures to prospective
borrowers and protect against discriminatory lending practices
and unfair credit practices. The principal disclosures required
under the Truth in Lending Act include the terms of repayment,
the total finance charge and the annual percentage rate charged
on each loan. The Equal Credit Opportunity Act prohibits
creditors from discriminating against loan applicants on the
basis of race, color, sex, age or marital status. Pursuant to
Regulation B promulgated under the Equal Credit Opportunity
Act, creditors are required to make certain disclosures
regarding consumer rights and advise consumers whose credit
applications are not approved of the reasons for the rejection.
In addition, the credit scoring system we use must comply with
the requirements for such a system as set forth in the Equal
Credit Opportunity Act and Regulation B. The Fair Credit
Reporting Act requires us to provide certain information to
consumers whose credit applications are not approved on the
basis of a report obtained from a consumer reporting agency.
Additionally, we are subject to the Gramm-Leach-Bliley Act,
which requires us to maintain privacy with respect to certain
consumer data in our possession and to periodically communicate
with consumers on privacy matters. We are also subject to the
Servicemembers Civil Relief Act, and similar state laws, which
requires us to reduce the interest rate charged on each loan to
customers who have subsequently joined the military.

The dealers that originate automobile contracts
we purchase also must comply with both state and federal credit
and trade practice statutes and regulations. Failure of the
dealers to comply with these statutes and regulations could
result in consumers having rights of rescission and other
remedies that could have an adverse effect on us.

We believe that we maintain all material licenses
and permits required for our current operations and are in
substantial compliance with all applicable local, state and
federal regulations. There can be no assurance, however, that we
will be able to maintain all requisite licenses and permits, and
the failure to satisfy those and other regulatory requirements
could have a material adverse effect on our operations. Further,
the adoption of additional, or the revision of existing, rules
and regulations could have a material adverse effect on our
business.

We are subject to routine periodic examinations
by the OTS on a variety of financial and regulatory matters. The
Banks most recent annual safety and soundness examination
by the OTS was completed in July 2003.

Adverse Economic Conditions May Impact Our
Profitability

Delinquencies, defaults, repossessions and credit
losses generally increase during periods of economic slowdown,
recession or higher unemployment. These periods also may be
accompanied by decreased consumer demand for automobiles and
declining values of automobiles securing outstanding contracts,
which weakens collateral coverage and increases the amount of
loss in the event of default. Significant increases in the
inventory of pre-owned automobiles during periods of economic
recession also may depress the prices at which repossessed
automobiles may be sold or delay the timing of these sales.
Because a portion of our borrowers are considered non-prime
borrowers, the actual rates of delinquencies, defaults,
repossessions and

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credit losses on these contracts are higher than
those experienced in the general automobile finance industry for
borrowers considered to be prime borrowers and could be more
dramatically affected by a general economic downturn. In
addition, during an economic slowdown or recession, our
servicing costs may increase without a corresponding increase in
our servicing fee income. While we seek to manage the higher
risk inherent in non-prime contracts through the underwriting
criteria and collection methods we employ, we cannot assure you
that these criteria or methods will afford adequate protection
against these risks. Any sustained period of increased
delinquencies, defaults, repossessions, credit losses or
servicing costs could adversely affect our financial position,
liquidity and results of operations and our ability to enter
into future securitizations.


Interest Rate Fluctuations May Impact Our
Profitability

Our profitability may be directly affected by the
level of and fluctuations in interest rates, which affects the
gross interest rate spread we earn on our contracts. As interest
rates change, our gross interest rate spread on new originations
may increase or decrease depending upon the interest rate
environment. In addition, the rates charged on the contracts
originated or purchased from dealers are limited by statutory
maximums, restricting our opportunity to pass on increased
interest costs. We believe that our profitability and liquidity
could be adversely affected during any period of changing
interest rates, possibly to a material degree. We monitor the
interest rate environment and employ our hedging strategies
designed to mitigate the impact of changes in interest rates. We
cannot assure you that our hedging strategies will mitigate the
impact of changes in interest rates.

Wholesale Auction Values May Impact Our
Profitability

We sell repossessed automobiles at wholesale
auction markets located throughout the United States. Auction
proceeds from the sale of repossessed vehicles and other
recoveries usually do not cover the outstanding balance of the
contracts, and the resulting deficiencies are charged off.
Decreased auction proceeds resulting from the depressed prices
at which pre-owned automobiles may be sold during periods of
economic slowdown or recession will result in higher credit
losses for us. Furthermore, depressed wholesale prices for
pre-owned automobiles may result from significant liquidations
of rental or fleet inventories and from increased volume of
trade-ins due to promotional financing programs offered by new
vehicle manufacturers. There can be no assurance that our
recovery rates will stabilize or improve in the future.

The Ownership of Our Common Stock Is
Concentrated, Which May Result in Conflicts of Interest and
Actions That Are Not in the Best Interests of Our Other
Stockholders

Ernest S. Rady is our founder, Chairman of the
Board of Directors and Chief Executive Officer. Mr. Rady is
also the Chairman of the Board of Directors and Chief Executive
Officer of the Bank and the Chairman of the Board of Directors
of WFS. Mr. Rady is the beneficial owner of approximately
54% of our outstanding shares of common stock and is able to
exercise significant control over our company. The Westcorp
common stock ownership of Mr. Rady enables him to elect all
of our directors and effectively control the vote on all matters
submitted to a vote of our shareholders, including mergers,
sales of all or substantially all of our assets, going
private transactions, conversions and other corporate
restructurings or reorganizations. Because of the significant
block of our common stock controlled by Mr. Rady, decisions
may be made that, while in the best interest of Mr. Rady,
may not be in the best interest of other stockholders.

We May Not Be Able to Generate Sufficient
Operating Cash Flows to Run Our Automobile Finance
Operations

Our automobile finance operations require
substantial operating cash flows. Operating cash requirements
include premiums paid to dealers for acquisition of automobile
contracts, expenses incurred in connection with the
securitization of automobile contracts, capital expenditures for
new technologies and ongoing operating costs. Our primary source
of operating cash is the excess cash flows received from
securitizations and contracts

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held on the balance sheet. The timing and amount
of excess cash flows from contracts varies based on a number of
factors, including:




| |   |                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the rates and amounts of loan delinquencies,
    defaults and net credit losses;                                                                                                                                                                                                                        
|
| |  | how quickly and at what price repossessed
    vehicles can be resold;                                                                                                                                                                                                                                   
|
| |  | the ages of the contracts in the portfolio;                                                                                                                                                                                                                                                             
|
| |  | levels of voluntary prepayments; and                                                                                                                                                                                                                                                                    
|
| |  | the terms of our securitizations, which include
    performance based triggers requiring higher levels of credit
    enhancements to the extent credit losses or delinquencies exceed
    certain thresholds. We have exceeded performance thresholds in
    the past and may do so again in the future.

Any adverse change in these factors could reduce
or eliminate excess cash flows to us. Although we currently have
positive operating cash flows, we cannot assure you that we will
continue to generate positive cash flows in the future, which
could have a material adverse effect on our financial position,
liquidity and results of operations.

Changes in Our Securitization Program Could
Adversely Affect Our Liquidity and Earnings

Our business depends on our ability to aggregate
and sell automobile contracts in the form of asset-backed
securities. These sales generate cash proceeds that allow us to
repay amounts borrowed and to purchase additional automobile
contracts. Changes in our asset-backed securities program could
materially adversely affect our earnings or ability to purchase
and resell automobile contracts on a timely basis. Such changes
could include, among other things, a:



| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | delay in the completion of a planned
    securitization;                                                                     
|
| |  | negative market perception of us; and                                                                                        
|
| |  | failure of the automobile contracts we intend to
    sell to conform to insurance company and rating agency
    requirements.

If we are unable to effectively securitize our
automobile contracts, we may have to reduce or even curtail our
automobile contract purchasing activities, which would have a
material adverse effect on our financial position, liquidity and
results of operations.

We Expect Our Operating Results to Continue
to Fluctuate, Which May Adversely Impact Our
Business

Our results of operations have fluctuated in the
past and are expected to fluctuate in the future. Factors that
could affect our quarterly earnings include:



| |   |                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | variations in the volume of automobile contracts
    originated, which historically tend to be lower in the first and
    fourth quarters of the year;
|
| |  | interest rate spreads;                                                                                                                                
|
| |  | the effectiveness of our hedging strategies;                                                                                                          
|
| |  | credit losses, which historically tend to be
    higher in the first and fourth quarters of the year;                                                 
|
| |  | amount and timing of whole loan sale
    transactions; and                                                                                            
|
| |  | operating costs.                                                                                                                                      

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Critical Accounting Policies

Management believes critical accounting policies
are important to the portrayal of our financial condition and
results of operations. Critical accounting policies require
difficult and complex judgments because they rely on estimates
about the effect of matters that are inherently uncertain due to
the impact of changing market conditions. The following is a
summary of accounting policies we consider critical.

Securitization Transactions

Contracts sold by us to our special purpose
entity subsidiaries in connection with a securitization
transaction are treated as having been sold for bankruptcy
purposes. The subsequent transfer of such contracts to the
securitization trust is treated as a secured financing under
generally accepted accounting principles, also known as GAAP.
For GAAP purposes, the contracts are retained on the balance
sheet with the securities issued to finance the contracts
recorded as notes payable on automobile secured financing. We
record interest income on the securitized contracts and interest
expense on the notes issued through the securitization
transactions.

As servicer of these contracts, we may hold and
remit funds collected from the borrowers on behalf of the
trustee pursuant to reinvestment contracts that we have entered
into or we may send funds to a trustee to be held until the
distribution dates, depending on the terms of our
securitizations. For securitization transactions that were
treated as sales, these amounts were reported as amounts held on
behalf of trustee on our Consolidated Statements of Financial
Condition.

Allowance for Credit Losses

Management determines the amount of the allowance
for credit losses based on a review of various quantitative and
qualitative analyses. Quantitative analyses include the review
of chargeoff trends by loan program and loan type, analysis of
cumulative losses, and evaluation of credit loss experience by
credit tier and geographic location. Other quantitative analyses
include the evaluation of the size of any particular asset
group, the concentration of any credit tier, the level of
nonperformance and the percentage of delinquency.

Qualitative analyses include trends in chargeoffs
over various time periods and at various statistical midpoints
and high points, the severity of depreciated values of
repossessions or foreclosures, trends in the number of days
repossessions are held in inventory, trends in the number of
loan modifications, trends in delinquency roll rates, trends in
deficiency balance collections both internally and from
collection agencies, trends in custom scores and the
effectiveness of our custom scores, and trends in the economy
generally or in specific geographic locations. Despite these
analyses, we recognize that establishing allowance for credit
losses is not an exact science and can be highly judgmental in
nature.

The analysis of the adequacy of the allowance for
credit losses is not only dependent upon effective quantitative
and qualitative analyses, but also effective loan review and
asset classification. We classify our assets in accordance with
regulatory guidance. Our multifamily and commercial loan
portfolios are evaluated individually while our single family
and consumer portfolios are evaluated in pools. We classify our
loan portfolios into five categories: Pass, Special Mention,
Substandard, Doubtful and Loss. Based upon our asset
classifications, we establish general and specific valuation
allowances.

General valuation allowances are determined by
applying various factors to loan balances that are classified as
Pass, Special Mention, Substandard or Doubtful. Specific
valuation allowances represent loan amounts that are classified
as Loss. Some assets may be split into more than one asset
classification due to fair value or net realizable value
calculations.

All contracts that are 60 to 90 days
delinquent are automatically classified as Special Mention. Real
estate loans that are manifesting a weakness in performance are
classified as Special Mention. Any contract that is 90 or more
days delinquent is automatically classified as Substandard. Real
estate loans that are manifesting a significant weakness in
performance are also classified as Substandard. Any multifamily
loan that is impaired is classified as Substandard. Any contract
where the borrower has filed for bankruptcy or

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where the vehicle has been repossessed by us and
is subject to a redemption period is classified as Substandard,
with the difference between the wholesale book value and loan
balance classified as Loss.


The allowance for credit losses is increased by
charging the provision for credit losses and decreased by actual
losses on the loans, by reversing the allowance for credit
losses through the provision for credit losses when the amount
of loans held on balance sheet is reduced through securitization
transactions treated as sales or based on credit trends or
economic conditions.

Derivatives and Hedging
Activities

Deposits and Securities Sold Under Agreements
to Repurchase

We may enter into cash flow hedges that will
protect against potential changes in interest rates affecting
interest payments on future deposits gathered by us and future
securities sold under agreements to repurchase. The fair value
of the interest rate swap agreements is included in deposits and
securities sold under agreements to repurchase, respectively,
and any change in the fair value is reported as accumulated
other comprehensive income (loss), net of tax, on our
Consolidated Statements of Financial Condition. Related interest
income or expense is settled on a quarterly basis and is
recorded in accumulated other comprehensive income (loss) and
reclassified into earnings during the period in which cash flows
on the hedged items affect income.

Notes Payable on Automobile Secured
Financing

The contracts originated and held by us are fixed
rate and, accordingly, we have exposure to changes in interest
rates. To protect against potential changes in interest rates
affecting interest payments on future securitization
transactions, we may enter into various hedge agreements prior
to closing the transaction. The market value of these hedge
agreements is designed to respond inversely to changes in
interest rates. Because of this inverse relationship, we can
effectively lock in a gross interest rate spread at the time of
entering into the hedge transaction. Gains and losses on these
agreements are recorded in accumulated other comprehensive
income (loss), net of tax, on our Consolidated Statements of
Financial Condition. Any ineffective portion is recognized in
interest expense during that period if the hedge is greater than
100% effective. Upon completion of the securitization
transaction, the gains or losses are recognized in full as an
adjustment to the gain or loss on the sale of the contracts if
the transaction is treated as a sale or amortized on a level
yield basis over the duration of the notes issued if the
transaction is treated as a secured financing.

If we issue certain variable rate notes payable
in connection with our securitization activities, we may also
enter into interest rate swap agreements in order to hedge our
variable interest rate exposure on future interest payments. See
Quantitative and Qualitative Disclosure About Market
Risk. The fair value of the interest rate swap agreements
is included in notes payable on automobile secured financing,
and any change in the fair value is reported as accumulated
other comprehensive income (loss), net of tax, on our
Consolidated Statements of Financial Condition. Any ineffective
portion is recorded in interest expense during that period if
the hedge is greater than 100% effective. Related interest
income or expense is settled on a monthly or quarterly basis and
recognized as an adjustment to interest expense in our
Consolidated Statements of Income.

We also enter into interest rate swap agreements
or other derivatives that we choose not to designate as hedges
or that do not qualify for hedge accounting under Statement of
Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended, also
known as SFAS No. 133. These derivatives pertain to
variable rate notes issued in conjunction with the
securitization of our contracts. Any change in the market value
of such derivatives and income or expense recognized on such
derivatives is recorded to noninterest income.

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Off Balance Sheet Arrangements

Prior to April 1, 2000, our securitization
transactions were structured as sales for accounting purposes.
Under this structure the notes issued by our unconsolidated
securitization trusts were not recorded as a liability on our
Consolidated Statements of Financial Condition. Effective
January 1, 2003, we regained control over assets of the
securitization trusts for all of our outstanding securitization
transactions treated as sales for accounting purposes. We
recorded $525 million of automobile contracts and the
related notes payable on automobile secured financing on our
Consolidated Statements of Financial Condition and have
eliminated all remaining off balance sheet amounts related to
these transactions. At December 31, 2003, we had no off
balance sheet arrangements.

Results of Operations

Net Interest Income

Net interest income is affected by our interest
rate spread, which is the difference between the rate earned on
our interest earning assets and the rate paid on our interest
bearing liabilities, and the relative amounts of our interest
earning assets and interest bearing liabilities. Net interest
income totaled $714 million, $612 million and
$471 million in 2003, 2002 and 2001, respectively. The
increase in net interest income for the past three years is
primarily the result of us holding a greater percentage of
contracts on balance sheet even as overall net interest margins
declined.

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##### Table of Contents



The following table presents information relative
to the average balances and interest rates on an owned basis for
the periods indicated:

|                                             |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |      |       |      |       |  
|-------------------------------------------- | --------------------------------------------- | --------------------------------------- | ---------------------------------- | ----------------------------- | ---------- | ---------- | ---------- | ------- | --------- | -------- | --------- | ------ | ----- | ------- | ----- | --------- | --------- | ---------- | ---------- | ------- | ------- | ------- | --------- | ----- | ----- | ---- | ----- | --------- | --------- | --------- | --------- | ------- | ------- | ------- | ------- | ---- | ----- | ---- | ----- | -
|                                             |                                               |                                        
|                                             |                                               | For the Year Ended December 31,        
|                                             |                                               |                                        
|                                             |                                               |                                         |                                    |                               |            |           
|                                             |                                               | 2003                                    |                                    | 2002                          |            | 2001      
|                                             |                                               |                                         |                                    |                               |            |           
|                                             |                                               | Average                                 |                                    |                               |            | Yield/     |            | Average |           |          |           | Yield/ |       | Average |       |           |           | Yield/    
|                                             |                                               | Balance                                 |                                    | Interest                      |            | Rate       |            | Balance |           | Interest |           | Rate   |       | Balance |       | Interest  |           | Rate      
|                                             |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |           
|                                             |                                               |                                        
|                                             |                                               | (Dollars in thousands)                 
|Interest earning assets:                     |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |     
|                                             | Total investments:                            |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |      |      
|                                             |                                               | Mortgage-backed securities              |                                    | $                             | 2,528,870  |            |            | $       | 83,663    |          |           |        | 3.31  | %       |       | $         | 2,196,539 |            |            | $       | 113,154 |         |           |       | 5.15  | %    |       | $         | 2,242,339 |           |           | $       | 133,415 |         |         |      | 5.95  | %   
|                                             |                                               | Other short-term investments            |                                    |                               | 377,762    |            |            |         | 4,464     |          |           |        | 1.18  |         |       |           | 320,388   |            |            |         | 5,556   |         |           |       | 1.73  |      |       |           | 111,889   |           |           |         | 4,753   |         |         |      | 4.25  |     
|                                             |                                               | Investment securities                   |                                    |                               | 80,626     |            |            |         | 3,057     |          |           |        | 3.79  |         |       |           | 47,983    |            |            |         | 2,815   |         |           |       | 5.87  |      |       |           | 51,899    |           |           |         | 3,272   |         |         |      | 6.30  |     
|                                             |                                               | Interest earning deposits with others   |                                    |                               | 7,869      |            |            |         | 65        |          |           |        | 0.83  |         |       |           | 7,106     |            |            |         | 98      |         |           |       | 1.38  |      |       |           | 2,628     |           |           |         | 74      |         |         |      | 2.80  |     
|                                             |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |     
|                                             |                                               |                                         |                                    | Total investments             |            |            | 2,995,127  |         |           |          | 91,249    |        |       |         | 3.05  | %         |           |            | 2,572,016  |         |         |         | 121,623   |       |       |      | 4.73  | %         |           |           | 2,408,755 |         |         |         | 141,514 |      |       |      | 5.87  | %
|                                             | Total loans:                                  |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |      |      
|                                             |                                               | Consumer loans                          |                                    |                               | 10,225,488 |            |            |         | 1,134,294 |          |           |        | 11.09 | %       |       |           | 8,181,117 |            |            |         | 993,417 |         |           |       | 12.14 | %    |       |           | 5,863,676 |           |           |         | 779,256 |         |         |      | 13.29 | %   
|                                             |                                               | Mortgage loans(1)                       |                                    |                               | 249,905    |            |            |         | 13,577    |          |           |        | 5.43  |         |       |           | 321,742   |            |            |         | 22,501  |         |           |       | 6.99  |      |       |           | 431,110   |           |           |         | 33,849  |         |         |      | 7.85  |     
|                                             |                                               | Commercial loans                        |                                    |                               | 110,296    |            |            |         | 5,409     |          |           |        | 4.90  |         |       |           | 90,642    |            |            |         | 5,035   |         |           |       | 5.55  |      |       |           | 99,904    |           |           |         | 7,321   |         |         |      | 7.33  |     
|                                             |                                               | Construction loans                      |                                    |                               | 10,177     |            |            |         | 488       |          |           |        | 4.80  |         |       |           | 7,951     |            |            |         | 364     |         |           |       | 4.57  |      |       |           | 10,694    |           |           |         | 687     |         |         |      | 6.42  |     
|                                             |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |     
|                                             |                                               |                                         |                                    | Total loans                   |            |            | 10,595,866 |         |           |          | 1,153,768 |        |       |         | 10.89 | %         |           |            | 8,601,452  |         |         |         | 1,021,317 |       |       |      | 11.87 | %         |           |           | 6,405,384 |         |         |         | 821,113 |      |       |      | 12.82 | %
|                                             |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |     
|                                             |                                               |                                         |                                    | Total interest earning assets |            |            | 13,590,993 |         |           |          | 1,245,017 |        |       |         | 9.16  | %         |           |            | 11,173,468 |         |         |         | 1,142,940 |       |       |      | 10.23 | %         |           |           | 8,814,139 |         |         |         | 962,627 |      |       |      | 10.92 | %
|                                             | Noninterest earning assets:                   |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |      |      
|                                             |                                               | Amounts due from trusts                 |                                    |                               | 5,865      |            |            |         |           |          |           |        |       |         |       |           | 121,627   |            |            |         |         |         |           |       |       |      |       |           | 246,217   |           |           |         |         |         |         |      |       |     
|                                             |                                               | Retained interest in securitized assets |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           | 15,888    |            |            |         |         |         |           |       |       |      |       |           | 79,832    |           |           |         |         |         |         |      |       |     
|                                             |                                               | Premises and equipment, net             |                                    |                               | 80,711     |            |            |         |           |          |           |        |       |         |       |           | 80,277    |            |            |         |         |         |           |       |       |      |       |           | 82,921    |           |           |         |         |         |         |      |       |     
|                                             |                                               | Other assets                            |                                    |                               | 308,927    |            |            |         |           |          |           |        |       |         |       |           | 397,306   |            |            |         |         |         |           |       |       |      |       |           | 181,578   |           |           |         |         |         |         |      |       |     
|                                             |                                               | Less: Allowance for credit losses       |                                    |                               | 288,058    |            |            |         |           |          |           |        |       |         |       |           | 216,539   |            |            |         |         |         |           |       |       |      |       |           | 124,306   |           |           |         |         |         |         |      |       |     
|                                             |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |     
|                                             |                                               |                                         |                                    | Total                         |            | $          | 13,698,438 |         |           |          |           |        |       |         |       |           |           | $          | 11,572,027 |         |         |         |           |       |       |      |       |           |           | $         | 9,280,381 |         |         |         |         |      |       |      |       |  
|                                             |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |     
|Interest bearing liabilities:                |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |     
|                                             | Deposits                                      |                                         | $                                  | 1,982,205                     |            |            |            | 64,634  |           |          |           | 3.26   | %     |         | $     | 2,196,262 |           |            |            | 80,015  |         |         |           | 3.64  | %     |      | $     | 2,319,466 |           |           |           | 114,831 |         |         |         | 4.95 | %    
|                                             | Securities sold under agreements to purchase  |                                         |                                    | 220,989                       |            |            |            | 4,544   |           |          |           | 2.06   |       |         |       | 222,154   |           |            |            | 5,543   |         |         |           | 2.50  |       |      |       | 155,387   |           |           |           | 7,014   |         |         |         | 4.51 |      
|                                             | FHLB advances and other borrowings            |                                         |                                    | 444,280                       |            |            |            | 6,221   |           |          |           | 1.40   |       |         |       | 244,284   |           |            |            | 5,281   |         |         |           | 2.16  |       |      |       | 443,337   |           |           |           | 20,424  |         |         |         | 4.61 |      
|                                             | Notes payable on automobile secured financing |                                         |                                    | 9,592,483                     |            |            |            | 416,577 |           |          |           | 4.34   |       |         |       | 7,426,265 |           |            |            | 406,851 |         |         |           | 5.48  |       |      |       | 5,018,456 |           |           |           | 333,768 |         |         |         | 6.65 |      
|                                             | Subordinated debentures                       |                                         |                                    | 396,211                       |            |            |            | 39,460  |           |          |           | 9.96   |       |         |       | 331,990   |           |            |            | 33,226  |         |         |           | 10.01 |       |      |       | 170,531   |           |           |           | 15,907  |         |         |         | 9.33 |      
|                                             |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |     
|                                             |                                               |                                         | Total interest bearing liabilities |                               |            | 12,636,168 |            |         |           | 531,436  |           |        |       | 4.21    | %     |           |           | 10,420,955 |            |         |         | 530,916 |           |       |       | 5.09 | %     |           |           | 8,107,177 |           |         |         | 491,944 |         |      |       | 6.07 |      
|                                             | Noninterest bearing liabilities:              |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |      |      
|                                             | Amounts held on behalf of trustee             |                                         |                                    | 10,518                        |            |            |            |         |           |          |           |        |       |         |       | 240,667   |           |            |            |         |         |         |           |       |       |      |       | 387,951   |           |           |           |         |         |         |         |      |      
|                                             | Other liabilities                             |                                         |                                    | 284,638                       |            |            |            |         |           |          |           |        |       |         |       | 323,644   |           |            |            |         |         |         |           |       |       |      |       | 257,985   |           |           |           |         |         |         |         |      |      
|                                             | Shareholders equity                          |                                         |                                    | 767,114                       |            |            |            |         |           |          |           |        |       |         |       | 586,761   |           |            |            |         |         |         |           |       |       |      |       | 527,268   |           |           |           |         |         |         |         |      |      
|                                             |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |     
|                                             |                                               |                                         |                                    | Total                         |            | $          | 13,698,438 |         |           |          |           |        |       |         |       |           |           | $          | 11,572,027 |         |         |         |           |       |       |      |       |           |           | $         | 9,280,381 |         |         |         |         |      |       |      |       |  
|                                             |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |     
|Net interest income and interest rate spread |                                               |                                         |                                    |                               |            | $          | 713,581    |         |           |          | 4.95      | %      |       |         |       |           |           | $          | 612,024    |         |         |         | 5.14      | %     |       |      |       |           |           | $         | 470,683   |         |         |         | 4.85    | %   
|                                             |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |     
|Net yield on average interest earning assets |                                               |                                         |                                    |                               |            |            |            |         |           |          | 5.25      | %      |       |         |       |           |           |            |            |         |         |         | 5.48      | %     |       |      |       |           |           |           |           |         |         |         | 5.34    | %   
|                                             |                                               |                                         |                                    |                               |            |            |            |         |           |          |           |        |       |         |       |           |           |            |            |         |         |         |           |       |       |      |       |           |           |           |           |         |         |         |         |     



---



|    |                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------
|(1) | For the purpose of these computations,
    nonaccruing loans are included in the average loan amounts
    outstanding.

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The total interest rate spread decreased 19 basis
points for 2003 compared with 2002 due to a decrease of 107
basis points in the yield on interest earning assets while the
costs of funds decreased only 88 basis points. The decrease in
the yield on interest earning assets in 2003 is primarily due to
our shift to originating a higher percentage of prime credit
quality contracts and an overall lower interest rate
environment. The decline in the cost of funds in 2003 compared
with 2002 was moderated by the increase in the amount of
subordinated debentures held by us during 2003 compared to 2002.
The total interest rate spread increased 29 basis points for
2002 compared with 2001 due to a decrease of 69 basis points in
the yield on interest earning assets while the costs of funds
decreased 98 basis points. The decrease in yield on interest
earning assets for 2002 compared with 2001 was due primarily to
originating a higher percentage of prime credit quality
contracts and a lower interest rate environment. The decrease in
the cost of funds in 2002 compared with 2001 was due primarily
to a lower interest rate environment.

The following table sets forth the changes in net
interest income attributable to changes in volume (change in
average portfolio volume multiplied by prior period average
rate) and changes in rates (change in weighted average interest
rate multiplied by prior period average portfolio balance):

|                                         |                                                |                          |                        |                          |         |         |   |         |         |          |         |         |         |         |   |         |         |         |   |         |         |          |         |         |         |         | 
|---------------------------------------- | ---------------------------------------------- | ------------------------ | ---------------------- | ------------------------ | ------- | ------- | - | ------- | ------- | -------- | ------- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | -------- | ------- | ------- | ------- | ------- | 
|                                         |                                                |                          |                        |                         
|                                         |                                                | 2003 Compared to 2002(1) |                        | 2002 Compared to 2001(1)
|                                         |                                                |                          |                        |                         
|                                         |                                                | Volume                   |                        | Rate                     |         | Total   |   | Volume  |         | Rate     |         | Total  
|                                         |                                                |                          |                        |                          |         |         |   |         |         |          |         |        
|                                         |                                                |                         
|                                         |                                                | (Dollars in thousands)  
|Increase (decrease) in interest income:  |                                                |                          |                        |                          |         |         |   |         |         |          |         |         |         |         |   |         |         |         |   |         |         |          |         |        
|                                         | Mortgage-backed securities                     |                          | $                      | 15,274                   |         |         | $ | (44,765 | )       |          | $       | (29,491 | )       |         | $ | (2,672  | )       |         | $ | (17,589 | )       |          | $       | (20,261 | )      
|                                         | Other short-term investments                   |                          |                        | 877                      |         |         |   | (1,969  | )       |          |         | (1,092  | )       |         |   | 4,888   |         |         |   | (4,085  | )       |          |         | 803     |        
|                                         | Investment securities                          |                          |                        | 1,472                    |         |         |   | (1,230  | )       |          |         | 242     |         |         |   | (240    | )       |         |   | (217    | )       |          |         | (457    | )      
|                                         | Interest earning deposits with others          |                          |                        | 10                       |         |         |   | (43     | )       |          |         | (33     | )       |         |   | 76      |         |         |   | (52     | )       |          |         | 24      |        
|                                         | Total loans:                                   |                          |                        |                          |         |         |   |         |         |          |         |         |         |         |   |         |         |         |   |         |         |          |         |         |        
|                                         |                                                | Consumer loans           |                        |                          | 232,283 |         |   |         | (91,406 | )        |         |         | 140,877 |         |   |         | 286,334 |         |   |         | (72,173 | )        |         |         | 214,161 |        
|                                         |                                                | Mortgage loans           |                        |                          | (4,463  | )       |   |         | (4,461  | )        |         |         | (8,924  | )       |   |         | (7,925  | )       |   |         | (3,423  | )        |         |         | (11,348 | )      
|                                         |                                                | Commercial loans         |                        |                          | 1,008   |         |   |         | (634    | )        |         |         | 374     |         |   |         | (631    | )       |   |         | (1,655  | )        |         |         | (2,286  | )      
|                                         |                                                | Construction loans       |                        |                          | 105     |         |   |         | 19      |          |         |         | 124     |         |   |         | (152    | )       |   |         | (171    | )        |         |         | (323    | )      
|                                         |                                                |                          |                        |                          |         |         |   |         |         |          |         |         |         |         |   |         |         |         |   |         |         |          |         |        
|                                         |                                                |                          | Total interest income  |                          | $       | 246,566 |   |         | $       | (144,489 | )       |         |         | 102,077 |   |         | $       | 279,678 |   |         | $       | (99,365  | )       |         |         | 180,313 | 
|                                         |                                                |                          |                        |                          |         |         |   |         |         |          |         |         |         |         |   |         |         |         |   |         |         |          |         |        
|Increase (decrease) in interest expense: |                                                |                          |                        |                          |         |         |   |         |         |          |         |         |         |         |   |         |         |         |   |         |         |          |         |        
|                                         | Deposits                                       |                          | $                      | (7,426                   | )       |         | $ | (7,955  | )       |          |         | (15,381 | )       |         | $ | (5,820  | )       |         | $ | (28,996 | )       |          |         | (34,816 | )      
|                                         | Securities sold under agreements to repurchase |                          |                        | (29                      | )       |         |   | (970    | )       |          |         | (999    | )       |         |   | 2,344   |         |         |   | (3,815  | )       |          |         | (1,471  | )      
|                                         | FHLB advances and other borrowings             |                          |                        | 3,255                    |         |         |   | (2,315  | )       |          |         | 940     |         |         |   | (6,935  | )       |         |   | (8,208  | )       |          |         | (15,143 | )      
|                                         | Notes payable on automobile secured financings |                          |                        | 104,511                  |         |         |   | (94,785 | )       |          |         | 9,726   |         |         |   | 139,398 |         |         |   | (66,315 | )       |          |         | 73,083  |        
|                                         | Subordinated debentures                        |                          |                        | 6,401                    |         |         |   | (167    | )       |          |         | 6,234   |         |         |   | 16,081  |         |         |   | 1,238   |         |          |         | 17,319  |        
|                                         |                                                |                          |                        |                          |         |         |   |         |         |          |         |         |         |         |   |         |         |         |   |         |         |          |         |        
|                                         |                                                |                          | Total interest expense |                          | $       | 106,712 |   |         | $       | (106,192 | )       |         |         | 520     |   |         | $       | 145,068 |   |         | $       | (106,096 | )       |         |         | 38,972  | 
|                                         |                                                |                          |                        |                          |         |         |   |         |         |          |         |         |         |         |   |         |         |         |   |         |         |          |         |        
|Increase in net interest income          |                                                |                          |                        |                          |         |         |   |         |         | $        | 101,557 |         |         |         |   |         |         |         |   |         |         | $        | 141,341 |        
|                                         |                                                |                          |                        |                          |         |         |   |         |         |          |         |         |         |         |   |         |         |         |   |         |         |          |         |        



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In the analysis of interest changes due to volume
    and rate, the changes due to the volume/rate variance (the
    combined effect of change in weighted average interest rate and
    change in average portfolio balance) were allocated
    proportionately based on the absolute value of the volume and
    rate variances. If there was no balance in the previous year,
    the total change was allocated to volume.

Provision for Credit Losses

We maintain an allowance for credit losses to
cover probable losses that can be reasonably estimated for the
loans held on the balance sheet. The allowance for credit losses
is increased by charging the provision for credit losses and
decreased by actual losses on such loans or by reversing the
allowance for credit losses through the provision for credit
losses when the amount of loans held on balance sheet is reduced
through

36



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##### Table of Contents



securitization transactions treated as sales. The
level of allowance is based principally on the outstanding
balance of loans held on balance sheet and historical loss
trends. We believe that the allowance for credit losses is
currently adequate to absorb probable losses in our owned loan
portfolio that can be reasonably estimated.


The provision for credit losses was
$294 million, $306 million and $197 million for
the years ended December 31, 2003, 2002 and 2001,
respectively. Net chargeoffs were $262 million,
$215 million and $123 million for the same respective
periods. The decrease in provision for credit losses from 2002
to 2003 was the result of holding a greater percentage of prime
credit quality contracts, which require a lower percentage of
allowance for credit losses. The increase in the provision for
credit losses from 2001 to 2002 was the result of a greater
amount of contracts held on balance sheet.

Noninterest Income

Automobile Lending Income

Since the first quarter of 2000, we have not
completed a securitization that has been accounted for as an off
balance sheet arrangement. For transactions treated as off
balance sheet arrangements prior to April 2000, we recorded a
non-cash gain equal to the present value of the estimated future
cash flows from the portfolio of contracts sold less the
write-off of dealer participation balances and the effect of
hedging activities. For these securitizations, net interest
earned on the contracts sold was recognized over the life of the
transactions as contractual servicing income and retained
interest income or expense. Effective January 1, 2003, we
regained control over assets of the securitization trusts for
all of our outstanding securitization transactions treated as
sales for accounting purposes. We no longer recognize retained
interest income or expense or contractual servicing income for
these securitization transactions on our Consolidated Statements
of Income. Rather, we recognize interest income on automobile
contracts held in these trusts and record interest expense on
notes payable on automobile secured financings.

The components of automobile lending income were
as follows:

|                                                        |                                 |                                 |        |        |  |      |         |        |  |   |         |        | 
|------------------------------------------------------- | ------------------------------- | ------------------------------- | ------ | ------ |  | ---- | ------- | ------ |  | - | ------- | ------ | 
|                                                        |                                 |                                
|                                                        |                                 | For the Year Ended December 31,
|                                                        |                                 |                                
|                                                        |                                 | 2003                            |        | 2002   |  | 2001
|                                                        |                                 |                                 |        |        |  |     
|                                                        |                                 |                                
|                                                        |                                 | (Dollars in thousands)         
|Fee income                                              |                                 | $                               | 90,511 |        |  | $    | 81,087  |        |  | $ | 67,579  |       
|Contractual servicing income                            |                                 |                                 |        |        |  |      | 10,735  |        |  |   | 23,018  |       
|Retained interest expense, net of RISA
    amortization |                                 |                                 |        |        |  |      | (29,490 | )      |  |   | (27,839 | )     
|                                                        |                                 |                                 |        |        |  |      |         |        |  |   |         |       
|                                                        | Total automobile lending income |                                 | $      | 90,511 |  |      | $       | 62,332 |  |   | $       | 62,758 | 
|                                                        |                                 |                                 |        |        |  |      |         |        |  |   |         |       

Fee income consists primarily of documentation
fees, late charges and deferment fees on our managed portfolio,
including contracts securitized in transactions accounted for as
sales and secured financings, as well as contracts not
securitized. The increase in fee income is due to the growth in
our average managed portfolio to $10.1 billion in 2003 from
$8.8 billion in 2002 and $7.6 billion in 2001.

There was no contractual servicing income for the
year ended December 31, 2003 due to our transition to
treating our securitizations as secured financings rather than
as sales as well as our regaining control over the assets of the
trusts for all our outstanding securitization transactions
previously treated as sales for accounting purposes. For
securitization transactions previously treated as sales for
accounting purposes, we earned contractual servicing income on
the outstanding balance of contracts serviced.

37



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##### Table of Contents



There was no retained interest expense for the
year ended December 31, 2003 as a result of our
reconsolidating all remaining off balance sheet trusts on
January 1, 2003. For accounting purposes, this expense is
recognized only on contracts sold through securitizations
treated as sales. Retained interest expense is dependent upon
the average excess spread on the contracts sold, credit losses,
the size of the sold portfolio and the amount of amortization of
the RISA. The retained interest expense recognized in 2002 and
2001 was the result of higher chargeoffs on our sold portfolio
as well as revised estimates of future chargeoffs due to
continued slowing in the economy. Net chargeoffs on the sold
portfolio decreased to $30.4 million for the year ended
December 31, 2002 from $50.4 million for the year
ended December 31, 2001. The outstanding sold portfolio had
a weighted average gross interest rate spread of 6.71% and 6.97%
for the years ended December 31, 2002 and 2001,
respectively. The average balance of the sold portfolio was
$840 million and $1.8 billion for the years ended
December 31, 2002 and 2001, respectively.

The following table sets forth our contract sales
and securitizations and related gain on sales:

|                                                             |                                |                                    |   |           |           |      |   |           |           |      |   |           |           |   |       |           |           |   |        |           |           | 
|------------------------------------------------------------ | ------------------------------ | ---------------------------------- | - | --------- | --------- | ---- | - | --------- | --------- | ---- | - | --------- | --------- | - | ----- | --------- | --------- | - | ------ | --------- | --------- | 
|                                                             |                                |                                   
|                                                             |                                | For the Year Ended December 31,   
|                                                             |                                |                                   
|                                                             |                                | 2003                               |   | 2002      |           | 2001 |   | 2000      |           | 1999
|                                                             |                                |                                    |   |           |           |      |   |           |           |     
|                                                             |                                |                                   
|                                                             |                                | (Dollars in thousands)            
|Contract sales and secured financings:                       |                                |                                    |   |           |           |      |   |           |           |      |   |           |           |   |       |           |           |   |        |          
|                                                             | Secured financings(1)          |                                    | $ | 5,889,375 |           |      | $ | 6,925,000 |           |      | $ | 4,220,000 |           |   | $     | 3,930,000 |           |   | $      | 500,000   |          
|                                                             | Sales to securitization trusts |                                    |   |           |           |      |   |           |           |      |   |           |           |   |       | 660,000   |           |   |        | 2,500,000 |          
|                                                             |                                |                                    |   |           |           |      |   |           |           |      |   |           |           |   |       |           |           |   |        |          
|                                                             |                                | Total sales and secured financings |   | $         | 5,889,375 |      |   | $         | 6,925,000 |      |   | $         | 4,220,000 |   |       | $         | 4,590,000 |   |        | $         | 3,000,000 | 
|                                                             |                                |                                    |   |           |           |      |   |           |           |      |   |           |           |   |       |           |           |   |        |          
|Gain on sale of contracts(2)                                 |                                |                                    |   |           |           |      |   |           |           |      |   |           |           | $ | 7,719 |           |           | $ | 51,345 |          
|Hedge gain on sale of contracts(3)                           |                                |                                    |   |           |           |      |   |           |           |      |   |           |           |   | 5,300 |           |           |   | 7,419  |          
|Gain on sale of contracts as a percent of total
    revenues |                                |                                    |   |           |           |      |   |           |           |      |   |           |           |   | 1.72  | %         |           |   | 14.47  | %        



---



|    |                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Information for 2002, 2001 and 1999 includes
    $775 million, $650 million, and $500 million,
    respectively, of contracts securitized in privately placed
    conduit facilities.
|   
|(2) | Net of the write-off of outstanding dealer
    participation balances and the effect of hedging activities.                                                                          
|   
|(3) | Included in gain on sale of contracts.                                                                                                                                               

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##### Table of Contents



The following table lists each of our public
securitizations:

|       |           |            |  |          |                 |                        |  |                   |            |             |  |                     |              |               |  |  |        |   |  |  |       |   |  |  |       |   |  |  |       |  
|------ | --------- | ---------- |  | -------- | --------------- | ---------------------- |  | ----------------- | ---------- | ----------- |  | ------------------- | ------------ | ------------- |  |  | ------ | - |  |  | ----- | - |  |  | ----- | - |  |  | ----- | -
|       |           |            |  |          |                 | Remaining              |  | Remaining Balance |            | Original    |  | Original Weighted   |              | Gross        
|Issue  |           |            |  | Original |                 | Balance at             |  | as a Percent of   |            | Weighted    |  | Average             |              | Interest Rate
|Number |           | Close Date |  | Balance  |                 | December 31, 2003(1)   |  | Original Balance  |            | Average APR |  | Securitization Rate |              | Spread(2)    
|       |           |            |  |          |                 |                        |  |                   |            |             |  |                     |              |              
|       |           |            |  |          |                 |                        |  |                   |            |             |  |                    
|       |           |            |  |          |                 | (Dollars in thousands) |  |                   |            |             |  |                    
|       | 1985-A    |            |  |          | December, 1985  |                        |  | $                 | 110,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 18.50 | % |  |  | 8.38  | % |  |  | 10.12 | %
|       | 1986-A    |            |  |          | November, 1986  |                        |  |                   | 191,930    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 14.20 |   |  |  | 6.63  |   |  |  | 7.57  |  
|       | 1987-A    |            |  |          | March, 1987     |                        |  |                   | 125,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 12.42 |   |  |  | 6.75  |   |  |  | 5.67  |  
|       | 1987-B    |            |  |          | July, 1987      |                        |  |                   | 110,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 12.68 |   |  |  | 7.80  |   |  |  | 4.88  |  
|       | 1988-A    |            |  |          | February, 1988  |                        |  |                   | 155,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 13.67 |   |  |  | 7.75  |   |  |  | 5.92  |  
|       | 1988-B    |            |  |          | May, 1988       |                        |  |                   | 100,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 14.01 |   |  |  | 8.50  |   |  |  | 5.51  |  
|       | 1988-C    |            |  |          | July, 1988      |                        |  |                   | 100,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.41 |   |  |  | 8.50  |   |  |  | 6.91  |  
|       | 1988-D    |            |  |          | October, 1988   |                        |  |                   | 105,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 14.95 |   |  |  | 8.85  |   |  |  | 6.10  |  
|       | 1989-A    |            |  |          | March, 1989     |                        |  |                   | 75,000     |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.88 |   |  |  | 10.45 |   |  |  | 5.43  |  
|       | 1989-B    |            |  |          | June, 1989      |                        |  |                   | 100,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.96 |   |  |  | 9.15  |   |  |  | 6.81  |  
|       | 1990-A    |            |  |          | August, 1990    |                        |  |                   | 150,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 16.05 |   |  |  | 8.35  |   |  |  | 7.70  |  
|       | 1990-1    |            |  |          | November, 1990  |                        |  |                   | 150,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.56 |   |  |  | 8.50  |   |  |  | 7.06  |  
|       | 1991-1    |            |  |          | April, 1991     |                        |  |                   | 200,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 16.06 |   |  |  | 7.70  |   |  |  | 8.36  |  
|       | 1991-2    |            |  |          | May, 1991       |                        |  |                   | 200,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.75 |   |  |  | 7.30  |   |  |  | 8.45  |  
|       | 1991-3    |            |  |          | August, 1991    |                        |  |                   | 175,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.69 |   |  |  | 6.75  |   |  |  | 8.94  |  
|       | 1991-4    |            |  |          | December, 1991  |                        |  |                   | 150,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.53 |   |  |  | 5.63  |   |  |  | 9.90  |  
|       | 1992-1    |            |  |          | March, 1992     |                        |  |                   | 150,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 14.49 |   |  |  | 5.85  |   |  |  | 8.64  |  
|       | 1992-2    |            |  |          | June, 1992      |                        |  |                   | 165,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 14.94 |   |  |  | 5.50  |   |  |  | 9.44  |  
|       | 1992-3    |            |  |          | September, 1992 |                        |  |                   | 135,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 14.45 |   |  |  | 4.70  |   |  |  | 9.75  |  
|       | 1993-1    |            |  |          | March, 1993     |                        |  |                   | 250,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 13.90 |   |  |  | 4.45  |   |  |  | 9.45  |  
|       | 1993-2    |            |  |          | June, 1993      |                        |  |                   | 175,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 13.77 |   |  |  | 4.70  |   |  |  | 9.07  |  
|       | 1993-3    |            |  |          | September, 1993 |                        |  |                   | 187,500    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 13.97 |   |  |  | 4.25  |   |  |  | 9.72  |  
|       | 1993-4    |            |  |          | December, 1993  |                        |  |                   | 165,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 12.90 |   |  |  | 4.60  |   |  |  | 8.30  |  
|       | 1994-1    |            |  |          | March, 1994     |                        |  |                   | 200,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 13.67 |   |  |  | 5.10  |   |  |  | 8.57  |  
|       | 1994-2    |            |  |          | May, 1994       |                        |  |                   | 230,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 14.04 |   |  |  | 6.38  |   |  |  | 7.66  |  
|       | 1994-3    |            |  |          | August, 1994    |                        |  |                   | 200,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 14.59 |   |  |  | 6.65  |   |  |  | 7.94  |  
|       | 1994-4    |            |  |          | October, 1994   |                        |  |                   | 212,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.58 |   |  |  | 7.10  |   |  |  | 8.48  |  
|       | 1995-1    |            |  |          | January, 1995   |                        |  |                   | 190,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.71 |   |  |  | 8.05  |   |  |  | 7.66  |  
|       | 1995-2    |            |  |          | March, 1995     |                        |  |                   | 190,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 16.36 |   |  |  | 7.10  |   |  |  | 9.26  |  
|       | 1995-3    |            |  |          | June, 1995      |                        |  |                   | 300,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.05 |   |  |  | 6.05  |   |  |  | 9.00  |  
|       | 1995-4    |            |  |          | September, 1995 |                        |  |                   | 375,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.04 |   |  |  | 6.20  |   |  |  | 8.84  |  
|       | 1995-5    |            |  |          | December, 1995  |                        |  |                   | 425,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.35 |   |  |  | 5.88  |   |  |  | 9.47  |  
|       | 1996-A    |            |  |          | March, 1996     |                        |  |                   | 485,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.46 |   |  |  | 6.13  |   |  |  | 9.33  |  
|       | 1996-B    |            |  |          | June, 1996      |                        |  |                   | 525,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.74 |   |  |  | 6.75  |   |  |  | 8.99  |  
|       | 1996-C    |            |  |          | September, 1996 |                        |  |                   | 535,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.83 |   |  |  | 6.60  |   |  |  | 9.23  |  
|       | 1996-D    |            |  |          | December, 1996  |                        |  |                   | 545,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.43 |   |  |  | 6.17  |   |  |  | 9.26  |  
|       | 1997-A    |            |  |          | March, 1997     |                        |  |                   | 500,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.33 |   |  |  | 6.60  |   |  |  | 8.73  |  
|       | 1997-B    |            |  |          | June, 1997      |                        |  |                   | 590,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.36 |   |  |  | 6.37  |   |  |  | 8.99  |  
|       | 1997-C    |            |  |          | September, 1997 |                        |  |                   | 600,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.43 |   |  |  | 6.17  |   |  |  | 9.26  |  
|       | 1997-D    |            |  |          | December, 1997  |                        |  |                   | 500,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 15.19 |   |  |  | 6.34  |   |  |  | 8.85  |  
|       | 1998-A    |            |  |          | March, 1998     |                        |  |                   | 525,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 14.72 |   |  |  | 6.01  |   |  |  | 8.71  |  
|       | 1998-B    |            |  |          | June, 1998      |                        |  |                   | 660,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 14.68 |   |  |  | 6.06  |   |  |  | 8.62  |  
|       | 1998-C    |            |  |          | November, 1998  |                        |  |                   | 700,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 14.42 |   |  |  | 5.81  |   |  |  | 8.61  |  
|       | 1999-A    |            |  |          | January, 1999   |                        |  |                   | 1,000,000  |             |  |                     | Paid in full |               |  |  |        |   |  |  | 14.42 |   |  |  | 5.70  |   |  |  | 8.72  |  
|       | 1999-B(3) |            |  |          | July, 1999      |                        |  |                   | 1,000,000  |             |  |                     | $57,856      |               |  |  | 5.79   | % |  |  | 14.62 |   |  |  | 6.36  |   |  |  | 8.26  |  
|       | 1999-C    |            |  |          | November, 1999  |                        |  |                   | 500,000    |             |  |                     | Paid in full |               |  |  |        |   |  |  | 14.77 |   |  |  | 7.01  |   |  |  | 7.76  |  
|       | 2000-A    |            |  |          | March, 2000     |                        |  |                   | 1,200,000  |             |  |                     | 128,805      |               |  |  | 10.73  |   |  |  | 14.66 |   |  |  | 7.28  |   |  |  | 7.38  |  
|       | 2000-B(4) |            |  |          | May, 2000       |                        |  |                   | 1,000,000  |             |  |                     | 116,746      |               |  |  | 11.67  |   |  |  | 14.84 |   |  |  | 7.78  |   |  |  | 7.06  |  
|       | 2000-C    |            |  |          | August, 2000    |                        |  |                   | 1,390,000  |             |  |                     | 230,390      |               |  |  | 16.57  |   |  |  | 15.04 |   |  |  | 7.32  |   |  |  | 7.72  |  
|       | 2000-D    |            |  |          | November, 2000  |                        |  |                   | 1,000,000  |             |  |                     | 217,831      |               |  |  | 21.78  |   |  |  | 15.20 |   |  |  | 6.94  |   |  |  | 8.26  |  
|       | 2001-A    |            |  |          | January, 2001   |                        |  |                   | 1,000,000  |             |  |                     | 245,123      |               |  |  | 24.51  |   |  |  | 14.87 |   |  |  | 5.77  |   |  |  | 9.10  |  
|       | 2001-B    |            |  |          | May, 2001       |                        |  |                   | 1,370,000  |             |  |                     | 356,102      |               |  |  | 25.99  |   |  |  | 14.41 |   |  |  | 4.23  |   |  |  | 10.18 |  
|       | 2001-C    |            |  |          | August, 2001    |                        |  |                   | 1,200,000  |             |  |                     | 397,936      |               |  |  | 33.16  |   |  |  | 13.90 |   |  |  | 4.50  |   |  |  | 9.40  |  
|       | 2002-1    |            |  |          | March, 2002     |                        |  |                   | 1,800,000  |             |  |                     | 818,991      |               |  |  | 45.50  |   |  |  | 13.50 |   |  |  | 4.26  |   |  |  | 9.24  |  
|       | 2002-2    |            |  |          | May, 2002       |                        |  |                   | 1,750,000  |             |  |                     | 927,306      |               |  |  | 52.99  |   |  |  | 12.51 |   |  |  | 3.89  |   |  |  | 8.62  |  
|       | 2002-3    |            |  |          | August, 2002    |                        |  |                   | 1,250,000  |             |  |                     | 737,185      |               |  |  | 58.97  |   |  |  | 12.30 |   |  |  | 3.06  |   |  |  | 9.24  |  
|       | 2002-4    |            |  |          | November, 2002  |                        |  |                   | 1,350,000  |             |  |                     | 928,067      |               |  |  | 68.75  |   |  |  | 12.18 |   |  |  | 2.66  |   |  |  | 9.52  |  
|       | 2003-1    |            |  |          | February, 2003  |                        |  |                   | 1,343,250  |             |  |                     | 965,251      |               |  |  | 71.86  |   |  |  | 11.79 |   |  |  | 2.42  |   |  |  | 9.37  |  
|       | 2003-2    |            |  |          | May, 2003       |                        |  |                   | 1,492,500  |             |  |                     | 1,200,666    |               |  |  | 80.45  |   |  |  | 11.57 |   |  |  | 2.13  |   |  |  | 9.44  |  
|       | 2003-3    |            |  |          | August, 2003    |                        |  |                   | 1,650,000  |             |  |                     | 1,551,109    |               |  |  | 94.01  |   |  |  | 10.59 |   |  |  | 2.66  |   |  |  | 7.93  |  
|       | 2003-4    |            |  |          | November, 2003  |                        |  |                   | 1,403,625  |             |  |                     | 1,403,625    |               |  |  | 100.00 |   |  |  | 10.89 |   |  |  | 2.70  |   |  |  | 8.19  |  
|       | 2004-1    |            |  |          | February, 2004  |                        |  |                   | 1,477,500  |             |  |                     |              |               |  |  |        |   |  |  | 10.89 |   |  |  | 2.36  |   |  |  | 8.53  |  
|       |           |            |  |          |                 |                        |  |                   |            |             |  |                     |              |               |  |  |        |   |  |  |       |   |  |  |       |   |  |  |       |  
|       |           |            |  |          | Total           |                        |  | $                 | 36,088,305 |             |  |                     | $10,282,989  |               |  |  |        |   |  |  |       |   |  |  |       |   |  |  |       |  
|       |           |            |  |          |                 |                        |  |                   |            |             |  |                     |              |               |  |  |        |   |  |  |       |   |  |  |       |   |  |  |       |  



---



|    |                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents only the note payable amounts
    outstanding at the date indicated.                                                                                                                                         
|   
|(2) | Represents the difference between the original
    weighted average annual percentage rate, also known as APR, and
    the estimated weighted average securitization rate on the
    closing date of the securitization.
|   
|(3) | Redeemed on January 20, 2004.                                                                                                                                                                                           
|   
|(4) | Redeemed on February 20, 2004.                                                                                                                                                                                          

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##### Table of Contents



Other Noninterest Income

Other noninterest income consists primarily of
insurance income, mortgage banking income and miscellaneous
income. Other noninterest income totaled $19.6 million,
$28.3 million and $16.1 million for the years ended
December 31, 2003, 2002 and 2001, respectively. Noninterest
income decreased for the year ended December 31, 2003
compared with the year ended December 31, 2002 and
increased for the year ended December 31, 2002 compared
with the year ended December 31, 2001 due to the sale of
our seven Northern California branch offices in 2002.

Noninterest Expense

Total noninterest expense was $282 million,
$251 million and $245 million for the years ended
December 31, 2003, 2002 and 2001, respectively. Noninterest
expense as a percentage of total revenues improved to 34% in
2003 compared to 36% in 2002 and 45% in 2001. The improvement in
operating efficiencies from 2001 to 2003 was achieved through
the centralization and automation of certain processes as well
as the deployment of new technologies.

The efficiencies realized include increasing the
conversion ratios on contracts purchased through dealer
education, automating the loan application and underwriting
system, increasing the percentage of applications received via
the Internet, outsourcing the data entry process, centralizing
the verification process, and implementing proprietary credit
scorecards and electronic funds transfers for our dealers.
Operating efficiencies also include implementing automated
dialers, centralizing and upgrading payment processing and asset
recovery processes, upgrading toll-free lines for customer
service and interactive voice response technology, implementing
direct debit for our borrowers, imaging for record retention and
retrieval, and implementing a new behavioral scoring collection
system.

Income Taxes

We file federal and certain state tax returns
with our subsidiaries. We file other state tax returns as a
separate entity. Tax liabilities from the consolidated returns
are allocated in accordance with a tax sharing agreement based
on the relative income or loss of each entity on a stand-alone
basis. Our effective tax rate was 40%, 36% and 39% for the years
ended 2003, 2002 and 2001, respectively. The relatively lower
effective tax rate for the year ended December 31, 2002 is
a result of a one-time benefit of legislation enacted by the
State of California that eliminated the use of the reserve
method of accounting for bad debts for large banks and financial
corporations for taxable income purposes for tax years after
January 1, 2002. In the first year of this change, 50% of
the ending reserve amount deducted from taxable income in prior
periods was included in California taxable income. The remaining
50% of the reserve was not required to be recaptured into
income, but rather represented a permanent difference between
GAAP and California tax accounting. The deferred tax liability
related to this permanent difference was eliminated from our
balance sheet and the state income tax provision for 2002 was
reduced accordingly. See Business 
Taxation.

Financial Condition

Overview

We originated $6.0 billion and
$5.4 billion of contracts for the year ended
December 31, 2003 and 2002, respectively. As a result of
higher contract originations, our portfolio of managed contracts
reached $10.6 billion at December 31, 2003, up from
$9.4 billion at December 31, 2002.

Total demand deposits and money market accounts
at our retail banking division were $608 million at
December 31, 2003 compared with $490 million at
December 31, 2002. Total demand deposit and money market
accounts represented 48% of total retail banking deposits at
December 31, 2003 compared with 36% at December 31,
2002. The commercial banking division had deposits of
$424 million at December 31, 2003 compared with
$277 million at December 31, 2002.

40



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##### Table of Contents



Investment and Other
Securities

Our investment and other securities portfolio
consists of short-term securities, including repurchase
agreements and overnight investments in federal funds. These
short-term securities are maintained primarily for liquidity
purposes. Additionally, we own FHLB stock as required by our
affiliation with the FHLB System and carry it at cost. The FHLB
stock is included in investment securities available for sale on
our Consolidated Statements of Financial Condition. We also hold
owner trust certificates and obligations of states and political
subdivisions, which are classified as available for sale. The
owner trust certificates are recorded at cost, which
approximates fair value. The obligations of states and political
subdivisions are reported at fair value with unrealized gains
and losses reflected as a separate component of
shareholders equity on our Consolidated Statements of
Financial Condition as accumulated other comprehensive income
(loss), net of applicable taxes.

The following table summarizes our investment
securities at the dates indicated:

|                             |                                                  |                        |         |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |         |        | 
|---------------------------- | ------------------------------------------------ | ---------------------- | ------- | ------ |  | ---- | ------- | ------ |  | ---- | ------- | ------ |  | - | ------- | ------ |  | - | ------- | ------ | 
|                             |                                                  |                       
|                             |                                                  | December 31,          
|                             |                                                  |                       
|                             |                                                  | 2003                   |         | 2002   |  | 2001 |         | 2000   |  | 1999
|                             |                                                  |                        |         |        |  |      |         |        |  |     
|                             |                                                  |                       
|                             |                                                  | (Dollars in thousands)
|Interest bearing deposits    |                                                  |                        |         |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |         |       
|                             | with other financial institutions                |                        | $       | 41,009 |  |      | $       | 59,004 |  |      | $       | 720    |  |   | $       | 720    |  |   | $       | 720    | 
|Other short-term investments |                                                  |                        | 291,000 |        |  |      |         |        |  |      | 35,000  |        |  |   | 66,500  |        |  |   | 137,000 |       
|Investment securities:       |                                                  |                        |         |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |         |       
|                             | Obligations of states and political subdivisions |                        |         |        |  |      |         | 1,046  |  |      |         | 1,549  |  |   |         | 1,533  |  |   |         | 1,506  | 
|                             | U.S. government agencies and corporations        |                        |         | 50,493 |  |      |         |        |  |      |         |        |  |   |         |        |  |   |         |        | 
|                             | Owner trust certificates                         |                        |         |        |  |      |         | 3,348  |  |      |         | 4,668  |  |   |         | 6,517  |  |   |         | 7,865  | 
|                             | FHLB stock                                       |                        |         | 58,803 |  |      |         | 46,341 |  |      |         | 64,446 |  |   |         | 24,367 |  |   |         | 23,313 | 
|                             | Other                                            |                        |         | 8,453  |  |      |         | 6,031  |  |      |         | 4,294  |  |   |         | 2,684  |  |   |         | 739    | 
|                             |                                                  |                        |         |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |         |       
|                             |                                                  | $                      | 449,758 |        |  | $    | 115,770 |        |  | $    | 110,677 |        |  | $ | 102,321 |        |  | $ | 171,143 |       
|                             |                                                  |                        |         |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |         |       

The following table sets forth the stated
maturities of our investment securities at December 31,
2003:

|                                                                |                                           |                        |         |               |  |              |        |           |  |           |       |       |  |   |       |       |  |   |        |        | 
|--------------------------------------------------------------- | ----------------------------------------- | ---------------------- | ------- | ------------- |  | ------------ | ------ | --------- |  | --------- | ----- | ----- |  | - | ----- | ----- |  | - | ------ | ------ | 
|                                                                |                                           | Up to                  |         | One Year      |  | Five Years   |        | Ten Years |  | No Stated
|                                                                |                                           | One Year               |         | to Five Years |  | to Ten Years |        | or More   |  | Maturity 
|                                                                |                                           |                        |         |               |  |              |        |           |  |          
|                                                                |                                           |                       
|                                                                |                                           | (Dollars in thousands)
|Interest bearing deposits with other financial
    institutions |                                           | $                      | 41,009  |               |  |              |        |           |  |           |       |       |  |   |       |       |  |   |        |       
|Other short-term investments                                    |                                           |                        | 291,000 |               |  |              |        |           |  |           |       |       |  |   |       |       |  |   |        |       
|Investment securities:                                          |                                           |                        |         |               |  |              |        |           |  |           |       |       |  |   |       |       |  |   |        |       
|                                                                | U.S. government agencies and corporations |                        |         |               |  |              | $      | 50,493    |  |           |       |       |  |   |       |       |  |   |        |        | 
|                                                                | FHLB stock                                |                        |         |               |  |              |        |           |  |           |       |       |  |   |       |       |  |   | $      | 58,803 | 
|                                                                | Other                                     |                        |         |               |  |              |        | 179       |  |           | $     | 1,271 |  |   | $     | 3,996 |  |   |        | 3,007  | 
|                                                                |                                           |                        |         |               |  |              |        |           |  |           |       |       |  |   |       |       |  |   |        |       
|                                                                |                                           | $                      | 332,009 |               |  | $            | 50,672 |           |  | $         | 1,271 |       |  | $ | 3,996 |       |  | $ | 61,810 |       
|                                                                |                                           |                        |         |               |  |              |        |           |  |           |       |       |  |   |       |       |  |   |        |       
|Weighted average interest rate(1)                               |                                           |                        | 1.18    | %             |  |              | 2.49   | %         |  |           | 1.18  | %     |  |   | 3.07  | %     |  |   | 4.35   | %     



---



|    |                                    
|--- | -----------------------------------
|(1) | Calculated based on amortized cost.

41



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##### Table of Contents



Mortgage-Backed Securities

We invest in MBS to generate net interest margin,
manage interest rate risk, provide another source of liquidity
through repurchase agreements and meet regulatory requirements.
Our MBS portfolio is classified as available for sale.
Accordingly, the portfolio is reported at fair value with
unrealized gains and losses reflected as a separate component of
shareholders equity on our Consolidated Statements of
Financial Condition as accumulated other comprehensive income
(loss), net of applicable taxes. The following table summarizes
our MBS portfolio by issuer:

|                               |                                  |                        |           |           |  |   |           |           | 
|------------------------------ | -------------------------------- | ---------------------- | --------- | --------- |  | - | --------- | --------- | 
|                               |                                  |                       
|                               |                                  | December 31,          
|                               |                                  |                       
|                               |                                  | 2003                   |           | 2002     
|                               |                                  |                        |           |          
|                               |                                  |                       
|                               |                                  | (Dollars in thousands)
|Available for sale securities: |                                  |                        |           |           |  |   |           |          
|                               | GNMA certificates                |                        | $         | 2,638,085 |  |   | $         | 2,607,457 | 
|                               | FNMA participation certificates  |                        |           | 25,273    |  |   |           | 39,124    | 
|                               | FHLMC participation certificates |                        |           | 36,665    |  |   |           | 1,068     | 
|                               | Other                            |                        |           | 1,774     |  |   |           | 2,008     | 
|                               |                                  |                        |           |           |  |   |           |          
|                               |                                  | $                      | 2,701,797 |           |  | $ | 2,649,657 |          
|                               |                                  |                        |           |           |  |   |           |          

The portfolio had a weighted average yield,
including effects of amortization of premiums and discounts, of
3.31%, 5.14% and 5.95% for the years ended December 31,
2003, 2002 and 2001, respectively. The weighted average coupon
rate was 3.55%, 6.96% and 7.48% at December 31, 2003, 2002
and 2001, respectively. Our MBS portfolio had maturities of one
month to thirty years at December 31, 2003, although
payments are generally received monthly throughout the life of
these securities.

Loan Portfolios

The following table sets forth the composition of
our loan portfolio by type of loan, including loans held for
sale, as of the dates indicated:

|                                |                     |                        |            |            |            |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |           |           |  |      |      |       |   |           |           |           |  |      |      |       |  
|------------------------------- | ------------------- | ---------------------- | ---------- | ---------- | ---------- | ------ | ---- | ---- | ----- | ------ | --------- | --------- | --------- | ------ | ---- | ---- | ----- | ------ | --------- | --------- | --------- |  | ---- | ---- | ----- | - | --------- | --------- | --------- |  | ---- | ---- | ----- | - | --------- | --------- | --------- |  | ---- | ---- | ----- | -
|                                |                     |                       
|                                |                     | December 31,          
|                                |                     |                       
|                                |                     |                        |            |            |            |        |      |      |       |       
|                                |                     | 2003                   |            | 2002       |            | 2001   |      | 2000 |       | 1999  
|                                |                     |                        |            |            |            |        |      |      |       |       
|                                |                     | Amount                 |            | %          |            | Amount |      | %    |       | Amount |           | %         |           | Amount |      | %    |       | Amount |           | %        
|                                |                     |                        |            |            |            |        |      |      |       |        |           |           |           |        |      |      |       |        |           |          
|                                |                     |                       
|                                |                     | (Dollars in thousands)
|Consumer loans:                 |                     |                        |            |            |            |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |           |           |  |      |      |       |   |           |           |           |  |      |     
|                                | Contracts           |                        | $          | 10,833,127 |            |        |      | 97.3 | %     |        | $         | 9,147,937 |           |        |      | 96.9 | %     |        | $         | 7,192,302 |           |  |      | 95.2 | %     |   | $         | 4,390,265 |           |  |      | 89.2 | %     |   | $         | 1,549,966 |           |  |      | 71.0 | %    
|                                | Other               |                        |            | 6,002      |            |        |      | 0.1  |       |        |           | 7,531     |           |        |      | 0.1  |       |        |           | 8,826     |           |  |      | 0.1  |       |   |           | 13,456    |           |  |      | 0.3  |       |   |           | 20,951    |           |  |      | 1.0  |      
|                                |                     |                        |            |            |            |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |           |           |  |      |      |       |   |           |           |           |  |      |     
|                                |                     |                        | 10,839,129 |            |            |        | 97.4 |      |       |        | 9,155,468 |           |           |        | 97.0 |      |       |        | 7,201,128 |           |           |  | 95.3 |      |       |   | 4,403,721 |           |           |  | 89.5 |      |       |   | 1,570,917 |           |           |  | 72.0 |     
|Less: Unearned interest         |                     |                        | 61,300     |            |            |        | 0.6  |      |       |        | 91,713    |           |           |        | 1.0  |      |       |        | 108,169   |           |           |  | 1.4  |      |       |   | 94,404    |           |           |  | 1.9  |      |       |   | 54,248    |           |           |  | 2.5  |     
|                                |                     |                        |            |            |            |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |           |           |  |      |      |       |   |           |           |           |  |      |     
|                                |                     | Total consumer loans   |            |            | 10,777,829 |        |      |      | 96.8  |        |           |           | 9,063,755 |        |      |      | 96.0  |        |           |           | 7,092,959 |  |      |      | 93.9  |   |           |           | 4,309,317 |  |      |      | 87.6  |   |           |           | 1,516,669 |  |      |      | 69.5  |  
|Mortgage loans:                 |                     |                        |            |            |            |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |           |           |  |      |      |       |   |           |           |           |  |      |     
|                                | Existing properties |                        |            | 237,668    |            |        |      | 2.1  |       |        |           | 277,233   |           |        |      | 3.0  |       |        |           | 361,115   |           |  |      | 4.8  |       |   |           | 498,963   |           |  |      | 10.1 |       |   |           | 589,286   |           |  |      | 27.0 |      
|                                | Construction        |                        |            | 16,503     |            |        |      | 0.2  |       |        |           | 14,150    |           |        |      | 0.1  |       |        |           | 15,638    |           |  |      | 0.2  |       |   |           | 14,784    |           |  |      | 0.3  |       |   |           | 23,190    |           |  |      | 1.1  |      
|                                |                     |                        |            |            |            |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |           |           |  |      |      |       |   |           |           |           |  |      |     
|                                |                     |                        | 254,171    |            |            |        | 2.3  |      |       |        | 291,383   |           |           |        | 3.1  |      |       |        | 376,753   |           |           |  | 5.0  |      |       |   | 513,747   |           |           |  | 10.4 |      |       |   | 612,476   |           |           |  | 28.1 |     
|Less: Undisbursed loan proceeds |                     |                        | 17,948     |            |            |        | 0.2  |      |       |        | 8,453     |           |           |        | 0.1  |      |       |        | 3,298     |           |           |  | 0.0  |      |       |   | 6,316     |           |           |  | 0.1  |      |       |   | 14,174    |           |           |  | 0.7  |     
|                                |                     |                        |            |            |            |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |           |           |  |      |      |       |   |           |           |           |  |      |     
|                                |                     | Total mortgage loans   |            |            | 236,223    |        |      |      | 2.1   |        |           |           | 282,930   |        |      |      | 3.0   |        |           |           | 373,455   |  |      |      | 5.0   |   |           |           | 507,431   |  |      |      | 10.3  |   |           |           | 598,302   |  |      |      | 27.4  |  
|Commercial loans                |                     |                        | 124,431    |            |            |        | 1.1  |      |       |        | 97,216    |           |           |        | 1.0  |      |       |        | 85,312    |           |           |  | 1.1  |      |       |   | 107,586   |           |           |  | 2.1  |      |       |   | 66,927    |           |           |  | 3.1  |     
|                                |                     |                        |            |            |            |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |           |           |  |      |      |       |   |           |           |           |  |      |     
|                                |                     | Total loans            |            | $          | 11,138,483 |        |      |      | 100.0 | %      |           | $         | 9,443,901 |        |      |      | 100.0 | %      |           | $         | 7,551,726 |  |      |      | 100.0 | % |           | $         | 4,924,334 |  |      |      | 100.0 | % |           | $         | 2,181,898 |  |      |      | 100.0 | %
|                                |                     |                        |            |            |            |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |           |           |  |      |      |       |   |           |           |           |  |      |     

There were no consumer loans serviced for the
benefit of others at December 31, 2003 compared with
$525 million and $1.2 billion at December 31,
2002 and 2001, respectively.

42



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##### Table of Contents



Mortgage Loan Portfolio

We have from time to time originated mortgage
products that we have held on our balance sheet rather than
selling through the secondary markets. Other than mortgage loans
originated through the commercial banking division on a limited
basis, we do not expect to add mortgage loans to our balance
sheet.

Commercial Loan Portfolio

We had outstanding commercial loan commitments of
$225 million at December 31, 2003 compared with
$199 million at December 31, 2002. We originated
$407 million and $354 million of commercial loans for
the years ended December 31, 2003 and 2002, respectively.
Though we continue to focus on expanding our commercial banking
operation, it is not a significant source of revenue.

Amounts Due From Trusts

The excess cash flows generated by contracts sold
to each of the securitization trusts are deposited into spread
accounts in the name of the trustee under the terms of the
securitizations. In addition, at the time a securitization
closes, we advance additional monies to our subsidiary that
originated the securitization trust to initially fund these
spread accounts. As these spread accounts reach the balances
required by the trust, excess amounts are released to us and are
used to pay down these amounts. The amounts due from trusts
represent initial advances made to spread accounts and excess
cash flows that were still under obligation to be held in the
spread accounts for securitizations treated as sales. There were
no amounts due from trusts at December 31, 2003 compared
with $101 million at December 31, 2002. The decrease
is the result of us regaining control over the assets of the
trust for all our outstanding securitizations treated as sales
for accounting purposes.



| |                                            
| | -------------------------------------------
| | Retained Interest in Securitized
    Assets

None of our securitization transactions in 2003,
2002 or 2001 were treated as sales. Therefore, we did not record
any retained interest in securitized assets.

The following table sets forth the components of
the RISA:

|                                          |  |                                 |  |      |  |      |         |   |  |   |         |  
|----------------------------------------- |  | ------------------------------- |  | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                          |  |                                
|                                          |  | For the Year Ended December 31,
|                                          |  |                                
|                                          |  | 2003                            |  | 2002 |  | 2001
|                                          |  |                                 |  |      |  |     
|                                          |  |                                
|                                          |  | (Dollars in thousands)         
|Balance at beginning of period            |  | $                               |  |      |  | $    | 37,392  |   |  | $ | 111,558 |  
|Additions                                 |  |                                 |  |      |  |      |         |   |  |   |         |  
|Amortization                              |  |                                 |  |      |  |      | (36,461 | ) |  |   | (75,546 | )
|Change in unrealized gain/loss on RISA(1) |  |                                 |  |      |  |      | (931    | ) |  |   | 1,380   |  
|                                          |  |                                 |  |      |  |      |         |   |  |   |         |  
|Balance at end of period(2)               |  | $                               |  |      |  | $    | 0       |   |  | $ | 37,392  |  
|                                          |  |                                 |  |      |  |      |         |   |  |   |         |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The change in unrealized gain/loss on RISA
    represents temporary changes in valuation including changes in
    the discount rate based on the current interest rate
    environment. Such amounts will not be realized unless the RISA
    is sold. Changes in prepayment and credit loss assumptions for
    the RISA are other than temporary in nature and impact the value
    of the RISA. Such other than temporary differences are
    immediately recognized in income as a component of retained
    interest income or expense.
|   
|(2) | There were no restrictions on the RISA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

The balance of contracts 30 days or more
delinquent included in such securitization trusts totaled
$35.2 million at December 31, 2002. Net chargeoffs for
these securitization trusts totaled $30.4 million and
$50.4 million for the years ended December 31, 2002
and 2001, respectively.

43



---



##### Table of Contents



Asset Quality

Overview

Nonperforming assets, repossessions, loan
delinquency and credit losses are considered by us as key
measures of asset quality. Asset quality, in turn, affects our
determination of the allowance for credit losses. We also take
into consideration general economic conditions in the markets we
serve, individual loan reviews, and the level of assets relative
to reserves in determining the adequacy of the allowance for
credit losses.

Automobile Contract Quality

We provide financing in a market where there is a
risk of default by borrowers. Chargeoffs directly impact our
earnings and cash flows. To minimize the amount of credit losses
we incur, we monitor delinquent accounts, promptly repossess and
remarket vehicles, and seek to collect on deficiency balances.
See Business  Operations.

We calculate delinquency based on the contractual
due date. The following table sets forth information with
respect to the delinquency of our portfolio of automobile
contracts managed, which includes contracts that are owned by us
and contracts that were sold but are managed by us:

|                                                                                         |                 |                        |            |            |  |        |      |            |   |        |           |            |  |  |      |      |   |   |           |         |  |  |      |      |  
|---------------------------------------------------------------------------------------- | --------------- | ---------------------- | ---------- | ---------- |  | ------ | ---- | ---------- | - | ------ | --------- | ---------- |  |  | ---- | ---- | - | - | --------- | ------- |  |  | ---- | ---- | -
|                                                                                         |                 |                       
|                                                                                         |                 | December 31,          
|                                                                                         |                 |                       
|                                                                                         |                 |                        |            |            |  |       
|                                                                                         |                 | 2003                   |            | 2002       |  | 2001  
|                                                                                         |                 |                        |            |            |  |       
|                                                                                         |                 | Amount                 |            | Percentage |  | Amount |      | Percentage |   | Amount |           | Percentage
|                                                                                         |                 |                        |            |            |  |        |      |            |   |        |           |           
|                                                                                         |                 |                       
|                                                                                         |                 | (Dollars in thousands)
|Automobile contracts managed                                                             |                 | $                      | 10,596,665 |            |  |        |      |            |   | $      | 9,389,974 |            |  |  |      |      |   | $ | 8,152,882 |         |  |  |      |     
|                                                                                         |                 |                        |            |            |  |        |      |            |   |        |           |            |  |  |      |      |   |   |           |         |  |  |      |     
|Period of delinquency:                                                                   |                 |                        |            |            |  |        |      |            |   |        |           |            |  |  |      |      |   |   |           |         |  |  |      |     
|                                                                                         | 30-59 days      |                        | $          | 219,937    |  |        |      | 2.08       | % |        | $         | 238,204    |  |  |      | 2.54 | % |   | $         | 217,873 |  |  |      | 2.67 | %
|                                                                                         | 60 days or more |                        |            | 87,129     |  |        |      | 0.82       |   |        |           | 90,291     |  |  |      | 0.96 |   |   |           | 85,290  |  |  |      | 1.05 |  
|                                                                                         |                 |                        |            |            |  |        |      |            |   |        |           |            |  |  |      |      |   |   |           |         |  |  |      |     
|Total contracts delinquent and delinquencies as a
    percentage of contracts managed(1) |                 | $                      | 307,066    |            |  |        | 2.90 | %          |   | $      | 328,495   |            |  |  | 3.50 | %    |   | $ | 303,163   |         |  |  | 3.72 | %   
|                                                                                         |                 |                        |            |            |  |        |      |            |   |        |           |            |  |  |      |      |   |   |           |         |  |  |      |     



---



|    |                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes Chapter 13 bankruptcy accounts
    greater than 120 days past due of $45.6 million and
    $41.5 million at December 31, 2003 and 2002,
    respectively.

The following table sets forth information with
respect to repossessions in our portfolio of automobile
contracts managed:

|                                                                                     |  |                        |         |        |  |           |            |        |  |           |         |        |  |   |           |  |  |  |         |  |  |   |           | 
|------------------------------------------------------------------------------------ |  | ---------------------- | ------- | ------ |  | --------- | ---------- | ------ |  | --------- | ------- | ------ |  | - | --------- |  |  |  | ------- |  |  | - | --------- | 
|                                                                                     |  |                       
|                                                                                     |  | December 31,          
|                                                                                     |  |                       
|                                                                                     |  |                        |         |        |  |          
|                                                                                     |  | 2003                   |         | 2002   |  | 2001     
|                                                                                     |  |                        |         |        |  |          
|                                                                                     |  | Number of              |         |        |  | Number of |            |        |  | Number of |         |       
|                                                                                     |  | Contracts              |         | Amount |  | Contracts |            | Amount |  | Contracts |         | Amount
|                                                                                     |  |                        |         |        |  |           |            |        |  |           |         |       
|                                                                                     |  |                       
|                                                                                     |  | (Dollars in thousands)
|Automobile contracts managed                                                         |  |                        | 862,122 |        |  | $         | 10,596,665 |        |  |           | 757,269 |        |  | $ | 9,389,974 |  |  |  | 690,401 |  |  | $ | 8,152,882 | 
|                                                                                     |  |                        |         |        |  |           |            |        |  |           |         |        |  |   |           |  |  |  |         |  |  |   |           | 
|Repossessed vehicles                                                                 |  |                        | 1,522   |        |  | $         | 10,331     |        |  |           | 2,375   |        |  | $ | 16,433    |  |  |  | 1,168   |  |  | $ | 7,553     | 
|                                                                                     |  |                        |         |        |  |           |            |        |  |           |         |        |  |   |           |  |  |  |         |  |  |   |           | 
|Repossessed assets as a percentage of number and
    amount of contracts outstanding |  |                        | 0.18%   |        |  |           | 0.10%      |        |  |           | 0.31%   |        |  |   | 0.18%     |  |  |  | 0.17%   |  |  |   | 0.09%     | 

44



---



##### Table of Contents



The following table sets forth information with
respect to actual credit loss experience on our portfolio of a
contracts managed:

|                                                                                         |  |                                 |            |      |  |      |           |   |  |   |           |  
|---------------------------------------------------------------------------------------- |  | ------------------------------- | ---------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                                                                                         |  |                                
|                                                                                         |  | For the Year Ended December 31,
|                                                                                         |  |                                
|                                                                                         |  | 2003                            |            | 2002 |  | 2001
|                                                                                         |  |                                 |            |      |  |     
|                                                                                         |  |                                
|                                                                                         |  | (Dollars in thousands)         
|Automobile contracts managed at end of period                                            |  | $                               | 10,596,665 |      |  | $    | 9,389,974 |   |  | $ | 8,152,882 |  
|                                                                                         |  |                                 |            |      |  |      |           |   |  |   |           |  
|Average contracts managed during period                                                  |  | $                               | 10,051,754 |      |  | $    | 8,845,635 |   |  | $ | 7,576,681 |  
|                                                                                         |  |                                 |            |      |  |      |           |   |  |   |           |  
|Gross chargeoffs                                                                         |  | $                               | 350,714    |      |  | $    | 327,161   |   |  | $ | 236,834   |  
|Recoveries                                                                               |  |                                 | 89,027     |      |  |      | 82,372    |   |  |   | 64,626    |  
|                                                                                         |  |                                 |            |      |  |      |           |   |  |   |           |  
|Net chargeoffs                                                                           |  | $                               | 261,687    |      |  | $    | 244,789   |   |  | $ | 172,208   |  
|                                                                                         |  |                                 |            |      |  |      |           |   |  |   |           |  
|Net chargeoffs as a percentage of average
    automobile contracts managed during period |  |                                 | 2.60       | %    |  |      | 2.77      | % |  |   | 2.27      | %
|                                                                                         |  |                                 |            |      |  |      |           |   |  |   |           |  

The decrease in delinquency and credit loss
experience for 2003 compared to 2002 was primarily a result of
our originating a higher percentage of prime credit quality
contracts and some stabilization of wholesale pre-owned car
prices. The increase in credit loss experience for 2002 compared
to 2001 was a result of a slowing economy.

45



---



##### Table of Contents



Cumulative static pool losses are another means
of analyzing contract quality. The cumulative static pool loss
of a securitization is the cumulative amount of losses actually
recognized, net of recoveries, as to the contracts securitized,
up to and including a given month, divided by the original
principal balance of the contracts in that securitization. The
following table sets forth the cumulative static pool loss
ratios by month for all outstanding securitized pools:

Cumulative Static Pool Loss Curves

At December 31, 2003


|          |              |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|--------- | ------------ | ------ |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  | ------ | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | -
|         
|         
|Period(1) |              | 1999-B |  | 2000-A |      | 2000-B |  | 2000-C |      | 2000-D |  | 2001-A |      | 2001-B |  | 2001-C |      | 2002-1 |  | 2002-2 |      | 2002-3 |  | 2002-4 |      | 2003-1 |  | 2003-2 |      | 2003-3 |  | 2003-4
|         
|         
|          | 1            |        |  |        | 0.00 | %      |  |        | 0.00 | %      |  |        | 0.00 | %      |  |        | 0.00 | %      |  |        | 0.00 | %      |  |        | 0.00 | %      |  |        | 0.00 | %      |  |        | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | %
|          | 2            |        |  |        | 0.04 | %      |  |        | 0.03 | %      |  |        | 0.02 | %      |  |        | 0.04 | %      |  |        | 0.04 | %      |  |        | 0.03 | %      |  |        | 0.03 | %      |  |        | 0.04 | % |  |  | 0.01 | % |  |  | 0.00 | % |  |  | 0.02 | % |  |  | 0.02 | % |  |  | 0.01 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.01 | %
|          | 3            |        |  |        | 0.11 | %      |  |        | 0.10 | %      |  |        | 0.09 | %      |  |        | 0.13 | %      |  |        | 0.11 | %      |  |        | 0.09 | %      |  |        | 0.10 | %      |  |        | 0.09 | % |  |  | 0.06 | % |  |  | 0.03 | % |  |  | 0.06 | % |  |  | 0.07 | % |  |  | 0.04 | % |  |  | 0.02 | % |  |  | 0.02 | % |  |  |      |  
|          | 4            |        |  |        | 0.26 | %      |  |        | 0.20 | %      |  |        | 0.24 | %      |  |        | 0.27 | %      |  |        | 0.24 | %      |  |        | 0.20 | %      |  |        | 0.21 | %      |  |        | 0.20 | % |  |  | 0.15 | % |  |  | 0.10 | % |  |  | 0.14 | % |  |  | 0.16 | % |  |  | 0.11 | % |  |  | 0.06 | % |  |  | 0.06 | % |  |  |      |  
|          | 5            |        |  |        | 0.47 | %      |  |        | 0.36 | %      |  |        | 0.39 | %      |  |        | 0.46 | %      |  |        | 0.39 | %      |  |        | 0.33 | %      |  |        | 0.33 | %      |  |        | 0.35 | % |  |  | 0.29 | % |  |  | 0.18 | % |  |  | 0.27 | % |  |  | 0.26 | % |  |  | 0.18 | % |  |  | 0.14 | % |  |  | 0.13 | % |  |  |      |  
|          | 6            |        |  |        | 0.66 | %      |  |        | 0.55 | %      |  |        | 0.59 | %      |  |        | 0.65 | %      |  |        | 0.54 | %      |  |        | 0.50 | %      |  |        | 0.50 | %      |  |        | 0.49 | % |  |  | 0.43 | % |  |  | 0.32 | % |  |  | 0.44 | % |  |  | 0.38 | % |  |  | 0.29 | % |  |  | 0.25 | % |  |  |      |   |  |  |      |  
|          | 7            |        |  |        | 0.87 | %      |  |        | 0.71 | %      |  |        | 0.78 | %      |  |        | 0.81 | %      |  |        | 0.74 | %      |  |        | 0.70 | %      |  |        | 0.69 | %      |  |        | 0.65 | % |  |  | 0.60 | % |  |  | 0.49 | % |  |  | 0.57 | % |  |  | 0.50 | % |  |  | 0.41 | % |  |  | 0.36 | % |  |  |      |   |  |  |      |  
|          | 8            |        |  |        | 1.00 | %      |  |        | 0.91 | %      |  |        | 0.99 | %      |  |        | 0.93 | %      |  |        | 0.93 | %      |  |        | 0.84 | %      |  |        | 0.87 | %      |  |        | 0.81 | % |  |  | 0.84 | % |  |  | 0.66 | % |  |  | 0.70 | % |  |  | 0.61 | % |  |  | 0.53 | % |  |  | 0.48 | % |  |  |      |   |  |  |      |  
|          | 9            |        |  |        | 1.13 | %      |  |        | 1.10 | %      |  |        | 1.17 | %      |  |        | 1.07 | %      |  |        | 1.13 | %      |  |        | 1.04 | %      |  |        | 1.05 | %      |  |        | 0.95 | % |  |  | 1.06 | % |  |  | 0.82 | % |  |  | 0.82 | % |  |  | 0.78 | % |  |  | 0.66 | % |  |  |      |   |  |  |      |   |  |  |      |  
|          | 10           |        |  |        | 1.24 | %      |  |        | 1.27 | %      |  |        | 1.33 | %      |  |        | 1.24 | %      |  |        | 1.34 | %      |  |        | 1.24 | %      |  |        | 1.22 | %      |  |        | 1.07 | % |  |  | 1.28 | % |  |  | 0.96 | % |  |  | 0.96 | % |  |  | 0.94 | % |  |  | 0.80 | % |  |  |      |   |  |  |      |   |  |  |      |  
|          | 11           |        |  |        | 1.35 | %      |  |        | 1.45 | %      |  |        | 1.44 | %      |  |        | 1.41 | %      |  |        | 1.50 | %      |  |        | 1.45 | %      |  |        | 1.36 | %      |  |        | 1.20 | % |  |  | 1.48 | % |  |  | 1.10 | % |  |  | 1.10 | % |  |  | 1.08 | % |  |  | 0.93 | % |  |  |      |   |  |  |      |   |  |  |      |  
|          | 12           |        |  |        | 1.44 | %      |  |        | 1.58 | %      |  |        | 1.57 | %      |  |        | 1.62 | %      |  |        | 1.74 | %      |  |        | 1.67 | %      |  |        | 1.53 | %      |  |        | 1.37 | % |  |  | 1.67 | % |  |  | 1.26 | % |  |  | 1.24 | % |  |  | 1.28 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 13           |        |  |        | 1.58 | %      |  |        | 1.73 | %      |  |        | 1.72 | %      |  |        | 1.86 | %      |  |        | 1.95 | %      |  |        | 1.90 | %      |  |        | 1.67 | %      |  |        | 1.55 | % |  |  | 1.82 | % |  |  | 1.39 | % |  |  | 1.38 | % |  |  | 1.43 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 14           |        |  |        | 1.74 | %      |  |        | 1.85 | %      |  |        | 1.86 | %      |  |        | 2.04 | %      |  |        | 2.21 | %      |  |        | 2.09 | %      |  |        | 1.81 | %      |  |        | 1.74 | % |  |  | 1.99 | % |  |  | 1.51 | % |  |  | 1.53 | % |  |  | 1.59 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 15           |        |  |        | 1.85 | %      |  |        | 2.00 | %      |  |        | 2.04 | %      |  |        | 2.25 | %      |  |        | 2.48 | %      |  |        | 2.25 | %      |  |        | 2.00 | %      |  |        | 1.97 | % |  |  | 2.14 | % |  |  | 1.68 | % |  |  | 1.70 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 16           |        |  |        | 2.03 | %      |  |        | 2.15 | %      |  |        | 2.24 | %      |  |        | 2.45 | %      |  |        | 2.71 | %      |  |        | 2.41 | %      |  |        | 2.19 | %      |  |        | 2.16 | % |  |  | 2.27 | % |  |  | 1.83 | % |  |  | 1.88 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 17           |        |  |        | 2.16 | %      |  |        | 2.37 | %      |  |        | 2.39 | %      |  |        | 2.68 | %      |  |        | 2.89 | %      |  |        | 2.54 | %      |  |        | 2.37 | %      |  |        | 2.36 | % |  |  | 2.45 | % |  |  | 1.99 | % |  |  | 2.03 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 18           |        |  |        | 2.30 | %      |  |        | 2.52 | %      |  |        | 2.55 | %      |  |        | 2.88 | %      |  |        | 3.08 | %      |  |        | 2.73 | %      |  |        | 2.60 | %      |  |        | 2.59 | % |  |  | 2.62 | % |  |  | 2.16 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 19           |        |  |        | 2.42 | %      |  |        | 2.67 | %      |  |        | 2.73 | %      |  |        | 3.08 | %      |  |        | 3.22 | %      |  |        | 2.93 | %      |  |        | 2.80 | %      |  |        | 2.78 | % |  |  | 2.80 | % |  |  | 2.31 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 20           |        |  |        | 2.50 | %      |  |        | 2.83 | %      |  |        | 2.93 | %      |  |        | 3.23 | %      |  |        | 3.40 | %      |  |        | 3.11 | %      |  |        | 3.01 | %      |  |        | 2.95 | % |  |  | 2.99 | % |  |  | 2.46 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 21           |        |  |        | 2.58 | %      |  |        | 2.99 | %      |  |        | 3.12 | %      |  |        | 3.38 | %      |  |        | 3.59 | %      |  |        | 3.34 | %      |  |        | 3.19 | %      |  |        | 3.14 | % |  |  | 3.15 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 22           |        |  |        | 2.67 | %      |  |        | 3.16 | %      |  |        | 3.27 | %      |  |        | 3.54 | %      |  |        | 3.78 | %      |  |        | 3.54 | %      |  |        | 3.34 | %      |  |        | 3.29 | % |  |  | 3.31 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 23           |        |  |        | 2.77 | %      |  |        | 3.34 | %      |  |        | 3.38 | %      |  |        | 3.67 | %      |  |        | 3.96 | %      |  |        | 3.72 | %      |  |        | 3.49 | %      |  |        | 3.41 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 24           |        |  |        | 2.87 | %      |  |        | 3.49 | %      |  |        | 3.52 | %      |  |        | 3.83 | %      |  |        | 4.18 | %      |  |        | 3.92 | %      |  |        | 3.62 | %      |  |        | 3.57 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 25           |        |  |        | 3.01 | %      |  |        | 3.63 | %      |  |        | 3.63 | %      |  |        | 4.00 | %      |  |        | 4.41 | %      |  |        | 4.10 | %      |  |        | 3.75 | %      |  |        | 3.73 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 26           |        |  |        | 3.14 | %      |  |        | 3.75 | %      |  |        | 3.73 | %      |  |        | 4.16 | %      |  |        | 4.58 | %      |  |        | 4.23 | %      |  |        | 3.87 | %      |  |        | 3.88 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 27           |        |  |        | 3.16 | %      |  |        | 3.86 | %      |  |        | 3.84 | %      |  |        | 4.35 | %      |  |        | 4.79 | %      |  |        | 4.36 | %      |  |        | 4.00 | %      |  |        | 4.04 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 28           |        |  |        | 3.29 | %      |  |        | 3.97 | %      |  |        | 3.97 | %      |  |        | 4.50 | %      |  |        | 4.96 | %      |  |        | 4.47 | %      |  |        | 4.15 | %      |  |        | 4.20 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 29           |        |  |        | 3.40 | %      |  |        | 4.09 | %      |  |        | 4.11 | %      |  |        | 4.64 | %      |  |        | 5.08 | %      |  |        | 4.56 | %      |  |        | 4.28 | %      |  |        | 4.35 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 30           |        |  |        | 3.50 | %      |  |        | 4.21 | %      |  |        | 4.26 | %      |  |        | 4.79 | %      |  |        | 5.22 | %      |  |        | 4.67 | %      |  |        | 4.40 | %      |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 31           |        |  |        | 3.61 | %      |  |        | 4.33 | %      |  |        | 4.40 | %      |  |        | 4.92 | %      |  |        | 5.34 | %      |  |        | 4.81 | %      |  |        | 4.52 | %      |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 32           |        |  |        | 3.68 | %      |  |        | 4.47 | %      |  |        | 4.50 | %      |  |        | 5.02 | %      |  |        | 5.44 | %      |  |        | 4.92 | %      |  |        | 4.64 | %      |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 33           |        |  |        | 3.74 | %      |  |        | 4.59 | %      |  |        | 4.61 | %      |  |        | 5.12 | %      |  |        | 5.54 | %      |  |        | 5.04 | %      |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 34           |        |  |        | 3.81 | %      |  |        | 4.68 | %      |  |        | 4.70 | %      |  |        | 5.22 | %      |  |        | 5.66 | %      |  |        | 5.13 | %      |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 35           |        |  |        | 3.87 | %      |  |        | 4.79 | %      |  |        | 4.78 | %      |  |        | 5.29 | %      |  |        | 5.76 | %      |  |        | 5.24 | %      |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 36           |        |  |        | 3.91 | %      |  |        | 4.86 | %      |  |        | 4.85 | %      |  |        | 5.38 | %      |  |        | 5.86 | %      |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 37           |        |  |        | 3.97 | %      |  |        | 4.93 | %      |  |        | 4.94 | %      |  |        | 5.47 | %      |  |        | 5.97 | %      |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 38           |        |  |        | 4.03 | %      |  |        | 5.01 | %      |  |        | 4.99 | %      |  |        | 5.53 | %      |  |        | 6.04 | %      |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 39           |        |  |        | 4.09 | %      |  |        | 5.08 | %      |  |        | 5.05 | %      |  |        | 5.62 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 40           |        |  |        | 4.13 | %      |  |        | 5.13 | %      |  |        | 5.12 | %      |  |        | 5.68 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 41           |        |  |        | 4.18 | %      |  |        | 5.18 | %      |  |        | 5.18 | %      |  |        | 5.75 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 42           |        |  |        | 4.23 | %      |  |        | 5.24 | %      |  |        | 5.23 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 43           |        |  |        | 4.28 | %      |  |        | 5.29 | %      |  |        | 5.27 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 44           |        |  |        | 4.33 | %      |  |        | 5.34 | %      |  |        | 5.31 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 45           |        |  |        | 4.35 | %      |  |        | 5.37 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 46           |        |  |        | 4.38 | %      |  |        | 5.42 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 47           |        |  |        | 4.39 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 48           |        |  |        | 4.41 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 49           |        |  |        | 4.43 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 50           |        |  |        | 4.44 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 51           |        |  |        | 4.46 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 52           |        |  |        | 4.48 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 53           |        |  |        | 4.49 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | 54           |        |  |        | 4.50 | %      |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |        |  |        |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|          | Prime Mix(2) |        |  |        | 70   | %      |  |        | 68   | %      |  |        | 69   | %      |  |        | 68   | %      |  |        | 68   | %      |  |        | 71   | %      |  |        | 71   | %      |  |        | 76   | % |  |  | 70   | % |  |  | 87   | % |  |  | 85   | % |  |  | 80   | % |  |  | 80   | % |  |  | 82   | % |  |  | 84   | % |  |  | 82   | %



---



|    |                                                                                                   
|--- | --------------------------------------------------------------------------------------------------
|(1) | Represents the number of months since the
    inception of the securitization.                    
|   
|(2) | Represents the original percentage of prime
    automobile contracts securitized within each pool.

46



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##### Table of Contents



Real Estate Loan Quality

Our mortgage delinquencies over 60 days
include both single family and multi-family mortgages. We had
1.25% of total mortgage loans past due over 60 days at
December 31, 2003 compared with 1.32% at December 31,
2002.

Nonperforming Assets

Nonperforming loans, also known as NPLs, are
defined as all nonaccrual loans. This includes mortgage loans
90 days or more past due, impaired loans where full
collection of principal and interest is not reasonably assured
and Chapter 13 bankruptcy accounts contractually past due
over 120 days. For those accounts that are in
Chapter 13 bankruptcy that are contractually past due over
120 days, all accrued interest is reversed and income is
recognized on a cash basis. When a loan is designated as
nonaccrual, all previously accrued but unpaid interest is
reversed. For the years ended December 31, 2003, 2002 and
2001, interest on NPLs excluded from interest income was
$3.3 million, $3.5 million and $3.1 million,
respectively.

Nonperforming assets, also known as NPAs, consist
of NPLs, repossessed automobiles, and real estate owned, also
known as REO. Repossessed automobiles are carried at fair value.
REO is carried at lower of cost or fair value. NPAs were
$63.6 million at December 31, 2003 compared with
$54.9 million at December 31, 2002. NPAs represented
0.4% of total assets at both December 31, 2003 and 2002.
There were no impaired loans at December 31, 2003 or 2002.

Allowance For Credit Losses

Our allowance for credit losses was
$302 million at December 31, 2003 compared with
$269 million at December 31, 2002. We have decreased
our percentage of allowance for credit losses from 2.9% at
December 31, 2002 to 2.7% at December 31, 2003 as we
have experienced lower losses in our loan portfolio due to our
originating a higher percentage of prime credit quality
contracts and improvement in the economy. Based on the analysis
we performed related to the allowance for credit losses as
described under Critical Accounting Policies, we
believe that our allowance for credit losses is currently
adequate to cover probable losses in our loan portfolio that can
be reasonable estimated.

47



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##### Table of Contents



The following table sets forth the activity in
the allowance for credit losses:

|                                                                                       |                  |                                 |          |          |   |      |          |          |   |      |          |          |   |   |         |         |   |   |         |         |  
|-------------------------------------------------------------------------------------- | ---------------- | ------------------------------- | -------- | -------- | - | ---- | -------- | -------- | - | ---- | -------- | -------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                       |                  |                                
|                                                                                       |                  | For the Year Ended December 31,
|                                                                                       |                  |                                
|                                                                                       |                  | 2003                            |          | 2002     |   | 2001 |          | 2000     |   | 1999
|                                                                                       |                  |                                 |          |          |   |      |          |          |   |     
|                                                                                       |                  |                                
|                                                                                       |                  | (Dollars in thousands)         
|Balance at beginning of period                                                         |                  | $                               | 269,352  |          |   | $    | 178,218  |          |   | $    | 104,006  |          |   | $ | 64,217  |         |   | $ | 37,660  |        
|Chargeoffs:                                                                            |                  |                                 |          |          |   |      |          |          |   |      |          |          |   |   |         |         |   |   |         |        
|                                                                                       | Consumer loans   |                                 |          | (350,718 | ) |      |          | (280,378 | ) |      |          | (162,878 | ) |   |         | (55,892 | ) |   |         | (20,052 | )
|                                                                                       | Commercial loans |                                 |          |          |   |      |          | (511     | ) |      |          |          |   |   |         |         |   |   |         |         |  
|                                                                                       | Mortgage loans   |                                 |          | (352     | ) |      |          | (260     | ) |      |          | (1,024   | ) |   |         | (1,234  | ) |   |         | (1,230  | )
|                                                                                       |                  |                                 |          |          |   |      |          |          |   |      |          |          |   |   |         |         |   |   |         |        
|                                                                                       |                  |                                 | (351,070 | )        |   |      | (281,149 | )        |   |      | (163,902 | )        |   |   | (57,126 | )       |   |   | (21,282 | )      
|Recoveries:                                                                            |                  |                                 |          |          |   |      |          |          |   |      |          |          |   |   |         |         |   |   |         |        
|                                                                                       | Consumer loans   |                                 |          | 89,196   |   |      |          | 66,050   |   |      |          | 41,120   |   |   |         | 14,731  |   |   |         | 7,592   |  
|                                                                                       | Commercial loans |                                 |          | 78       |   |      |          |          |   |      |          |          |   |   |         |         |   |   |         |         |  
|                                                                                       | Mortgage loans   |                                 |          | 40       |   |      |          |          |   |      |          | 17       |   |   |         | 51      |   |   |         | 1,847   |  
|                                                                                       |                  |                                 |          |          |   |      |          |          |   |      |          |          |   |   |         |         |   |   |         |        
|                                                                                       |                  |                                 | 89,314   |          |   |      | 66,050   |          |   |      | 41,137   |          |   |   | 14,782  |         |   |   | 9,439   |        
|                                                                                       |                  |                                 |          |          |   |      |          |          |   |      |          |          |   |   |         |         |   |   |         |        
|Net chargeoffs                                                                         |                  |                                 | (261,756 | )        |   |      | (215,099 | )        |   |      | (122,765 | )        |   |   | (42,344 | )       |   |   | (11,843 | )      
|Provision for credit losses                                                            |                  |                                 | 294,006  |          |   |      | 306,233  |          |   |      | 196,977  |          |   |   | 82,133  |         |   |   | 38,400  |        
|                                                                                       |                  |                                 |          |          |   |      |          |          |   |      |          |          |   |   |         |         |   |   |         |        
|Balance at end of period                                                               |                  | $                               | 301,602  |          |   | $    | 269,352  |          |   | $    | 178,218  |          |   | $ | 104,006 |         |   | $ | 64,217  |        
|                                                                                       |                  |                                 |          |          |   |      |          |          |   |      |          |          |   |   |         |         |   |   |         |        
|Ratio of net chargeoffs during the period to
    average loans owned during the period |                  |                                 | 2.5      | %        |   |      | 2.6      | %        |   |      | 2.0      | %        |   |   | 1.3     | %       |   |   | 0.7     | %      
|Ratio of allowance for credit losses to loans at
    the end of the period             |                  |                                 | 2.7      | %        |   |      | 2.9      | %        |   |      | 2.4      | %        |   |   | 2.1     | %       |   |   | 2.9     | %      

48



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##### Table of Contents



The allowance for credit losses by loan category
was as follows:

|                          |  |                        |            |           |  |           |       |           |  |          |         |           |  |           |     |           |  |   |           |  |  |  |       |   |  |   |         |  |  |  |     |  
|------------------------- |  | ---------------------- | ---------- | --------- |  | --------- | ----- | --------- |  | -------- | ------- | --------- |  | --------- | --- | --------- |  | - | --------- |  |  |  | ----- | - |  | - | ------- |  |  |  | --- | -
|                          |  |                       
|                          |  | December 31,          
|                          |  |                       
|                          |  |                        |            |          
|                          |  | 2003                   |            | 2002     
|                          |  |                        |            |          
|                          |  |                        |            | Loans in  |  |           |       |           |  | Loans in |         |          
|                          |  |                        |            | Each      |  |           |       |           |  | Each     |         |          
|                          |  |                        |            | Category  |  |           |       |           |  | Category |         |          
|                          |  |                        |            | as a % of |  |           |       | Allowance |  |          |         | as a % of |  |           |     | Allowance
|                          |  |                        |            | Total     |  |           |       | as a % of |  | Loan     |         | Total     |  |           |     | as a % of
|                          |  | Loan Balance           |            | Loans     |  | Allowance |       | Loans     |  | Balance  |         | Loans     |  | Allowance |     | Loans    
|                          |  |                        |            |           |  |           |       |           |  |          |         |           |  |           |     |          
|                          |  |                       
|                          |  | (Dollars in thousands)
|Consumer loans            |  | $                      | 10,777,829 |           |  |           | 96.8  | %         |  | $        | 297,058 |           |  |           | 2.8 | %         |  | $ | 9,063,755 |  |  |  | 96.0  | % |  | $ | 260,634 |  |  |  | 2.9 | %
|Single family residential |  |                        | 61,628     |           |  |           | 0.6   |           |  |          | 1,477   |           |  |           | 2.4 |           |  |   | 98,635    |  |  |  | 1.0   |   |  |   | 3,924   |  |  |  | 4.0 |  
|Multifamily residential   |  |                        | 169,473    |           |  |           | 1.5   |           |  |          | 1,065   |           |  |           | 0.6 |           |  |   | 178,598   |  |  |  | 1.9   |   |  |   | 2,392   |  |  |  | 1.3 |  
|Construction loans        |  |                        | 5,122      |           |  |           | 0.0   |           |  |          | 260     |           |  |           | 5.1 |           |  |   | 5,697     |  |  |  | 0.1   |   |  |   | 133     |  |  |  | 2.3 |  
|Commercial loans          |  |                        | 124,431    |           |  |           | 1.1   |           |  |          | 1,742   |           |  |           | 1.4 |           |  |   | 97,216    |  |  |  | 1.0   |   |  |   | 2,269   |  |  |  | 2.3 |  
|                          |  |                        |            |           |  |           |       |           |  |          |         |           |  |           |     |           |  |   |           |  |  |  |       |   |  |   |         |  |  |  |     |  
|                          |  | $                      | 11,138,483 |           |  |           | 100.0 | %         |  | $        | 301,602 |           |  |           | 2.7 | %         |  | $ | 9,443,901 |  |  |  | 100.0 | % |  | $ | 269,352 |  |  |  | 2.9 | %
|                          |  |                        |            |           |  |           |       |           |  |          |         |           |  |           |     |           |  |   |           |  |  |  |       |   |  |   |         |  |  |  |     |  

|                          |  |                        |           |           |  |           |       |           |  |          |         |           |  |           |     |           |  |   |           |  |  |  |       |   |  |   |         |  |  |  |     |  
|------------------------- |  | ---------------------- | --------- | --------- |  | --------- | ----- | --------- |  | -------- | ------- | --------- |  | --------- | --- | --------- |  | - | --------- |  |  |  | ----- | - |  | - | ------- |  |  |  | --- | -
|                          |  |                       
|                          |  | December 31,          
|                          |  |                       
|                          |  |                        |           |          
|                          |  | 2001                   |           | 2000     
|                          |  |                        |           |          
|                          |  |                        |           | Loans in  |  |           |       |           |  | Loans in |         |          
|                          |  |                        |           | Each      |  |           |       |           |  | Each     |         |          
|                          |  |                        |           | Category  |  |           |       |           |  | Category |         |          
|                          |  |                        |           | as a % of |  |           |       | Allowance |  |          |         | as a % of |  |           |     | Allowance
|                          |  |                        |           | Total     |  |           |       | as a % of |  | Loan     |         | Total     |  |           |     | as a % of
|                          |  | Loan Balance           |           | Loans     |  | Allowance |       | Loans     |  | Balance  |         | Loans     |  | Allowance |     | Loans    
|                          |  |                        |           |           |  |           |       |           |  |          |         |           |  |           |     |          
|                          |  |                       
|                          |  | (Dollars in thousands)
|Consumer loans            |  | $                      | 7,092,959 |           |  |           | 94.0  | %         |  | $        | 167,659 |           |  |           | 2.4 | %         |  | $ | 4,309,317 |  |  |  | 87.5  | % |  | $ | 83,687  |  |  |  | 1.9 | %
|Single family residential |  |                        | 151,540   |           |  |           | 2.0   |           |  |          | 4,432   |           |  |           | 2.9 |           |  |   | 230,854   |  |  |  | 4.7   |   |  |   | 9,020   |  |  |  | 3.9 |  
|Multifamily residential   |  |                        | 209,575   |           |  |           | 2.8   |           |  |          | 3,257   |           |  |           | 1.6 |           |  |   | 268,109   |  |  |  | 5.4   |   |  |   | 7,909   |  |  |  | 2.9 |  
|Construction loans        |  |                        | 12,340    |           |  |           | 0.1   |           |  |          | 153     |           |  |           | 1.2 |           |  |   | 8,468     |  |  |  | 0.2   |   |  |   | 139     |  |  |  | 1.6 |  
|Commercial loans          |  |                        | 85,312    |           |  |           | 1.1   |           |  |          | 2,717   |           |  |           | 3.2 |           |  |   | 107,586   |  |  |  | 2.2   |   |  |   | 3,251   |  |  |  | 3.0 |  
|                          |  |                        |           |           |  |           |       |           |  |          |         |           |  |           |     |           |  |   |           |  |  |  |       |   |  |   |         |  |  |  |     |  
|                          |  | $                      | 7,551,726 |           |  |           | 100.0 | %         |  | $        | 178,218 |           |  |           | 2.4 | %         |  | $ | 4,924,334 |  |  |  | 100.0 | % |  | $ | 104,006 |  |  |  | 2.1 | %
|                          |  |                        |           |           |  |           |       |           |  |          |         |           |  |           |     |           |  |   |           |  |  |  |       |   |  |   |         |  |  |  |     |  

|                             |  |                        |           |             |  |           |       |           |  |   |        |  |  |  |      |  
|---------------------------- |  | ---------------------- | --------- | ----------- |  | --------- | ----- | --------- |  | - | ------ |  |  |  | ---- | -
|                             |  |                       
|                             |  | December 31, 1999     
|                             |  |                       
|                             |  |                        |           | Loans in    |  |          
|                             |  |                        |           | Each        |  |          
|                             |  |                        |           | Category as |  |           |       | Allowance
|                             |  |                        |           | a % of      |  |           |       | as a % of
|                             |  | Loan Balance           |           | Total Loans |  | Allowance |       | Loans    
|                             |  |                        |           |             |  |           |       |          
|                             |  |                       
|                             |  | (Dollars in thousands)
|Consumer loans held for sale |  | $                      | 1,432,644 |             |  |           | 65.7  | %         |  | $ | 31,936 |  |  |  | 2.2  | %
|Consumer loans               |  |                        | 84,025    |             |  |           | 3.8   |           |  |   | 8,715  |  |  |  | 10.4 |  
|Single family residential    |  |                        | 285,203   |             |  |           | 13.1  |           |  |   | 7,344  |  |  |  | 2.6  |  
|Multifamily residential      |  |                        | 304,083   |             |  |           | 13.9  |           |  |   | 14,334 |  |  |  | 4.7  |  
|Construction loans           |  |                        | 9,016     |             |  |           | 0.4   |           |  |   | 195    |  |  |  | 2.2  |  
|Commercial loans             |  |                        | 66,927    |             |  |           | 3.1   |           |  |   | 1,693  |  |  |  | 2.5  |  
|                             |  |                        |           |             |  |           |       |           |  |   |        |  |  |  |      |  
|                             |  | $                      | 2,181,898 |             |  |           | 100.0 | %         |  | $ | 64,217 |  |  |  | 2.9  | %
|                             |  |                        |           |             |  |           |       |           |  |   |        |  |  |  |      |  

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The following table presents summarized data
relative to the allowances for credit and real estate owned
losses at the dates indicated:

|                                                                                             |                                |                        |            |       |   |      |           |       |   |      |           |       |   |   |           |         |   |   |           |       |  
|-------------------------------------------------------------------------------------------- | ------------------------------ | ---------------------- | ---------- | ----- | - | ---- | --------- | ----- | - | ---- | --------- | ----- | - | - | --------- | ------- | - | - | --------- | ----- | -
|                                                                                             |                                |                       
|                                                                                             |                                | At December 31,       
|                                                                                             |                                |                       
|                                                                                             |                                | 2003                   |            | 2002  |   | 2001 |           | 2000  |   | 1999
|                                                                                             |                                |                        |            |       |   |      |           |       |   |     
|                                                                                             |                                |                       
|                                                                                             |                                | (Dollars in thousands)
|Total loans(1)                                                                               |                                | $                      | 11,138,483 |       |   | $    | 9,433,901 |       |   | $    | 7,551,726 |       |   | $ | 4,924,334 |         |   | $ | 2,181,898 |      
|Allowance for credit losses                                                                  |                                |                        | 301,602    |       |   |      | 269,352   |       |   |      | 178,218   |       |   |   | 104,006   |         |   |   | 64,217    |      
|Allowance for real estate owned losses                                                       |                                |                        | 100        |       |   |      | 250       |       |   |      | 250       |       |   |   | 250       |         |   |   | 784       |      
|Loans past due 60 days or more(2)                                                            |                                |                        | 91,381     |       |   |      | 86,199    |       |   |      | 74,851    |       |   |   | 37,911    |         |   |   | 17,514    |      
|Nonperforming loans(3)                                                                       |                                |                        | 53,026     |       |   |      | 39,231    |       |   |      | 25,347    |       |   |   | 9,413     |         |   |   | 11,279    |      
|Nonperforming assets(4)                                                                      |                                |                        | 63,600     |       |   |      | 54,923    |       |   |      | 35,127    |       |   |   | 14,684    |         |   |   | 13,250    |      
|Allowance for credit losses as a percentage of:                                              |                                |                        |            |       |   |      |           |       |   |      |           |       |   |   |           |         |   |   |           |      
|                                                                                             | Total loans                    |                        |            | 2.7   | % |      |           | 2.9   | % |      |           | 2.4   | % |   |           | 2.1     | % |   |           | 2.9   | %
|                                                                                             | Loans past due 60 days or more |                        |            | 330.0 | % |      |           | 312.5 | % |      |           | 238.1 | % |   |           | 274.3   | % |   |           | 366.7 | %
|                                                                                             | Nonperforming loans            |                        |            | 568.8 | % |      |           | 686.6 | % |      |           | 703.1 | % |   |           | 1,104.9 | % |   |           | 569.4 | %
|Total allowance for credit losses and REO losses
    as a percentage of nonperforming assets |                                |                        | 474.4      | %     |   |      | 490.9     | %     |   |      | 508.1     | %     |   |   | 710.0     | %       |   |   | 490.6     | %    
|Nonperforming loans as a percentage of total loans                                           |                                |                        | 0.5        | %     |   |      | 0.4       | %     |   |      | 0.3       | %     |   |   | 0.2       | %       |   |   | 0.5       | %    
|Nonperforming assets as a percentage of total
    assets                                     |                                |                        | 0.4        | %     |   |      | 0.4       | %     |   |      | 0.3       | %     |   |   | 0.2       | %       |   |   | 0.3       | %    



---



|    |                                                                            
|--- | ---------------------------------------------------------------------------
|(1) | Loans net of unearned interest and undisbursed
    loan proceeds.          
|   
|(2) | Excludes Chapter 13 bankruptcy accounts
    greater than 120 days past due.
|   
|(3) | All nonperforming loans are on nonaccrual.                                 
|   
|(4) | Repossessed automobiles and real estate owned,
    net of allowance.       

Capital Resources and Liquidity

Overview

We require substantial capital resources and cash
to support our business. Our ability to maintain positive cash
flows from operations is the result of our consistent managed
growth, favorable loss experience and efficient operations.

Principal Sources of Cash

We employ various sources to fund our operations,
including collections of principal and interest from loans,
deposits, securitizations, commercial paper, advances from the
FHLB, repurchase agreements, subordinated debentures and other
borrowings. The sources used vary depending on such factors as
rates paid, maturities, and the impact on capital.

Automobile Contract Sales and
Securitizations

Our primary source of funds is the ability to
aggregate and securitize contracts in the form of asset-backed
securities. These transactions generate cash proceeds that allow
us to repay amounts borrowed and to purchase additional
contracts. Since 1985, we have securitized over
$36.0 billion of automobile contracts in 62 public
offerings, making us the fourth largest issuer by dollar amount
of such securities in the nation.

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Collections of Principal and Interest from
Loans and MBS and Release of Cash from Spread Accounts

The collection of principal and interest from
contracts originated and securitized and the release of cash
from spread accounts is another significant source of funds for
us. Collections of principal and interest are deposited into
collection accounts established in connection with each
securitization or into our accounts for non-securitized
contracts. Pursuant to reinvestment contracts entered into in
connection with securitizations guaranteed under a financial
guarantee insurance policy issued by FSA, we receive access to
the amounts deposited into collection accounts and amounts held
in the spread accounts for these securitizations. We use those
amounts so received in our daily operations to fund the purchase
of contracts or to cover the day to day costs of operations. If
delinquency or chargeoff rates in a securitization exceed
established triggers, amounts required to be held in spread
accounts will increase, requiring us to pledge additional
collateral. We may bear additional expense due to an increase in
required collateral. If the reinvestment contracts were no
longer deemed an eligible investment, which determination would
be made by the rating agencies or FSA, we would no longer have
the ability to use this cash in the ordinary course of business
and would need to obtain alternative financing, which may only
be available on less attractive terms. See
Business  Transactions with Related
Parties  Reinvestment Contracts. If we were
unable to obtain additional financing, we may have to curtail
our contract purchasing activities, which would also have a
material adverse effect on our financial position, liquidity and
results of operations. Also, a significant increase in credit
losses could have a material adverse impact on our collections
of principal and interest from contracts.

Pursuant to the securitization agreements for our
securitizations that are credit enhanced through the issuance of
subordinated notes, we receive cash released from the trustee
from the spread accounts on such transactions once the spread
accounts reach predetermined funding levels. The amounts
released from these spread accounts represent the return of the
initial deposits to such accounts as well as the release of
excess spread on the securitized contracts.

For real estate loans and MBS, principal and
interest are deposited into our own accounts and such amounts
are also used in our daily operations.

Total principal and interest collections on MBS,
loans owned by us and loans securitized under a financial
guarantee insurance policy issued by FSA and release of cash
from spread accounts on securitizations that are credit enhanced
through the issuance of subordinated notes totaled
$6.4 billion, $7.2 billion and $5.9 billion for
the years ended December 31, 2003, 2002 and 2001,
respectively. The increase in principal and interest collections
is due to an increase in the amount of contracts managed and MBS
held by us.

Deposits

We attract both short-term and long-term deposits
from the general public, commercial enterprises and institutions
by offering a variety of accounts and rates. We offer regular
passbook accounts, demand deposit accounts, money market
accounts, certificate of deposit accounts and individual
retirement accounts. Our retail banking division gathers
deposits from 20 retail branch locations throughout Southern
California. Our commercial banking division gathers deposits by
establishing commercial relationships with businesses located
throughout Southern California.

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The following table sets forth the amount of our
deposits by type at the dates indicated:

|                      |                                      |                        |           |         |  |      |           |         |  |      |           |           |  |   |           |           |  |   |           |           | 
|--------------------- | ------------------------------------ | ---------------------- | --------- | ------- |  | ---- | --------- | ------- |  | ---- | --------- | --------- |  | - | --------- | --------- |  | - | --------- | --------- | 
|                      |                                      |                       
|                      |                                      | December 31,          
|                      |                                      |                       
|                      |                                      | 2003                   |           | 2002    |  | 2001 |           | 2000    |  | 1999
|                      |                                      |                        |           |         |  |      |           |         |  |     
|                      |                                      |                       
|                      |                                      | (Dollars in thousands)
|No minimum term:      |                                      |                        |           |         |  |      |           |         |  |      |           |           |  |   |           |           |  |   |           |          
|                      | Demand deposit accounts              |                        | $         | 1,145   |  |      | $         | 1,037   |  |      | $         | 1,124     |  |   | $         | 8,229     |  |   | $         | 60,365    | 
|                      | Passbook accounts                    |                        |           | 7,282   |  |      |           | 6,688   |  |      |           | 11,192    |  |   |           | 11,768    |  |   |           | 13,789    | 
|                      | Money market accounts                |                        |           | 963,004 |  |      |           | 730,245 |  |      |           | 858,371   |  |   |           | 810,169   |  |   |           | 574,589   | 
|                      | Noninterest bearing deposits         |                        |           | 210,405 |  |      |           | 165,844 |  |      |           | 100,170   |  |   |           | 67,984    |  |   |           | 47,770    | 
|Certificate accounts: |                                      |                        |           |         |  |      |           |         |  |      |           |           |  |   |           |           |  |   |           |          
|                      | Certificates (30 days to five years) |                        |           | 646,868 |  |      |           | 878,096 |  |      |           | 1,154,917 |  |   |           | 1,414,956 |  |   |           | 1,311,916 | 
|                      | Individual retirement accounts       |                        |           | 81,701  |  |      |           | 94,082  |  |      |           | 147,250   |  |   |           | 165,381   |  |   |           | 175,286   | 
|Brokered deposits     |                                      |                        | 62,451    |         |  |      | 98,992    |         |  |      | 56,302    |           |  |   |           |           |  |   | 28,594    |          
|                      |                                      |                        |           |         |  |      |           |         |  |      |           |           |  |   |           |           |  |   |           |          
|                      |                                      | $                      | 1,972,856 |         |  | $    | 1,974,984 |         |  | $    | 2,329,326 |           |  | $ | 2,478,487 |           |  | $ | 2,212,309 |          
|                      |                                      |                        |           |         |  |      |           |         |  |      |           |           |  |   |           |           |  |   |           |          

The variety of deposits we offer has allowed us
to remain competitive in obtaining funds and provided us the
flexibility to respond to changes in customer demand and
competitive pressures. Generally, as other financial
institutions, we have become more subject to short-term
fluctuations in deposit flows as customers have become more
interest rate conscious. Our ability to attract and maintain
deposits and control our cost of funds has been and will
continue to be significantly affected by market conditions.

The following table summarizes our average
certificate and money market accounts outstanding:

|                                                        |  |                                 |         |      |  |      |           |   |  |   |           |  
|------------------------------------------------------- |  | ------------------------------- | ------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                                                        |  |                                
|                                                        |  | For the Year Ended December 31,
|                                                        |  |                                
|                                                        |  | 2003                            |         | 2002 |  | 2001
|                                                        |  |                                 |         |      |  |     
|                                                        |  |                                
|                                                        |  | (Dollars in thousands)         
|Average certificate accounts outstanding                |  | $                               | 783,720 |      |  | $    | 1,154,090 |   |  | $ | 1,382,426 |  
|Average interest rate paid on certificate accounts      |  |                                 | 2.63    | %    |  |      | 3.58      | % |  |   | 5.84      | %
|Average money market accounts outstanding               |  | $                               | 855,460 |      |  | $    | 748,814   |   |  | $ | 750,924   |  
|Average interest rate paid on money market
    accounts |  |                                 | 1.33    | %    |  |      | 1.97      | % |  |   | 3.82      | %

Deposit accounts, subject to certain FDIC
attribution rules, are insured by the FDIC up to $100,000 per
customer. Our maturities of certificate accounts greater than or
equal to $100,000 were as follows:

|                                     |  |                        |         |      |  |   |         | 
|------------------------------------ |  | ---------------------- | ------- | ---- |  | - | ------- | 
|                                     |  |                       
|                                     |  | December 31,          
|                                     |  |                       
|                                     |  | 2003                   |         | 2002
|                                     |  |                        |         |     
|                                     |  |                       
|                                     |  | (Dollars in thousands)
|Three months or less                 |  | $                      | 2,449   |      |  | $ | 1,970   | 
|Over three months through six months |  |                        | 1,497   |      |  |   | 2,129   | 
|Over six months through one year     |  |                        | 186,647 |      |  |   | 180,374 | 
|Over one year through three years    |  |                        | 27,458  |      |  |   | 119,083 | 
|Over three years                     |  |                        | 1,844   |      |  |   | 1,726   | 
|                                     |  |                        |         |      |  |   |         | 
|                                     |  | $                      | 219,895 |      |  | $ | 305,282 | 
|                                     |  |                        |         |      |  |   |         | 

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Borrowings and Other Sources of
Funds

Our other sources of funds include commercial
paper, advances from the FHLB, sales of securities under
agreements to repurchase, other borrowings and cash generated
from operations. We select from among these funding alternatives
based on the timing and duration of our cash needs, as well as
the costs, maturities and other requirements of each funding
source.

The FHLB system functions in a reserve capacity
for savings institutions. As a member, we are required to own
capital stock in the FHLB and are authorized to apply for
advances from the FHLB on security of such stock and on certain
residential mortgage loans. The Bank has been pre-approved for
advances up to 25% of its assets, based on remaining
availability under credit facilities established by the Bank
with the FHLB, with 24 hours notice. Such borrowings may be
made pursuant to several different programs offered from time to
time by the FHLB. Additional funds are available subject to
additional collateral and other requirements. Each credit
program has its own interest rate, which may be fixed or
variable, and range of maturities. The FHLB prescribes the
acceptable uses to which advances pursuant to each program may
be put, as well as limitations on the sizes of advances and
repayment provisions.

Federal regulations have been promulgated which
connect CRA performance with access to long-term advances from
the FHLB to member institutions. The Bank received a
satisfactory rating in its most recent CRA
evaluation concluded in July 2003.

Subordinated Capital Debentures

In 1993, the Bank issued $125 million of
8.5% subordinated capital debentures due in 2003. The Bank
redeemed these subordinated debentures in July 2001. In 1998 and
2002, the Bank issued $150 million of 8.875% and
$300 million of 9.625% subordinated capital debentures due
in 2007 and 2012, respectively. At December 31, 2003,
$101 million and $300 million were outstanding on the
subordinated debentures due in 2007 and 2012, respectively,
excluding discounts and issue costs. The subordinated debentures
are redeemable at our option, in whole or in part, on or after
August 1, 2004 and May 15, 2009, respectively, both at
100% of the principal amount being redeemed plus accrued
interest as of the date of redemption. In addition to providing
additional liquidity, the Bank is permitted to include
$355 million of these debentures in supplementary capital
for purposes of determining compliance with risk-based capital
requirements. The Banks subordinated debentures are
included in supplementary capital for regulatory purposes. The
amount of the 8.875% debentures that may be included as
supplementary capital began to decrease at the rate of 20% of
the amount originally outstanding per year, net of redemptions,
on August 1, 2002. The 9.625% debentures will not begin to
be phased out as supplementary capital until May 15, 2007.
See Business  Supervision and
Regulation  Capital Requirements.

Conduit Financing

We have previously entered into secured conduit
financing transactions using an automobile receivable
securitization structure for short-term financing needs. For the
years ended December 31, 2002 and 2001, we issued
$775 million and $650 million of notes secured by
contracts through conduit facilities established in January 2002
and December 2001, respectively. We terminated the December 2001
facility in March 2002 in conjunction with a $1.8 billion
public asset-backed securitization. The January 2002 facility
was terminated in May 2002 in conjunction with a
$1.8 billion public asset-backed securitization. We did not
enter into a secured conduit financing in 2003.

Equity Offerings

We completed common stock offerings in July 2003
and November 2003 in which we raised a total of
$163 million and $207 million through the issuance of
6.1 million and 6.3 million additional common shares
at a price of $28.00 and $34.39 per share, respectively. With
the completion of these offerings, our total number of common
shares issued and outstanding increased 31.6% to
51.7 million shares at December 31, 2003.

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We completed rights offerings in March 2002 and
May 2001 in which we raised $51.3 million and
$61.0 million through the issuance of 3.3 million and
3.7 million additional common shares at a price of $15.75
and $16.25 per share, respectively. With the completion of the
March 2002 offering, our total number of common shares issued
and outstanding increased 9.1% to 39.1 million shares at
March 31, 2002, compared with an increase of 12% to
35.7 million shares in May 2001.

WFS completed rights offerings in March 2002 and
May 2001 that raised a total of $110 million and
$116 million through the issuance of 6.1 million and
6.4 million additional common shares at a price of $18.00
and $18.25 per share, respectively. With the completion of the
March 2002 offering, the number of WFS common shares issued and
outstanding increased by 18% to 41.1 million shares,
compared with an increase of 22% to 35.0 million shares in
May 2001.

Of the 6.1 million and 6.4 million
additional common shares issued by WFS in 2002 and 2001, the
Bank purchased 5.2 million and 5.3 million shares in
the amount of $94.4 million and $96.5 million,
respectively. The net amount of proceeds received from WFS
and our rights offerings executed in March 2002 and May 2001
totaled $67.3 million and $80.6 million, respectively.
At December 31, 2003, the Bank owned 84% of WFS
common stock.

Principal Uses of Cash

Acquisition of Loans and Investment
Securities

Our most significant use of cash is for the
acquisition of contracts, MBS and other investment securities.
Loan originations totaled $6.4 billion during 2003 compared
with $5.8 billion and $5.2 billion in 2002 and 2001,
respectively. We purchased $2.2 billion of MBS and other
investment securities during 2003 compared with
$1.6 billion and $1.2 billion during 2002 and 2001,
respectively.

Payments of Principal and Interest on
Securitizations

Under the terms of our reinvestment contract on
securitizations guaranteed under a financial guarantee insurance
policy issued by FSA, we fund quarterly payments of interest and
principal to these security holders derived from the cash flows
received on the securitized contracts that we service. Payments
of principal and interest to security holders totaled
$3.8 billion in 2003 compared with $5.6 billion and
$3.7 billion in 2002 and 2001, respectively. Payments of
principal and interest in 2002 include $1.5 billion of
payments on conduit financings.

Amounts Paid to Dealers

Consistent with industry practice, we generally
pay dealer participation to the originating dealer for each
contract purchased. Participation paid to dealers during 2003
totaled $141 million compared with $129 million and
$120 million in 2002 and 2001, respectively. Typically, the
acquisition of contracts higher up the prime credit quality
spectrum requires a higher amount of participation paid to the
dealers due to increased level of competition for such
contracts. The amount of participation paid to dealers increased
primarily as a result of an increase in the amount of contracts
purchased.

Advances to Spread Accounts

At the time a securitization transaction closes,
we are required to advance monies to initially fund the spread
account. On senior/ subordinated securitizations, the spread
account balance is invested in eligible mutual fund investments
by the trustee. The advanced monies are included in restricted
cash on our Consolidated Statements of Financial Condition. The
amount of such initial advances included in restricted cash was
$21.7 million at December 31, 2003 compared with
$12.5 million at December 31, 2002.

Operating Our Business

Our largest operating expenditure is salaries and
benefits paid to our associates. Other expenditures include
occupancy, collection, repossession, telephone and data
processing costs. We also use substantial

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amounts of cash in capital expenditures for
automation and new technologies to remain competitive and to
become more efficient. See Business  Our
Business Strategy  Create Operating Efficiencies
Through Technology and Best Practices.


Contractual Obligations

The following table lists our contractual
obligations:

|                                                  |                               |                        |         |             |  |             |           |            |  |           |           |           |  |   |           |           |  |   |       |       |  |   |            |            | 
|------------------------------------------------- | ----------------------------- | ---------------------- | ------- | ----------- |  | ----------- | --------- | ---------- |  | --------- | --------- | --------- |  | - | --------- | --------- |  | - | ----- | ----- |  | - | ---------- | ---------- | 
|                                                  |                               |                       
|                                                  |                               | At December 31, 2003  
|                                                  |                               |                       
|                                                  |                               |                        |         | More than   |  | More than   |           |           
|                                                  |                               |                        |         | One Year    |  | Three Years |           |           
|                                                  |                               | One Year               |         | through     |  | through     |           | More than  |  | No Stated |           |          
|                                                  |                               | or Less                |         | Three Years |  | Five years  |           | Five Years |  | Maturity  |           | Total    
|                                                  |                               |                        |         |             |  |             |           |            |  |           |           |          
|                                                  |                               |                       
|                                                  |                               | (Dollars in thousands)
|Certificate of deposits                           |                               | $                      | 694,837 |             |  | $           | 30,097    |            |  | $         | 3,635     |           |  |   |           |           |  |   |       |       |  | $ | 728,569    |           
|Notes payable on automobile secured financing(1)  |                               |                        | 429,446 |             |  |             | 1,670,993 |            |  |           | 4,478,079 |           |  | $ | 3,676,123 |           |  |   |       |       |  |   | 10,254,641 |           
|Securities sold under agreements to repurchase(1) |                               |                        | 222,489 |             |  |             |           |            |  |           |           |           |  |   |           |           |  |   |       |       |  |   | 222,489    |           
|Federal Home Loan Bank advances                   |                               |                        | 326,000 |             |  |             |           |            |  |           |           |           |  |   | 2,644     |           |  |   |       |       |  |   | 328,644    |           
|Subordinated debentures                           |                               |                        |         |             |  |             |           |            |  |           | 99,326    |           |  |   | 295,528   |           |  |   |       |       |  |   | 394,854    |           
|Other borrowings                                  |                               |                        | 9,046   |             |  |             |           |            |  |           |           |           |  |   |           |           |  |   |       |       |  |   | 9,046      |           
|Loan commitments                                  |                               |                        | 222,921 |             |  |             | 1,790     |            |  |           | 39        |           |  |   | 4         |           |  | $ | 1,959 |       |  |   | 226,713    |           
|Operating leases                                  |                               |                        | 6,917   |             |  |             | 10,298    |            |  |           | 5,867     |           |  |   | 4,807     |           |  |   |       |       |  |   | 27,889     |           
|                                                  |                               |                        |         |             |  |             |           |            |  |           |           |           |  |   |           |           |  |   |       |       |  |   |            |           
|                                                  | Total contractual obligations |                        | $       | 1,911,656   |  |             | $         | 1,713,178  |  |           | $         | 4,586,946 |  |   | $         | 3,979,106 |  |   | $     | 1,959 |  |   | $          | 12,192,845 | 
|                                                  |                               |                        |         |             |  |             |           |            |  |           |           |           |  |   |           |           |  |   |       |       |  |   |            |           



---



|    |                                            
|--- | -------------------------------------------
|(1) | Includes the effects of hedging activities.

Capital Requirements

The Bank is subject to certain minimum capital
requirements imposed by FIRREA and FDICIA. See
Business  Supervision and
Regulation  Capital Requirements. The Bank
currently meets all of the requirements of a well
capitalized financial institution.

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The following table summarizes the Banks
actual capital and required capital as of December 31, 2003
and 2002:

|                                          |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |           |  
|----------------------------------------- | ------------- | ---------------------- | - | ------- | - | ---------- | - | ---------- | - |  | - | ------- | - |  | - | --------- | -
|                                          |               |                        |   |         |   | Tier 1     |   |           
|                                          |               | Tangible               |   | Core    |   | Risk-Based |   | Risk-Based
|                                          |               | Capital                |   | Capital |   | Capital    |   | Capital   
|                                          |               |                        |   |         |   |            |   |           
|                                          |               |                       
|                                          |               | (Dollars in thousands)
|December 31, 2003                         |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|Actual capital:                           |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|                                          | Amount        |                        | $ | 884,536 |   |            | $ | 884,536    |   |  | $ | 881,517 |   |  | $ | 1,357,744 |  
|                                          | Capital ratio |                        |   | 7.06    | % |            |   | 7.06       | % |  |   | 9.20    | % |  |   | 14.17     | %
|FIRREA minimum required capital:          |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|                                          | Amount        |                        | $ | 187,923 |   |            | $ | 375,845    |   |  |   | N/A     |   |  | $ | 766,665   |  
|                                          | Capital ratio |                        |   | 1.50    | % |            |   | 3.00       | % |  |   | N/A     |   |  |   | 8.00      | %
|                                          | Excess        |                        | $ | 696,613 |   |            | $ | 508,691    |   |  |   | N/A     |   |  | $ | 591,079   |  
|FDICIA well capitalized required capital: |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|                                          | Amount        |                        |   | N/A     |   |            | $ | 626,409    |   |  | $ | 574,999 |   |  | $ | 958,332   |  
|                                          | Capital ratio |                        |   | N/A     |   |            |   | 5.00       | % |  |   | 6.00    | % |  |   | 10.00     | %
|                                          | Excess        |                        |   | N/A     |   |            | $ | 258,127    |   |  | $ | 306,518 |   |  | $ | 399,412   |  
|December 31, 2002                         |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|Actual capital:                           |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|                                          | Amount        |                        | $ | 728,631 |   |            | $ | 728,631    |   |  | $ | 655,142 |   |  | $ | 1,143,345 |  
|                                          | Capital ratio |                        |   | 6.43    | % |            |   | 6.43       | % |  |   | 7.67    | % |  |   | 13.38     | %
|FIRREA minimum required capital:          |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|                                          | Amount        |                        | $ | 169,991 |   |            | $ | 339,981    |   |  |   | N/A     |   |  | $ | 683,481   |  
|                                          | Capital ratio |                        |   | 1.50    | % |            |   | 3.00       | % |  |   | N/A     |   |  |   | 8.00      | %
|                                          | Excess        |                        | $ | 558,640 |   |            | $ | 388,650    |   |  |   | N/A     |   |  | $ | 459,864   |  
|FDICIA well capitalized required capital: |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|                                          | Amount        |                        |   | N/A     |   |            | $ | 566,635    |   |  | $ | 512,611 |   |  | $ | 854,351   |  
|                                          | Capital ratio |                        |   | N/A     |   |            |   | 5.00       | % |  |   | 6.00    | % |  |   | 10.00     | %
|                                          | Excess        |                        |   | N/A     |   |            | $ | 161,996    |   |  | $ | 142,531 |   |  | $ | 288,994   |  

The following table reconciles the Banks
capital in accordance with GAAP to the Banks tangible,
core and risk-based capital:

|                                           |                                                  |                        |           |         |   |   |           |         |  
|------------------------------------------ | ------------------------------------------------ | ---------------------- | --------- | ------- | - | - | --------- | ------- | -
|                                           |                                                  |                       
|                                           |                                                  | December 31,          
|                                           |                                                  |                       
|                                           |                                                  | 2003                   |           | 2002   
|                                           |                                                  |                        |           |        
|                                           |                                                  |                       
|                                           |                                                  | (Dollars in thousands)
|Bank shareholders equity  GAAP
    basis |                                                  | $                      | 685,045   |         |   | $ | 532,902   |        
|                                           | Add: Net unrealized losses                       |                        |           | 68,203  |   |   |           | 94,220  |  
|                                           | Add: Minority interest in equity of subsidiaries |                        |           | 131,434 |   |   |           | 101,666 |  
|                                           | Less: Non-permissible activities                 |                        |           | (146    | ) |   |           | (157    | )
|                                           |                                                  |                        |           |         |   |   |           |        
|Total tangible and core capital            |                                                  |                        | 884,536   |         |   |   | 728,631   |        
|Adjustments for risk-based capital:        |                                                  |                        |           |         |   |   |           |        
|                                           | Subordinated debentures(1)                       |                        |           | 355,370 |   |   |           | 380,314 |  
|                                           | General loan valuation allowance(2)              |                        |           | 120,857 |   |   |           | 107,889 |  
|                                           | Low-level recourse deduction                     |                        |           | (3,019  | ) |   |           | (73,489 | )
|                                           |                                                  |                        |           |         |   |   |           |        
|Risk-based capital                         |                                                  | $                      | 1,357,744 |         |   | $ | 1,143,345 |        
|                                           |                                                  |                        |           |         |   |   |           |        



---



|    |                                                
|--- | -----------------------------------------------
|(1) | Excludes capitalized discounts and issue costs.
|   
|(2) | Limited to 1.25% of risk-weighted assets.      

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We manage the Bank to higher internal capital
targets than the standards defined by FDICIA for qualification
as well capitalized because, among other reasons,
many of the contracts we originate possess one or more of the
factors identified by the OTS as factors indicative of subprime
loans. See Business Risks  OTS Guidance
Regarding Subprime Lending May Affect the Banks Capital
Requirements. Starting in the fifth year prior to
maturity, 20% per year of the principal amount of subordinated
debentures outstanding can no longer be included as
supplementary capital. As a result, we will need to replace that
capital in order to maintain the current capital levels of the
Bank. Capital can be increased through increases in retained
earnings and from the issuance of equity and new subordinated
debentures. In addition, the amount of capital required can be
reduced through sales of assets.






|         |                                                              
|-------- | -------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosure
    About Market Risk

Fluctuations in interest rates and early
prepayment of contracts are the primary market risks facing us.
Our Credit and Pricing Committee is responsible for setting
credit and pricing policies and for monitoring credit quality.
Our Asset/ Liability Committee is responsible for the management
of interest rate and prepayment risks. Asset/ liability
management is the process of measuring and controlling interest
rate risk through matching the maturity and repricing
characteristics of interest earning assets with those of
interest bearing liabilities.

The Asset/ Liability Committee closely monitors
interest rate and prepayment risks and recommends policies for
managing such risks. The primary measurement tool for evaluating
this risk is the use of interest rate shock analysis. This
analysis simulates the effects of an instantaneous and sustained
change in interest rates (in increments of 100 basis points) on
our assets and liabilities and measures the resulting increase
or decrease to our net portfolio value, also known as NPV. NPV
is the discounted value of the future cash flows (or
paths of cash flows in the presence of options based
on volatility assumptions and an arbitrage free Monte Carlo
simulation method to achieve the current market price) of all
assets minus all liabilities whose value is affected by interest
rates changes plus the book value of non-interest rate sensitive
assets minus the book value of non-interest rate sensitive
liabilities. It should be noted that shock analysis is objective
but not entirely realistic in that it assumes an instantaneous
and isolated set of events. The NPV ratio is the ratio of the
NPV to the market value of our assets as calculated above. In
general, an increase in interest rates would more adversely
affect our NPV than would a decrease in interest rates.

The following table summarizes our NPV
sensitivity analysis at December 31, 2003 based on guidance
from the OTS:

|                          |  |           |      |  
|------------------------- |  | --------- | ---- | -
|Changes in Interest Rates |  | NPV Ratio
|                          |  |          
|+100 basis points         |  |           | 9.50 | %
|Base case                 |  |           | 9.63 | %
|-100 basis points         |  |           | 9.91 | %

Another important measurement of our interest
rate risk is gap analysis. Gap is defined as the
difference between the amount of interest sensitive assets that
reprice versus the amount of interest sensitive liabilities that
also reprice within a defined period of time. We have more
interest sensitive liabilities rather than assets repricing in
shorter term maturity buckets and more interest sensitive assets
rather than liabilities repricing in longer term maturity
buckets.

57



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The following table summarizes our maturity gap
position:

|                                                                           |                                                   |                                                         |                                    |             |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           |            |         |            | 
|-------------------------------------------------------------------------- | ------------------------------------------------- | ------------------------------------------------------- | ---------------------------------- | ----------- | ------- | --------- | -------- | ---------- | ------- | --------- | ---------- | --------- | ------- | --------- | --------- | --------- | ----- | --------- | --------- | ------- | --- | ------- | --------- | ---------- | ------- | ---------- | 
|                                                                           |                                                   |                                                        
|                                                                           |                                                   | Interest Rate Sensitivity Analysis at December 31, 2003
|                                                                           |                                                   |                                                        
|                                                                           |                                                   | Within                                                  |                                    | 3 Months to |         | 1 Year to |          | 3 Years to |         | After     |            |          
|                                                                           |                                                   | 3 Months                                                |                                    | 1 Year      |         | 3 Years   |          | 5 Years    |         | 5 Years   |            | Total    
|                                                                           |                                                   |                                                         |                                    |             |         |           |          |            |         |           |            |          
|                                                                           |                                                   |                                                        
|                                                                           |                                                   | (Dollars in thousands)                                 
|Interest earning assets:                                                   |                                                   |                                                         |                                    |             |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           |           
|                                                                           | Investment securities                             |                                                         | $                                  | 67,646      |         |           |          |            |         |           | $          | 50,103    |         |           |           |           |       |           |           |         |     |         | $         | 117,749    |        
|                                                                           | Other investments                                 |                                                         |                                    | 577,208     |         |           | $        | 200        |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           | 577,408    |        
|                                                                           | Mortgage-backed securities                        |                                                         |                                    | 633,909     |         |           |          | 1,018,740  |         |           |            | 746,985   |         |           | $         | 189,813   |       |           | $         | 112,350 |     |         |           | 2,701,797  |        
|                                                                           |                                                   |                                                         |                                    |             |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           |           
|                                                                           |                                                   |                                                         | Total investments                  |             |         | 1,278,763 |          |            |         | 1,018,940 |            |           |         | 797,088   |           |           |       | 189,813   |           |         |     | 112,350 |           |            |         | 3,396,954  | 
|                                                                           | Consumer loans(1)                                 |                                                         |                                    | 758,797     |         |           |          | 2,983,401  |         |           |            | 5,099,017 |         |           |           | 1,883,438 |       |           |           | 53,176  |     |         |           | 10,777,829 |        
|                                                                           | Mortgage loans:                                   |                                                         |                                    |             |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           |            |        
|                                                                           |                                                   | Adjustable rate(2)                                      |                                    |             | 201,023 |           |          |            | 12,005  |           |            |           |         |           |           |           |       |           |           |         |     |         |           |            | 213,028 |           
|                                                                           |                                                   | Fixed rate(2)                                           |                                    |             | 2,781   |           |          |            | 7,506   |           |            |           | 5,520   |           |           |           | 1,314 |           |           |         | 952 |         |           |            | 18,073  |           
|                                                                           | Construction loans(2)                             |                                                         |                                    | 5,122       |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           | 5,122      |        
|                                                                           | Commercial loans(2)                               |                                                         |                                    | 124,242     |         |           |          | 150        |         |           |            | 39        |         |           |           |           |       |           |           |         |     |         |           | 124,431    |        
|                                                                           |                                                   |                                                         |                                    |             |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           |           
|                                                                           |                                                   |                                                         | Total interest earning assets      |             |         | 2,370,728 |          |            |         | 4,022,002 |            |           |         | 5,901,664 |           |           |       | 2,074,565 |           |         |     | 166,478 |           |            |         | 14,535,437 | 
|Interest bearing liabilities:                                              |                                                   |                                                         |                                    |             |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           |           
|                                                                           | Deposits:                                         |                                                         |                                    |             |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           |            |        
|                                                                           |                                                   | Passbook accounts(3)                                    |                                    |             | 760     |           |          |            | 2,754   |           |            |           | 3,768   |           |           |           |       |           |           |         |     |         |           |            | 7,282   |           
|                                                                           |                                                   | Demand deposit and money market accounts(3)             |                                    |             | 232,806 |           |          |            | 323,319 |           |            |           | 408,023 |           |           |           |       |           |           |         |     |         |           |            | 964,148 |           
|                                                                           |                                                   | Certificate accounts(4)                                 |                                    |             | 175,505 |           |          |            | 581,789 |           |            |           | 30,092  |           |           |           | 3,634 |           |           |         |     |         |           |            | 791,020 |           
|                                                                           | FHLB advances(4)                                  |                                                         |                                    | 326,000     |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           | 2,644   |     |         |           | 328,644    |        
|                                                                           | Securities sold under agreements to repurchase(4) |                                                         |                                    | 222,489     |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           | 222,489    |        
|                                                                           | Notes payable on automobile secured financing(1)  |                                                         |                                    | 2,938,946   |         |           |          | 2,678,682  |         |           |            | 3,714,853 |         |           |           | 922,160   |       |           |           |         |     |         |           | 10,254,641 |        
|                                                                           | Subordinated debentures(4)                        |                                                         |                                    |             |         |           |          |            |         |           |            |           |         |           |           | 99,326    |       |           |           | 295,528 |     |         |           | 394,854    |        
|                                                                           | Other borrowings(4)                               |                                                         |                                    | 9,046       |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           | 9,046      |        
|                                                                           |                                                   |                                                         |                                    |             |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           |           
|                                                                           |                                                   |                                                         | Total interest bearing liabilities |             |         | 3,905,552 |          |            |         | 3,586,544 |            |           |         | 4,156,736 |           |           |       | 1,025,120 |           |         |     | 298,172 |           |            |         | 12,972,124 | 
|                                                                           |                                                   |                                                         |                                    |             |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           |           
|Excess interest earning/ bearing assets
    (liabilities)                  |                                                   |                                                         | (1,534,824                         | )           |         |           | 435,458  |            |         |           | 1,744,928  |           |         |           | 1,049,445 |           |       |           | (131,694  | )       |     |         | 1,563,313 |           
|Effect of hedging activities(5)                                            |                                                   |                                                         | 2,626,895                          |             |         |           | (565,901 | )          |         |           | (1,306,574 | )         |         |           | (309,920  | )         |       |           | (444,500  | )       |     |         |           |           
|                                                                           |                                                   |                                                         |                                    |             |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           |           
|Hedged excess (deficit)                                                    |                                                   | $                                                       | 1,092,071                          |             |         | $         | (130,443 | )          |         | $         | 438,354    |           |         | $         | 739,525   |           |       | $         | (576,194  | )       |     | $       | 1,563,313 |           
|                                                                           |                                                   |                                                         |                                    |             |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           |           
|Cumulative excess                                                          |                                                   | $                                                       | 1,092,071                          |             |         | $         | 961,628  |            |         | $         | 1,399,982  |           |         | $         | 2,139,507 |           |       | $         | 1,563,313 |         |     | $       | 1,563,313 |           
|                                                                           |                                                   |                                                         |                                    |             |         |           |          |            |         |           |            |           |         |           |           |           |       |           |           |         |     |         |           |           
|Cumulative difference as a percentage of total
    interest earning assets |                                                   |                                                         | 7.51                               | %           |         |           | 6.62     | %          |         |           | 9.63       | %         |         |           | 14.72     | %         |       |           | 10.76     | %       |     |         | 10.76     | %         



---



|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(1) | Based on contractual maturities adjusted by our
    historical prepayment rate.
|   
|(2) | Based on interest rate repricing adjusted for
    projected prepayments.       
|   
|(3) | Based on assumptions established by the OTS.                                   
|   
|(4) | Based on contractual maturity.                                                 
|   
|(5) | Includes effect of interest rate caps and swaps
    on the MBS portfolio.      

58



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The contracts originated and held by us are fixed
rate and, accordingly, we have exposure to changes in interest
rates. To protect against potential changes in interest rates
affecting interest payments on future securitization
transactions, we may enter into various hedge agreements prior
to closing the transaction. We enter into Euro-dollar future
contracts and forward agreements in order to hedge our future
interest payments on our notes payable on automobile secured
financing. The market value of these hedge agreements is
designed to respond inversely to changes in interest rates.
Because of this inverse relationship, we can effectively lock in
a gross interest rate spread at the time of entering into the
hedge transaction. Gains and losses on these agreements are
recorded in accumulated other comprehensive income (loss), net
of tax, on our Consolidated Statements of Financial Condition.
Any ineffective portion is recognized in interest expense during
that period if the hedge is greater than 100% effective. Upon
completion of the securitization transaction, the gains or
losses are recognized in full as an adjustment to the gain or
loss on the sale of the contracts if the securitization
transaction is treated as a sale or amortized on a level yield
basis over the duration of the notes issued if the transaction
is treated as a secured financing. These hedge instruments are
settled daily, and therefore, there are no related financial
instruments recorded on the consolidated statements of financial
condition. Credit risk related to these hedge instruments is
minimal. As a result of our approach to interest rate risk
management and our hedging strategies, we do not anticipate that
changes in interest rates will materially affect our results of
operations or liquidity, although we can provide no assurance in
this regard.

As we issued certain variable rate notes payable
in connection with our securitization activities, we also
entered into interest rate swap agreements in order to hedge our
variable interest rate exposure on future interest payments. The
fair value of the interest rate swap agreements is included in
notes payable on automobile secured financing, and any change in
the fair value is reported as accumulated other comprehensive
income (loss), net of tax, on our Consolidated Statements of
Financial Condition. Any ineffective portion is recorded in
interest expense during that period if the hedge is greater than
100% effective. Related interest income or expense is settled on
a quarterly basis and recognized as an adjustment to interest
expense in our Consolidated Statements of Income.

We have entered into interest rate swap
agreements or other derivatives that we choose not to designate
as hedges or that do not qualify for hedge accounting under
SFAS No. 133. These derivatives pertain to variable
rate notes issued in conjunction with the securitization of our
contracts. Any change in the market value of such derivatives
and any income or expense recognized on such derivatives is
recorded to noninterest income.

We have entered into or committed to interest
rate swaps as hedges against deposits and securities sold under
agreements to repurchase to manage interest rate risk exposure.
The fair value of the interest rate swap agreements is included
in deposits and securities sold under agreements to repurchase,
respectively and any change in the fair value is reported as
accumulated other comprehensive income (loss), net of tax, on
our Consolidated Statements of Financial Condition. Related
interest income or expense is settled on a quarterly basis and
is recorded in accumulated other comprehensive income (loss) and
reclassified into earnings in the period during which cash flows
on the hedged items affect income.

The Asset/ Liability Committee monitors our
hedging activities to ensure that the value of hedges, their
correlation to the contracts being hedged and the amounts being
hedged continue to provide effective protection against interest
rate risk. The amount and timing of hedging transactions are
determined by our senior management based upon the monitoring
activities of the Asset/ Liability Committee. As a result of our
approach to interest rate risk management and our hedging
strategies, we do not anticipate that changes in interest rates
will materially affect our results of operations or liquidity,
although we can provide no assurance in this regard. There were
no material changes in market risks in the current year compared
with the prior year.

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The following table provides information about
our derivative financial instruments and other financial
instruments used that are sensitive to changes in interest
rates. For loans, securities and liabilities with contractual
maturities, the table presents principal cash flows and related
weighted average interest rates by contractual maturities as
well as our historical experience of the impact of interest rate
fluctuations on the prepayment of real estate loans, contracts
and MBS. For passbook, money market and interest bearing demand
deposit accounts that have no contractual maturity, the table
presents principal cash flows and, as applicable, related
weighted average interest rates based on our historical
experience, managements judgment and statistical analysis,
as applicable, concerning their most likely withdrawal
behaviors. For interest rate swap agreements, the table presents
notional amounts and, as applicable, weighted average interest
rates by contractual maturity date. Notional amounts are used to
calculate the contractual payments to be exchanged under the
contracts.

|                                                             |                       |                        |           |       |   |      |           |       |   |      |           |            |   |       |           |            |   |   |         |      |   |   |          |      |   |   |            |       |   |   |            |   | 
|------------------------------------------------------------ | --------------------- | ---------------------- | --------- | ----- | - | ---- | --------- | ----- | - | ---- | --------- | ---------- | - | ----- | --------- | ---------- | - | - | ------- | ---- | - | - | -------- | ---- | - | - | ---------- | ----- | - | - | ---------- | - | 
|                                                             |                       | 2004                   |           | 2005  |   | 2006 |           | 2007  |   | 2008 |           | Thereafter |   | Total |           | Fair Value
|                                                             |                       |                        |           |       |   |      |           |       |   |      |           |            |   |       |           |           
|                                                             |                       |                       
|                                                             |                       | (Dollars in thousands)
|Rate sensitive assets:                                       |                       |                        |           |       |   |      |           |       |   |      |           |            |   |       |           |            |   |   |         |      |   |   |          |      |   |   |            |       |   |   |            |  
|Fixed interest rate loans                                    |                       | $                      | 3,747,906 |       |   | $    | 3,049,438 |       |   | $    | 2,055,139 |            |   | $     | 1,219,004 |            |   | $ | 665,749 |      |   | $ | 54,129   |      |   | $ | 10,791,365 |       |   | $ | 11,662,739 |  
|                                                             | Average interest rate |                        |           | 11.08 | % |      |           | 11.04 | % |      |           | 10.80      | % |       |           | 10.38      | % |   |         | 7.44 | % |   |          | 8.65 | % |   |            | 10.70 | % |   |            |   | 
|Variable interest rate loans                                 |                       | $                      | 347,118   |       |   |      |           |       |   |      |           |            |   |       |           |            |   |   |         |      |   |   |          |      |   | $ | 347,118    |       |   | $ | 341,651    |  
|Average interest rate                                        |                       |                        | 4.72      | %     |   |      |           |       |   |      |           |            |   |       |           |            |   |   |         |      |   |   |          |      |   |   | 4.72       | %     |   |   |            |  
|Fixed interest rate securities                               |                       | $                      | 1,731,656 |       |   | $    | 551,627   |       |   | $    | 245,461   |            |   | $     | 124,273   |            |   | $ | 65,540  |      |   | $ | 112,350  |      |   | $ | 2,830,907  |       |   | $ | 2,868,539  |  
|Average interest rate                                        |                       |                        | 2.73      | %     |   |      | 3.55      | %     |   |      | 3.73      | %          |   |       | 3.77      | %          |   |   | 3.83    | %    |   |   | 4.06     | %    |   |   | 3.10       | %     |   |   |            |  
|Variable interest rate securities                            |                       | $                      | 566,047   |       |   |      |           |       |   |      |           |            |   |       |           |            |   |   |         |      |   |   |          |      |   | $ | 566,047    |       |   | $ | 561,358    |  
|Average interest rate                                        |                       |                        | 2.42      | %     |   |      |           |       |   |      |           |            |   |       |           |            |   |   |         |      |   |   |          |      |   |   | 2.42       | %     |   |   |            |  
|Rate sensitive
    liabilities:                              |                       |                        |           |       |   |      |           |       |   |      |           |            |   |       |           |            |   |   |         |      |   |   |          |      |   |   |            |       |   |   |            |  
|Passbook deposits                                            |                       | $                      | 3,513     |       |   | $    | 2,380     |       |   | $    | 1,389     |            |   |       |           |            |   |   |         |      |   |   |          |      |   | $ | 7,282      |       |   | $ | 7,132      |  
|Average interest rate                                        |                       |                        | 0.10      | %     |   |      | 0.11      | %     |   |      | 0.11      | %          |   |       |           |            |   |   |         |      |   |   |          |      |   |   | 0.10       | %     |   |   |            |  
|Money market and interest bearing demand deposits            |                       | $                      | 556,126   |       |   | $    | 288,446   |       |   | $    | 119,577   |            |   |       |           |            |   |   |         |      |   |   |          |      |   | $ | 964,149    |       |   | $ | 954,475    |  
|Average interest rate                                        |                       |                        | 0.93      | %     |   |      | 1.30      | %     |   |      | 1.50      | %          |   |       |           |            |   |   |         |      |   |   |          |      |   |   | 1.11       | %     |   |   |            |  
|Certificates of deposit                                      |                       | $                      | 757,293   |       |   | $    | 26,886    |       |   | $    | 3,207     |            |   | $     | 3,309     |            |   | $ | 325     |      |   |   |          |      |   | $ | 791,020    |       |   | $ | 793,933    |  
|Average interest rate                                        |                       |                        | 1.70      | %     |   |      | 3.00      | %     |   |      | 2.96      | %          |   |       | 3.95      | %          |   |   | 2.11    | %    |   |   |          |      |   |   | 1.76       | %     |   |   |            |  
|Notes payable under automobile secured
    financing  fixed |                       | $                      | 3,804,431 |       |   | $    | 2,137,247 |       |   | $    | 1,577,606 |            |   | $     | 922,160   |            |   |   |         |      |   |   |          |      |   | $ | 8,441,444  |       |   | $ | 8,697,847  |  
|Average interest rate                                        |                       |                        | 3.29      | %     |   |      | 2.97      | %     |   |      | 3.32      | %          |   |       | 2.98      | %          |   |   |         |      |   |   |          |      |   |   | 3.18       | %     |   |   |            |  
|Notes payable on automobile secured
    financing  variable |                       | $                      | 1,813,197 |       |   |      |           |       |   |      |           |            |   |       |           |            |   |   |         |      |   |   |          |      |   | $ | 1,813,197  |       |   | $ | 1,813,197  |  
|Average interest rate                                        |                       |                        | 1.15      | %     |   |      |           |       |   |      |           |            |   |       |           |            |   |   |         |      |   |   |          |      |   |   | 1.15       | %     |   |   |            |  
|Other fixed interest rate borrowings                         |                       | $                      | 548,489   |       |   |      |           |       |   |      |           |            |   | $     | 99,326    |            |   |   |         |      |   | $ | 298,172  |      |   | $ | 945,987    |       |   | $ | 946,832    |  
|Average interest rate                                        |                       |                        | 1.02      | %     |   |      |           |       |   |      |           |            |   |       | 8.87      | %          |   |   |         |      |   |   | 9.60     | %    |   |   | 4.58       | %     |   |   |            |  
|Other variable interest rate borrowings                      |                       | $                      | 9,046     |       |   |      |           |       |   |      |           |            |   |       |           |            |   |   |         |      |   |   |          |      |   | $ | 9,046      |       |   | $ | 9,049      |  
|Average interest rate                                        |                       |                        | 2.64      | %     |   |      |           |       |   |      |           |            |   |       |           |            |   |   |         |      |   |   |          |      |   |   | 2.64       | %     |   |   |            |  
|Rate sensitive
    derivative financial
    instruments:     |                       |                        |           |       |   |      |           |       |   |      |           |            |   |       |           |            |   |   |         |      |   |   |          |      |   |   |            |       |   |   |            |  
|Interest rate swap agreements                                |                       | $                      | 1,714,769 |       |   | $    | (724,865  | )     |   | $    | (334,454  | )          |   | $     | (210,950  | )          |   |   |         |      |   | $ | (444,500 | )    |   |   |            |       |   | $ | (115,529   | )
|Average pay rate                                             |                       |                        | 4.27      | %     |   |      | 3.92      | %     |   |      | 3.20      | %          |   |       | 7.28      | %          |   |   |         |      |   |   | 6.00     | %    |   |   | 4.59       | %     |   |   |            |  
|Average receive rate                                         |                       |                        | 1.21      | %     |   |      | 1.19      | %     |   |      | 1.21      | %          |   |       | 1.17      | %          |   |   |         |      |   |   | 1.16     | %    |   |   | 1.19       | %     |   |   |            |  
|Euro-dollar futures contracts                                |                       | $                      | 346,225   |       |   | $    | (139,636  | )     |   | $    | (107,619  | )          |   | $     | (98,970   | )          |   |   |         |      |   |   |          |      |   |   |            |       |   |   |            |  

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Glossary

ALLOWANCE FOR CREDIT LOSSES: An account
established to cover probable credit losses. If we believe a
loan is uncollectible, we set aside in the allowance account a
portion of earnings equal to the difference between unpaid
principal and the market value of the loan. If the loan is
charged off, we reduce the loan balance and the allowance by
equal amounts.

ASSET-BACKED SECURITIES: Securities that are
backed by financial assets such as automobile contracts.

AUTOMOBILE CONTRACTS: Closed-end loans secured by
a first lien on a vehicle.

BOOK VALUE PER COMMON SHARE: The value of a share
of common stock based on the values at which the assets are
recorded on the balance sheet determined by dividing
shareholders equity excluding accumulated other
comprehensive income or loss by the total number of common
shares outstanding.

CHARGEOFF: A loan written off as uncollectible.

CHARGEOFF RATE: Net annualized chargeoffs divided
by average receivables outstanding for the period.

COMMERCIAL LOAN COMMITMENTS: Legally binding
agreements to provide commercial financing at a future date.

CONDUIT FINANCING: A transaction involving the
transfer of a pool of assets to a trust, wherein securities
representing undivided interests in, or obligations of, the
trust, are purchased by an investor that issues short-term
notes. The transaction is treated as a secured financing.

CORE CAPITAL: A capital measure applicable to
savings institutions. The Banks core capital is comprised
of common shareholders equity (excluding certain
components of accumulated other comprehensive income or loss),
minority interest in includable consolidated subsidiaries, less
investments in and advances to nonincludable subsidiaries.

CORE CAPITAL RATIO: A regulatory measurement of
capital adequacy. The Banks core capital ratio is core
capital to total assets adjusted for assets in certain
subsidiaries that cannot be included and certain unrealized
gains or losses on certain securities and cash flow hedges.

DEALER PARTICIPATION: The amount paid to a dealer
for the purchase of an automobile contract in excess of the
principal amount financed.

DELINQUENCY: A method of determining aging of
past due accounts based on the status of payments under the loan.

DERIVATIVES: Interest rate swaps, futures,
forwards, option contracts or other financial instruments used
for asset and liability management purposes. These instruments
derive their values or contractually determined cash flows from
the price of an underlying asset or liability, reference rate,
index or other security.

DEFERRED TAX ASSET: An asset attributable to
deductible temporary differences and carryforwards. A deferred
tax asset is measured using the applicable enacted tax rate and
provisions of the enacted tax law.

DEFERRED TAX LIABILITY: A liability attributable
to taxable temporary differences. A deferred tax liability is
measured using the applicable enacted tax rate and provisions of
the enacted law.

DIVIDEND PAYOUT RATIO: Dividends per share
divided by net income per share.

EARNING PER SHARE (EPS): The most common method
of expressing a companys profitability. Its purpose is to
indicate how effective an enterprise has been in using the
resources provided by common shareholders. EPS is usually
presented in two ways: basic EPS and diluted EPS. The
computation of basic EPS includes other instruments that are
equivalent to common stock. Diluted EPS includes all instruments
that have the potential of causing additional shares of common
stock to be issued, such as unexercised stock options.

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EURO-DOLLAR FUTURES CONTRACTS: Futures contracts
used as a hedge to lock in a gross spread on a future
securitization transaction prior to closing the transaction.

FEDERAL FUNDS: Non-interest bearing deposits held
by member banks at the Federal Reserve Bank.

FEE INCOME: Income from documentation fees, late
charges, deferment fees, transaction processing fees, service
charges on deposit accounts and other fees.

FHLB: The Federal Home Loan Bank, a network of
twelve regional Federal Home Loan Banks chartered by Congress in
1932 to ensure financial institutions have access to money to
lend to consumers for home mortgages.

FHLMC: The Federal Home Loan Mortgage
Corporation, a government-chartered corporation that buys
qualified mortgage loans from the financial institutions that
originate them, securitizes the loans, and distributes the
securities through the dealer community.

FNMA: The Federal National Mortgage Association,
a congressionally chartered corporation that buys mortgages on
the secondary market, pools them and sells them as
mortgage-backed securities to investors on the open market.

FORWARD AGREEMENTS: Contracts to exchange
payments on a specified future date, based on a market change in
interest rates from trade date to contract settlement date.

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP):
Accounting rules and conventions defining acceptable practices
in preparing financial statements in the United States of
America. The Financial Accounting Standards Board (FASB), an
independent self-regulatory organization, is the primary source
of accounting rules.

GNMA: The Government National Mortgage
Association, a U.S. Government-owned corporation that
guarantees timely payment of principal and interest on specified
mortgage-backed certificates.

HEDGE: A derivative instrument designed to reduce
or eliminate risk, such as interest rate risk. To be treated as
a hedge under GAAP, the instrument must meet certain
requirements as defined under Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, as amended, also known as SFAS 133.
Under SFAS 133, a derivative must be expected to be highly
effective in reducing the hedged risk in order to utilize the
special accounting allowed for hedges. In addition, the hedge
must be assessed as being highly effective on an ongoing basis
throughout its life. The ineffective portion of a hedge is
recorded in earnings immediately.

HOLDING COMPANY: A corporation or other entity
that owns a majority of stock or securities of one or more other
corporations, thus obtaining control of the other corporations.

INTEREST BEARING LIABILITIES: The sum of
deposits, notes, subordinated debt and other borrowings on which
interest expense is incurred.

INTEREST EARNING ASSETS: The sum of loans and
investments on which interest income is earned.

INTEREST RATE SPREAD: The difference between the
yield on our interest earning assets and the rate paid on our
interest bearing liabilities.

INTEREST RATE SWAP: A contract between two
parties to exchange interest payments on a notional amount for a
specified period. Typically, one party makes fixed rate
payments, while the other party makes payments using a variable
rate. Such a transaction is commonly used to manage the asset or
liability sensitivity of a balance sheet by converting fixed
rate assets or liabilities to floating rates, or vice versa.

LIBOR: London Interbank Offered Rate, which is a
widely quoted market rate that is frequently the index used to
determine the rate at which our subsidiaries or we borrow funds.

LIQUIDITY: A measure of how quickly we can
convert assets to cash or raise additional cash by issuing debt.

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MANAGED LOANS or MANAGED PORTFOLIO: Loans on the
balance sheet plus contracts securitized in transactions treated
as sales under GAAP, which we continue to service.

MINORITY INTEREST: Less than 50% ownership of a
corporations voting stock or not enough ownership to
control company operations. When a parent owns a majority (but
less than 100%) of a subsidiarys stock, the Consolidated
Financial Statements must reflect the minoritys interest
in the subsidiary. The minority interest as shown on the
Consolidated Statements of Income is equal to the
minoritys proportionate share of the subsidiarys net
income. The minority interest as shown on the Consolidated
Statements of Financial Condition is equal to the
minoritys proportionate share of the subsidiarys net
assets.

MORTGAGE-BACKED SECURITY (MBS): A security
secured by or representing an undivided interest in a pool of
mortgage loans each of which mortgage loans is secured by a
completed single family dwelling (one-to-four family units),
which security is either guaranteed by GNMA or issued or
guaranteed by FNMA or FHLMC.

MORTGAGE LOAN: Closed-end loans and revolving
lines of credit secured by first or second liens on residential
real estate.

NET CHARGEOFFS or NET CREDIT LOSSES: The amount
of loans written off as uncollectible, net of the recovery of
loans previously written off as uncollectible.

NET INTEREST INCOME: Interest income and loan
fees on interest earning assets less the interest expense
incurred on all interest bearing liabilities.

NET INTEREST MARGIN: Interest income from
receivables and other interest earning assets reduced by
interest expense as a percentage of the average balance of such
interest earning assets.

NET YIELD ON AVERAGE INTEREST EARNING ASSETS: The
average interest rate earned on interest earning assets less the
average interest rate paid on interest bearing liabilities.

NONACCRUAL LOANS or NONPERFORMING LOANS: Loans on
which we no longer accrue interest because ultimate collection
is unlikely.

NONINTEREST EXPENSE: All expenses other than
interest expense.

NONINTEREST INCOME: All income other than
interest income.

NONPERFORMING ASSETS (NPAs): Nonperforming loans,
repossessed automobiles and real estate owned.

NON-PRIME BORROWERS: Borrowers who have overcome
past credit difficulties.

NOTIONAL AMOUNT: The principal amount of a
financial instrument on which a derivative transaction is based.
In an interest rate swap, for example, the notional amount is
used to calculate the interest rate cash flows to be exchanged.
No exchange of principal occurs.

OWNED LOANS: Loans held on our balance sheet.

PRIME BORROWERS: Borrowers who have strong credit
histories.

PROVISION FOR CREDIT LOSSES: A charge to earnings
to recognize that all loans will not be fully paid. The amount
is determined based on such factors as our actual loss
experience, managements expectations of probable credit
losses, as well as current economic trends.

REAL ESTATE LOAN: Closed-end loans and revolving
lines of credit secured by first or second liens on residential
real estate.

REAL ESTATE OWNED (REO): Real estate acquired in
foreclosure or comparable proceedings under which possession of
the collateral has been taken.

REINVESTMENT CONTRACTS: A series of agreements
between WFS, the Bank and WFAL2 through which WFS has access to
the cash flows of certain securitizations. Under such
agreements, collections of

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principal and interest on the contracts in the
securitization trust and funds in the spread account are
invested at either the Bank or WFAL2. Funds invested at the Bank
are collateralized by mortgage-backed securities and made
available to WFS through the WFS Reinvestment Contract. Funds
invested at WFAL2 are collateralized by automobile contracts,
which WFAL2 purchases from WFS.


RETAINED INTEREST IN SECURITIZED ASSETS (RISA):
An asset that represents our contractual right to receive
interest and other cash flows from our securitization trusts
after the investors receive their contractual return.

RETAINED INTEREST INCOME OR EXPENSE: The excess
cash flows on the contracts sold through securitizations treated
as sales less the amortization of the retained interest in
securitized assets. The excess cash flows represent all cash
received on the contracts securitized less payments to investors
for principal and interest.

RETURN ON AVERAGE MANAGED CONTRACTS: A financial
measurement of our overall performance. Return on average
managed contracts is the ratio of net income divided by average
managed contracts.

RETURN ON AVERAGE SHAREHOLDERS EQUITY: A
measure of how effective a business has been in investing its
net worth. Return on equity is expressed as a ratio, calculated
by dividing net income by average equity excluding accumulated
other comprehensive income or loss.

RISK-ADJUSTED MARGIN: The net interest margin
less the chargeoff rate.

RISK-WEIGHTED ASSETS: An amount used in
determining risk-based capital ratios applicable to savings
institutions. The amount of risk-weighted assets is calculated
by taking the face amount of assets on and off the balance sheet
and applying a factor based on the inherent risk of such asset
as defined by regulation.

SECURED FINANCING: A transaction where interests
in a pool of financial assets, such as automobile contracts, are
sold to investors. The contracts are transferred to a trust that
issues interests that are sold to investors. The contracts and
related debt remain on our balance sheet.

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE:
An agreement between a seller and a buyer, generally of
government or agency securities, whereby the seller agrees to
repurchase the securities at an agreed-upon price at a future
date.

SECURITIZATION: A transaction involving the
transfer of a pool of assets, to a trust, wherein securities
representing undivided interests in, or obligations of, the
trust are purchased by investors. The securities are repaid by
the cash flows from the assets transferred to the trust. The
transaction is treated as either a secured financing or a sale,
depending on the terms of the transaction.

SFAS: Statement of Financial Accounting Standards.

SHAREHOLDERS EQUITY: A balance sheet amount
that represents the total investment in the corporation by
holders of common stock.

SPREAD ACCOUNT: An account of a securitization
trust into which excess cash flows generated by the assets
securitized are deposited. The terms of the account, which vary
with each securitization, typically state a maximum balance,
generally expressed as a percentage of the current principal
balance of the notes and certificates. The initial deposit is
generally funded by the company securitizing the assets and is
expressed as a percentage of the original balance of the notes
and certificates. Once the required or maximum spread account
balance is reached, the excess is typically released to the
certificate holder.

SUBORDINATED DEBENTURES: Borrowing in the form of
an unsecured note, debenture, or other debt instrument, which in
the event of the debtors bankruptcy, has a claim to the
assets of the debtor with a lower priority than other classes of
debt.

SUBSIDIARY: An organization controlled by another
organization or company.

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SUPPLEMENTARY CAPITAL: Instruments that qualify
as additional regulatory capital for total risk-based capital
measurement. The Banks supplementary capital includes
subordinated debentures and general valuation loan and lease
loss allowance limited to 1.25% of risk-weighted assets.
Supplementary capital is limited to 100% of core capital.

TANGIBLE CAPITAL: A capital measure applicable to
savings institutions. The Banks tangible capital is the
same as its core capital because it does not have any intangible
assets that would be deducted from core capital to derive
tangible capital.

TIER 1 RISK-BASED CAPITAL: A capital measure
applicable to savings institutions. The Banks tier 1
risk-based capital equals core capital less a dollar-for-dollar
reduction for its residual interests in securitized assets and
other recourse obligations.

TIER 1 RISK-BASED CAPITAL RATIO: A
regulatory measurement of capital adequacy. The ratio of the
Banks tier 1 risk-based capital to risk-weighted
assets.

TOTAL EQUITY: The sum of shareholders
equity excluding other comprehensive income or loss and
including minority interest.

TOTAL RISK-BASED CAPITAL: A capital measure
applicable to savings institutions. The Banks total
risk-based capital equals its tier 1 risk-based capital
plus supplementary capital.

TOTAL RISK-BASED CAPITAL RATIO: A regulatory
measurement of capital adequacy. The ratio of total risk-based
capital to risk-weighted assets.

WFS REINVESTMENT CONTRACT: An agreement between
WFS and the Bank whereby the Bank allows WFS to utilize the
funds invested in the reinvestment contract at the Bank. In
return for the use of such funds, WFS pays the Bank a fee as
consideration for the pledge of collateral by the Bank.

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|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data

Our Consolidated Financial Statements begin on
page F-3 of this report.






|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With
    Accountants on Accounting and Financial Disclosure

None.






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Disclosure controls and procedures are designed
to ensure that the information required to be disclosed by us in
the reports that we file or submit under the Exchange Act are
recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange
Commissions rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by
us in the reports that we file under the Exchange Act is
accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosures.

Under the supervision and with the participation
of our management, including our Chief Executive Officer and
Chief Financial Officer, we have evaluated the effectiveness of
the design and operations of our disclosure controls and
procedures within 90 days of the filing date of this annual
report. Based on their evaluation, our Chief Executive Officer
and Chief Financial Officer have concluded that these controls
and procedures are effective. There has been no significant
change in our internal controls or in other factors that could
significantly affect the controls and procedures subsequent to
the date of their evaluation.

66



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##### Table of Contents






PART III

Certain information required by Part III is
omitted from this report, as we will file a definitive proxy
statement, also known as the Proxy Statement, within
120 days after the end of our fiscal year pursuant to
Regulation 14A of the Securities Exchange Act of 1934 for
our Annual Meeting of Shareholders to be held April 26,
2004, and the information included therein is incorporated
herein by reference.






|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant

Information regarding directors appears under the
caption Election of Directors in the Proxy Statement
and is incorporated herein by reference. Information regarding
executive officers appears under the caption Executive
Officers Who Are Not Directors in the Proxy Statement and
is incorporated herein by reference. Information regarding
Section 16(a) Beneficial Ownership Reporting Compliance
appears under that caption in the Proxy Statement and is
incorporated herein by reference.






|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Information regarding executive compensation
appears under the caption Compensation of Executive
Officers in the Proxy Statement and is incorporated herein
by reference.






|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management

Information regarding security ownership of
certain beneficial owners and management appears under the
caption Security Ownership of Certain Beneficial Owners
and Management in the Proxy Statement and is incorporated
herein by reference.






|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

None.






|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accounting Fees and
    Services

Information regarding principal accounting fees
and services appears under the caption Audit Fees; Audit
Related Fees; Tax Fees; and Other Fees in the Proxy
Statement and is incorporated herein by reference.

67



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##### Table of Contents






PART IV





|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Financial Statement Schedules, Exhibits and
    Reports on Form 8-K

(a) List of documents filed as part of
this report:



| |                         
| | ------------------------
| | (1) Financial Statements



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following consolidated financial statements
    and report of independent auditors for us and our subsidiaries
    are included in this Report commencing on page F-2:
|
| | Report of Independent Auditors                                                                                                                                            
|
| | Consolidated Statements of Financial Condition at
    December 31, 2003 and 2002                                                                                          
|
| | Consolidated Statements of Income for the years
    ended December 31, 2003, 2002 and 2001                                                                                
|
| | Consolidated Statements of Changes in
    Shareholders Equity for the years ended December 31,
    2003, 2002 and 2001                                                   
|
| | Consolidated Statements of Cash Flows for the
    years ended December 31, 2003, 2002 and 2001                                                                            
|
| | Notes to Consolidated Financial Statements                                                                                                                                



| |                                  
| | ---------------------------------
| | (2) Financial Statement Schedules



| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Schedules to the consolidated financial
    statements are omitted because the required information is
    inapplicable or the information is presented in our consolidated
    financial statements or related notes.



| |             
| | ------------
| | (3) Exhibits

|        |    |                        |  |                                                                                                                                                                                                                                                        
|------- | -- | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|No.     |    | Description of Exhibit
|        |    |                       
|        | 3  | .1                     |  | Articles of Incorporation(11)                                                                                                                                                                                                                          
|        | 3  | .1.1                   |  | Certificate of Amendment of the Articles of
    Incorporation of Westcorp                                                                                                                                                                              
|        | 3  | .2                     |  | Bylaws(11)                                                                                                                                                                                                                                             
|        | 4  | .1                     |  | Indenture dated as of July 25, 1997 issued
    by Western Financial Bank, formerly Western Financial Savings
    Bank, F.S.B., with respect to $150,000,000 in aggregate
    principal amount of 8.875% Subordinated Capital Debentures due
    2007(7)
|        | 4  | .2                     |  | Indenture dated as of May 3, 2002 issued by
    Western Financial Bank, formerly Western Financial Savings Bank,
    F.S.B., with respect to $300,000,000 in aggregate principal
    amount of 9.625% Subordinated Capital Debentures due 2012(8)      
|        | 10 | .1                     |  | Amended and Restated 1991 Stock Option Plan of
    Westcorp(10)                                                                                                                                                                                        
|        | 10 | .2                     |  | Westcorp 2001 Stock Option Plan(9)                                                                                                                                                                                                                     
|        | 10 | .3                     |  | 2000 Executive Deferral Plan V(8)                                                                                                                                                                                                                      
|        | 10 | .3.1                   |  | First Amendment to the Westcorp Executive
    Deferral Plan V, dated as of April 1, 2003(10)                                                                                                                                                           
|        | 10 | .4                     |  | Amended and Restated Tax Sharing Agreement
    between Westcorp And its subsidiaries, dated September 30,
    2002(9)                                                                                                                                  
|        | 10 | .4.1                   |  | First Amendment to the Amended and Restated Tax
    Sharing Agreement, Dated as of January 1, 2003(10)                                                                                                                                                 
|        | 10 | .4.2                   |  | Second Amendment to the Amended and Restated Tax
    Sharing Amendment, dated August 1, 2003(10)                                                                                                                                                       
|        | 10 | .5                     |  | Master Reinvestment Contract between WFS
    Financial Inc and Western Financial Bank, F.S.B., dated
    May 1, 1995(1)                                                                                                                                
|        | 10 | .6                     |  | Amendment No. 1, dated as of June 1,
    1995, to the Restated Master Reinvestment Reimbursement
    Agreement(5)                                                                                                                                      

68



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##### Table of Contents



|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | -- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|No.     |    | Description of Exhibit
|        |    |                       
|        | 10 | .7                     |  | Amended and Restated Master Collateral Assignment
    Agreement, dated as of March 1, 2000(6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 10 | .8                     |  | Form of WFS Financial Inc Dealer Agreement(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 10 | .9                     |  | Form of WFS Financial Inc Loan Application(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 10 | .10                    |  | Amended and Restated Westcorp Employee Stock
    Ownership and Salary Savings Plan, dated January 1, 2001(8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 10 | .10.1                  |  | Amendment No. 1, dated as of January 1,
    2001, to Amended and Restated Westcorp Employee Stock Ownership
    and Salary Savings Plan(8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10 | .10.2                  |  | Amendment No. 2, dated as of January 1,
    2001, to Amended and Restated Westcorp Employee Stock Ownership
    and Salary Savings Plan(8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10 | .10.3                  |  | Amendment No. 3, dated as of January 1,
    2001, to Amended and Restated Westcorp Employee Stock Ownership
    and Salary Savings Plan(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .10.4                  |  | Amendment No. 4, dated as of January 1,
    2001, to Amended and Restated Westcorp Employee Stock Ownership
    and Salary Savings Plan(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .10.5                  |  | Amendment No. 5, dated as of January 1,
    2001, to Amended and Restated Westcorp Employee Stock Ownership
    and Salary Savings Plan(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .10.6                  |  | Amendment No. 6, dated as of
    November 1, 2003, to Amended and Restated Westcorp Employee
    Stock Ownership and Salary Savings Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10 | .10.7                  |  | Amendment No. 7, dated as of
    December 1, 2003, to Amended and Restated Westcorp Employee
    Stock Ownership and Salary Savings Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10 | .11                    |  | Amended and Restated WFS 1996 Incentive Stock
    Option Plan(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10 | .12                    |  | Amended and Restated Allocation Agreement, dated
    March 31, 2003(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10 | .12.1                  |  | First Amendment to the Amended and Restated
    Allocation Agreement, dated as of August 1, 2003(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .12.2                  |  | Second Amendment to the Amended and Restated
    Allocation Agreement, dated as of September 1, 2003(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10 | .13                    |  | Employment Agreement(3)(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10 | .14                    |  | Logo License Agreement between Western Financial
    Bank, Westcorp, WFS Financial Inc, Western Consumer Products,
    WFS Receivables Corporation, WFS Receivables Corporation 2, WFS
    Receivables Corporation 3, WFS Financial Auto Loans, Inc.,
    The Hammond Company, The Mortgage Bankers, WFS Funding Inc., WFS
    Investments, Inc., Westran Services Corporation, WestFin
    Insurance Agency, Inc., Western Auto
    Investments, Inc., Western Consumer Services, Inc.,
    Westhrift Life Insurance Entity, Inc., Western Reconveyance
    Entity, Inc., and WFS Web Investments, Inc.(9)
|        | 10 | .14.1                  |  | First Amendment to the Logo and License
    Agreement, dated as of September 1, 2003(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10 | .15                    |  | Travel Services Agreement between Westran
    Services Corporation and Westcorp, Western Financial Bank, WFS
    Financial Inc, and Westfin Insurance Agency, Inc., dated
    August 28, 2002(9)                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10 | .15.1                  |  | First Amendment to the Travel Services Agreement,
    dated July 16, 2003(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 10 | .17                    |  | Interest Rate Swap Guarantee Agreement, dated
    May 10, 2001(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10 | .17.1                  |  | First Amendment to the Interest Rate Swap
    Guarantee Agreement, dated as of March 3, 2003(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 21 | .1                     |  | Subsidiaries of Westcorp                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 23 | .1                     |  | Consent of Independent Auditors, Ernst &
    Young LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 31 | .1                     |  | CEO Certification Pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 31 | .2                     |  | CFO Certification Pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 32 | .1                     |  | Certification of the Chief Executive Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 32 | .2                     |  | Certification of the Chief Financial Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                              

69



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---



| |     |                                                                                                                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Exhibits previously filed with WFS Financial Inc
    Registration Statement on Form S-1 (File
    No. 33-93068), filed August 8, 1995 incorporated
    herein by reference under Exhibit Number indicated.                                
|
| | (2) | Exhibit previously filed as Exhibit 4.1 to
    the WFS Financial Inc Registration Statement on Form S-8
    (File No. 333-40121), filed November 13, 1997 and
    incorporated herein by reference.                                       
|
| | (3) | Employment Agreement dated February 27, 1998
    between WFS Financial Inc, Westcorp and Lee A. Whatcott (will be
    provided to the SEC upon request).                                                                                  
|
| | (4) | Employment Agreement, dated November 15,
    1998 between the WFS Financial Inc, Westcorp and Mark Olson
    (will be provided to the SEC upon request).                                                                                  
|
| | (5) | Exhibits previously filed with Annual Report on
    Form 10-K of WFS Financial Inc for the year ended
    December 31, 1998 (File No. 33-93068) as filed on or
    about March 31, 1999.                                                  
|
| | (6) | Exhibits previously filed with WFS Registration
    Statements on Form S-2 (File No. 333-91277) filed
    November 19, 1999 and subsequently amended on
    January 20, 2000 incorporated by reference under
    Exhibit Number indicated.
|
| | (7) | Exhibit previously filed with Western Financial
    Bank, formerly Western Financial Bank, F.S.B., Offering Circular
    with the OTS, dated July 25, 1997 (will be provided to the
    SEC upon request).                                
|
| | (8) | Exhibit previously filed with Annual Report on
    Form 10-K of Westcorp for the year ended December 31,
    2001 as filed on or about March 29, 2002.                                                                                    
|
| | (9) | Exhibit previously filed with Annual Report on
    Form 10-K of Westcorp for the year ended December 31,
    2002 as filed on or about March 28, 2003.                                                                                    



|     |                                                                                                                                                                                                                                                
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Exhibit previously filed with Westcorp
    Registration Statements on Form S-3 (File
    No. 333-110244) filed November 5, 2003 and
    subsequently amended on November 10, 2003 incorporated by
    reference under Exhibit Number indicated.
|    
|(11) | Exhibit previously filed with Westcorp
    Registration Statement on Form S-4 (File
    No. 333-34286) filed April 11, 1990, incorporated
    herein by reference under Exhibit Numbers indicated.                                             

(b) Reports on Form 8-K



| |                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------
| | On October 23, 2003, we filed a current
    report on Form 8-K dated October 21, 2003, reporting
    information under Items 7, 9 and 12.
|
| | On November 12, 2003, we filed a current
    report on Form 8-K dated November 10, 2003, reporting
    information under Items 5 and 7.  
|
| | On November 17, 2003, we filed a current
    report on Form 8-K dated November 17, 2003, reporting
    information under Items 5 and 7.  

70



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SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |                  
| | -----------------
| | WFS FINANCIAL INC

Dated: March 11, 2004

| |     |                   
| | --- | ------------------
| | BY: | /s/ ERNEST S. RADY

| |                          
| | -------------------------
| |                          
| | Ernest S. Rady           
| | Chairman of the Board and
| | Chief Executive Officer  

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

|                                         |  |                                                                                                                                    |  |               
|---------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Signature                                |  | Title                                                                                                                              |  | Date          
|                                         |  |                                                                                                                                    |  |               
|                                        
|/s/ ERNEST S. RADYErnest S. Rady         |  | Chairman of the Board and
    Chief Executive Officer                                                                              |  | March 11, 2004
|                                        
|/s/ THOMAS A. WOLFEThomas A. Wolfe       |  | President and Director                                                                                                             |  | March 11, 2004
|                                        
|/s/ JUDITH M. BARDWICKJudith M. Bardwick |  | Director                                                                                                                           |  | March 11, 2004
|                                        
|/s/ ROBERT T. BARNUMRobert T. Barnum     |  | Director                                                                                                                           |  | March 11, 2004
|                                        
|/s/ JAMES R. DOWLANJames R. Dowlan       |  | Director                                                                                                                           |  | March 11, 2004
|                                        
|/s/ DUANE A. NELLESDuane A. Nelles       |  | Director                                                                                                                           |  | March 11, 2004
|                                        
|/s/ HARRY RADYHarry Rady                 |  | Director                                                                                                                           |  | March 11, 2004
|                                        
|/s/ LEE A. WHATCOTTLee A. Whatcott       |  | Executive Vice President, Chief Financial Officer
    and Chief Operating Officer (Principal Financial and Accounting
    Officer) |  | March 11, 2004

71



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##### Table of Contents



WESTCORP AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

AND REPORT OF INDEPENDENT AUDITORS


|                                                                                                                        |  |      |     | 
|----------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                        |  | Page
|                                                                                                                        |  |     
|Report of Independent
    Auditors                                                                                      |  |      | F-2 | 
|Consolidated Financial Statements:                                                                                      |  |      |     | 
|Consolidated Statements of
    Financial Condition at December 31, 2003 and 2002                                        |  |      | F-3 | 
|Consolidated Statements of
    Income for the years ended December 31, 2003, 2002 and
    2001                          |  |      | F-4 | 
|Consolidated Statements of
    Changes in Shareholders Equity for the years ended
    December 31, 2003, 2002 and 2001 |  |      | F-5 | 
|Consolidated Statements of
    Cash Flows for the years ended December 31, 2003, 2002 and
    2001                      |  |      | F-6 | 
|Notes to Consolidated
    Financial Statements                                                                          |  |      | F-7 | 

F-1



---



##### Table of Contents






REPORT OF INDEPENDENT AUDITORS

Shareholders and Board of Directors

Westcorp


We have audited the accompanying consolidated
statements of financial condition of Westcorp and subsidiaries
as of December 31, 2003 and 2002, and the related
consolidated statements of income, changes in shareholders
equity and cash flows for each of the three years in the period
ended December 31, 2003. These consolidated financial
statements are the responsibility of Westcorps management.
Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial
statements referred to above present fairly in all material
respects, the consolidated financial position of Westcorp and
subsidiaries at December 31, 2003 and 2002 and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended
December 31, 2003 in conformity with accounting principles
generally accepted in the United States.



| |                  
| | -----------------
| | ERNST & YOUNG LLP

Los Angeles, California

January 20, 2004


F-2



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##### Table of Contents



WESTCORP AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION


|                                                                                                                                                                   |                         |                                            |            |            |            |   |           |           |            | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------- | ------------------------------------------ | ---------- | ---------- | ---------- | - | --------- | --------- | ---------- | 
|                                                                                                                                                                   |                         |                                           
|                                                                                                                                                                   |                         | December 31,                              
|                                                                                                                                                                   |                         |                                           
|                                                                                                                                                                   |                         | 2003                                       |            | 2002      
|                                                                                                                                                                   |                         |                                            |            |           
|                                                                                                                                                                   |                         |                                           
|                                                                                                                                                                   |                         | (Dollars in thousands)                    
|ASSETS                                                                                                                                                             |                         |                                            |            |            |            |   |           |          
|Cash                                                                                                                                                               |                         | $                                          | 50,073     |            |            | $ | 25,211    |          
|Interest bearing deposits with other financial
    institutions                                                                                                    |                         |                                            | 41,009     |            |            |   | 59,004    |          
|Other short-term investments                                                                                                                                       |                         |                                            | 291,000    |            |            |   |           |          
|                                                                                                                                                                   |                         |                                            |            |            |            |   |           |          
|                                                                                                                                                                   | Cash and due from banks |                                            |            | 382,082    |            |   |           | 84,215    |           
|Restricted cash                                                                                                                                                    |                         |                                            | 245,399    |            |            |   | 71,763    |          
|Investment securities available for sale                                                                                                                           |                         |                                            | 117,749    |            |            |   | 56,766    |          
|Mortgage-backed securities available for sale                                                                                                                      |                         |                                            | 2,701,797  |            |            |   | 2,649,657 |          
|Loans receivable                                                                                                                                                   |                         |                                            | 11,138,483 |            |            |   | 9,443,901 |          
|Allowance for credit losses                                                                                                                                        |                         |                                            | (301,602   | )          |            |   | (269,352  | )        
|                                                                                                                                                                   |                         |                                            |            |            |            |   |           |          
|                                                                                                                                                                   | Loans receivable, net   |                                            |            | 10,836,881 |            |   |           | 9,174,549 |           
|Amounts due from trusts                                                                                                                                            |                         |                                            |            |            |            |   | 101,473   |          
|Premises and equipment, net                                                                                                                                        |                         |                                            | 81,814     |            |            |   | 78,664    |          
|Interest receivable                                                                                                                                                |                         |                                            | 80,957     |            |            |   | 77,581    |          
|Other assets                                                                                                                                                       |                         |                                            | 169,241    |            |            |   | 187,971   |          
|                                                                                                                                                                   |                         |                                            |            |            |            |   |           |          
|                                                                                                                                                                   |                         | TOTAL ASSETS                               |            | $          | 14,615,920 |   |           | $         | 12,482,639 | 
|                                                                                                                                                                   |                         |                                            |            |            |            |   |           |          
|LIABILITIES                                                                                                                                                        |                         |                                            |            |            |            |   |           |          
|Deposits                                                                                                                                                           |                         | $                                          | 1,972,856  |            |            | $ | 1,974,984 |          
|Notes payable on automobile secured financing                                                                                                                      |                         |                                            | 10,254,641 |            |            |   | 8,494,678 |          
|Securities sold under agreements to repurchase                                                                                                                     |                         |                                            | 222,489    |            |            |   | 276,600   |          
|Federal Home Loan Bank advances                                                                                                                                    |                         |                                            | 328,644    |            |            |   | 336,275   |          
|Subordinated debentures                                                                                                                                            |                         |                                            | 394,854    |            |            |   | 400,561   |          
|Amounts held on behalf of trustee                                                                                                                                  |                         |                                            |            |            |            |   | 177,642   |          
|Other liabilities                                                                                                                                                  |                         |                                            | 188,517    |            |            |   | 107,036   |          
|                                                                                                                                                                   |                         |                                            |            |            |            |   |           |          
|                                                                                                                                                                   |                         | TOTAL LIABILITIES                          |            |            | 13,362,001 |   |           |           | 11,767,776 | 
|Minority interest                                                                                                                                                  |                         |                                            | 131,434    |            |            |   | 101,666   |          
|SHAREHOLDERS EQUITY                                                                                                                                               |                         |                                            |            |            |            |   |           |          
|Common stock (par value $1.00 per share;
    authorized 65,000,000 shares; issued and outstanding 51,698,398
    shares in 2003 and 39,200,474 shares
    in 2002) |                         |                                            | 51,698     |            |            |   | 39,200    |          
|Paid-in capital                                                                                                                                                    |                         |                                            | 710,001    |            |            |   | 350,018   |          
|Retained earnings                                                                                                                                                  |                         |                                            | 427,527    |            |            |   | 325,529   |          
|Accumulated other comprehensive loss, net of tax                                                                                                                   |                         |                                            | (66,741    | )          |            |   | (101,550  | )        
|                                                                                                                                                                   |                         |                                            |            |            |            |   |           |          
|                                                                                                                                                                   |                         | TOTAL SHAREHOLDERS EQUITY                 |            |            | 1,122,485  |   |           |           | 613,197    | 
|                                                                                                                                                                   |                         |                                            |            |            |            |   |           |          
|                                                                                                                                                                   |                         | TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |            | $          | 14,615,920 |   |           | $         | 12,482,639 | 
|                                                                                                                                                                   |                         |                                            |            |            |            |   |           |          

See accompanying notes to consolidated financial
statements.

F-3



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##### Table of Contents



WESTCORP AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF INCOME


|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |            |         | 
|--------------------------------------------------------- | --------------------------------------------- | ------------------------------------------------ | ------- | ---------- | --------- | ---- | ------- | ---------- | --------- | - | ------- | ---------- | ------- | 
|                                                          |                                               |                                                 
|                                                          |                                               | For the Year Ended December 31,                 
|                                                          |                                               |                                                 
|                                                          |                                               | 2003                                             |         | 2002       |           | 2001
|                                                          |                                               |                                                  |         |            |           |     
|                                                          |                                               |                                                 
|                                                          |                                               | (Dollars in thousands, except per share amounts)
|Interest income:                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|                                                          | Loans, including fees                         |                                                  | $       | 1,153,768  |           |      | $       | 1,021,317  |           |   | $       | 821,113    |        
|                                                          | Mortgage-backed securities                    |                                                  |         | 83,663     |           |      |         | 113,154    |           |   |         | 133,415    |        
|                                                          | Investment securities                         |                                                  |         | 3,057      |           |      |         | 2,815      |           |   |         | 3,272      |        
|                                                          | Other                                         |                                                  |         | 4,529      |           |      |         | 5,654      |           |   |         | 4,827      |        
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|                                                          |                                               | TOTAL INTEREST INCOME                            |         |            | 1,245,017 |      |         |            | 1,142,940 |   |         |            | 962,627 | 
|Interest expense:                                         |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|                                                          | Deposits                                      |                                                  |         | 64,634     |           |      |         | 80,015     |           |   |         | 114,831    |        
|                                                          | Notes payable on automobile secured financing |                                                  |         | 416,577    |           |      |         | 406,851    |           |   |         | 333,768    |        
|                                                          | Other                                         |                                                  |         | 50,225     |           |      |         | 44,050     |           |   |         | 43,345     |        
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|                                                          |                                               | TOTAL INTEREST EXPENSE                           |         |            | 531,436   |      |         |            | 530,916   |   |         |            | 491,944 | 
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|NET INTEREST INCOME                                       |                                               |                                                  | 713,581 |            |           |      | 612,024 |            |           |   | 470,683 |           
|Provision for credit losses                               |                                               |                                                  | 294,006 |            |           |      | 306,233 |            |           |   | 196,977 |           
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|NET INTEREST INCOME AFTER PROVISION FOR CREDIT
    LOSSES |                                               |                                                  | 419,575 |            |           |      | 305,791 |            |           |   | 273,706 |           
|Noninterest income:                                       |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|                                                          | Automobile lending                            |                                                  |         | 90,511     |           |      |         | 62,332     |           |   |         | 62,758     |        
|                                                          | Mortgage banking                              |                                                  |         | 1,335      |           |      |         | 1,421      |           |   |         | 1,495      |        
|                                                          | Insurance income                              |                                                  |         | 8,680      |           |      |         | 10,561     |           |   |         | 9,090      |        
|                                                          | Other                                         |                                                  |         | 9,631      |           |      |         | 16,339     |           |   |         | 5,556      |        
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|                                                          |                                               | TOTAL NONINTEREST INCOME                         |         |            | 110,157   |      |         |            | 90,653    |   |         |            | 78,899  | 
|Noninterest expenses:                                     |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|                                                          | Salaries and associate benefits               |                                                  |         | 163,436    |           |      |         | 137,462    |           |   |         | 142,322    |        
|                                                          | Credit and collections                        |                                                  |         | 35,977     |           |      |         | 36,429     |           |   |         | 27,707     |        
|                                                          | Data processing                               |                                                  |         | 17,751     |           |      |         | 18,711     |           |   |         | 18,396     |        
|                                                          | Occupancy                                     |                                                  |         | 15,678     |           |      |         | 15,063     |           |   |         | 14,615     |        
|                                                          | Telephone                                     |                                                  |         | 4,818      |           |      |         | 5,394      |           |   |         | 6,187      |        
|                                                          | Other                                         |                                                  |         | 44,128     |           |      |         | 38,247     |           |   |         | 35,644     |        
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|                                                          |                                               | TOTAL NONINTEREST EXPENSES                       |         |            | 281,788   |      |         |            | 251,306   |   |         |            | 244,871 | 
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|INCOME BEFORE INCOME TAX                                  |                                               |                                                  | 247,944 |            |           |      | 145,138 |            |           |   | 107,734 |           
|Income tax                                                |                                               |                                                  | 98,275  |            |           |      | 52,267  |            |           |   | 41,675  |           
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|INCOME BEFORE MINORITY INTEREST                           |                                               |                                                  | 149,669 |            |           |      | 92,871  |            |           |   | 66,059  |           
|Minority interest in earnings of subsidiaries             |                                               |                                                  | 26,064  |            |           |      | 13,153  |            |           |   | 10,369  |           
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|NET INCOME                                                |                                               | $                                                | 123,605 |            |           | $    | 79,718  |            |           | $ | 55,690  |           
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|Earnings per common share:                                |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|                                                          | Basic                                         |                                                  | $       | 2.88       |           |      | $       | 2.07       |           |   | $       | 1.62       |        
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|                                                          | Diluted                                       |                                                  | $       | 2.85       |           |      | $       | 2.05       |           |   | $       | 1.61       |        
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|Weighted average number of common shares
    outstanding: |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|                                                          | Basic                                         |                                                  |         | 42,867,262 |           |      |         | 38,588,710 |           |   |         | 34,277,856 |        
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|                                                          | Diluted                                       |                                                  |         | 43,397,211 |           |      |         | 38,922,611 |           |   |         | 34,485,127 |        
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           
|                                                          | Dividends declared                            |                                                  | $       | 0.52       |           |      | $       | 0.48       |           |   | $       | 0.44       |        
|                                                          |                                               |                                                  |         |            |           |      |         |            |           |   |         |           

See accompanying notes to consolidated financial
statements.

F-4



---



##### Table of Contents



WESTCORP AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS EQUITY


|                             |                                                                                                                       |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          |          |   |   |         |           |  
|---------------------------- | --------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ---------- | ---------- |  | ------- | ------ | -------- |  | -------------- | ------- | ------- | - | - | ------- | ------- | - | - | -------- | -------- | - | - | ------- | --------- | -
|                             |                                                                                                                       |                                              |            |            |  |         |        |          |  | Accumulated    |         |        
|                             |                                                                                                                       |                                              |            |            |  |         |        |          |  | Other          |         |        
|                             |                                                                                                                       |                                              |            |            |  |         |        |          |  | Comprehensive  |         |        
|                             |                                                                                                                       |                                              |            | Common     |  | Paid-in |        | Retained |  | Income (Loss), |         |        
|                             |                                                                                                                       | Shares                                       |            | Stock      |  | Capital |        | Earnings |  | Net of Tax     |         | Total  
|                             |                                                                                                                       |                                              |            |            |  |         |        |          |  |                |         |        
|                             |                                                                                                                       |                                             
|                             |                                                                                                                       | (Dollars in thousands, except share amounts)
|Balance at January 1, 2001   |                                                                                                                       |                                              | 31,931,826 |            |  | $       | 31,932 |          |  | $              | 246,889 |         |   | $ | 223,163 |         |   | $ | (14,816  | )        |   | $ | 487,168 |          
|                             | Net income                                                                                                            |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         | 55,690  |   |   |          |          |   |   |         | 55,690    |  
|                             | Unrealized gains on securities available for sale
    and retained interest in securitized assets, net of tax(1)      |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          | 12,309   |   |   |         | 12,309    |  
|                             | Unrealized losses on cash flow hedges, net of
    tax(2)                                                              |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          | (75,048  | ) |   |         | (75,048   | )
|                             | Reclassification adjustment for losses on
    securities available for sale included in net income, net of
    tax(3) |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          | 1,050    |   |   |         | 1,050     |  
|                             | Reclassification adjustment for losses on cash
    flow hedges included in income, net of tax(4)                      |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          | 15,599   |   |   |         | 15,599    |  
|                             |                                                                                                                       |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          |          |   |   |         |          
|                             | Comprehensive income                                                                                                  |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          |          |   |   |         | 9,600     |  
|                             | Issuance of common stock                                                                                              |                                              |            | 3,870,665  |  |         |        | 3,870    |  |                |         | 58,271  |   |   |         |         |   |   |          |          |   |   |         | 62,141    |  
|                             | Issuance of subsidiary common stock                                                                                   |                                              |            |            |  |         |        |          |  |                |         | (3,205  | ) |   |         |         |   |   |          |          |   |   |         | (3,205    | )
|                             | Cash dividends                                                                                                        |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         | (15,000 | ) |   |          |          |   |   |         | (15,000   | )
|                             |                                                                                                                       |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          |          |   |   |         |          
|Balance at December 31, 2001 |                                                                                                                       |                                              | 35,802,491 |            |  |         | 35,802 |          |  |                | 301,955 |         |   |   | 263,853 |         |   |   | (60,906  | )        |   |   | 540,704 |          
|                             | Net income                                                                                                            |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         | 79,718  |   |   |          |          |   |   |         | 79,718    |  
|                             | Unrealized gains on securities available for sale
    and retained interest in securitized assets, net of tax(1)      |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          | 28,605   |   |   |         | 28,605    |  
|                             | Unrealized losses on cash flow hedges, net of
    tax(2)                                                              |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          | (135,422 | ) |   |         | (135,422  | )
|                             | Reclassification adjustment for gains on
    securities available for sale included in net income, net of
    tax(3)  |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          | (3       | ) |   |         | (3        | )
|                             | Reclassification adjustment for losses on cash
    flow hedges included in income, net of tax(4)                      |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          | 66,176   |   |   |         | 66,176    |  
|                             |                                                                                                                       |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          |          |   |   |         |          
|                             | Comprehensive income                                                                                                  |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          |          |   |   |         | 39,074    |  
|                             | Issuance of common stock                                                                                              |                                              |            | 3,397,983  |  |         |        | 3,398    |  |                |         | 49,468  |   |   |         |         |   |   |          |          |   |   |         | 52,866    |  
|                             | Issuance of subsidiary common stock                                                                                   |                                              |            |            |  |         |        |          |  |                |         | (1,405  | ) |   |         |         |   |   |          |          |   |   |         | (1,405    | )
|                             | Cash dividends                                                                                                        |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         | (18,042 | ) |   |          |          |   |   |         | (18,042   | )
|                             |                                                                                                                       |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          |          |   |   |         |          
|Balance at December 31, 2002 |                                                                                                                       |                                              | 39,200,474 |            |  |         | 39,200 |          |  |                | 350,018 |         |   |   | 325,529 |         |   |   | (101,550 | )        |   |   | 613,197 |          
|                             | Net income                                                                                                            |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         | 123,605 |   |   |          |          |   |   |         | 123,605   |  
|                             | Unrealized losses on securities available for
    sale, net of tax(1)                                                 |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          | (7,315   | ) |   |         | (7,315    | )
|                             | Unrealized losses on cash flow hedges, net of
    tax(2)                                                              |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          | (21,285  | ) |   |         | (21,285   | )
|                             | Reclassification adjustment for gains on
    securities available for sale included in net income, net of
    tax(3)  |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          | (5,058   | ) |   |         | (5,058    | )
|                             | Reclassification adjustment for losses on cash
    flow hedges included in income, net of tax(4)                      |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          | 68,467   |   |   |         | 68,467    |  
|                             |                                                                                                                       |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          |          |   |   |         |          
|                             | Comprehensive income                                                                                                  |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          |          |   |   |         | 158,414   |  
|                             | Issuance of common stock                                                                                              |                                              |            | 12,371,500 |  |         |        | 12,372   |  |                |         | 356,863 |   |   |         |         |   |   |          |          |   |   |         | 369,235   |  
|                             | Issuance of subsidiary common stock                                                                                   |                                              |            |            |  |         |        |          |  |                |         | 702     |   |   |         |         |   |   |          |          |   |   |         | 702       |  
|                             | Stock options expensed(5)                                                                                             |                                              |            |            |  |         |        |          |  |                |         | 669     |   |   |         |         |   |   |          |          |   |   |         | 669       |  
|                             | Stock options exercised                                                                                               |                                              |            | 126,424    |  |         |        | 126      |  |                |         | 1,749   |   |   |         |         |   |   |          |          |   |   |         | 1,875     |  
|                             | Cash dividends                                                                                                        |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         | (21,607 | ) |   |          |          |   |   |         | (21,607   | )
|                             |                                                                                                                       |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          |          |   |   |         |          
|                             | Balance at December 31, 2003                                                                                          |                                              |            | 51,698,398 |  |         | $      | 51,698   |  |                | $       | 710,001 |   |   | $       | 427,527 |   |   | $        | (66,741  | ) |   | $       | 1,122,485 |  
|                             |                                                                                                                       |                                              |            |            |  |         |        |          |  |                |         |         |   |   |         |         |   |   |          |          |   |   |         |          



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The pre-tax amount of unrealized losses on
    securities available for sale and retained interest in
    securitized assets was $12.2 million for the year ended
    December 31, 2003 compared with unrealized gains of
    $48.5 million and $20.9 million for the years ended
    December 31, 2002 and 2001, respectively.                                                                                                                 
|(2) | The pre-tax amount of unrealized losses on cash
    flow hedges was $35.5 million for the year ended
    December 31, 2003 compared with and $230 million and
    $127 million for the years ended December 31, 2002 and
    2001, respectively.                                                                                                                                                                                                
|(3) | The pre-tax amount of unrealized gains and losses
    on securities available for sale reclassified into earnings was
    $8.4 million for the year ended December 31, 2003
    compared with $5.0 thousand and $1.8 million for the years
    ended December 31, 2002 and 2001.                                                                                                                                                                
|(4) | The pre-tax amount of unrealized losses on cash
    flow hedges reclassified into earnings was $114 million for
    the year ended December 31, 2003 compared with
    $112 million and $26.4 million for the year ended
    December 31, 2002 and 2001, respectively. The amount
    reclassified into earnings in 2001 includes $1.8 million of
    the $4.8 million cumulative effect adjustment related to
    the adoption of SFAS No. 133.
|(5) | Amount represents expense related to stock
    options granted.                                                                                                                                                                                                                                                                                                                                                                                 

See accompanying notes to consolidated financial
statements.

F-5



---



##### Table of Contents



WESTCORP AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH
FLOWS


|                                                                                      |                                                             |                                 |            |            |   |      |            |            |   |   |            |            |  
|------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------------------- | ---------- | ---------- | - | ---- | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                                                                      |                                                             |                                
|                                                                                      |                                                             | For the Year Ended December 31,
|                                                                                      |                                                             |                                
|                                                                                      |                                                             | 2003                            |            | 2002       |   | 2001
|                                                                                      |                                                             |                                 |            |            |   |     
|                                                                                      |                                                             |                                
|                                                                                      |                                                             | (Dollars in thousands)         
|OPERATING ACTIVITIES:                                                                 |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|Net income                                                                            |                                                             | $                               | 123,605    |            |   | $    | 79,718     |            |   | $ | 55,690     |           
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|                                                                                      | Provision for credit losses                                 |                                 |            | 294,006    |   |      |            | 306,233    |   |   |            | 196,977    |  
|                                                                                      | Depreciation                                                |                                 |            | 13,771     |   |      |            | 14,654     |   |   |            | 14,618     |  
|                                                                                      | Amortization of losses on cash flow hedges                  |                                 |            | 54,523     |   |      |            | 54,509     |   |   |            | 5,089      |  
|                                                                                      | Amortization of premium on mortgage-backed
    securities   |                                 |            | 70,177     |   |      |            | 38,319     |   |   |            | 28,879     |  
|                                                                                      | Amortization of participation paid to dealers               |                                 |            | 110,120    |   |      |            | 92,151     |   |   |            | 64,045     |  
|                                                                                      | Amortization of retained interest in securitized
    assets |                                 |            |            |   |      |            | 36,461     |   |   |            | 75,545     |  
|                                                                                      | Amortization, other                                         |                                 |            | 1,927      |   |      |            | 2,073      |   |   |            | 644        |  
|                                                                                      | (Gain) loss on sales, net                                   |                                 |            | (12,396    | ) |      |            | (9,380     | ) |   |            | 8,088      |  
|                                                                                      | Other                                                       |                                 |            | (6,119     | ) |      |            | (2,652     | ) |   |            | (3,370     | )
|Loans held for sale:                                                                  |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|                                                                                      | Proceeds from sales of mortgage loans                       |                                 |            |            |   |      |            | 554        |   |   |            | 3,382      |  
|                                                                                      | Decrease (increase) in other assets                         |                                 |            | 1,220      |   |      |            | (45,195    | ) |   |            | (34,365    | )
|                                                                                      | Increase in other liabilities                               |                                 |            | 72,961     |   |      |            | 15,148     |   |   |            | 14,774     |  
|                                                                                      | Other, net                                                  |                                 |            | 27,019     |   |      |            | 9,215      |   |   |            | 9,325      |  
|                                                                                      |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                             |                                                             |                                 | 750,814    |            |   |      | 591,808    |            |   |   | 439,321    |           
|INVESTING ACTIVITIES:                                                                 |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|Loans receivable:                                                                     |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|                                                                                      | Origination of loans                                        |                                 |            | (6,416,501 | ) |      |            | (5,797,684 | ) |   |            | (5,184,915 | )
|                                                                                      | Participation paid to dealers                               |                                 |            | (141,079   | ) |      |            | (129,272   | ) |   |            | (120,194   | )
|                                                                                      | Loan payments and payoffs                                   |                                 |            | 5,015,241  |   |      |            | 3,725,870  |   |   |            | 2,484,479  |  
|Investment securities available for sale:                                             |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|                                                                                      | Purchases                                                   |                                 |            | (139,912   | ) |      |            | (59,449    | ) |   |            | (67,524    | )
|                                                                                      | Proceeds from sale                                          |                                 |            | 82,288     |   |      |            | 75,629     |   |   |            | 26,998     |  
|                                                                                      | Proceeds from maturities                                    |                                 |            | 427        |   |      |            | 1,646      |   |   |            | 1,308      |  
|Mortgage-backed securities:                                                           |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|                                                                                      | Purchases                                                   |                                 |            | (2,165,051 | ) |      |            | (1,624,936 | ) |   |            | (1,233,390 | )
|                                                                                      | Proceeds from sale                                          |                                 |            | 157,828    |   |      |            |            |   |   |            | 507,839    |  
|                                                                                      | Payments received                                           |                                 |            | 1,872,193  |   |      |            | 1,077,868  |   |   |            | 881,094    |  
|Decrease in amounts due from trusts                                                   |                                                             |                                 |            |            |   |      | 34,658     |            |   |   | 220,920    |           
|Purchase of premises and equipment                                                    |                                                             |                                 | (22,577    | )          |   |      | (18,920    | )          |   |   | (10,079    | )         
|Proceeds from sales of premises and equipment                                         |                                                             |                                 | 7,940      |            |   |      | 8,348      |            |   |   | 43         |           
|                                                                                      |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|NET CASH USED IN INVESTING ACTIVITIES                                                 |                                                             |                                 | (1,749,203 | )          |   |      | (2,706,242 | )          |   |   | (2,493,421 | )         
|FINANCING ACTIVITIES:                                                                 |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|Increase (decrease) in deposits                                                       |                                                             |                                 | 24,011     |            |   |      | (417,706   | )          |   |   | (194,310   | )         
|(Decrease) increase in securities sold under
    agreements to repurchase             |                                                             |                                 | (53,103    | )          |   |      | 117,954    |            |   |   | (24,931    | )         
|Proceeds from notes payable on automobile secured
    financing                       |                                                             |                                 | 5,877,506  |            |   |      | 6,912,058  |            |   |   | 3,519,112  |           
|Payments on notes payable on automobile secured
    financing                         |                                                             |                                 | (4,677,911 | )          |   |      | (4,336,602 | )          |   |   | (1,156,604 | )         
|Increase (decrease) in borrowings                                                     |                                                             |                                 | 3,155      |            |   |      | (19,178    | )          |   |   | (2,734     | )         
|Increase in amounts held on behalf of trustee                                         |                                                             |                                 |            |            |   |      | (102,854   | )          |   |   | (214,361   | )         
|(Decrease) increase in FHLB Advances                                                  |                                                             |                                 | (7,631     | )          |   |      | (207,141   | )          |   |   | 133,847    |           
|Proceeds from issuance of subordinated debentures                                     |                                                             |                                 |            |            |   |      | 292,472    |            |   |   |            |           
|Payments on subordinated debentures                                                   |                                                             |                                 | (7,315     | )          |   |      | (41,134    | )          |   |   | (42,892    | )         
|Increase in restricted cash                                                           |                                                             |                                 | (173,636   | )          |   |      | (71,763    | )          |   |   |            |           
|Proceeds from issuance of common stock                                                |                                                             |                                 | 371,110    |            |   |      | 52,866     |            |   |   | 62,142     |           
|Proceeds from issuance of subsidiary common stock                                     |                                                             |                                 | 105        |            |   |      | 16,472     |            |   |   | 13,973     |           
|Cash dividends                                                                        |                                                             |                                 | (21,607    | )          |   |      | (18,042    | )          |   |   | (15,000    | )         
|Payments on cash flow hedges                                                          |                                                             |                                 | (38,428    | )          |   |      | (83,080    | )          |   |   | (48,578    | )         
|                                                                                      |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                             |                                                             |                                 | 1,296,256  |            |   |      | 2,094,322  |            |   |   | 2,029,664  |           
|                                                                                      |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|INCREASE (DECREASE) IN CASH AND DUE FROM BANKS                                        |                                                             |                                 | 297,867    |            |   |      | (20,112    | )          |   |   | (24,436    | )         
|Cash and due from banks at beginning of year                                          |                                                             |                                 | 84,215     |            |   |      | 104,327    |            |   |   | 128,763    |           
|                                                                                      |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|CASH AND DUE FROM BANKS AT END OF YEAR                                                |                                                             | $                               | 382,082    |            |   | $    | 84,215     |            |   | $ | 104,327    |           
|                                                                                      |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                    |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|Cash paid for:                                                                        |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|                                                                                      | Interest                                                    |                                 | $          | 524,146    |   |      | $          | 513,944    |   |   | $          | 484,821    |  
|                                                                                      | Income taxes                                                |                                 |            | 108,403    |   |      |            | 83,267     |   |   |            | 67,906     |  
|SUPPLEMENTAL DISCLOSURES OF NONCASH TRANSACTIONS:                                     |                                                             |                                 |            |            |   |      |            |            |   |   |            |           
|                                                                                      | Acquisition of real estate acquired through
    foreclosure |                                 |            | 412        |   |      |            | 1,107      |   |   |            | 3,047      |  

See accompanying notes to consolidated financial
statements.

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WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS




|       |                                                 
|------ | ------------------------------------------------
|Note 1 |  Summary of Significant Accounting
    Policies



| |                      
| | ---------------------
| | Basis of Presentation

The accompanying consolidated financial
statements include our accounts and the accounts of our wholly
owned subsidiary, Western Financial Bank, also known as the
Bank, and its majority owned subsidiary,
WFS Financial Inc, also known as WFS. All significant
intercompany accounts and transactions have been eliminated in
consolidation. Certain prior year amounts have been reclassified
to conform with the current years presentation.

Effective January 1, 2003, we regained
control over assets of the securitization trusts for all of our
outstanding securitization transactions treated as sales for
accounting purposes, excluding loans sold in whole loan sales.
We regained control of these assets when each trust was given
the ability to invest in financial assets not related to the
securitization of contracts. In accordance with
paragraph 55 of Statement of Financial Accounting Standards
No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, also known
as SFAS No. 140, and Emerging Issues Task Force 02-9,
Accounting for Changes that Result in a Transferor Regaining
Control of Financial Assets Sold, we recorded $525 million
of automobile contracts and the related notes payable on
automobile secured financing on our Consolidated Statements of
Financial Condition and have eliminated all remaining amounts
due from trusts and amounts held on behalf of trustee for these
transactions. We no longer recognize retained interest income or
expense or contractual servicing income for these securitization
transactions on our Consolidated Statements of Income. Rather,
we recognize interest income on automobile contracts held in
these trusts and record interest expense on notes payable on
automobile secured financings. These loans were considered in
the overall evaluation of the adequacy of our allowance for
credit losses.

During the first quarter of 2003, Chapter 13
bankruptcy accounts greater than 120 days were reclassified
to contracts receivable and the related reserves were
reclassified to the allowance for credit losses on the Statement
of Financial Condition. Previously, such amounts were reported
as nonperforming assets and were included in other assets on the
Statement of Financial Condition. The 2002 amounts have been
reclassified accordingly. These loans were considered in the
overall evaluation of the adequacy of our allowance for credit
losses for the periods presented.

During the second quarter of 2003, various cash
amounts related to certain securitization transactions were
reclassified to restricted cash on the Statement of Financial
Condition. Previously, such amounts were reported as a reduction
of notes payable on automobile secured financing on the
Statement of Financial Condition. The 2002 amounts have been
reclassified accordingly.



| |                 
| | ----------------
| | Use of Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires us to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.



| |                     
| | --------------------
| | Nature of Operations

We are a financial services company that
specializes primarily in automobile lending, which is funded by
our community banking operations and our asset-backed
securitization transactions. We have only one reportable segment.



| |                        
| | -----------------------
| | Cash and Due from Banks

Cash and due from banks include cash, interest
bearing deposits with other financial institutions and other
short-term investments, which have no material restrictions as
to withdrawal or usage.

F-7



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##### Table of Contents





| |                
| | ---------------
| | Restricted Cash

Restricted cash represents amounts that are held
by the trustee until such cash is released under the terms of
the securitization agreements.



| |                                                                            
| | ---------------------------------------------------------------------------
| | Investment Securities and Mortgage-Backed
    Securities Available for Sale

Investment securities and mortgage-backed
securities, also known as MBS, are classified as available for
sale and carried at fair value. Any change in the fair value is
reported as accumulated other comprehensive income (loss), net
of tax, on our Consolidated Statements of Financial Condition.
Any decline in the fair value of the investments which is deemed
to be other than temporary is charged against current earnings.
The method used in determining the cost of investments sold is
specific identification.



| |                 
| | ----------------
| | Loans Receivable

Our loan portfolio consists primarily of
automobile contracts purchased from automobile dealers on a
nonrecourse basis and contracts financed directly with the
consumer. If pre-computed finance charges are added to a
contract, they are added to the contract balance and carried as
an offset against the contract balance as unearned discounts.
Amounts paid to dealers are capitalized as dealer participation
and amortized over the life of the contract. Additionally, our
loan portfolio consists of commercial loans, construction loans,
real estate loans and other consumer loans.



| |                            
| | ---------------------------
| | Allowance for Credit Losses

The allowance for credit losses is maintained at
a level that we believe is adequate to absorb probable losses in
the on balance sheet loan portfolio that can be reasonably
estimated. Our determination of the adequacy of the allowance is
based on an evaluation of the portfolio, past credit loss
experience, current economic conditions, volume, pending
contract sales, growth and composition of the loan portfolio,
and other relevant factors. The allowance is increased by
provisions for credit losses charged against income.



| |                 
| | ----------------
| | Nonaccrual Loans

Nonaccrual loans are loans on which accrual of
interest has been suspended. Interest is suspended on all real
estate loans when, in our judgement, the interest will not be
collectible in the normal course of business or when loans are
90 days or more past due or full collection of principal is
not assured. When a loan is placed on nonaccrual, interest
accrued is reversed against interest income. The accrual of
interest income is suspended on all loans, except consumer
loans. On these loans, interest continues to accrue until the
loans are charged off, which occurs automatically after the
loans are past due 120 days, except for accounts that are
in Chapter 13 bankruptcy. At the time that a loan is
charged off, all accrued interest is reversed. For those
accounts that are in Chapter 13 bankruptcy and are
contractually past due greater than 120 days, all accrued
interest is reversed and income is recognized on a cash basis.
As of December 31, 2003 and 2002, the amounts of accrued
interest reversed were not material.



| |                       
| | ----------------------
| | Premises and Equipment

Premises and equipment are recorded at cost less
accumulated depreciation and amortization and are depreciated
over their estimated useful lives principally using the
straight-line method for financial reporting and accelerated
methods for tax purposes. Leasehold improvements are amortized
over the lives of the respective leases or the service lives of
the improvements, whichever is shorter. Useful lives for
premises and equipment are 5 to 39 years for buildings and
improvements, 5 to 7 years for furniture and equipment, 3
to 5 years for computers and software, and 5 to
15 years for all other premises and equipment.

F-8



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##### Table of Contents





| |                   
| | ------------------
| | Repossessed Assets

All accounts for which collateral has been
repossessed and the redemption period has expired are
reclassified from loans receivable to repossessed assets at fair
value with any adjustment recorded against the allowance for
credit losses. Repossessed assets were included in other assets
on the Consolidated Statements of Financial Condition and are
not material.



| |                  
| | -----------------
| | Real Estate Owned

Real estate acquired through foreclosure is
recorded at the lower of cost or fair value less estimated costs
to sell. These values are periodically reviewed and write-downs
are recorded, if appropriate. Costs of holding this real estate
and related gains and losses on disposition are credited or
charged to real estate operations as incurred.

Real estate owned is carried net of an allowance
for losses which is maintained at a level we believe to be
adequate to absorb any probable losses in the portfolio that can
be reasonably estimated. Our determination of the adequacy of
the allowance is based on an evaluation of past credit loss
experience, current economic conditions, selling costs and other
relevant factors.



| |                     
| | --------------------
| | Nonperforming Assets

Nonperforming assets consist of nonperforming
loans that are defined as all nonaccrual loans, repossessed
assets, and real estate owned. Nonperforming assets were
included in other assets on the Consolidated Statements of
Financial Condition and are not material.



| |                               
| | ------------------------------
| | Interest Income and Fee Income

Interest income is earned in accordance with the
terms of the loan. For pre-computed contracts, interest is
earned monthly, and for simple interest loans, interest is
earned daily. Interest income on certain loans is earned using
the effective yield method and classified as interest receivable
to the extent not collected and reported in interest receivable
on the Consolidated Statements of Financial Condition. Other
loans use the sum of the months digit method, which approximates
the effective yield method.

We defer certain loan origination fees,
commitment fees, premiums paid to dealers and loan origination
costs. The net amount is amortized as an adjustment to the
related loans yield over their contractual life.
Commitment fees based on a percentage of a customers
unused line of credit are recognized over the commitment period.
Fees for other services are recorded as income when earned.



| |                        
| | -----------------------
| | Mortgage Banking Income

Mortgage banking income consists primarily of
gain on sale of mortgage loans and other mortgage servicing
related fee income.



| |                      
| | ---------------------
| | Insurance Commissions

Commissions on insurance policies sold are
recognized as income over the life of the policies.



| |                   
| | ------------------
| | Insurance Premiums

Premiums for life and accident/ health insurance
policies are recognized as income over the term of the insurance
contract.



| |                 
| | ----------------
| | Interest Expense

Interest expense is recognized when incurred. Our
level yield calculation for notes payable on automobile secured
financing includes the interest on the notes, underwriting
discounts, hedge gains or losses and payments under interest
rate swap agreements.

F-9



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##### Table of Contents





| |             
| | ------------
| | Income Taxes

We file a consolidated federal tax return, and
combined or consolidated returns in states where such filing
method is allowed, including subsidiaries as required by such
states. In other states, subsidiaries file separate state tax
returns.



| |                                     
| | ------------------------------------
| | Fair Values of Financial Instruments

Fair value information about financial
instruments is reported using quoted market prices for which it
is practicable to estimate that value. In cases where quoted
market prices are not available, fair values are based on
estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions
used, including the discount rates and estimates of future cash
flows. In that regard, the derived fair value estimates cannot
be substantiated by comparison to independent markets and in
many cases, could not be realized in immediate settlement of the
instruments. Fair values for certain financial instruments and
all non-financial instruments are not required to be disclosed.
Accordingly, the aggregate fair value amounts presented do not
necessarily represent the underlying value of our financial
position.

We use the following methods and assumptions in
estimating our fair value disclosures for financial instruments:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cash and due from
    banks:The carrying amounts reported
    in the Consolidated Statements of Financial Condition for cash
    and due from banks approximate those assets fair values.                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | Restricted cash:The
    carrying amounts reported in the Consolidated Statements of
    Financial Condition approximate those assets fair values.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | Investment securities and
    MBS:Fair values for investment
    securities and MBS are based on quoted market prices, where
    available. If quoted market prices are not available, fair
    values are based on quoted market prices of comparable
    instruments.                                                                                                                                                                                                                                                                                                                                
|
| | Loans receivable:The fair values for loans are estimated using discounted cash
    flow analysis, based on interest rates currently being offered
    for loans with similar terms to borrowers of similar credit
    quality.                                                                                                                                                                                                                                                                                                                                                                         
|
| | Interest rate swap
    agreements:The fair value is
    estimated by obtaining market quotes from brokers or internally
    valuing when market quotes are not readily available.                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | Loan commitments (including fixed and
    variable):The fair values of loan
    commitments are based on quoted market prices of similar loans
    sold in the secondary market.                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | Deposits:The fair
    values disclosed for demand deposit accounts, passbook accounts,
    certificate accounts, brokered certificate accounts and certain
    types of money market accounts are, by definition, equal to the
    amount payable on demand at the reporting date, i.e., their
    carrying amounts. Fair values for fixed rate certificates of
    deposit are estimated using a discounted cash flow calculation
    that applies interest rates currently being offered on
    certificates of deposit to a schedule of aggregated expected
    monthly maturities on time deposits.
|
| | Securities sold under agreements to
    repurchase, notes payable on automobile secured financing,
    Federal Home Loan Bank advances, and subordinated
    debentures:The fair value is
    estimated by using discounted cash flow analyses based on our
    current incremental borrowing rates for similar types of
    borrowing arrangements.                                                                                                                                                                                                                                                   
|
| | Short-term
    borrowings:The carrying amounts
    reported in the Consolidated Statements of Financial Condition
    approximate their fair values.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | Amounts held on behalf of
    trustee:The carrying amounts reported
    in the Consolidated Statements of Financial Condition
    approximate their fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                        

F-10



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##### Table of Contents





| |                                 
| | --------------------------------
| | Derivative Financial Instruments

Effective January 1, 2001, we adopted
Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities, as
amended, also known as SFAS No. 133, which requires all
derivatives to be recorded on the balance sheet at fair value.
Changes in the fair value of derivatives designated as hedges
are either offset against the change in fair value of the hedged
assets, liabilities or firm commitments directly through income
or recognized through accumulated other comprehensive income
(loss) on the balance sheet until the hedged items are
recognized in earnings, depending on the nature of the hedges.
The ineffective portion of a derivatives change in fair
value for a cash flow hedge is recognized in accumulated other
comprehensive income (loss) on the balance sheet if the hedge is
less than 100% effective or in earnings if the hedge is greater
than 100% effective. We employ regression analysis and
discounted cash flow analysis to test the effectiveness of our
hedges on a quarterly basis. All of our derivative instruments
that are designated as hedges are treated as cash flow hedges
under SFAS No. 133.

The contracts originated and held by us are fixed
rate and, accordingly, we have exposure to changes in interest
rates. To protect against potential changes in interest rates
affecting interest payments on future securitization
transactions, we enter into various hedge agreements. We enter
into Euro-dollar futures contracts and forward agreements in
order to hedge our future interest payments on our notes payable
on automobile secured financing. The market value of these hedge
agreements responds inversely to changes in interest rates.
Because of this inverse relationship, we can effectively lock in
a gross interest rate spread at the time of entering into the
hedge transaction. Gains and losses on these agreements are
recorded in accumulated other comprehensive income (loss), net
of tax. Any ineffective portion is recognized in interest
expense during that period if the hedge is greater than 100%
effective. Upon completion of the securitization transaction,
the gains or losses are recognized in full as an adjustment to
the gain or loss on the sale of the contracts if the
securitization transaction is treated as a sale or amortized on
a level yield basis over the duration of the notes issued if the
transaction is treated as a secured financing. These hedge
instruments are settled daily, and therefore, there are no
related financial instruments recorded on the Consolidated
Statements of Financial Condition. Credit risk related to these
hedge instruments is minimal.

As we issued certain variable rate notes payable,
we also entered into interest rate swap agreements in order to
hedge our variable interest rate exposure on future interest
payments. The fair value of the interest rate swap agreements is
included in notes payable on automobile secured financing, and
any change in the fair value is reported as accumulated other
comprehensive income (loss), net of tax, on our Consolidated
Statements of Financial Condition. Any ineffective portion is
recorded in interest expense during that period if the hedge is
greater than 100% effective. Related interest income or expense
is settled on a quarterly basis and recognized as an adjustment
to interest expense in our Consolidated Statements of Income.

Historically, to protect against market value
changes on our MBS portfolio, we entered into various hedge
agreements. As part of the adoption of SFAS No. 133, we
redesignated these existing agreements from hedges on our MBS
portfolio to cash flow hedges that will protect against
potential changes in interest rates affecting interest payments
on future deposits gathered by us and future securities sold
under agreements to repurchase. The fair value of the interest
rate swap agreements is included in deposits and securities sold
under agreements to repurchase, respectively, and any change in
the fair value is reported as accumulated other comprehensive
income (loss), net of tax, on our Consolidated Statements of
Financial Condition. Related interest income or expense is
settled on a quarterly basis and is recorded in accumulated
other comprehensive income (loss) and reclassified into earnings
in the period during which cash flows on the hedged items affect
income. In conjunction with this redesignation on
January 1, 2001, we recorded a transition adjustment to
earnings for the $33.7 million unrealized loss on these
derivatives offset by an equal amount of unrealized gain on our
MBS portfolio.

We also enter into interest rate swap agreements
or other derivatives that we choose not to designate as hedges
or that do not qualify for hedge accounting under SFAS
No. 133. These derivatives pertain to variable rate notes
issued in conjunction with the securitization of our contracts.
Any change in the market value of such derivatives and any
income or expense recognized on such derivatives is recorded to
noninterest income.

F-11



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##### Table of Contents



As part of the adoption of SFAS No. 133 in
2001, we recorded a cumulative effect adjustment to accumulated
other comprehensive income (loss) of $4.8 million, net of
tax, which represents the deferred loss on our Euro-dollar
futures contracts outstanding at January 1, 2001. Of the
$4.8 million, $1.8 million was reclassified into
earnings during 2001.



| |                            
| | ---------------------------
| | Securitization Transactions

Automobile contract asset-backed securitization
transactions are treated as either sales or secured financings
for accounting purposes depending upon the securitization
structure. In September 2000, the Financial Accounting Standards
Board, also known as the FASB, issued Statement of Financial
Accounting Standards No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities, also known as SFAS No. 140, to replace
Statement of Financial Accounting Standards No. 125,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, also known as SFAS No. 125.
SFAS No. 140 revises the standards for accounting for
securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it generally
carries over most of SFAS No. 125s provisions without
reconsideration. SFAS No. 140 defines the criteria used to
evaluate securitization structures in determining the proper
accounting treatment. These criteria pertain to whether or not
the transferor has surrendered control over the transferred
assets. If a securitization transaction meets all the criteria
defined in SFAS No. 140, the transaction is required to be
treated as a sale. If any one of the criteria is not met, the
transaction is required to be treated as a secured financing.
Since March 31, 2000, our securitization transactions
included certain provisions which allow us to effectively
maintain control over the transferred assets. As a result, these
securitization transactions are required to be treated as
secured financings. Our securitization transactions prior to
March 31, 2000 did not give us this right and, therefore,
we were required to treat such transactions as sales.

For securitization transactions treated as sales,
we recorded a non-cash gain equal to the present value of the
estimated future cash flows on a cash out basis, net of the
write-off of dealer participation and gains or losses on hedges.
We determined whether or not we must record a servicing asset or
liability by estimating future servicing revenues, including
servicing fees, late charges, other ancillary income, and float
benefit, less the actual cost to service the loans.

In determining the fair value of our retained
interest in securitized assets, also known as RISA, we evaluated
the cost basis of contracts relative to the fair value of such
contracts and the fair value of the RISA recorded. The RISA was
capitalized and amortized over the expected life of the
underlying contracts. Net interest income and servicing fees
earned on these contracts are recognized over the life of the
securitization transactions as contractual servicing income,
retained interest income and other fee income. The amortization
of the RISA was calculated so as to recognize retained interest
income on an effective yield basis. These amounts were reported
as automobile lending income on our Consolidated Statements of
Income.

RISA was classified in a manner similar to
available for sale securities and as such was marked to market
each quarter. Market value changes were calculated by
discounting estimated future cash flows using the current market
discount rate. Any changes in the market value of the RISA were
reported as accumulated other comprehensive income (loss), net
of tax, on our Consolidated Statements of Financial Condition.
On a quarterly basis, we evaluated the carrying value of the
RISA in light of the actual performance of the underlying
contracts and made adjustments to reduce the carrying value, if
appropriate.

For securitization transactions treated as
secured financings, the contracts are retained on the balance
sheet with the securities issued to finance the contracts
recorded as notes payable on automobile secured financing. We
record interest income on the securitized contracts and interest
expense on the notes issued through the securitization
transactions.

The excess cash flows generated by securitized
contracts are deposited into spread accounts in the name of the
trustee under the terms of the securitization transactions. In
addition, we advance additional monies to initially fund these
spread accounts. For securitization transactions treated as
sales, amounts due to us held in the spread accounts and
servicing income earned by us for which we have not yet received
repayment from the trust are reported as amounts due from trust
on our Consolidated Statements of Financial Condition.

F-12



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##### Table of Contents



As servicer of these contracts, we hold and remit
funds collected from the borrowers on behalf of the trustee
pursuant to reinvestment contracts that we have entered into for
most securitizations. For securitization transactions treated as
sales, these amounts are reported as amounts held on behalf of
trustee on our Consolidated Statements of Financial Condition.



| |                         
| | ------------------------
| | Stock-Based Compensation

As discussed below, Statement of Financial
Accounting Standards No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure 
an amendment of FASB Statement No. 123, also known as SFAS
No. 148, requires expanded disclosure of the effects of a
companys accounting policy for stock-based employee
compensation. We use the fair value method to account for
stock-based employee compensation. See Note 22 
Stock Options for further disclosure.



| |                          
| | -------------------------
| | Accounting Pronouncements

In July 2001, the FASB issued Statement of
Financial Accounting Standards No. 143, Accounting for
Asset Retirement Obligations, also known as SFAS No. 143,
in which retirement obligations would be recorded as a liability
using the present value of the estimated cash flows and a
corresponding amount would be capitalized as part of the
assets carrying amount. The capitalized asset retirement
cost would be amortized to expense over the assets useful
life using a systematic and rational allocation method. The
estimate of the asset retirement obligation will change and have
to be revised over time. SFAS No. 143 is effective for
fiscal years beginning after June 15, 2002. The adoption of
SFAS No. 143 did not have a material effect on our earnings
or financial position.

In June 2002, the FASB issued Statement of
Financial Accounting Standards No. 146, Accounting for
Costs Associated with Exit or Disposal Activities, also known as
SFAS No. 146, in which liabilities for costs associated
with an exit or disposal activity be recognized and measured
initially at fair value only when the liabilities are incurred.
SFAS No. 146 eliminated the recognition of certain costs
associated with exit or disposal activities that were previously
recognized as liabilities at a plan (commitment) date under
Emerging Issues Task Force Issue No. 94-3 that did not meet
the definition of a liability in FASB Concepts Statement
No. 6, Elements of Financial Statements. SFAS No. 146
is effective for disposal activities initiated after
December 31, 2002. The adoption of SFAS No. 146 did
not have a material effect on our earnings or financial position.

In December 2002, the FASB issued SFAS
No. 148. SFAS 148 provides alternative methods of
transition for a voluntary change to the fair value based method
of accounting for stock-based employee compensation and requires
prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based
employee compensation and the method used on reported results.
SFAS No. 148 provides two additional transition methods for
entities that adopt Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation, also know
as SFAS No. 123. Both of these methods avoid the ramp-up
effects arising from prospective application of the fair value
based method. SFAS No. 148 does not permit the use of the
original SFAS No. 123 method of transition for changes to
the fair value based method made in fiscal years beginning after
December 15, 2003. This statement also requires disclosure
of comparable information for all companies regardless of which
method of accounting for stock-based employee compensation. SFAS
No. 148 improves the timeliness of disclosures by requiring
their inclusion in financial reports for interim periods. SFAS
No. 148 is effective for fiscal years ending after
December 15, 2002. We adopted the disclosure provisions of
SFAS No. 148 on December 31, 2002 and the prospective
application method of transition to the fair value based method
in the first quarter of 2003. Neither the disclosure adoption
nor the accounting adoption had a material effect on our
earnings or financial position.

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest Entities, also
known as FIN No. 46. FIN No. 46 changes the
consolidation requirements by requiring a variable interest
entity to be consolidated by a company if that company is
subject to the majority of the risk of loss from the variable
interest entitys activities or entitled to receive a
majority of the entitys residual returns or both. In
addition, FIN No. 46 requires disclosures about variable
interest entities that the company is not required to

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consolidate but in which it has a significant
variable interest. The consolidation requirements of FIN
No. 46 apply to variable interest entities created after
January 31, 2003 and apply to existing variable interest
entities in the first fiscal year or interim period beginning
after December 15, 2003. The adoption of FIN No. 46
did not have a material effect on our earnings or financial
position.


In April 2003, the FASB issued Statement of
Financial Accounting Standards No. 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities,
also known as SFAS No. 149. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded
in other contracts (collectively referred to as derivatives) and
for hedging activities under SFAS No. 133. The adoption of
SFAS No. 149 did not have a material effect on our earnings
or financial position.

In May 2003, the FASB issued Statement of
Financial Accounting Standards No. 150, Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity, also known as SFAS No. 150. SFAS
No. 150 establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics
of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances). Many of those
instruments were previously classified as equity. The adoption
of SFAS No. 150 did not have a material effect on our
earnings or financial position.



|         |                                             
|-------- | --------------------------------------------
|Note 2  | Investment Securities Available for
    Sale

Investment securities available for sale
consisted of the following:

|                                          |  |                        |         |            |  |       |     |  |  |   |         | 
|----------------------------------------- |  | ---------------------- | ------- | ---------- |  | ----- | --- |  |  | - | ------- | 
|                                          |  |                       
|                                          |  | December 31, 2003     
|                                          |  |                       
|                                          |  |                        |         | Gross      |  |      
|                                          |  | Amortized              |         | Unrealized |  | Fair 
|                                          |  | Cost                   |         | Gain       |  | Value
|                                          |  |                        |         |            |  |      
|                                          |  |                       
|                                          |  | (Dollars in thousands)
|U.S. government agencies and corporations |  | $                      | 50,241  |            |  | $     | 252 |  |  | $ | 50,493  | 
|FHLB securities                           |  |                        | 58,803  |            |  |       |     |  |  |   | 58,803  | 
|Other                                     |  |                        | 8,446   |            |  |       | 7   |  |  |   | 8,453   | 
|                                          |  |                        |         |            |  |       |     |  |  |   |         | 
|                                          |  | $                      | 117,490 |            |  | $     | 259 |  |  | $ | 117,749 | 
|                                          |  |                        |         |            |  |       |     |  |  |   |         | 

|                                                 |  |                        |        |            |  |       |    |  |  |   |        | 
|------------------------------------------------ |  | ---------------------- | ------ | ---------- |  | ----- | -- |  |  | - | ------ | 
|                                                 |  |                       
|                                                 |  | December 31, 2002     
|                                                 |  |                       
|                                                 |  |                        |        | Gross      |  |      
|                                                 |  | Amortized              |        | Unrealized |  | Fair 
|                                                 |  | Cost                   |        | Gain       |  | Value
|                                                 |  |                        |        |            |  |      
|                                                 |  |                       
|                                                 |  | (Dollars in thousands)
|Obligations of states and political subdivisions |  | $                      | 1,023  |            |  | $     | 23 |  |  | $ | 1,046  | 
|Owner trust certificates                         |  |                        | 3,348  |            |  |       |    |  |  |   | 3,348  | 
|FHLB securities                                  |  |                        | 46,316 |            |  |       |    |  |  |   | 46,316 | 
|Other                                            |  |                        | 6,056  |            |  |       |    |  |  |   | 6,056  | 
|                                                 |  |                        |        |            |  |       |    |  |  |   |        | 
|                                                 |  | $                      | 56,743 |            |  | $     | 23 |  |  | $ | 56,766 | 
|                                                 |  |                        |        |            |  |       |    |  |  |   |        | 

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At December 31, 2003, the stated maturities
of our investment securities available for sale were as follows:

|                                          |  |               |        |              |  |                      |        |                    |  |           |       |       |  |           |       |       |  |   |       |  |  |   |       |  |  |   |        |  |  |   |        | 
|----------------------------------------- |  | ------------- | ------ | ------------ |  | -------------------- | ------ | ------------------ |  | --------- | ----- | ----- |  | --------- | ----- | ----- |  | - | ----- |  |  | - | ----- |  |  | - | ------ |  |  | - | ------ | 
|                                          |  |               |        |              |  |                      |        |                    |  |          
|                                          |  | One Year      |        | Five Years   |  | Ten Years            |        |                   
|                                          |  | to Five Years |        | to Ten Years |  | to Twenty-five Years |        | No stated maturity
|                                          |  |               |        |              |  |                      |        |                   
|                                          |  | Amortized     |        | Fair         |  | Amortized            |        | Fair               |  | Amortized |       | Fair  |  | Amortized |       | Fair 
|                                          |  | Cost          |        | Value        |  | Cost                 |        | Value              |  | Cost      |       | Value |  | Cost      |       | Value
|                                          |  |               |        |              |  |                      |        |                    |  |           |       |       |  |           |       |      
|Other                                     |  | $             | 179    |              |  | $                    | 179    |                    |  | $         | 1,271 |       |  | $         | 1,271 |       |  | $ | 3,996 |  |  | $ | 3,996 |  |  | $ | 3,000  |  |  | $ | 3,007  | 
|U.S. government agencies and corporations |  |               | 50,241 |              |  |                      | 50,493 |                    |  |           |       |       |  |           |       |       |  |   |       |  |  |   |       |  |  |   |        |  |  |   |        | 
|FHLB securities                           |  |               |        |              |  |                      |        |                    |  |           |       |       |  |           |       |       |  |   |       |  |  |   |       |  |  |   | 58,803 |  |  |   | 58,803 | 
|                                          |  |               |        |              |  |                      |        |                    |  |           |       |       |  |           |       |       |  |   |       |  |  |   |       |  |  |   |        |  |  |   |        | 
|                                          |  | $             | 50,420 |              |  | $                    | 50,672 |                    |  | $         | 1,271 |       |  | $         | 1,271 |       |  | $ | 3,996 |  |  | $ | 3,996 |  |  | $ | 61,803 |  |  | $ | 61,810 | 
|                                          |  |               |        |              |  |                      |        |                    |  |           |       |       |  |           |       |       |  |   |       |  |  |   |       |  |  |   |        |  |  |   |        | 

Note 3  Mortgage-Backed
Securities Available for Sale

MBS available for sale consisted of the following:

|                                 |  |                        |           |            |  |            |        |            |  |   |       |  |  |   |           | 
|-------------------------------- |  | ---------------------- | --------- | ---------- |  | ---------- | ------ | ---------- |  | - | ----- |  |  | - | --------- | 
|                                 |  |                       
|                                 |  | December 31, 2003     
|                                 |  |                       
|                                 |  |                        |           | Gross      |  | Gross      |        |           
|                                 |  | Amortized              |           | Unrealized |  | Unrealized |        |           
|                                 |  | Cost                   |           | Gains      |  | Losses     |        | Fair Value
|                                 |  |                        |           |            |  |            |        |           
|                                 |  |                       
|                                 |  | (Dollars in thousands)
|GNMA certificates                |  | $                      | 2,613,962 |            |  | $          | 28,607 |            |  | $ | 4,484 |  |  | $ | 2,638,085 | 
|FNMA participation certificates  |  |                        | 24,967    |            |  |            | 306    |            |  |   |       |  |  |   | 25,273    | 
|FHLMC participation certificates |  |                        | 36,734    |            |  |            | 9      |            |  |   | 78    |  |  |   | 36,665    | 
|Other                            |  |                        | 1,774     |            |  |            |        |            |  |   |       |  |  |   | 1,774     | 
|                                 |  |                        |           |            |  |            |        |            |  |   |       |  |  |   |           | 
|                                 |  | $                      | 2,677,437 |            |  | $          | 28,922 |            |  | $ | 4,562 |  |  | $ | 2,701,797 | 
|                                 |  |                        |           |            |  |            |        |            |  |   |       |  |  |   |           | 

|                                 |  |                        |           |            |  |            |        |            |  |   |       |  |  |   |           | 
|-------------------------------- |  | ---------------------- | --------- | ---------- |  | ---------- | ------ | ---------- |  | - | ----- |  |  | - | --------- | 
|                                 |  |                       
|                                 |  | December 31, 2002     
|                                 |  |                       
|                                 |  |                        |           | Gross      |  | Gross      |        |           
|                                 |  | Amortized              |           | Unrealized |  | Unrealized |        |           
|                                 |  | Cost                   |           | Gains      |  | Losses     |        | Fair Value
|                                 |  |                        |           |            |  |            |        |           
|                                 |  |                       
|                                 |  | (Dollars in thousands)
|GNMA certificates                |  | $                      | 2,562,459 |            |  | $          | 46,008 |            |  | $ | 1,010 |  |  | $ | 2,607,457 | 
|FNMA participation certificates  |  |                        | 38,647    |            |  |            | 477    |            |  |   |       |  |  |   | 39,124    | 
|FHLMC participation certificates |  |                        | 1,046     |            |  |            | 22     |            |  |   |       |  |  |   | 1,068     | 
|Other                            |  |                        | 2,008     |            |  |            |        |            |  |   |       |  |  |   | 2,008     | 
|                                 |  |                        |           |            |  |            |        |            |  |   |       |  |  |   |           | 
|                                 |  | $                      | 2,604,160 |            |  | $          | 46,507 |            |  | $ | 1,010 |  |  | $ | 2,649,657 | 
|                                 |  |                        |           |            |  |            |        |            |  |   |       |  |  |   |           | 

Proceeds from the sale of MBS available for sale
for the years ended December 31, 2003, 2002 and 2001 were
as follows:

|                                              |  |                                 |         |      |  |      |  |  |  |   |         | 
|--------------------------------------------- |  | ------------------------------- | ------- | ---- |  | ---- |  |  |  | - | ------- | 
|                                              |  |                                
|                                              |  | For the Year Ended December 31,
|                                              |  |                                
|                                              |  | 2003                            |         | 2002 |  | 2001
|                                              |  |                                 |         |      |  |     
|                                              |  |                                
|                                              |  | (Dollars in thousands)         
|Proceeds from sales of MBS available for sale |  | $                               | 157,828 |      |  |      |  |  |  | $ | 507,839 | 
|Gross realized gains                          |  |                                 | 8,423   |      |  |      |  |  |  |   | 4,020   | 
|Gross realized losses                         |  |                                 |         |      |  |      |  |  |  |   | 3,479   | 

Our MBS available for sale portfolio had
maturities of one month to thirty years at December 31,
2003 and 2002, although payments are generally received monthly
throughout the life of these securities.

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##### Table of Contents



Note 4  Net Loans
Receivable

Net loans receivable consisted of the following:

|                            |                                                         |                        |            |            |   |   |           |           |  
|--------------------------- | ------------------------------------------------------- | ---------------------- | ---------- | ---------- | - | - | --------- | --------- | -
|                            |                                                         |                       
|                            |                                                         | December 31,          
|                            |                                                         |                       
|                            |                                                         | 2003                   |            | 2002      
|                            |                                                         |                        |            |           
|                            |                                                         |                       
|                            |                                                         | (Dollars in thousands)
|Consumer:                   |                                                         |                        |            |            |   |   |           |          
|                            | Automobile contracts                                    |                        | $          | 10,657,864 |   |   | $         | 8,993,266 |  
|                            | Dealer participation, net of deferred contract
    fees |                        |            | 175,263    |   |   |           | 154,671   |  
|                            | Other                                                   |                        |            | 6,002      |   |   |           | 7,531     |  
|                            | Unearned discounts                                      |                        |            | (61,300    | ) |   |           | (91,713   | )
|                            |                                                         |                        |            |            |   |   |           |          
|                            |                                                         |                        | 10,777,829 |            |   |   | 9,063,755 |          
|Real estate:                |                                                         |                        |            |            |   |   |           |          
|                            | Mortgage                                                |                        |            | 237,668    |   |   |           | 277,233   |  
|                            | Construction                                            |                        |            | 16,503     |   |   |           | 14,150    |  
|                            |                                                         |                        |            |            |   |   |           |          
|                            |                                                         |                        | 254,171    |            |   |   | 291,383   |          
|Undisbursed loan proceeds   |                                                         |                        | (17,948    | )          |   |   | (8,453    | )        
|                            |                                                         |                        |            |            |   |   |           |          
|                            |                                                         |                        | 236,223    |            |   |   | 282,930   |          
|Commercial                  |                                                         |                        | 124,431    |            |   |   | 97,216    |          
|                            |                                                         |                        |            |            |   |   |           |          
|                            |                                                         |                        | 11,138,483 |            |   |   | 9,443,901 |          
|Allowance for credit losses |                                                         |                        | (301,602   | )          |   |   | (269,352  | )        
|                            |                                                         |                        |            |            |   |   |           |          
|                            |                                                         | $                      | 10,836,881 |            |   | $ | 9,174,549 |          
|                            |                                                         |                        |            |            |   |   |           |          

Loans managed by us totaled $11.0 billion
and $9.8 billion as of December 31, 2003 and 2002,
respectively. We owned all of the $11.0 billion loans
managed at December 31, 2003. Of the $9.8 billion
loans managed at December 31, 2002, $9.3 billion were
owned by us and $525 million were owned by securitization
trusts. There were no impaired loans at December 31, 2003
and 2002. Nonperforming loans, or loans on which we have
discontinued the accrual of interest income, included in net
loans receivable were $53.0 million and $39.2 million
at December 31, 2003 and 2002, respectively. Repossessed
assets and real estate owned were $10.6 million and
$15.7 million at December 31, 2003 and 2002,
respectively, and are included in other assets on our
Consolidated Statement of Financial Condition.

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##### Table of Contents



Note 5  Allowance for Credit
Losses

Changes in the allowance for credit losses were
as follows:

|                                                                                       |                  |                                 |          |          |   |      |          |          |   |   |          |          |  
|-------------------------------------------------------------------------------------- | ---------------- | ------------------------------- | -------- | -------- | - | ---- | -------- | -------- | - | - | -------- | -------- | -
|                                                                                       |                  |                                
|                                                                                       |                  | For the Year Ended December 31,
|                                                                                       |                  |                                
|                                                                                       |                  | 2003                            |          | 2002     |   | 2001
|                                                                                       |                  |                                 |          |          |   |     
|                                                                                       |                  |                                
|                                                                                       |                  | (Dollars in thousands)         
|Balance at beginning of year                                                           |                  | $                               | 269,352  |          |   | $    | 178,218  |          |   | $ | 104,006  |         
|Chargeoffs:                                                                            |                  |                                 |          |          |   |      |          |          |   |   |          |         
|                                                                                       | Consumer loans   |                                 |          | (350,718 | ) |      |          | (280,378 | ) |   |          | (162,878 | )
|                                                                                       | Commercial loans |                                 |          |          |   |      |          | (511     | ) |   |          |          |  
|                                                                                       | Mortgage loans   |                                 |          | (352     | ) |      |          | (260     | ) |   |          | (1,024   | )
|                                                                                       |                  |                                 |          |          |   |      |          |          |   |   |          |         
|                                                                                       |                  |                                 | (351,070 | )        |   |      | (281,149 | )        |   |   | (163,902 | )       
|Recoveries:                                                                            |                  |                                 |          |          |   |      |          |          |   |   |          |         
|                                                                                       | Consumer loans   |                                 |          | 89,196   |   |      |          | 66,050   |   |   |          | 41,120   |  
|                                                                                       | Commercial loans |                                 |          | 78       |   |      |          |          |   |   |          |          |  
|                                                                                       | Mortgage loans   |                                 |          | 40       |   |      |          |          |   |   |          | 17       |  
|                                                                                       |                  |                                 |          |          |   |      |          |          |   |   |          |         
|                                                                                       |                  |                                 | 89,314   |          |   |      | 66,050   |          |   |   | 41,137   |         
|                                                                                       |                  |                                 |          |          |   |      |          |          |   |   |          |         
|Net chargeoffs                                                                         |                  |                                 | (261,756 | )        |   |      | (215,099 | )        |   |   | (122,765 | )       
|Provision for credit losses                                                            |                  |                                 | 294,006  |          |   |      | 306,233  |          |   |   | 196,977  |         
|                                                                                       |                  |                                 |          |          |   |      |          |          |   |   |          |         
|Balance at end of year                                                                 |                  | $                               | 301,602  |          |   | $    | 269,352  |          |   | $ | 178,218  |         
|                                                                                       |                  |                                 |          |          |   |      |          |          |   |   |          |         
|Ratio of net chargeoffs during the period to
    average loans owned during the period |                  |                                 | 2.5      | %        |   |      | 2.6      | %        |   |   | 2.0      | %       
|Ratio of allowance for credit losses to loans at
    the end of the period             |                  |                                 | 2.7      | %        |   |      | 2.9      | %        |   |   | 2.4      | %       

Note 6  Retained Interest in
Securitized Assets

None of our securitization transactions in 2003,
2002 or 2001 were treated as sales. Therefore, we did not record
any retained interest in securitized assets.

The following table presents the activity of the
RISA:

|                                          |  |                                 |  |      |  |      |         |   |  |   |         |  
|----------------------------------------- |  | ------------------------------- |  | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                          |  |                                
|                                          |  | For the Year Ended December 31,
|                                          |  |                                
|                                          |  | 2003                            |  | 2002 |  | 2001
|                                          |  |                                 |  |      |  |     
|                                          |  |                                
|                                          |  | (Dollars in thousands)         
|Balance at beginning of period            |  | $                               |  |      |  | $    | 37,392  |   |  | $ | 111,558 |  
|Additions                                 |  |                                 |  |      |  |      |         |   |  |   |         |  
|Amortization                              |  |                                 |  |      |  |      | (36,461 | ) |  |   | (75,546 | )
|Change in unrealized gain/loss on RISA(1) |  |                                 |  |      |  |      | (931    | ) |  |   | 1,380   |  
|                                          |  |                                 |  |      |  |      |         |   |  |   |         |  
|Balance at end of period(2)               |  | $                               |  |      |  | $    | 0       |   |  | $ | 37,392  |  
|                                          |  |                                 |  |      |  |      |         |   |  |   |         |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The change in unrealized gain/loss on RISA
    represents temporary changes in valuation including changes in
    the discount rate based on the current interest rate
    environment. Such amounts will not be realized unless the RISA
    is sold. Changes in prepayment and credit loss assumptions for
    the RISA are other than temporary in nature and impact the value
    of the RISA. Such other than temporary differences are
    immediately recognized in income as a component of retained
    interest income or expense.
|   
|(2) | There were no restrictions on the RISA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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The balance of contracts 30 days or more
delinquent included in securitization trusts totaled
$35.2 million at December 31, 2002. Net chargeoffs for
these securitization trusts totaled $30.4 million and
$50.4 million for the years ended December 31, 2002
and 2001, respectively.

Note 7  Premises and
Equipment

Premises and equipment consisted of the following:

|                               |  |                        |         |      |  |   |         |  
|------------------------------ |  | ---------------------- | ------- | ---- |  | - | ------- | -
|                               |  |                       
|                               |  | December 31,          
|                               |  |                       
|                               |  | 2003                   |         | 2002
|                               |  |                        |         |     
|                               |  |                       
|                               |  | (Dollars in thousands)
|Land                           |  | $                      | 16,985  |      |  | $ | 15,949  |  
|Buildings and improvements     |  |                        | 52,522  |      |  |   | 50,738  |  
|Computers and software         |  |                        | 57,626  |      |  |   | 51,780  |  
|Furniture and equipment        |  |                        | 21,110  |      |  |   | 20,037  |  
|Other                          |  |                        | 12,478  |      |  |   | 9,092   |  
|                               |  |                        |         |      |  |   |         |  
|                               |  |                        | 160,721 |      |  |   | 147,596 |  
|Less: Accumulated depreciation |  |                        | (78,907 | )    |  |   | (68,932 | )
|                               |  |                        |         |      |  |   |         |  
|                               |  | $                      | 81,814  |      |  | $ | 78,664  |  
|                               |  |                        |         |      |  |   |         |  

Note 8  Accrued Interest
Receivable

Accrued interest receivable consisted of the
following:

|                             |  |                        |        |      |  |   |        | 
|---------------------------- |  | ---------------------- | ------ | ---- |  | - | ------ | 
|                             |  |                       
|                             |  | December 31,          
|                             |  |                       
|                             |  | 2003                   |        | 2002
|                             |  |                        |        |     
|                             |  |                       
|                             |  | (Dollars in thousands)
|Interest on loans receivable |  | $                      | 67,663 |      |  | $ | 62,411 | 
|Interest on securities       |  |                        | 13,294 |      |  |   | 15,170 | 
|                             |  |                        |        |      |  |   |        | 
|                             |  | $                      | 80,957 |      |  | $ | 77,581 | 
|                             |  |                        |        |      |  |   |        | 

Accrued interest receivable at December 31,
2003 and 2002 is included in other assets in the Consolidated
Statements of Financial Condition.

Note 9  Deposits

Deposits consisted of the following:

|                              |  |                      |     |                      |  |                        |     |      |  |   |           |  |  |   |           | 
|----------------------------- |  | -------------------- | --- | -------------------- |  | ---------------------- | --- | ---- |  | - | --------- |  |  | - | --------- | 
|                              |  |                      |     | Weighted             |  |                       
|                              |  | Weighted             |     | Average Rate for     |  | December 31,          
|                              |  | Average Rate at      |     | the Year Ended       |  |                       
|                              |  | December 31, 2003(1) |     | December 31, 2003(2) |  | 2003                   |     | 2002
|                              |  |                      |     |                      |  |                        |     |     
|                              |  |                      |     |                      |  |                       
|                              |  |                      |     |                      |  | (Dollars in thousands)
|Noninterest bearing deposits  |  |                      |    |                      |  |                        |    |      |  | $ | 210,405   |  |  | $ | 165,844   | 
|Demand deposit accounts       |  |                      | 0.1 | %                    |  |                        | 0.2 | %    |  |   | 1,145     |  |  |   | 1,037     | 
|Passbook accounts             |  |                      | 0.1 |                      |  |                        | 0.2 |      |  |   | 7,282     |  |  |   | 6,688     | 
|Money market deposit accounts |  |                      | 1.4 |                      |  |                        | 1.3 |      |  |   | 963,004   |  |  |   | 730,245   | 
|Brokered certificate accounts |  |                      | 1.4 |                      |  |                        | 2.2 |      |  |   | 62,451    |  |  |   | 98,992    | 
|Certificate accounts          |  |                      | 2.0 |                      |  |                        | 5.8 |      |  |   | 728,569   |  |  |   | 972,178   | 
|                              |  |                      |     |                      |  |                        |     |      |  |   |           |  |  |   |           | 
|                              |  |                      |     |                      |  |                        |     |      |  | $ | 1,972,856 |  |  | $ | 1,974,984 | 
|                              |  |                      |     |                      |  |                        |     |      |  |   |           |  |  |   |           | 



---



|    |                                        
|--- | ---------------------------------------
|(1) | Contractual rate.                      
|   
|(2) | Includes effects of hedging activities.

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##### Table of Contents



The aggregate amount of certificate accounts in
denominations greater than or equal to $100,000 was
$220 million and $305 million at December 31,
2003 and 2002, respectively. Deposit amounts in excess of
$100,000 are not federally insured.

Scheduled maturities of certificate accounts at
December 31, 2003 were as follows:

|                                        |  |                        |         |          |  |  |      |  
|--------------------------------------- |  | ---------------------- | ------- | -------- |  |  | ---- | -
|                                        |  |                        |         | Weighted
|                                        |  |                        |         | Average 
|                                        |  | Amount                 |         | Rate    
|                                        |  |                        |         |         
|                                        |  |                       
|                                        |  | (Dollars in thousands)
|Six months or less                      |  | $                      | 301,862 |          |  |  | 2.06 | %
|More than six months through one year   |  |                        | 392,975 |          |  |  | 1.83 |  
|More than one year through three years  |  |                        | 30,097  |          |  |  | 3.00 |  
|More than three years through ten years |  |                        | 3,635   |          |  |  | 3.78 |  
|                                        |  |                        |         |          |  |  |      |  
|                                        |  | $                      | 728,569 |          |  |  |      |  
|                                        |  |                        |         |          |  |  |      |  

Interest expense on deposits consisted of the
following:

|                              |  |                                 |        |      |  |      |        |  |  |   |         | 
|----------------------------- |  | ------------------------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------- | 
|                              |  |                                
|                              |  | For the Year Ended December 31,
|                              |  |                                
|                              |  | 2003                            |        | 2002 |  | 2001
|                              |  |                                 |        |      |  |     
|                              |  |                                
|                              |  | (Dollars in thousands)         
|Demand deposit accounts       |  | $                               | 48     |      |  | $    | 117    |  |  | $ | 70      | 
|Passbook accounts             |  |                                 | 16     |      |  |      | 39     |  |  |   | 169     | 
|Money market deposit accounts |  |                                 | 11,359 |      |  |      | 14,772 |  |  |   | 28,648  | 
|Certificate accounts          |  |                                 | 51,154 |      |  |      | 63,867 |  |  |   | 83,859  | 
|Brokered certificate accounts |  |                                 | 2,057  |      |  |      | 1,220  |  |  |   | 2,085   | 
|                              |  |                                 |        |      |  |      |        |  |  |   |         | 
|                              |  | $                               | 64,634 |      |  | $    | 80,015 |  |  | $ | 114,831 | 
|                              |  |                                 |        |      |  |      |        |  |  |   |         | 

Accrued interest payable on deposits at both
December 31, 2003 and 2002 was $5.7 million, including
accrued interest payable on related interest rate swap
agreements, and is included in other liabilities in the
Consolidated Statements of Financial Condition.

The following table summarizes certificate
accounts by maturity categories at:

|     |  |                        |         | 
|---- |  | ---------------------- | ------- | 
|     |  | December 31, 2003     
|     |  |                       
|     |  | (Dollars in thousands)
|2004 |  | $                      | 694,837 | 
|2005 |  |                        | 26,890  | 
|2006 |  |                        | 3,207   | 
|2007 |  |                        | 3,309   | 
|2008 |  |                        | 326     | 
|     |  |                        |         | 
|     |  | $                      | 728,569 | 
|     |  |                        |         | 



|          |                                                  
|--------- | -------------------------------------------------
|Note 10  | Notes Payable on Automobile Secured
    Financing

For the years ended December 31, 2003 and
2002, we issued $5.9 billion and $6.9 billion of notes
secured by automobile contracts, of which $5.9 billion and
$6.2 billion were through public transactions and no
amounts and $775 million, respectively, were through
conduit facilities. We had no amount outstanding on the conduit
facilities at December 31, 2003 and 2002. We terminated our
$775 million conduit facility in May 2002.

Interest payments on the public transactions
based on the respective notes interest rate are due either
monthly or quarterly, in arrears. Interest payments on the
conduit facility were due monthly, in arrears, based on the
respective notes interest rate. Interest expense on all
notes payable on automobile secured financing,

F-19



---



##### Table of Contents



including interest payments under interest rate
swap agreements, totaled $417 million for the year ended
December 31, 2003 compared with $407 million and
$334 million for the years ended December 31, 2002 and
2001, respectively.


The stated maturities of our notes payable on
automobile secured financing and their weighted average interest
rates, including the effect of interest rate swap agreements on
variable rate notes payable, were as follows:

|           |  |                        |            |                 |  |  |      |  
|---------- |  | ---------------------- | ---------- | --------------- |  |  | ---- | -
|           |  |                       
|           |  | December 31, 2003     
|           |  |                       
|           |  |                        |            | Weighed Average
|           |  | Amount                 |            | Interest Rate  
|           |  |                        |            |                
|           |  |                       
|           |  | (Dollars in thousands)
|2004       |  | $                      | 429,446    |                 |  |  | 1.15 | %
|2005       |  |                        | 173,365    |                 |  |  | 2.14 |  
|2006       |  |                        | 1,497,628  |                 |  |  | 2.89 |  
|2007       |  |                        | 2,301,284  |                 |  |  | 2.84 |  
|2008       |  |                        | 2,176,795  |                 |  |  | 4.03 |  
|Thereafter |  |                        | 3,676,123  |                 |  |  | 3.62 |  
|           |  |                        |            |                 |  |  |      |  
|           |  | $                      | 10,254,641 |                 |  |  | 3.30 | %
|           |  |                        |            |                 |  |  |      |  



|          |                                                   
|--------- | --------------------------------------------------
|Note 11  | Securities Sold Under Agreements to
    Repurchase

Securities sold under agreements to repurchase
are summarized as follows:

|                                                                        |  |                        |         |      |  |   |         |  
|----------------------------------------------------------------------- |  | ---------------------- | ------- | ---- |  | - | ------- | -
|                                                                        |  |                       
|                                                                        |  | December 31,          
|                                                                        |  |                       
|                                                                        |  | 2003                   |         | 2002
|                                                                        |  |                        |         |     
|                                                                        |  |                       
|                                                                        |  | (Dollars in thousands)
|Balance at end of period                                                |  | $                      | 222,489 |      |  | $ | 276,600 |  
|Estimated fair value at end of period                                   |  |                        | 222,489 |      |  |   | 276,932 |  
|Average amount outstanding during the period                            |  |                        | 220,989 |      |  |   | 222,154 |  
|Maximum amount outstanding at any given month-end
    during the period |  |                        | 273,094 |      |  |   | 356,450 |  
|Weighted average interest rate during the period                        |  |                        | 2.0     | %    |  |   | 2.5     | %
|Weighted average interest rate at end of period                         |  |                        | 1.1     | %    |  |   | 1.4     | %

MBS available for sale sold under agreements to
repurchase were delivered to dealers who arranged the
transactions. The dealers may have sold, loaned, or otherwise
disposed of such securities to other parties in the normal
course of their operations and have agreed to resell to us
substantially identical securities at the maturity of the
agreements. At December 31, 2003, we had $118 million
and $99.4 million outstanding with our counterparties,
Salomon Smith Barney and Nomura Securities Co., Ltd.,
respectively. At December 31, 2002, we had
$220 million and $49.3 million outstanding with our
counterparties, Salomon Smith Barney and Nomura Securities Co.,
Ltd., respectively. The agreements at December 31, 2003 and
2002 mature within 30 days. Average amounts are computed
based upon daily ending balances.



|          |                                
|--------- | -------------------------------
|Note 12  | Federal Home Loan Bank Advances

Advances from the Federal Home Loan Bank are
collateralized with eligible real estate loans and MBS. The FHLB
advances were collateralized with mortgage loans totaling
$147 million and $206 million at December 31,
2003 and 2002, respectively, and MBS totaling $1.1 billion
and $1.3 billion at December 31, 2003 and 2002,
respectively.

F-20



---



##### Table of Contents



Information as to interest rates and maturities
on advances from the FHLB is as follows:

|                               |            |                        |            |         |  |   |            |         | 
|------------------------------ | ---------- | ---------------------- | ---------- | ------- |  | - | ---------- | ------- | 
|                               |            |                       
|                               |            | December 31,          
|                               |            |                       
|                               |            | 2003                   |            | 2002   
|                               |            |                        |            |        
|                               |            |                       
|                               |            | (Dollars in thousands)
|Range of interest rates        |            |                        | 0.9%  7.1 | %       |  |   | 1.4%  7.1 | %      
|Weighted average interest rate |            |                        | 1.0        | %       |  |   | 1.4        | %      
|Year due:                      |            |                        |            |         |  |   |            |        
|                               | 2003       |                        |            |         |  |   | $          | 333,500 | 
|                               | 2004       |                        | $          | 326,000 |  |   |            |         | 
|                               | Thereafter |                        |            | 2,644   |  |   |            | 2,775   | 
|                               |            |                        |            |         |  |   |            |        
|                               |            | $                      | 328,644    |         |  | $ | 336,275    |        
|                               |            |                        |            |         |  |   |            |        

We had available credit with the FHLB of
approximately $779 million and $1.0 billion at
December 31, 2003 and 2002, respectively.



|          |                 
|--------- | ----------------
|Note 13  | Other Borrowings

We have an unsecured line of credit with a bank
which has a maximum availability of $30.0 million at both
December 31, 2003 and 2002. There was no amount outstanding
at both December 31, 2003 and 2002. The line of credit has
an interest rate tied to either the Prime rate or the London
Interbank Offered Rate, also known as LIBOR, based on our
choice. The weighted average interest rate was 3.12%, 4.5%, and
4.0% at December 31, 2003, 2002, and 2001, respectively.
There was no interest expense for the year ended
December 31, 2003 compared with interest expense of
$0.1 million and $0.6 million for the years ended
December 31, 2002 and 2001, respectively.



|          |                        
|--------- | -----------------------
|Note 14  | Subordinated Debentures

Subordinated debentures consisted of the
following:

|                            |  |                        |         |      |  |   |         |  
|--------------------------- |  | ---------------------- | ------- | ---- |  | - | ------- | -
|                            |  |                       
|                            |  | December 31,          
|                            |  |                       
|                            |  | 2003                   |         | 2002
|                            |  |                        |         |     
|                            |  |                       
|                            |  | (Dollars in thousands)
|Subordinated debentures     |  | $                      | 400,820 |      |  | $ | 408,010 |  
|Discount and issuance costs |  |                        | (5,966  | )    |  |   | (7,449  | )
|                            |  |                        |         |      |  |   |         |  
|Net subordinated debentures |  | $                      | 394,854 |      |  | $ | 400,561 |  
|                            |  |                        |         |      |  |   |         |  

The subordinated debentures are unsecured and
consist of two issuances with outstanding balances of
$101 million with an interest rate of 8.875% per annum due
in 2007 and $294 million with an interest rate of 9.625%
per annum due in 2012. They are redeemable at our option, in
whole or in part, on or after August 1, 2004 and
May 15, 2009, respectively, both at 100% of the principal
amount being redeemed plus accrued interest as of the date of
redemption. In addition, the 9.625% debentures may be redeemed
in part prior to May 15, 2005, provided at least 65% of the
debentures remain outstanding, the redemption is with the
proceeds of and within 90 days of an equity issuance by the
Bank and the redemption price is not less than 109.625%. For
regulatory purposes, the subordinated debentures are included as
part of the Banks supplementary capital, subject to
certain limitations.

F-21



---



##### Table of Contents





|          |                              
|--------- | -----------------------------
|Note 15  | Commitments and Contingencies

Future minimum payments under noncancelable
operating leases on premises and equipment with terms of one
year or more were as follows:

|           |  |                        |        | 
|---------- |  | ---------------------- | ------ | 
|           |  | December 31, 2003     
|           |  |                       
|           |  | (Dollars in thousands)
|2004       |  | $                      | 6,917  | 
|2005       |  |                        | 5,901  | 
|2006       |  |                        | 4,397  | 
|2007       |  |                        | 3,432  | 
|2008       |  |                        | 2,435  | 
|Thereafter |  |                        | 4,807  | 
|           |  |                        |        | 
|           |  | $                      | 27,889 | 
|           |  |                        |        | 

In certain cases, these agreements include
various renewal options and contingent rental agreements. Rental
expense for premises and equipment totaled $7.4 million,
$7.1 million and $6.9 million for the years ended
December 31, 2003, 2002 and 2001, respectively.

Commitments to fund mortgage loans, letters of
credit and unused lines of credit were as follows:

|                                  |  |                        |         |      |  |   |         | 
|--------------------------------- |  | ---------------------- | ------- | ---- |  | - | ------- | 
|                                  |  |                       
|                                  |  | December 31,          
|                                  |  |                       
|                                  |  | 2003                   |         | 2002
|                                  |  |                        |         |     
|                                  |  |                       
|                                  |  | (Dollars in thousands)
|Fixed rate loans                  |  | $                      | 100,573 |      |  | $ | 98,923  | 
|Variable rate loans               |  |                        | 126,140 |      |  |   | 115,651 | 
|                                  |  |                        |         |      |  |   |         | 
|                                  |  | $                      | 226,713 |      |  | $ | 214,574 | 
|                                  |  |                        |         |      |  |   |         | 
|Mortgage loans sold with recourse |  | $                      | 31,448  |      |  | $ | 45,424  | 
|                                  |  |                        |         |      |  |   |         | 

At December 31, 2003, we had commitments to
fund fixed rate loans at rates ranging from 3.88% to 10.09% with
loan terms ranging from one month to 200 months.

We have pledged certain assets relative to
amounts held on behalf of trustee, including amounts related to
securitization transactions treated as secured financings, as
follows:

|                                |  |                        |           |      |  |   |           | 
|------------------------------- |  | ---------------------- | --------- | ---- |  | - | --------- | 
|                                |  |                       
|                                |  | December 31,          
|                                |  |                       
|                                |  | 2003                   |           | 2002
|                                |  |                        |           |     
|                                |  |                       
|                                |  | (Dollars in thousands)
|FNMA participation certificates |  | $                      | 19,744    |      |  | $ | 30,204    | 
|GNMA certificates               |  |                        | 1,058,908 |      |  |   | 692,908   | 
|Automobile contracts            |  |                        | 375,230   |      |  |   | 473,775   | 
|Multifamily first mortgages     |  |                        | 18,680    |      |  |   | 22,834    | 
|                                |  |                        |           |      |  |   |           | 
|                                |  | $                      | 1,472,562 |      |  | $ | 1,219,721 | 
|                                |  |                        |           |      |  |   |           | 

We issued certain MBS that include recourse
provisions. Subject to certain limitations, we are required, for
the life of the loans, to repurchase the buyers interest
in individual loans on which foreclosure proceedings have been
completed. Securities with recourse issued by us had a total
outstanding balance of $31.4 million and $45.4 million
at December 31, 2003 and 2002, respectively. The maximum
remaining exposure under these recourse provisions was
$31.4 million and $45.4 million at December 31,
2003 and 2002, respectively. We have pledged approximately
$5.0 million of MBS as collateral under these recourse
provisions at both December 31, 2003 and 2002.

We have provided for probable losses which can be
reasonably estimated that may occur as a result of our recourse
obligations. The amount reserved for probable losses on recourse
obligations totaled $1.0 million and

F-22



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##### Table of Contents



$3.1 million at December 31, 2003 and
2002, respectively. The amount of reserves held was determined
based upon historical experience of losses on repurchased loans.


We or our subsidiaries are involved as a party in
certain legal proceedings incidental to our business. We do not
believe that the outcome of these proceedings will have a
material effect upon our financial condition, results of
operations and cash flows.

Note 16  Accumulated Other
Comprehensive Loss, Net of Tax

The following table summarizes the components of
accumulated other comprehensive loss, net of tax:

|                                               |                                                |                        |         |         |   |   |          |         |  
|---------------------------------------------- | ---------------------------------------------- | ---------------------- | ------- | ------- | - | - | -------- | ------- | -
|                                               |                                                |                       
|                                               |                                                | December 31,          
|                                               |                                                |                       
|                                               |                                                | 2003                   |         | 2002   
|                                               |                                                |                        |         |        
|                                               |                                                |                       
|                                               |                                                | (Dollars in thousands)
|Unrealized gain on marketable securities       |                                                | $                      | 14,771  |         |   | $ | 27,145   |        
|Unrealized loss on interest rate swaps: (1)    |                                                |                        |         |         |   |   |          |        
|                                               | Deposits                                       |                        |         | (38,297 | ) |   |          | (53,081 | )
|                                               | Automobile secured financing                   |                        |         | (19,539 | ) |   |          | (43,624 | )
|                                               | Securities sold under agreements to repurchase |                        |         | (2,248  | ) |   |          | (3,092  | )
|                                               |                                                |                        |         |         |   |   |          |        
|                                               |                                                |                        | (60,084 | )       |   |   | (99,797  | )      
|Realized loss on settled cash flow hedges: (1) |                                                |                        |         |         |   |   |          |        
|                                               | Deposits                                       |                        |         | (9,539  | ) |   |          | (11,367 | )
|                                               | Automobile secured financing                   |                        |         | (11,889 | ) |   |          | (17,531 | )
|                                               |                                                |                        |         |         |   |   |          |        
|                                               |                                                |                        | (21,428 | )       |   |   | (28,898  | )      
|                                               |                                                |                        |         |         |   |   |          |        
|Total other accumulated comprehensive loss     |                                                | $                      | (66,741 | )       |   | $ | (101,550 | )      
|                                               |                                                |                        |         |         |   |   |          |        



---



|    |                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------
|(1) | All cash flow hedges are structured to hedge
    future interest payments on deposits or borrowings.

Note 17  Comprehensive
income

The following table presents the components of
comprehensive income, net of related tax, for the periods
indicated:

|                                                                                                |  |                                 |         |      |  |      |          |   |  |   |         |  
|----------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | ---- |  | ---- | -------- | - |  | - | ------- | -
|                                                                                                |  |                                
|                                                                                                |  | For the Year Ended December 31,
|                                                                                                |  |                                
|                                                                                                |  | 2003                            |         | 2002 |  | 2001
|                                                                                                |  |                                 |         |      |  |     
|                                                                                                |  |                                
|                                                                                                |  | (Dollars in thousands)         
|Net income                                                                                      |  | $                               | 123,605 |      |  | $    | 79,718   |   |  | $ | 55,690  |  
|Unrealized (losses) gains on securities
    available
    for sale, net of tax                  |  |                                 | (7,315  | )    |  |      | 28,605   |   |  |   | 12,309  |  
|Unrealized losses on cash flow hedges, net of tax                                               |  |                                 | (21,285 | )    |  |      | (135,422 | ) |  |   | (75,048 | )
|Reclassification adjustment for (gains) losses on
    securities available for sale, net of tax |  |                                 | (5,058  | )    |  |      | (3       | ) |  |   | 1,050   |  
|Reclassification adjustment for losses on cash
    flow hedges included in income, net of tax   |  |                                 | 68,467  |      |  |      | 66,176   |   |  |   | 15,599  |  
|                                                                                                |  |                                 |         |      |  |      |          |   |  |   |         |  
|Comprehensive income                                                                            |  | $                               | 158,414 |      |  | $    | 39,074   |   |  | $ | 9,600   |  
|                                                                                                |  |                                 |         |      |  |      |          |   |  |   |         |  

Note 18  Equity
Offerings

We completed common stock offerings in July 2003
and November 2003 in which we raised a total of
$163 million and $207 million through the issuance of
6.1 million and 6.3 million additional common shares
at a price of $28.00 and $34.39 per share, respectively. With
the completion of these offerings, our total number of common
shares issued and outstanding increased 31.6% to
51.7 million shares at December 31, 2003.

F-23



---



##### Table of Contents



We completed rights offerings in March 2002 and
May 2001 in which we raised $51.3 million and
$61.0 million through the issuance of 3.3 million and
3.7 million additional common shares at a price of $15.75
and $16.25 per share, respectively. With the completion of the
March 2002 offering, our total number of common shares issued
and outstanding increased 9.1% to 39.1 million shares at
March 31, 2002, compared with an increase of 12% to
35.7 million shares in May 2001.

WFS completed rights offerings in March 2002 and
May 2001 that raised a total of $110 million and
$116 million through the issuance of 6.1 million and
6.4 million additional common shares at a price of $18.00
and $18.25 per share, respectively. With the completion of the
March 2002 offering, the number of WFS common shares issued and
outstanding increased by 18% to 41.1 million shares,
compared with an increase of 22% to 35.0 million shares in
May 2001.

Of the 6.1 million and 6.4 million
additional common shares issued by WFS in 2002 and 2001, the
Bank purchased 5.2 million and 5.3 million shares in
the amount of $94.4 million and $96.5 million,
respectively. The net amount of proceeds received from WFS
and our rights offerings executed in March 2002 and May 2001
totaled $67.3 million and $80.6 million, respectively.
At December 31, 2003, the Bank owned 84% of WFS
common stock.

Note 19  Dividends

We paid cash dividends of $0.51, $0.47 and $0.43
per share for the years ended December 31, 2003, 2002 and
2001, respectively. There are no restrictions on the payment of
dividends by Westcorp.

Our wholly owned subsidiary, the Bank, is
restricted by regulation and by the indentures relating to its
subordinated debentures as to the amount of funds which can be
transferred to us in the form of dividends. Under the most
restrictive of these terms, on December 31, 2003, the
Banks restricted shareholders equity was
$467 million with a maximum dividend of $218 million.

The Bank must notify the Office of Thrift
Supervision, also known as the OTS, of its intent to declare
cash dividends thirty days before declaration and may not make a
loan to us for any purpose to the extent we engage in any
activities not permitted for a bank holding company.

Note 20  Automobile Lending
Income

Automobile lending income consisted of the
following components:

|                                                        |  |                                 |        |      |  |      |         |   |  |   |         |  
|------------------------------------------------------- |  | ------------------------------- | ------ | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                        |  |                                
|                                                        |  | For the Year Ended December 31,
|                                                        |  |                                
|                                                        |  | 2003                            |        | 2002 |  | 2001
|                                                        |  |                                 |        |      |  |     
|                                                        |  |                                
|                                                        |  | (Dollars in thousands)         
|Fee income                                              |  | $                               | 90,511 |      |  | $    | 81,087  |   |  | $ | 67,579  |  
|Contractual servicing income                            |  |                                 |        |      |  |      | 10,735  |   |  |   | 23,018  |  
|Retained interest expense, net of RISA
    amortization |  |                                 |        |      |  |      | (29,490 | ) |  |   | (27,839 | )
|                                                        |  |                                 |        |      |  |      |         |   |  |   |         |  
|Total automobile lending income                         |  | $                               | 90,511 |      |  | $    | 62,332  |   |  | $ | 62,758  |  
|                                                        |  |                                 |        |      |  |      |         |   |  |   |         |  

Fee income consists primarily of documentation
fees, late charges and deferment fees. According to the terms of
each securitization transaction, we earn contractual servicing
income on the outstanding balance of contracts securitized.

Note 21  Employee Benefit
Plans

We have various employee benefit plans, which
vary on the types of associates covered and the benefits
received. These plans include the Westcorp Employee Stock
Ownership and Salary Savings Plan, the Executive Deferral Plan,
and the Long Term Incentive Plan.

The Westcorp Employee Stock Ownership Plan, also
known as the ESOP, covers essentially all associates who have
completed six months of service, excluding contract or temporary
employees. Contributions to the ESOP are discretionary and
determined by the Board of Directors within limits set forth

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under the Employee Retirement Income Security Act
of 1974. These contributions are allocated to the
associates account based upon years of service and annual
compensation. All shares purchased by the ESOP are allocated to
associates who participate in the ESOP. The Salary Savings Plan,
also known as the 401(k) Plan, covers essentially all associates
who have completed three months of service, excluding contract
or temporary employees. Contributions to the 401(k) Plan are
guaranteed and based on a fixed percent of the associates
payroll deferral for the calendar year. Contributions to the
ESOP and 401(k) Plan totaled $5.8 million,
$2.8 million and $8.4 million in 2003, 2002 and 2001,
respectively. Compensation expense related to the ESOP and
401(k) Plan totaled $9.8 million, $1.4 million and
$4.8 million in 2003, 2002 and 2001, respectively. As of
December 31, 2003, the ESOP and 401(k) plan held a total of
1,844,293 shares of our common stock. All shares are considered
outstanding for purposes of calculating our earnings per share.


The Executive Deferral Plan, also known as the
EDP, covers a select group of our management or highly
compensated associates as determined by our Board of Directors.
The EDP is designed to allow participants to defer a portion of
their compensation on a pre-tax basis and earn tax-deferred
interest on these deferrals. The EDP also provides for us to
match portions of the amounts contributed by our associates at
the discretion of our Board of Directors. For the year ended
December 31, 2003, expense related to the EDP for us and
our subsidiaries totaled $2.1 million compared with
$0.7 million and $0.3 million for the years ended
December 31, 2002 and 2001, respectively.

The Long Term Incentive Plan, also known as the
LTIP, covers certain key executive officers in which such
officers will be entitled to receive a fixed incentive amount
provided that our tangible net book value per common share as of
December 31, 2004 equals or exceeds $28.08, as adjusted at
our sole discretion, and the executive officer remains
continuously employed by us or our subsidiaries through
April 30, 2005. We expensed $0.9 million,
$0.8 million and $0.9 million for the years ended
December 31, 2003, 2002 and 2001, respectively, related to
the LTIP.

Note 22  Stock
Options

In May 2001, we adopted the 2001 Westcorp Stock
Option Plan, also known as the 2001 Plan, an incentive stock
option plan for certain associates and directors. The 2001 Plan
replaced the 1991 Stock Option Plan, also known as the 1991
Plan, that expired on April 15, 2001. Those who received
options prior to the approval of the 2001 Plan are still subject
to the 1991 Plan and may continue to exercise the remaining
shares that are outstanding and exercisable, however, any and
all shares reserved for the 1991 Plan are no longer available
for future grants. As such, no further grants will be made under
the expired 1991 Plan.

Under the 2001 Plan, we reserved a total of
3,000,000 shares of common stock for future issuance. As of
December 31, 2003, a total of 2,185,750 shares were
available for future grants. The options may be exercised within
seven years after the date of the grant. Additionally, the
weighted average life of the options outstanding at
December 31, 2003 was 3.97 years and the exercise
prices ranged from $9.94 to $20.41 per share.

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Options outstanding and exercisable at
December 31, 2003 were as follows:

|                |               |                     |  |                     |           |                  |  |             |      |                  |  |   |       |  |  |  |         |  |  |   |       | 
|--------------- | ------------- | ------------------- |  | ------------------- | --------- | ---------------- |  | ----------- | ---- | ---------------- |  | - | ----- |  |  |  | ------- |  |  | - | ----- | 
|                |               |                     |  |                    
|                |               | Options Outstanding |  | Options Exercisable
|                |               |                     |  |                    
|                |               | Number              |  | Weighted Average    |           | Weighted Average |  | Number      |      | Weighted Average
|Exercise Prices |               | Outstanding         |  | Remaining Life      |           | Exercise Price   |  | Exercisable |      | Exercise Price  
|                |               |                     |  |                     |           |                  |  |             |      |                 
|$               | 9.00  10.00  |                     |  |                     | 750       |                  |  |             | 1.62 |                  |  | $ | 9.94  |  |  |  | 750     |  |  | $ | 9.94  | 
|                | 12.00  13.00 |                     |  |                     | 187,786   |                  |  |             | 2.00 |                  |  |   | 12.62 |  |  |  | 187,786 |  |  |   | 12.62 | 
|                | 13.00  14.00 |                     |  |                     | 194,000   |                  |  |             | 3.14 |                  |  |   | 13.25 |  |  |  | 131,717 |  |  |   | 13.25 | 
|                | 15.00  16.00 |                     |  |                     | 1,000     |                  |  |             | 3.86 |                  |  |   | 15.25 |  |  |  | 750     |  |  |   | 15.25 | 
|                | 17.00  18.00 |                     |  |                     | 284,500   |                  |  |             | 4.15 |                  |  |   | 17.32 |  |  |  | 125,125 |  |  |   | 17.32 | 
|                | 18.00  19.00 |                     |  |                     | 784,500   |                  |  |             | 4.57 |                  |  |   | 18.57 |  |  |  | 74,375  |  |  |   | 18.30 | 
|                | 19.00  20.00 |                     |  |                     | 5,000     |                  |  |             | 5.60 |                  |  |   | 19.85 |  |  |  | 1,250   |  |  |   | 19.85 | 
|                | 20.00  21.00 |                     |  |                     | 3,000     |                  |  |             | 5.85 |                  |  |   | 20.41 |  |  |  | 750     |  |  |   | 20.41 | 
|                |               |                     |  |                     |           |                  |  |             |      |                  |  |   |       |  |  |  |         |  |  |   |       | 
|                |               |                     |  |                     | 1,460,536 |                  |  |             | 3.97 |                  |  | $ | 16.86 |  |  |  | 522,503 |  |  | $ | 14.74 | 
|                |               |                     |  |                     |           |                  |  |             |      |                  |  |   |       |  |  |  |         |  |  |   |       | 

Stock option activity is summarized as follows:

|                                 |           |        |           |                  |   |   |       |       | 
|-------------------------------- | --------- | ------ | --------- | ---------------- | - | - | ----- | ----- | 
|                                 |           |        |           | Weighted Average
|                                 |           | Shares |           | Exercise Price  
|                                 |           |        |           |                 
|Outstanding at January 1, 2001   |           |        | 820,715   |                  |   | $ | 12.94 |      
|                                 | Granted   |        |           | 444,250          |   |   |       | 17.37 | 
|                                 | Exercised |        |           | (113,834         | ) |   |       | 12.68 | 
|                                 | Forfeited |        |           | (74,317          | ) |   |       | 14.76 | 
|                                 |           |        |           |                  |   |   |       |      
|Outstanding at December 31, 2001 |           |        | 1,076,814 |                  |   |   | 14.67 |      
|                                 | Granted   |        |           | 414,500          |   |   |       | 18.33 | 
|                                 | Exercised |        |           | (143,251         | ) |   |       | 13.29 | 
|                                 | Forfeited |        |           | (180,625         | ) |   |       | 16.06 | 
|                                 |           |        |           |                  |   |   |       |      
|Outstanding at December 31, 2002 |           |        | 1,167,438 |                  |   |   | 15.91 |      
|                                 | Granted   |        |           | 444,000          |   |   |       | 18.78 | 
|                                 | Exercised |        |           | (126,424         | ) |   |       | 14.84 | 
|                                 | Forfeited |        |           | (24,478          | ) |   |       | 17.19 | 
|                                 |           |        |           |                  |   |   |       |      
|Outstanding at December 31, 2003 |           |        | 1,460,536 |                  |   | $ | 16.86 |      
|                                 |           |        |           |                  |   |   |       |      

Option valuation models require the input of
highly subjective assumptions including the expected stock price
volatility. Our stock options have characteristics significantly
different from traded options, and changes in the subjective
input assumptions can materially affect the fair value estimate.
In 2002 and 2001, we utilized the Black-Scholes option valuation
model to determine the fair value of the options granted. During
2003, we decided to utilize the Binomial option valuation model
for all stock options expensed as part of our implementation of
SFAS No. 148 as we feel it provides a better measure of
value for companies that pay dividends. In addition, in 2003 we
utilized the Binomial option valuation model to value all
outstanding options, including those granted prior to 2003. In
our opinion, neither of these models necessarily provides a
reliable single measure of the fair value of our employee stock
options. Nonetheless, the fair value of options granted in 2003,
2002, and 2001 was estimated with the following assumptions:

|                        |  |              |          |      |  |      |          |   |  |  |          |  
|----------------------- |  | ------------ | -------- | ---- |  | ---- | -------- | - |  |  | -------- | -
|                        |  |             
|                        |  | December 31,
|                        |  |             
|                        |  | 2003         |          | 2002 |  | 2001
|                        |  |              |          |      |  |     
|Risk-free interest rate |  |              | 2.2      | %    |  |      | 3.4      | % |  |  | 4.7      | %
|Expected dividend       |  |              | 0.45     |      |  |      |          |   |  |  |          |  
|Volatility factor       |  |              | 0.46     |      |  |      | 0.31     |   |  |  | 0.40     |  
|Expected option life    |  |              | 3  years |      |  |      | 7  years |   |  |  | 7  years |  

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The weighted average fair value of options
granted during the year ended December 31, 2003 was $5.48
compared to $6.11 for the options granted during the year ended
December 31, 2002.

Pro forma information regarding net income and
earnings per share is required by SFAS No. 123, Accounting
for Stock-Based Compensation, as amended by SFAS No. 148,
and has been determined as if we had accounted for our employee
stock options under the fair value method of that statement. We
adopted the disclosure provisions of SFAS No. 148 on
December 31, 2002 and the prospective application method of
transition to the fair value based method of accounting for
stock options in the first quarter of 2003.

Pro forma net income and diluted earnings per
share for the respective periods were as follows:

|                                                                                                                                                        |                       |                                   |         |      |  |      |        |      |  |   |        |      | 
|------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | --------------------------------- | ------- | ---- |  | ---- | ------ | ---- |  | - | ------ | ---- | 
|                                                                                                                                                        |                       |                                  
|                                                                                                                                                        |                       | For the Year Ended December 31,  
|                                                                                                                                                        |                       |                                  
|                                                                                                                                                        |                       | 2003                              |         | 2002 |  | 2001
|                                                                                                                                                        |                       |                                   |         |      |  |     
|                                                                                                                                                        |                       |                                  
|                                                                                                                                                        |                       | (Dollars in thousands, except per
|                                                                                                                                                        |                       | share amounts)                   
|Net income, as reported                                                                                                                                 |                       | $                                 | 123,605 |      |  | $    | 79,718 |      |  | $ | 55,690 |     
|Add: Stock-based employee compensation
    expense included in reported net
    income, net of related tax effects                                      |                       |                                   | 404     |      |  |      |        |      |  |   |        |     
|Deduct: Total stock-based employee
    compensation expense determined under fair
    value based method for all awards, net of
    related tax effects |                       |                                   | 1,225   |      |  |      | 858    |      |  |   | 800    |     
|                                                                                                                                                        |                       |                                   |         |      |  |      |        |      |  |   |        |     
|Pro forma net income                                                                                                                                    |                       | $                                 | 122,784 |      |  | $    | 78,860 |      |  | $ | 54,890 |     
|                                                                                                                                                        |                       |                                   |         |      |  |      |        |      |  |   |        |     
|Earnings per share                                                                                                                                      |                       |                                   |         |      |  |      |        |      |  |   |        |     
|                                                                                                                                                        | Basic  as reported   |                                   | $       | 2.88 |  |      | $      | 2.07 |  |   | $      | 1.62 | 
|                                                                                                                                                        |                       |                                   |         |      |  |      |        |      |  |   |        |     
|                                                                                                                                                        | Basic  pro forma     |                                   | $       | 2.86 |  |      | $      | 2.04 |  |   | $      | 1.60 | 
|                                                                                                                                                        |                       |                                   |         |      |  |      |        |      |  |   |        |     
|Earnings per share                                                                                                                                      |                       |                                   |         |      |  |      |        |      |  |   |        |     
|                                                                                                                                                        | Diluted  as reported |                                   | $       | 2.85 |  |      | $      | 2.05 |  |   | $      | 1.61 | 
|                                                                                                                                                        |                       |                                   |         |      |  |      |        |      |  |   |        |     
|                                                                                                                                                        | Diluted  pro forma   |                                   | $       | 2.83 |  |      | $      | 2.03 |  |   | $      | 1.59 | 
|                                                                                                                                                        |                       |                                   |         |      |  |      |        |      |  |   |        |     

Note 23  Income
Taxes

Income tax expense consisted of the following:

|          |         |                                 |         |         |   |      |         |         |   |   |         |         |  
|--------- | ------- | ------------------------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|          |         |                                
|          |         | For the Year Ended December 31,
|          |         |                                
|          |         | 2003                            |         | 2002    |   | 2001
|          |         |                                 |         |         |   |     
|          |         |                                
|          |         | (Dollars in thousands)         
|Current   |         |                                 |         |         |   |      |         |         |   |   |         |        
|          | Federal |                                 | $       | 95,316  |   |      | $       | 72,144  |   |   | $       | 74,383  |  
|          | State   |                                 |         | 20,222  |   |      |         | 14,127  |   |   |         | 10,123  |  
|          |         |                                 |         |         |   |      |         |         |   |   |         |        
|          |         |                                 | 115,538 |         |   |      | 86,271  |         |   |   | 84,506  |        
|Deferred: |         |                                 |         |         |   |      |         |         |   |   |         |        
|          | Federal |                                 |         | (14,467 | ) |      |         | (24,816 | ) |   |         | (38,623 | )
|          | State   |                                 |         | (2,796  | ) |      |         | (9,188  | ) |   |         | (4,208  | )
|          |         |                                 |         |         |   |      |         |         |   |   |         |        
|          |         |                                 | (17,263 | )       |   |      | (34,004 | )       |   |   | (42,831 | )      
|          |         |                                 |         |         |   |      |         |         |   |   |         |        
|          |         | $                               | 98,275  |         |   | $    | 52,267  |         |   | $ | 41,675  |        
|          |         |                                 |         |         |   |      |         |         |   |   |         |        

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A reconciliation of total tax provisions and the
amounts computed by applying the statutory federal income tax
rate of 35% to income before tax is as follows:

|                                          |  |                                 |        |      |  |      |        |   |  |   |        | 
|----------------------------------------- |  | ------------------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | 
|                                          |  |                                
|                                          |  | For the Year Ended December 31,
|                                          |  |                                
|                                          |  | 2003                            |        | 2002 |  | 2001
|                                          |  |                                 |        |      |  |     
|                                          |  |                                
|                                          |  | (Dollars in thousands)         
|Tax at statutory rate                     |  | $                               | 86,780 |      |  | $    | 50,601 |   |  | $ | 37,707 | 
|State tax (net of federal tax benefit)(1) |  |                                 | 11,327 |      |  |      | 3,211  |   |  |   | 3,844  | 
|Other                                     |  |                                 | 168    |      |  |      | (1,545 | ) |  |   | 124    | 
|                                          |  |                                 |        |      |  |      |        |   |  |   |        | 
|                                          |  | $                               | 98,275 |      |  | $    | 52,267 |   |  | $ | 41,675 | 
|                                          |  |                                 |        |      |  |      |        |   |  |   |        | 



---



|    |                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | State tax for 2002 includes the result of a
    one-time benefit of legislation enacted by the State of
    California which eliminated the use of the reserve method of
    accounting for bad debts for large banks and financial
    corporations for taxable income purposes for tax years after
    January 1, 2002.

Deferred taxes reflect the net tax effect of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Amounts previously reported as
current and deferred income tax expense have been reclassified.
Such changes to the components of the expense occur because all
tax alternatives available to us are not known for a number of
months subsequent to year end.

Significant components of our deferred tax assets
and liabilities were as follows:

|                                                                 |                                |                        |         |         |   |   |         |         |  
|---------------------------------------------------------------- | ------------------------------ | ---------------------- | ------- | ------- | - | - | ------- | ------- | -
|                                                                 |                                |                       
|                                                                 |                                | December 31,          
|                                                                 |                                |                       
|                                                                 |                                | 2003                   |         | 2002   
|                                                                 |                                |                        |         |        
|                                                                 |                                |                       
|                                                                 |                                | (Dollars in thousands)
|Deferred tax assets:                                             |                                |                        |         |         |   |   |         |        
|Reserves for credit losses                                       |                                | $                      | 108,183 |         |   | $ | 94,482  |        
|State tax deferred benefit                                       |                                |                        | 5,351   |         |   |   | 5,241   |        
|Deferred compensation accrual                                    |                                |                        | 7,158   |         |   |   | 4,007   |        
|Tax basis difference  marketable
    securities and derivatives |                                |                        | 57,861  |         |   |   | 91,543  |        
|Other, net                                                       |                                |                        | 13,276  |         |   |   | 13,272  |        
|                                                                 |                                |                        |         |         |   |   |         |        
|                                                                 | Total deferred tax assets      |                        |         | 191,829 |   |   |         | 208,545 |  
|Deferred tax liabilities:                                        |                                |                        |         |         |   |   |         |        
|Loan fee income deferred for tax purposes                        |                                |                        | (107    | )       |   |   | (529    | )      
|FHLB dividends                                                   |                                |                        | (7,947  | )       |   |   | (7,259  | )      
|Accelerated depreciation for tax purposes                        |                                |                        | (10,339 | )       |   |   | (4,120  | )      
|Loan costs                                                       |                                |                        | (428    | )       |   |   | (321    | )      
|Deferred taxes on unrealized gains                               |                                |                        | (9,847  | )       |   |   | (18,375 | )      
|Tax basis difference  mortgage-backed
    securities            |                                |                        | (17,817 | )       |   |   | (20,685 | )      
|Other, net                                                       |                                |                        | (20,637 | )       |   |   | (24,658 | )      
|                                                                 |                                |                        |         |         |   |   |         |        
|                                                                 | Total deferred tax liabilities |                        |         | (67,122 | ) |   |         | (75,947 | )
|                                                                 |                                |                        |         |         |   |   |         |        
|                                                                 | Net deferred tax assets        |                        | $       | 124,707 |   |   | $       | 132,598 |  
|                                                                 |                                |                        |         |         |   |   |         |        

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##### Table of Contents



Note 24  Fair Values of
Financial Instruments

The estimated fair values of our financial
instruments were as follows:

|                       |                                                                           |                               |   |            |          |          |   |            |          |   |   |           |          |   |   |            |          |  
|---------------------- | ------------------------------------------------------------------------- | ----------------------------- | - | ---------- | -------- | -------- | - | ---------- | -------- | - | - | --------- | -------- | - | - | ---------- | -------- | -
|                       |                                                                           |                              
|                       |                                                                           | December 31,                 
|                       |                                                                           |                              
|                       |                                                                           |                               |   |           
|                       |                                                                           | 2003                          |   | 2002      
|                       |                                                                           |                               |   |           
|                       |                                                                           | Carrying                      |   |            |          | Carrying |   |           
|                       |                                                                           | Amounts                       |   | Fair Value |          | Amounts  |   | Fair Value
|                       |                                                                           |                               |   |            |          |          |   |           
|                       |                                                                           |                              
|                       |                                                                           | (Dollars in thousands)       
|Financial assets:      |                                                                           |                               |   |            |          |          |   |            |          |   |   |           |          |   |   |           
|                       | Cash and due from banks                                                   |                               | $ | 91,082     |          |          | $ | 91,082     |          |   | $ | 84,215    |          |   | $ | 84,215     |         
|                       | Restricted cash                                                           |                               |   | 245,399    |          |          |   | 245,399    |          |   |   | 71,763    |          |   |   | 71,763     |         
|                       | Other short-term investments                                              |                               |   | 291,000    |          |          |   | 291,000    |          |   |   |           |          |   |   |            |         
|                       | Investment securities and MBS                                             |                               |   | 2,819,546  |          |          |   | 2,819,546  |          |   |   | 2,706,423 |          |   |   | 2,706,423  |         
|                       | Loans receivable                                                          |                               |   | 11,138,483 |          |          |   | 12,004,390 |          |   |   | 9,443,901 |          |   |   | 10,456,167 |         
|                       | Financial instrument agreements held for purposes
    other than trading: |                               |   |            |          |          |   |            |          |   |   |           |          |   |   |            |         
|                       |                                                                           | Interest rate swap agreements |   |            | (115,529 | )        |   |            | (115,529 | ) |   |           | (194,590 | ) |   |            | (194,590 | )
|Financial liabilities: |                                                                           |                               |   |            |          |          |   |            |          |   |   |           |          |   |   |           
|                       | Deposits                                                                  |                               |   | 1,972,856  |          |          |   | 1,965,945  |          |   |   | 1,974,984 |          |   |   | 1,984,247  |         
|                       | Securities sold under agreements to repurchase                            |                               |   | 222,489    |          |          |   | 222,489    |          |   |   | 276,600   |          |   |   | 276,932    |         
|                       | Short-term borrowings                                                     |                               |   | 9,046      |          |          |   | 9,049      |          |   |   | 5,891     |          |   |   | 5,897      |         
|                       | Notes payable on automobile secured financing                             |                               |   | 10,254,641 |          |          |   | 10,511,044 |          |   |   | 8,494,678 |          |   |   | 8,743,888  |         
|                       | Federal Home Loan Bank advances                                           |                               |   | 328,644    |          |          |   | 328,644    |          |   |   | 336,275   |          |   |   | 333,679    |         
|                       | Amounts held on behalf of trustee                                         |                               |   |            |          |          |   |            |          |   |   | 177,642   |          |   |   | 177,642    |         
|                       | Subordinated debentures                                                   |                               |   | 394,854    |          |          |   | 395,699    |          |   |   | 400,561   |          |   |   | 418,947    |         

The methods and assumptions used in estimating
the fair values of our financial instruments are included in
Note 1.

Note 25  Financial Instrument
Agreements

Our interest rate swap agreements are with
counterparties to exchange, at specified intervals, the
difference between fixed rate and floating rate interest amounts
calculated by reference to an agreed notional amount and a
specified index. We pay a fixed interest rate and receive a
floating interest rate on all of our interest rate swap
agreements. At December 31, 2003 and 2002, the terms of our
interest rate swaps were to pay a weighted average fixed rate of
4.5% and 4.8% and to receive a weighted average variable rate of
1.4% and 1.6%, respectively, with expiration dates ranging from
2004 to 2011 and collateral requirements generally ranging from
3% to 4%. Variable interest rates may change in the future.

Notional amounts do not represent amounts
exchanged with other parties and, therefore, are not a measure
of our exposure to loss through our use of these agreements. The
amounts exchanged are determined by reference to the notional
amounts and the other terms of the agreements.

The current credit exposure under these
agreements is limited to the fair value of the agreements with a
positive fair value at the reporting date. Master netting
agreements are arranged or collateral is obtained through
physical delivery of, or rights to, securities to minimize our
exposure to credit losses in the event of nonperformance by
counterparties to financial instruments. We use only highly
rated counterparties and further reduce our risk by avoiding any
material concentration with a single counterparty.

For the year ended December 31, 2003, the
unrealized loss on cash flow hedges was $21.3 million, net
of taxes of $14.2 million, compared with $135 million,
net of taxes of $94.1 million, for the year ended

F-29



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##### Table of Contents



December 31, 2002. We reclassified
$68.5 million and $66.2 million into earnings, net of
tax, for the years ended December 31, 2003 and 2002,
respectively, which is included in interest expense on the
Consolidated Statements of Income. The amount recognized in
earnings due to ineffectiveness was immaterial. We estimate that
we will reclassify into earnings during the next twelve months
approximately $19 million to $24 million of the
unrealized loss on these instruments that was recorded in
accumulated other comprehensive loss as of December 31,
2003.


Note 26  Earnings Per
Share

The following table sets forth the computation of
basic and diluted earnings per share:

|                                          |  |                                                  |            |      |  |      |            |  |  |   |            | 
|----------------------------------------- |  | ------------------------------------------------ | ---------- | ---- |  | ---- | ---------- |  |  | - | ---------- | 
|                                          |  |                                                 
|                                          |  | For the Year Ended December 31,                 
|                                          |  |                                                 
|                                          |  | 2003                                             |            | 2002 |  | 2001
|                                          |  |                                                  |            |      |  |     
|                                          |  |                                                 
|                                          |  | (Dollars in thousands, except per share amounts)
|Basic:                                    |  |                                                  |            |      |  |      |            |  |  |   |            | 
|Net income                                |  | $                                                | 123,605    |      |  | $    | 79,718     |  |  | $ | 55,690     | 
|Average basic common shares outstanding   |  |                                                  | 42,867,262 |      |  |      | 38,588,710 |  |  |   | 34,277,856 | 
|Net income per common share  basic       |  | $                                                | 2.88       |      |  | $    | 2.07       |  |  | $ | 1.62       | 
|Diluted:                                  |  |                                                  |            |      |  |      |            |  |  |   |            | 
|Net income                                |  | $                                                | 123,605    |      |  | $    | 79,718     |  |  | $ | 55,690     | 
|Average basic common shares outstanding   |  |                                                  | 42,687,262 |      |  |      | 38,588,710 |  |  |   | 34,277,856 | 
|Stock option adjustment                   |  |                                                  | 709,949    |      |  |      | 333,901    |  |  |   | 207,271    | 
|Average diluted common shares outstanding |  |                                                  | 43,397,211 |      |  |      | 38,922,611 |  |  |   | 34,485,127 | 
|Earnings per common share  diluted       |  | $                                                | 2.85       |      |  | $    | 2.05       |  |  | $ | 1.61       | 

Options to purchase 26,000 shares of common
stock at prices ranging from $18.20 to $18.69 per share were
outstanding at December 31, 2001 but were not included in
the computation of diluted earnings per share because the
options exercise prices were greater than the average
market price of the common shares and therefore, the effect
would be antidilutive.

F-30



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##### Table of Contents



Note 27  Regulatory
Capital

At December 31, 2003 and 2002, the Office of
Thrift Supervision categorized the Bank as well
capitalized. To be categorized as well
capitalized, the Bank must maintain minimum capital ratios
as set forth in the table below. The Banks capital is
subject to review by federal regulators for the components,
amounts, risk weighting classifications and other factors. There
are no conditions or events since December 31, 2003 that we
believe have changed the Banks category.

The following table summarizes the Banks
actual capital and required capital as of December 31, 2003
and 2002:

|                                          |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |           |  
|----------------------------------------- | ------------- | ---------------------- | - | ------- | - | ---------- | - | ---------- | - |  | - | ------- | - |  | - | --------- | -
|                                          |               |                        |   |         |   | Tier 1     |   |           
|                                          |               | Tangible               |   | Core    |   | Risk-Based |   | Risk-Based
|                                          |               | Capital                |   | Capital |   | Capital    |   | Capital   
|                                          |               |                        |   |         |   |            |   |           
|                                          |               |                       
|                                          |               | (Dollars in thousands)
|December 31, 2003                         |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|Actual Capital:                           |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|                                          | Amount        |                        | $ | 884,536 |   |            | $ | 884,536    |   |  | $ | 881,517 |   |  | $ | 1,357,744 |  
|                                          | Capital ratio |                        |   | 7.06    | % |            |   | 7.06       | % |  |   | 9.20    | % |  |   | 14.17     | %
|FIRREA minimum required capital:          |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|                                          | Amount        |                        | $ | 187,923 |   |            | $ | 375,845    |   |  |   | N/A     |   |  | $ | 766,665   |  
|                                          | Capital ratio |                        |   | 1.50    | % |            |   | 3.00       | % |  |   | N/A     |   |  |   | 8.00      | %
|                                          | Excess        |                        | $ | 696,313 |   |            | $ | 508,691    |   |  |   | N/A     |   |  | $ | 591,079   |  
|FDICIA well capitalized required capital: |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|                                          | Amount        |                        |   | N/A     |   |            | $ | 626,409    |   |  | $ | 574,999 |   |  | $ | 958,332   |  
|                                          | Capital ratio |                        |   | N/A     |   |            |   | 5.00       | % |  |   | 6.00    | % |  |   | 10.00     | %
|                                          | Excess        |                        |   | N/A     |   |            | $ | 258,127    |   |  | $ | 306,518 |   |  | $ | 399,412   |  
|December 31, 2002                         |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|Actual Capital:                           |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|                                          | Amount        |                        | $ | 728,631 |   |            | $ | 728,631    |   |  | $ | 655,142 |   |  | $ | 1,143,345 |  
|                                          | Capital ratio |                        |   | 6.43    | % |            |   | 6.43       | % |  |   | 7.67    | % |  |   | 13.38     | %
|FIRREA minimum required capital:          |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|                                          | Amount        |                        | $ | 169,991 |   |            | $ | 339,981    |   |  |   | N/A     |   |  | $ | 683,481   |  
|                                          | Capital ratio |                        |   | 1.50    | % |            |   | 3.00       | % |  |   | N/A     |   |  |   | 8.00      | %
|                                          | Excess        |                        | $ | 558,640 |   |            | $ | 388,650    |   |  |   | N/A     |   |  | $ | 459,864   |  
|FDICIA well capitalized required capital: |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |          
|                                          | Amount        |                        |   | N/A     |   |            | $ | 566,635    |   |  | $ | 512,611 |   |  | $ | 854,351   |  
|                                          | Capital ratio |                        |   | N/A     |   |            |   | 5.00       | % |  |   | 6.00    | % |  |   | 10.00     | %
|                                          | Excess        |                        |   | N/A     |   |            | $ | 161,996    |   |  | $ | 142,531 |   |  | $ | 288,994   |  

F-31



---



##### Table of Contents



The following table reconciles the Banks
equity to the Banks tangible, core and risk-based capital:

|                                           |                                                           |                        |           |         |   |   |           |         |  
|------------------------------------------ | --------------------------------------------------------- | ---------------------- | --------- | ------- | - | - | --------- | ------- | -
|                                           |                                                           |                       
|                                           |                                                           | December 31,          
|                                           |                                                           |                       
|                                           |                                                           | 2003                   |           | 2002   
|                                           |                                                           |                        |           |        
|                                           |                                                           |                       
|                                           |                                                           | (Dollars in thousands)
|Bank shareholders equity  GAAP
    basis |                                                           | $                      | 685,045   |         |   | $ | 532,902   |        
|Adjustments for tangible and core capital: |                                                           |                        |           |         |   |   |           |        
|                                           | Unrealized losses under SFAS No. 115 and
    SFAS No. 133 |                        |           | 68,203  |   |   |           | 94,220  |  
|                                           | Non-permissible activities                                |                        |           | (146    | ) |   |           | (157    | )
|                                           | Minority interest in equity of subsidiaries               |                        |           | 131,434 |   |   |           | 101,666 |  
|                                           |                                                           |                        |           |         |   |   |           |        
|Total tangible and core capital            |                                                           |                        | 884,536   |         |   |   | 728,631   |        
|Adjustments for risk-based capital:        |                                                           |                        |           |         |   |   |           |        
|                                           | Subordinated debentures(1)                                |                        |           | 355,370 |   |   |           | 380,314 |  
|                                           | General loan valuation allowance(2)                       |                        |           | 120,857 |   |   |           | 107,889 |  
|                                           | Low-level recourse deduction                              |                        |           | (3,019  | ) |   |           | (73,489 | )
|                                           |                                                           |                        |           |         |   |   |           |        
|Risk-based capital                         |                                                           | $                      | 1,357,744 |         |   | $ | 1,143,345 |        
|                                           |                                                           |                        |           |         |   |   |           |        



---



|    |                                                
|--- | -----------------------------------------------
|(1) | Excludes capitalized discounts and issue costs.
|   
|(2) | Limited to 1.25% of risk-weighted assets.      



|          |                                                         
|--------- | --------------------------------------------------------
|Note 28  | Westcorp (Parent Company Only) Financial
    Information

STATEMENTS OF FINANCIAL CONDITION

|                     |                            |                                            |           |         |           |  |         |         |         | 
|-------------------- | -------------------------- | ------------------------------------------ | --------- | ------- | --------- |  | ------- | ------- | ------- | 
|                     |                            |                                           
|                     |                            | December 31,                              
|                     |                            |                                           
|                     |                            | 2003                                       |           | 2002   
|                     |                            |                                            |           |        
|                     |                            |                                           
|                     |                            | (Dollars in thousands)                    
|Assets               |                            |                                            |           |         |           |  |         |        
|                     | Cash                       |                                            | $         | 287,730 |           |  | $       | 8,420   |        
|                     | Investment in subsidiaries |                                            |           | 847,447 |           |  |         | 617,598 |        
|                     | Other                      |                                            |           | 129     |           |  |         | 4,258   |        
|                     |                            |                                            |           |         |           |  |         |        
|                     |                            | Total assets                               |           | $       | 1,135,306 |  |         | $       | 630,276 | 
|Liabilities          |                            |                                            |           |         |           |  |         |        
|                     | Other liabilities          |                                            | $         | 2,952   |           |  | $       | 3,495   |        
|                     |                            |                                            |           |         |           |  |         |        
|                     |                            | Total liabilities                          |           |         | 2,952     |  |         |         | 3,495   | 
|Shareholders equity |                            |                                            | 1,132,354 |         |           |  | 626,781 |        
|                     |                            |                                            |           |         |           |  |         |        
|                     |                            | Total liabilities and shareholders equity |           | $       | 1,135,306 |  |         | $       | 630,276 | 
|                     |                            |                                            |           |         |           |  |         |        

F-32



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##### Table of Contents



STATEMENTS OF INCOME

|                                                                        |               |                                 |         |        |  |      |        |        |  |   |        |        | 
|----------------------------------------------------------------------- | ------------- | ------------------------------- | ------- | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                                                        |               |                                
|                                                                        |               | For the Year Ended December 31,
|                                                                        |               |                                
|                                                                        |               | 2003                            |         | 2002   |  | 2001
|                                                                        |               |                                 |         |        |  |     
|                                                                        |               |                                
|                                                                        |               | (Dollars in thousands)         
|Income:                                                                 |               |                                 |         |        |  |      |        |        |  |   |        |       
|Dividends from subsidiaries                                             |               | $                               | 19,250  |        |  | $    | 16,100 |        |  | $ | 60,100 |       
|Interest income                                                         |               |                                 | 251     |        |  |      |        |        |  |   |        |       
|Noninterest income                                                      |               |                                 | 29      |        |  |      |        |        |  |   |        |       
|                                                                        |               |                                 |         |        |  |      |        |        |  |   |        |       
|                                                                        | Total income  |                                 |         | 19,530 |  |      |        | 16,100 |  |   |        | 60,100 | 
|Expense:                                                                |               |                                 |         |        |  |      |        |        |  |   |        |       
|Interest expense                                                        |               |                                 |         |        |  |      | 138    |        |  |   | 620    |       
|Noninterest expense                                                     |               |                                 | 1,298   |        |  |      | 5,071  |        |  |   | 3,536  |       
|                                                                        |               |                                 |         |        |  |      |        |        |  |   |        |       
|                                                                        | Total expense |                                 |         | 1,298  |  |      |        | 5,209  |  |   |        | 4,156  | 
|Income before income taxes and equity in net
    income of subsidiaries |               |                                 | 18,232  |        |  |      | 10,891 |        |  |   | 55,944 |       
|Income tax benefit                                                      |               |                                 | (369    | )      |  |      | (2,087 | )      |  |   | (1,623 | )     
|                                                                        |               |                                 |         |        |  |      |        |        |  |   |        |       
|Income before equity in net income of subsidiaries                      |               |                                 | 18,601  |        |  |      | 12,978 |        |  |   | 57,567 |       
|Equity in undistributed net income of subsidiaries                      |               |                                 | 105,230 |        |  |      | 67,698 |        |  |   | 10,860 |       
|                                                                        |               |                                 |         |        |  |      |        |        |  |   |        |       
|Net income                                                              |               | $                               | 123,831 |        |  | $    | 80,676 |        |  | $ | 68,427 |       
|                                                                        |               |                                 |         |        |  |      |        |        |  |   |        |       

STATEMENTS OF CASH FLOWS

|                                                                                      |                                                    |                                 |         |          |   |      |         |         |   |   |         |         |  
|------------------------------------------------------------------------------------- | -------------------------------------------------- | ------------------------------- | ------- | -------- | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|                                                                                      |                                                    |                                
|                                                                                      |                                                    | For the Year Ended December 31,
|                                                                                      |                                                    |                                
|                                                                                      |                                                    | 2003                            |         | 2002     |   | 2001
|                                                                                      |                                                    |                                 |         |          |   |     
|                                                                                      |                                                    |                                
|                                                                                      |                                                    | (Dollars in thousands)         
|OPERATING ACTIVITIES                                                                  |                                                    |                                 |         |          |   |      |         |         |   |   |         |        
|Net income                                                                            |                                                    | $                               | 123,831 |          |   | $    | 80,676  |         |   | $ | 68,427  |        
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                    |                                 |         |          |   |      |         |         |   |   |         |        
|                                                                                      | Equity in undistributed net income of subsidiaries |                                 |         | (105,230 | ) |      |         | (67,698 | ) |   |         | (10,860 | )
|                                                                                      | Other, net                                         |                                 |         | 4,256    |   |      |         | (927    | ) |   |         | (2,127  | )
|                                                                                      |                                                    |                                 |         |          |   |      |         |         |   |   |         |        
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                             |                                                    |                                 | 22,857  |          |   |      | 12,051  |         |   |   | 55,440  |        
|INVESTING ACTIVITIES                                                                  |                                                    |                                 |         |          |   |      |         |         |   |   |         |        
|Capital contribution to subsidiary                                                    |                                                    |                                 | (93,050 | )        |   |      | (29,700 | )       |   |   | (94,000 | )      
|                                                                                      |                                                    |                                 |         |          |   |      |         |         |   |   |         |        
|NET CASH USED IN INVESTING ACTIVITIES                                                 |                                                    |                                 | (93,050 | )        |   |      | (29,700 | )       |   |   | (94,000 | )      
|FINANCING ACTIVITIES                                                                  |                                                    |                                 |         |          |   |      |         |         |   |   |         |        
|Decrease in short-term borrowings                                                     |                                                    |                                 |         |          |   |      | (20,000 | )       |   |   | (2,300  | )      
|Dividends paid                                                                        |                                                    |                                 | (21,607 | )        |   |      | (18,042 | )       |   |   | (15,000 | )      
|Issuance of common stock                                                              |                                                    |                                 | 371,110 |          |   |      | 52,866  |         |   |   | 62,141  |        
|                                                                                      |                                                    |                                 |         |          |   |      |         |         |   |   |         |        
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                             |                                                    |                                 | 349,503 |          |   |      | 14,824  |         |   |   | 44,841  |        
|                                                                                      |                                                    |                                 |         |          |   |      |         |         |   |   |         |        
|INCREASE (DECREASE) IN CASH                                                           |                                                    |                                 | 279,310 |          |   |      | (2,825  | )       |   |   | 6,281   |        
|Cash at beginning of year                                                             |                                                    |                                 | 8,420   |          |   |      | 11,245  |         |   |   | 4,964   |        
|                                                                                      |                                                    |                                 |         |          |   |      |         |         |   |   |         |        
|CASH AT END OF YEAR                                                                   |                                                    | $                               | 287,730 |          |   | $    | 8,420   |         |   | $ | 11,245  |        
|                                                                                      |                                                    |                                 |         |          |   |      |         |         |   |   |         |        

F-33



---



##### Table of Contents





|          |                                                
|--------- | -----------------------------------------------
|Note 29  | Quarterly Results of Operations
    (Unaudited)

The following is a summary of unaudited quarterly
results of operations for the years ended December 31, 2003
and 2002. Certain quarterly amounts have been adjusted to
conform with the year-end presentation.

|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|--------------------------------------------- |  | ------------------------------------------------ | ------- | ------- |  | ------------ | ------- | ----------- |  | - | ------- |  |  | - | ------- | 
|                                              |  |                                                 
|                                              |  | For the Three Months Ended                      
|                                              |  |                                                 
|                                              |  | March 31                                         |         | June 30 |  | September 30 |         | December 31
|                                              |  |                                                  |         |         |  |              |         |            
|                                              |  |                                                 
|                                              |  | (Dollars in thousands, except per share amounts)
|2003                                          |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Interest income                               |  | $                                                | 307,862 |         |  | $            | 309,562 |             |  | $ | 310,911 |  |  | $ | 316,682 | 
|Interest expense                              |  |                                                  | 141,572 |         |  |              | 135,637 |             |  |   | 130,048 |  |  |   | 124,179 | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Net interest income                           |  |                                                  | 166,290 |         |  |              | 173,925 |             |  |   | 180,863 |  |  |   | 192,503 | 
|Provision for credit losses                   |  |                                                  | 79,884  |         |  |              | 68,036  |             |  |   | 73,150  |  |  |   | 72,936  | 
|Noninterest income                            |  |                                                  | 27,753  |         |  |              | 27,731  |             |  |   | 27,833  |  |  |   | 26,840  | 
|Noninterest expense                           |  |                                                  | 68,439  |         |  |              | 72,657  |             |  |   | 66,745  |  |  |   | 73,947  | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Income before income taxes                    |  |                                                  | 45,720  |         |  |              | 60,963  |             |  |   | 68,801  |  |  |   | 72,460  | 
|Income taxes                                  |  |                                                  | 18,226  |         |  |              | 23,975  |             |  |   | 27,343  |  |  |   | 28,731  | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Income before minority interest               |  |                                                  | 27,494  |         |  |              | 36,998  |             |  |   | 41,458  |  |  |   | 43,729  | 
|Minority interest in earnings of subsidiaries |  |                                                  | 3,945   |         |  |              | 5,385   |             |  |   | 12,123  |  |  |   | 4,611   | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Net income                                    |  | $                                                | 23,549  |         |  | $            | 31,603  |             |  | $ | 29,335  |  |  | $ | 39,118  | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Earnings per common share  basic             |  | $                                                | 0.60    |         |  | $            | 0.81    |             |  | $ | 0.65    |  |  | $ | 0.82    | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Earnings per common share  diluted           |  | $                                                | 0.60    |         |  | $            | 0.80    |             |  | $ | 0.64    |  |  | $ | 0.80    | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|2002                                          |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Interest income                               |  | $                                                | 262,196 |         |  | $            | 280,008 |             |  | $ | 299,006 |  |  | $ | 301,730 | 
|Interest expense                              |  |                                                  | 120,070 |         |  |              | 133,111 |             |  |   | 139,976 |  |  |   | 137,759 | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Net interest income                           |  |                                                  | 142,126 |         |  |              | 146,897 |             |  |   | 159,030 |  |  |   | 163,971 | 
|Provision for credit losses                   |  |                                                  | 65,698  |         |  |              | 62,350  |             |  |   | 80,996  |  |  |   | 97,189  | 
|Noninterest income                            |  |                                                  | 17,159  |         |  |              | 20,732  |             |  |   | 26,410  |  |  |   | 26,352  | 
|Noninterest expense                           |  |                                                  | 60,859  |         |  |              | 64,774  |             |  |   | 62,207  |  |  |   | 63,466  | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Income before income taxes                    |  |                                                  | 32,728  |         |  |              | 40,505  |             |  |   | 42,237  |  |  |   | 29,668  | 
|Income taxes                                  |  |                                                  | 12,964  |         |  |              | 15,185  |             |  |   | 16,824  |  |  |   | 7,294   | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Income before minority interest               |  |                                                  | 19,764  |         |  |              | 25,320  |             |  |   | 25,413  |  |  |   | 22,374  | 
|Minority interest in earnings of subsidiaries |  |                                                  | 2,911   |         |  |              | 3,612   |             |  |   | 3,740   |  |  |   | 2,890   | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Net income                                    |  | $                                                | 16,853  |         |  | $            | 21,708  |             |  | $ | 21,673  |  |  | $ | 19,484  | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Earnings per common share  basic             |  | $                                                | 0.46    |         |  | $            | 0.55    |             |  | $ | 0.55    |  |  | $ | 0.50    | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Earnings per common share  diluted           |  | $                                                | 0.46    |         |  | $            | 0.55    |             |  | $ | 0.55    |  |  | $ | 0.49    | 
|                                              |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 



|          |                              
|--------- | -----------------------------
|Note 30  | Subsequent Events (Unaudited)

On February 25, 2004, we declared a cash
dividend of $0.14 per share for shareholders of record as
of May 4, 2004, with a payable date of May 18, 2004.

On February 27, 2004, we completed the
issuance of $1.5 billion of notes secured by contracts
through a securitization transaction accounted for as a secured
financing. The senior notes issued are credit enhanced through
the issuance of subordinated notes.

F-34



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##### Table of Contents



EXHIBIT INDEX

|        |    |                        |  |                                                                                                                                                                                                                                                        
|------- | -- | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|No.     |    | Description of Exhibit
|        |    |                       
|        | 3  | .1                     |  | Articles of Incorporation(11)                                                                                                                                                                                                                          
|        | 3  | .1.1                   |  | Certificate of Amendment of the Articles of
    Incorporation of Westcorp                                                                                                                                                                              
|        | 3  | .2                     |  | Bylaws(11)                                                                                                                                                                                                                                             
|        | 4  | .1                     |  | Indenture dated as of July 25, 1997 issued
    by Western Financial Bank, formerly Western Financial Savings
    Bank, F.S.B., with respect to $150,000,000 in aggregate
    principal amount of 8.875% Subordinated Capital Debentures due
    2007(7)
|        | 4  | .2                     |  | Indenture dated as of May 3, 2002 issued by
    Western Financial Bank, formerly Western Financial Savings Bank,
    F.S.B., with respect to $300,000,000 in aggregate principal
    amount of 9.625% Subordinated Capital Debentures due 2012(8)      
|        | 10 | .1                     |  | Amended and Restated 1991 Stock Option Plan of
    Westcorp(10)                                                                                                                                                                                        
|        | 10 | .2                     |  | Westcorp 2001 Stock Option Plan(9)                                                                                                                                                                                                                     
|        | 10 | .3                     |  | 2000 Executive Deferral Plan V(8)                                                                                                                                                                                                                      
|        | 10 | .3.1                   |  | First Amendment to the Westcorp Executive
    Deferral Plan V, dated as of April 1, 2003(10)                                                                                                                                                           
|        | 10 | .4                     |  | Amended and Restated Tax Sharing Agreement
    between Westcorp And its subsidiaries, dated September 30,
    2002(9)                                                                                                                                  
|        | 10 | .4.1                   |  | First Amendment to the Amended and Restated Tax
    Sharing Agreement, Dated as of January 1, 2003(10)                                                                                                                                                 
|        | 10 | .4.2                   |  | Second Amendment to the Amended and Restated Tax
    Sharing Amendment, dated August 1, 2003(10)                                                                                                                                                       
|        | 10 | .5                     |  | Master Reinvestment Contract between WFS
    Financial Inc and Western Financial Bank, F.S.B., dated
    May 1, 1995(1)                                                                                                                                
|        | 10 | .6                     |  | Amendment No. 1, dated as of June 1,
    1995, to the Restated Master Reinvestment Reimbursement
    Agreement(5)                                                                                                                                      
|        | 10 | .7                     |  | Amended and Restated Master Collateral Assignment
    Agreement, dated as of March 1, 2000(6)                                                                                                                                                          
|        | 10 | .8                     |  | Form of WFS Financial Inc Dealer Agreement(10)                                                                                                                                                                                                         
|        | 10 | .9                     |  | Form of WFS Financial Inc Loan Application(10)                                                                                                                                                                                                         
|        | 10 | .10                    |  | Amended and Restated Westcorp Employee Stock
    Ownership and Salary Savings Plan, dated January 1, 2001(8)                                                                                                                                           
|        | 10 | .10.1                  |  | Amendment No. 1, dated as of January 1,
    2001, to Amended and Restated Westcorp Employee Stock Ownership
    and Salary Savings Plan(8)                                                                                                             
|        | 10 | .10.2                  |  | Amendment No. 2, dated as of January 1,
    2001, to Amended and Restated Westcorp Employee Stock Ownership
    and Salary Savings Plan(8)                                                                                                             
|        | 10 | .10.3                  |  | Amendment No. 3, dated as of January 1,
    2001, to Amended and Restated Westcorp Employee Stock Ownership
    and Salary Savings Plan(10)                                                                                                            
|        | 10 | .10.4                  |  | Amendment No. 4, dated as of January 1,
    2001, to Amended and Restated Westcorp Employee Stock Ownership
    and Salary Savings Plan(10)                                                                                                            
|        | 10 | .10.5                  |  | Amendment No. 5, dated as of January 1,
    2001, to Amended and Restated Westcorp Employee Stock Ownership
    and Salary Savings Plan(10)                                                                                                            
|        | 10 | .10.6                  |  | Amendment No. 6, dated as of
    November 1, 2003, to Amended and Restated Westcorp Employee
    Stock Ownership and Salary Savings Plan                                                                                                               
|        | 10 | .10.7                  |  | Amendment No. 7, dated as of
    December 1, 2003, to Amended and Restated Westcorp Employee
    Stock Ownership and Salary Savings Plan                                                                                                               
|        | 10 | .11                    |  | Amended and Restated WFS 1996 Incentive Stock
    Option Plan(2)                                                                                                                                                                                       
|        | 10 | .12                    |  | Amended and Restated Allocation Agreement, dated
    March 31, 2003(10)                                                                                                                                                                                
|        | 10 | .12.1                  |  | First Amendment to the Amended and Restated
    Allocation Agreement, dated as of August 1, 2003(10)                                                                                                                                                   



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##### Table of Contents



|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | -- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|No.     |    | Description of Exhibit
|        |    |                       
|        | 10 | .12.2                  |  | Second Amendment to the Amended and Restated
    Allocation Agreement, dated as of September 1, 2003(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10 | .13                    |  | Employment Agreement(3)(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10 | .14                    |  | Logo License Agreement between Western Financial
    Bank, Westcorp, WFS Financial Inc, Western Consumer Products,
    WFS Receivables Corporation, WFS Receivables Corporation 2, WFS
    Receivables Corporation 3, WFS Financial Auto Loans, Inc., The
    Hammond Company, The Mortgage Bankers, WFS Funding Inc., WFS
    Investments, Inc., Westran Services Corporation, WestFin
    Insurance Agency, Inc., Western Auto Investments, Inc., Western
    Consumer Services, Inc., Westhrift Life Insurance Entity, Inc.,
    Western Reconveyance Entity, Inc., and WFS Web Investments,
    Inc.(9)
|        | 10 | .14.1                  |  | First Amendment to the Logo and License
    Agreement, dated as of September 1, 2003(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10 | .15                    |  | Travel Services Agreement between Westran
    Services Corporation and Westcorp, Western Financial Bank, WFS
    Financial Inc, and Westfin Insurance Agency, Inc., dated
    August 28, 2002(9)                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10 | .15.1                  |  | First Amendment to the Travel Services Agreement,
    dated July 16, 2003(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 10 | .17                    |  | Interest Rate Swap Guarantee Agreement, dated
    May 10, 2001(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10 | .17.1                  |  | First Amendment to the Interest Rate Swap
    Guarantee Agreement, dated as of March 3, 2003(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 21 | .1                     |  | Subsidiaries of Westcorp                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 23 | .1                     |  | Consent of Independent Auditors, Ernst &
    Young LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 31 | .1                     |  | CEO Certification Pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 31 | .2                     |  | CFO Certification Pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 32 | .1                     |  | Certification of the Chief Executive Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 32 | .2                     |  | Certification of the Chief Financial Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                              



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| |     |                                                                                                                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Exhibits previously filed with WFS Financial Inc
    Registration Statement on Form S-1 (File
    No. 33-93068), filed August 8, 1995 incorporated
    herein by reference under Exhibit Number indicated.                                
|
| | (2) | Exhibit previously filed as Exhibit 4.1 to
    the WFS Financial Inc Registration Statement on Form S-8
    (File No. 333-40121), filed November 13, 1997 and
    incorporated herein by reference.                                       
|
| | (3) | Employment Agreement dated February 27, 1998
    between WFS Financial Inc, Westcorp and Lee A. Whatcott (will be
    provided to the SEC upon request).                                                                                  
|
| | (4) | Employment Agreement, dated November 15,
    1998 between the WFS Financial Inc, Westcorp and Mark Olson
    (will be provided to the SEC upon request).                                                                                  
|
| | (5) | Exhibits previously filed with Annual Report on
    Form 10-K of WFS Financial Inc for the year ended
    December 31, 1998 (File No. 33-93068) as filed on or
    about March 31, 1999.                                                  
|
| | (6) | Exhibits previously filed with WFS Registration
    Statements on Form S-2 (File No. 333-91277) filed
    November 19, 1999 and subsequently amended on
    January 20, 2000 incorporated by reference under
    Exhibit Number indicated.
|
| | (7) | Exhibit previously filed with Western Financial
    Bank, formerly Western Financial Bank, F.S.B., Offering Circular
    with the OTS, dated July 25, 1997 (will be provided to the
    SEC upon request).                                
|
| | (8) | Exhibit previously filed with Annual Report on
    Form 10-K of Westcorp for the year ended December 31,
    2001 as filed on or about March 29, 2002.                                                                                    
|
| | (9) | Exhibit previously filed with Annual Report on
    Form 10-K of Westcorp for the year ended December 31,
    2002 as filed on or about March 28, 2003.                                                                                    



| |      |                                                                                                                                                                                                                                                
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (10) | Exhibit previously filed with Westcorp
    Registration Statements on Form S-3 (File
    No. 333-110244) filed November 5, 2003 and
    subsequently amended on November 10, 2003 incorporated by
    reference under Exhibit Number indicated.
|
| | (11) | Exhibit previously filed with Westcorp
    Registration Statement on Form S-4 (File
    No. 333-34286) filed April 11, 1990, incorporated
    herein by reference under Exhibit Numbers indicated.